Document:

<PAGE>

                                                                    Exhibit 10.1

                             2004 STOCK OPTION PLAN
                                       OF
                                BBMF CORPORATION

     1.   PURPOSES OF THE PLAN

          The purposes of the Stock Option Plan (the "PLAN") of BBMF
CORPORATION, a State of Nevada corporation (the "COMPANY"), are to:

          (a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;

          (b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates; and

          (c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "COMMON STOCK").

          Options granted under this Plan ("OPTIONS") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE"), or "nonqualified
options" ("NQOs").

     2.   ELIGIBLE PERSONS

          Every person who at the date of grant of an Option is an employee of
the Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQOs or ISOs under this Plan. Every person who at the date of grant is a
consultant to, or nonemployee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NQOs under this Plan. The
term "AFFILIATE" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "EMPLOYEE" includes an officer or director
who is an employee of the Company. The term "CONSULTANT" includes persons
employed by, or otherwise affiliated with, a consultant.

     3.   STOCK SUBJECT TO THIS PLAN

          Subject to the provisions of Section 6.1.1 of the Plan, the total
number of shares of stock which may be issued under options granted pursuant to
this Plan and the total number of shares provided for issuance under this Plan
shall be 2,400,000 shares of Common Stock. The shares covered by the portion of
any grant under the Plan which expires unexercised shall become available again
for grants under the Plan.

<PAGE>

     4.   ADMINISTRATION

          4.1 GENERAL. This Plan shall be administered by the Board of Directors
of the Company (the "BOARD") or, either in its entirety or only insofar as
required pursuant to Section 4.2 hereof, by a committee (the "COMMITTEE") of at
least two Board members to which administration of the Plan, or of part of the
Plan, is delegated (in either case, the "ADMINISTRATOR").

          4.2 PUBLIC COMPANY. From and after such time as the Company registers
a class of equity securities under Section 12 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), it is intended that this Plan shall be
administered in accordance with the disinterested administration requirements of
Rule 16b-3 promulgated by the Securities and Exchange Commission ("RULE 16b-3"),
or any successor rule thereto. For so long as the Company's Common Stock is
publicly traded, a Committee responsible for granting awards and administering
the Plan as to officers, Covered Employees (as defined below) or directors shall
consist of two (2) or more Independent Directors (as defined below) if at least
two such Independent Directors are available to serve on the Committee. The term
"COVERED EMPLOYEE" as used in this Plan means the chief executive officer and
the four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code. The term "INDEPENDENT
DIRECTOR" as used in this Plan means a director who qualifies as a "non-employee
director" under Section 16 of the Exchange Act (and the rules promulgated
thereunder), as an "outside director" under Code Section 162(m) (and the rules
promulgated thereunder) and as an "independent" director under applicable Nasdaq
rules (or the rules of any exchange on which the Common Stock is then listed or
approved for listing).

          4.3 AUTHORITY OF ADMINISTRATOR. Subject to the other provisions of
this Plan, the Administrator shall have the authority, in its discretion: (i) to
grant Options; (ii) to determine the fair market value of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons (each an "OPTIONEE") to whom, and the time or
times at which, Options shall be granted, and the number of shares subject to
each Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind
rules and regulations relating to this Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical), including but
not limited to, the time or times at which Options shall be exercisable; (viii)
with the consent of the Optionee, to modify or amend any Option; (ix) to defer
(with the consent of the Optionee) the exercise date of any Option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of this Plan. The
Administrator may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper.

          4.4 INTERPRETATION BY ADMINISTRATOR. All questions of interpretation,
implementation, and application of this Plan shall be determined in its absolute
discretion by the Administrator. Such determinations shall be final and binding
on all persons.

<PAGE>

          4.5 RULE 16b-3. With respect to persons subject to Section 16 of the
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.

     5.   GRANTING OF OPTIONS; OPTION AGREEMENT

          5.1 TERMINATION OF PLAN. No Options shall be granted under this Plan
after ten years from the date of adoption of this Plan by the Board.

          5.2 STOCK OPTION AGREEMENT. Each Option shall be evidenced by a
written stock option agreement (the "OPTION AGREEMENT"), in form satisfactory to
the Company, executed by the Company and the person to whom such Option is
granted; provided, however, that the failure by the Company, the Optionee, or
both, to execute an Option Agreement shall not invalidate the granting of an
Option, although the exercise of each Option shall be subject to Section 6.1.3.

          5.3 TYPE OF OPTION. The Option Agreement shall specify whether each
Option it evidences is an NQO or an ISO.

          5.4 EARLY APPROVAL OF GRANTS. Subject to Section 6.3.3 with respect to
ISOs, the Administrator may approve the grant of Options under this Plan to
persons who are expected to become employees, directors or consultants of the
Company, but are not employees, directors or consultants at the date of
approval, with such grant to specify whether it is effective immediately or
effective only on such person becoming an employee, director or consultant.

     6.   TERMS AND CONDITIONS OF OPTIONS

          Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.

          6.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. All Options
granted under this Plan shall be subject to the following terms and conditions:

               6.1.1 CHANGES IN CAPITAL STRUCTURE. Subject to Section 6.1.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided,

<PAGE>

however, that the Company shall not be required to issue fractional shares as a
result of any such adjustments. Each such adjustment shall be subject to
approval by the Board in its absolute discretion.

               6.1.2 CORPORATE TRANSACTIONS.

                    (a) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action.

                    (b) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company:

                         (i) OPTIONS. Each Option shall be assumed or an
equivalent option substituted by the successor corporation (including as a
"successor" any purchaser of substantially all of the assets of the Company) or
a parent or subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option, the
Optionee shall have the right to exercise the Option as to all of the shares of
Common Stock covered by the Option, including Shares as to which it would not
otherwise be exercisable. If an Option is exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option shall be fully exercisable for a period of
15 days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each share of Common Stock subject
to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its parent entity, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Common Stock subject to the Option, to
be solely common stock of the successor corporation or its parent entity equal
in fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.

                         (ii) SHARES SUBJECT TO RIGHT OF REPURCHASE. Any Shares
subject to a Right of Repurchase of the Company shall be exchanged for the
consideration (whether stock, cash, or other securities or property) received in
the merger or asset sale by the holders of Common Stock for each share held on
the effective date of the transaction, as described in the preceding paragraph.
If in such exchange the Optionee receives shares of stock of the successor
corporation or a parent or subsidiary of such successor corporation, and if the
successor corporation has agreed to assume or substitute for Options as provided
in the preceding paragraph, such exchanged shares shall continue to be subject
to a Right of Repurchase as

<PAGE>

provided in the Optionee's Stock Option Plan stock purchase agreement. If, as
provided in the preceding paragraph, the Optionee shall have the right to
exercise an Option as to all of the shares of Common Stock covered thereby, all
Shares that are subject to a Right of Repurchase of the Company shall be
released from such Right of Repurchase and shall be fully vested.

               6.1.3 TIME OF OPTION EXERCISE. Subject to Section 5 and Section
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the Option Agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the Administrator
(in any case, the "VESTING BASE DATE") and specified in the Option Agreement
relating to such Option; provided, however, that with respect to Options granted
to employees who are not officers or directors, the right to exercise an Option
must vest at the rate of at least 20% per year over five years from the date the
Option was granted. Options granted to officers, directors or consultants may
become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Board of the
Administrator in accordance with this Plan. In any case, no Option shall be
exercisable until a written Option Agreement in form satisfactory to the Company
is executed by the Company and the Optionee, and the person exercising the
Option executes an appropriate stock purchase agreement with the Company and, if
the stock to be delivered pursuant to exercise of such Option is subject to a
right of repurchase as set forth in Section 6.1.8, such person delivers to the
Company an Acknowledgment and Statement of Decision Regarding Election Pursuant
to Section 83(b) of the Internal Revenue Code.

               6.1.4 OPTION GRANT DATE. Except in the case of grants contingent
on the beginning of employment or other service, as described in Sections 5.4
and 6.3.3, the date of grant of an Option under this Plan shall be the date as
of which the Administrator approves the grant.

               6.1.5 NONASSIGNABILITY OF OPTION RIGHTS. Except as otherwise
determined by the Administrator and expressly set forth in the Option Agreement,
no Option granted under this Plan shall be assignable or otherwise transferable
by the Optionee except by will or by the laws of descent and distribution.
During the life of the Optionee, except as otherwise determined by the
Administrator and expressly set forth in the Option Agreement, an Option shall
be exercisable only by the Optionee.

               6.1.6 PAYMENT. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize the following or
more additional methods of payment:

                    (a) Delivery (actual or constructive) by the Optionee of
Common Stock already owned by the Optionee for all or part of the Option price,
provided the value (determined as set forth in Section 6.1.11) of such Common
Stock is equal on the date of exercise to the Option price, or such portion
thereof as the Optionee is authorized to pay by

<PAGE>

delivery of such stock; provided, however, that if an Optionee has exercised any
portion of any Option granted by the Company by delivery of Common Stock, the
Optionee may not, within six months following such exercise, exercise any Option
granted under this Plan by delivery of Common Stock without the consent of the
Administrator.

               6.1.7 TERMINATION OF EMPLOYMENT.

                    (a) If for any reason other than death, disability or
termination for "cause" (as defined below), an Optionee ceases to be employed by
the Company or any of its Affiliates (such event being called a "TERMINATION"),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three months of the date of
such Termination, or such other period of not less than three months after the
date of such Termination as is specified in the Option Agreement (but in no
event after the Expiration Date); provided, however, that if such exercise of
the Option would result in liability for the Optionee under Section 16(b) of the
Exchange Act, then such three-month period automatically shall be extended until
the tenth day following the last date upon which Optionee has any liability
under Section 16(b) (but in no event after the Expiration Date, as defined
below).

                    (b) If an Optionee dies while employed by the Company or an
Affiliate or within the period that the Option remains exercisable after
Termination, Options then held (to the extent then exercisable) may be
exercised, in whole or in part, by the Optionee, by the Optionee's personal
representative, or by the person to whom the Option is transferred by devise or
the laws of descent and distribution, at any time within 12 months after the
death of the Optionee, or such other period of not less than six months from the
date of Termination as is specified in the Option Agreement (but in no event
after the Expiration Date).

                    (c) If an Optionee ceases to be employed by the Company as a
result of his or her disability, the Optionee may, but only within six months
after the date of Termination (and in no event after the Expiration Date),
exercise the Option to the extent otherwise entitled to exercise it at the date
of Termination; provided, however, that if such disability is not a "disability"
as such term is defined in Section 22(e)(3) of the Code, in the case of an ISO
such ISO shall automatically convert to an NQO on the day three months and one
day following such Termination. To the extent that the Optionee was not entitled
to exercise the Option at the date of Termination or if the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

                    (d) If an Optionee is terminated for "cause" all Options
then held by such Optionee shall terminate and no longer be exercisable
immediately upon and after such Termination.

                    (e) For purposes of this Section 6.1.7, "EMPLOYMENT"
includes service as an employee, a director or as a consultant.

                    (f) For purposes of this Section 6.1.7, an Optionee's
employment shall not be deemed to terminate by reason of sick leave, military
leave or other leave of absence approved by the Administrator, if the period of
any such leave does not exceed

<PAGE>

three months or, if longer, if the Optionee's right to reemployment by the
Company or any Affiliate is guaranteed either contractually or by statute.

                    (g) For purposes of this Section 6.1.7, "CAUSE" shall mean
Termination (i) by reason of Optionee's commission of a felony, misdemeanor or
other illegal conduct involving dishonesty, fraud or other matters of moral
turpitude, (ii) by reason of Optionee's dishonesty towards, fraud upon, or
deliberate injury or attempted injury to the Company or any of its Affiliates,
or (iii) by reason of Optionee's willfully engaging in misconduct which is
materially and demonstrably injurious to the Company or any of its Affiliates.

               6.1.8 REPURCHASE OF STOCK. At the option of the Administrator,
the stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase shall be exercisable as the
Administrator may determine in the grant of option, either or both:

                    (a) at the Option exercise price and (i) shall lapse at the
rate of at least 20% per year over five years from the date the Option is
granted (without regard to the date it was exercised or becomes exercisable),
(ii) must be exercised for cash or cancellation of purchase money indebtedness
within 90 days after such Termination (or in the case of securities issued upon
exercise of options after the date of Termination, within 90 days after the date
of exercise), and (iii) if the right is assignable by the Company, the assignee
must pay the Company upon assignment of the right (unless the assignee is a 100%
owned subsidiary of the Company or is an Affiliate) cash equal to the difference
between the Option exercise price and the value (determined as set forth in
Section 6.1.11) of the stock to be purchased if the Option exercise price is
less than such value; and

                    (b) at the higher of the Option exercise price or the value
(determined as set forth in Section 6.1.11) of the stock being repurchased on
the date of Termination, and must be exercised for cash or cancellation of
purchase money indebtedness within 90 days of Termination (or in the case of
securities issued upon exercise of options after the date of Termination, within
90 days after the date of exercise), and such right shall terminate when the
Company's securities become publicly traded.

                    In addition to the restrictions set forth in subparagraphs
(a) and (b) above, the shares held by an officer, director or consultant of the
issuer or by an Affiliate of the issuer may be subject to additional or greater
restrictions, in the absolute discretion of the Administrator.

                    Determination of the number of shares subject to any such
right of repurchase shall be made as of the date the employee's employment by,
director's director relationship with, or consultant's consulting relationship
with, the Company terminates, not as of the date that any Option granted to such
employee, director or consultant is thereafter exercised.

<PAGE>

               6.1.9 WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise
of an Option or at such other time or times as the amount of such obligations
become determinable (the "TAX DATE"), the Optionee shall remit to the Company in
cash all applicable federal and state withholding and employment taxes due by
reason of the exercise of an Option, the disposition of Common Stock acquired
through exercise of an Option, or the lapse of rights to repurchase Common
Stock. The Administrator may, in its absolute discretion after considering any
tax or accounting consequences, permit an Optionee to (i) deliver a full
recourse promissory note on such terms as the Administrator deems appropriate,
(ii) tender to the Company previously owned shares of Stock or other securities
of the Company, or (iii) have shares of Common Stock which are acquired upon
exercise of the Option withheld by the Company to pay some or all of the amount
of tax that is required by law to be withheld by the Company as a result of the
exercise of such Option, the disposition of Common Stock acquired through
exercise of an Option, or the lapse of rights to repurchase Common Stock,
subject to the following limitations:

                    (a) Any election pursuant to clause (ii) above, where the
Optionee is tendering Common Stock issued pursuant to the exercise of an Option,
shall require that such shares be held at least six months prior to the Tax
Date.

                    (b) Any of the foregoing limitations may be waived (or
additional limitations may be imposed) by the Administrator, in its absolute
discretion, if the Administrator determines that such foregoing limitations are
not required (or that such additional limitations are required) in order that
the transaction shall be exempt from Section 16(b) of the Exchange Act pursuant
to Rule 16b-3, or any successor rule thereto. In addition, any of the foregoing
limitations may be waived by the Administrator, in its sole discretion, if the
Administrator determines that Rule 16b-3, or any successor rule thereto, is not
applicable to the exercise of the Option by the Optionee or for any other
reason.

                    (c) Any securities tendered or withheld in accordance with
this Section 6.1.9 shall be valued by the Company as of the Tax Date.

               6.1.10 OTHER PROVISIONS. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code. If Options provide for a right of first refusal in favor of the
Company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the closing of the Company's initial registered public offering to the public
generally.

               6.1.11 DETERMINATION OF VALUE. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:

                    (a) If the stock of the Company is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System, its fair market value shall be the closing sales
price for such stock or the closing bid if no sales were

<PAGE>

reported, as quoted on such system or exchange (or the largest such exchange)
for the date the value is to be determined (or if there are no sales for such
date, then for the last preceding business day on which there were sales), as
reported in the Wall Street Journal or similar publication.

                    (b) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).

                    (c) In the absence of an active trading market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator by consideration of such factors as the Administrator in its
discretion deems appropriate, including but not limited to the recent issue
price of other securities of the Company, the Company's net worth, prospective
earning power, dividend-paying capacity, and other relevant factors, including
the goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.

               6.1.12 OPTION TERM. Subject to Section 6.3.5, no Option shall be
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the Option Agreement (the end of the maximum exercise
period stated in the Option Agreement is referred to in this Plan as the
"EXPIRATION DATE").

               6.1.13 LIMITS ON GRANTS FOR QUALIFIED PERFORMANCE-BASED
COMPENSATION. The Company may not issue Options covering in the aggregate more
than 1,000,000 shares of Common Stock to any one participant in any calendar
year.

          6.2 EXERCISE PRICE OF NQOs. The exercise price of any NQO granted
under this Plan shall be not less than 85% of the fair market value (determined
in accordance with Section 6.1.11) of the stock subject to the Option on the
date of grant.

          6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOs ARE SUBJECT. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:

               6.3.1 EXERCISE PRICE. Except as set forth in Section 6.3.5, the
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted or deemed granted under Section 6.3.3.

               6.3.2 DISQUALIFYING DISPOSITIONS. If stock acquired by exercise
of an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition

<PAGE>

shall promptly notify the Company in writing of the date and terms of the
disposition and shall provide such other information regarding the Option as the
Company may reasonably require.

               6.3.3 GRANT DATE. If an ISO is granted in anticipation of
employment as provided in Section 5.4, the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.

               6.3.4 VESTING. Notwithstanding any other provision of this Plan,
ISOs granted under all incentive stock option plans of the Company and its
Affiliates may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, including vesting resulting from a change in control of the
Company, such ISOs shall be treated as NQOs to the extent such $100,000 limit is
exceeded. In no event shall more than $100,000 in fair market value of stock
(measured on the grant date(s)) vest in any calendar year with respect to the
ISOs. Additionally, in no event, will the operation of this Section 6.3.4 cause
an ISO to vest before its terms or, having vested, cease to be vested.

               6.3.5 EXERCISE PRICE. The exercise price of any ISO granted to
any person who owns, directly or by attribution under Section 424(d) of the
Code, stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or of any Affiliate (a "TEN PERCENT
SHAREHOLDER") shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.

               6.3.6 TERM. Notwithstanding Section 6.1.12, no ISO granted to any
Ten Percent Shareholder shall be exercisable more than five years after the date
of grant.

     7.   MANNER OF EXERCISE

          7.1  WRITTEN NOTICE AND PAYMENT. An Optionee wishing to exercise an
Option shall give written notice to the Company at its principal executive
office, to the attention of the officer of the Company designated by the
Administrator, accompanied by payment of the exercise price as provided in
Section 6.1.6. The date the Company receives written notice of an exercise
hereunder accompanied by payment of the exercise price will be considered as the
date such Option was exercised.

          7.2  ISSUANCE OF STOCK. Promptly after receipt of written notice of
exercise of an Option, the Company shall, without stock issue or stock transfer
taxes to the Optionee or other person entitled to exercise the Option, deliver
to the Optionee or such other person a certificate or certificates for the
requisite number of shares of stock or register such Optionee as a shareholder
by book entry. An Optionee or permitted transferee of an Optionee shall not have
any privileges as a shareholder with respect to any shares of stock covered by
the Option until the date of issuance (as evidenced by the appropriate entry on
the books of the Company or a duly authorized transfer agent) of such shares.

<PAGE>

     8.   EMPLOYMENT OR CONSULTING RELATIONSHIP

          Nothing in this Plan or any Option granted thereunder shall interfere
with or limit in any way the right of the Company or of any of its Affiliates to
terminate any Optionee's employment or consulting at any time, nor confer upon
any Optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates, nor interfere in any way with provisions in
the Company's charter documents or applicable law relating to the election,
appointment, terms of office, and removal of members of the Board.

     9.   FINANCIAL INFORMATION

          The Company shall provide to each Optionee during the period such
Optionee holds an outstanding Option, and to each holder of Common Stock
acquired upon exercise of Options granted under the Plan for so long as such
person is a holder of such Common Stock, annual financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall include, at a
minimum, a balance sheet and an income statement, and shall be delivered as soon
as practicable following the end of the Company's fiscal year. The provisions of
this Section 9 shall not apply with respect to Optionees who are key employees
of the Company whose duties in connection with the Company assures them access
to information equivalent to the information provided in the financial
statements.

     10.  CONDITIONS UPON ISSUANCE OF SHARES

          Shares of Common Stock shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"SECURITIES ACT").

     11.  NONEXCLUSIVITY OF THE PLAN

          The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.

     12.  MARKET STANDOFF

          Each Optionee, if so requested by the Company or any representative of
the underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
Company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first two registration statements of the Company to
become effective under the Securities Act which includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of such
180-day period.

<PAGE>

     13.  AMENDMENTS TO PLAN

          The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an Optionee, no amendment, alteration, suspension
or discontinuance may adversely affect outstanding Options except to conform
this Plan and ISOs granted under this Plan to the requirements of federal or
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, (b) shareholder approval is required to
preserve option grants as "qualified performance-based compensation" under
Section 162(m) of the Code, (c) shareholder approval is required under the rules
of any exchange or quotation system on which the Common Stock is listed or
quoted, or (d) the Board otherwise concludes that shareholder approval is
advisable.

     14.  EFFECTIVE DATE OF PLAN

          This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholders' meeting, is obtained within 12 months
after adoption by the Board. If such shareholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be granted
and exercised under this Plan only after there has been compliance with all
applicable federal and state securities laws.

Plan adopted by the Board of Directors on: September 22, 2004.Exhibit 10.52

                                  VAXGEN, INC.

                           WARRANT EXCHANGE AGREEMENT

                               SEPTEMBER __, 2004

<PAGE>

                                  VAXGEN, INC.

                           WARRANT EXCHANGE AGREEMENT

            This Warrant Exchange Agreement (this "Agreement") is made as of
September __, 2004 by and between VAXGEN, INC., a Delaware corporation (the
"Company"), and CD INVESTMENT PARTNERS, LTD. (the "Warrant Holder").

                                    RECITALS

      WHEREAS, the Warrant Holder owns a warrant to purchase shares of common
stock of the Company (the "Common Stock"), which warrant was issued in a
transaction completed on May 23, 2001 in connection with the sale of the
Company's Series A Preferred Stock (the "Series A Warrant"); and

      WHEREAS, the Company wishes to issue to the Warrant Holder, pursuant to
the exemption from registration provided by Section 3(a)(9) ("Section 3(a)(9)")
under the Securities Act of 1933, as amended (the "Securities Act"), new
warrants to purchase the Common Stock in exchange for the Series A Warrant (the
"Exchange") and to cancel the Series A Warrant upon the terms and conditions set
forth herein.

                                    AGREEMENT

            1. Issuance of Exchange Warrants. Subject to the terms and
conditions of this Agreement, in exchange for the Series A Warrant held by the
Warrant Holder, the Company, as of the Closing Date (as defined in Section 3
hereof), shall issue to the Warrant Holder:

                  1.1 A warrant, dated as of the Closing Date, to purchase
85,978 shares of Common Stock, in the form attached hereto as Exhibit A (the
"First Exchange Warrant"), at an exercise price of $0.01 per share of Common
Stock; and

                  1.2 A warrant, dated as of the Closing Date, to purchase
49,130 shares of Common Stock, in the form attached hereto as Exhibit B (the
"Second Exchange Warrant" and, together with the First Exchange Warrant, the
"Exchange Warrants"), at an exercise price of $16.00 per share of Common Stock.

            2. Exchange and Cancellation of Series A Warrant. On the Closing
Date, subject to the terms and conditions of this Agreement, the Warrant Holder
shall tender the Series A Warrant held by the Warrant Holder, to the Company, in
exchange for the Exchange Warrants and upon the execution and delivery to the
Warrant Holder of the Exchange Warrants, the Series A Warrant shall be
cancelled, and all rights of the Warrant Holder with respect to the Series A
Warrant shall be immediately terminated.

            3. Closing; Delivery of Exchange Warrants . The closing of the
exchange of the Series A Warrant for the Exchange Warrants pursuant to this
Agreement (the "Closing") shall take place at 1:00 p.m. at the offices of Cooley
Godward LLP, 3175 Hanover Street, Palo

<PAGE>

Alto, California, on the date of this Agreement or at such other time and place
as may be agreed to by the Company and the Warrant Holder (the "Closing Date"),
subject to the satisfaction or waiver by the appropriate party of the conditions
set forth in Sections 4 and 5 hereof as of the Closing Date. At the Closing, the
Warrant Holder shall deliver the Series A Warrant owned by it to the Company,
and the Company shall deliver the Exchange Warrants to the Warrant Holder in
accordance with the terms hereof.

            4. Conditions to Company's Obligations. The Company's obligation to
issue the Exchange Warrants in exchange for the Series A Warrant at the Closing
shall be subject to the fulfillment on or prior to the Closing of the following
conditions, any one or more of which may be waived in whole or in part by the
written consent of the Company:

                  4.1 Representations and Warranties True and Correct;
Compliance with Covenants. The representations and warranties made by the
Warrant Holder in Section 7 hereof shall be true and correct in all material
respects as of the date hereof and the Closing Date with the same force and
effect as if they had been made as of the Closing Date. The Warrant Holder shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Warrant Holder on or prior to the Closing Date.

                  4.2 Compliance with Laws. The exchange of the Series A Warrant
for the Exchange Warrants by the Warrant Holder hereunder shall be legally
permitted by all laws and regulations to which the Company is subject (including
all applicable federal, state and foreign securities laws).

                  4.3 No Injunction or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or governmental entity or other
legal or regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect; nor shall there be any
action taken by any court of competent jurisdiction or governmental entity, or
any law or order enacted, entered, enforced or deemed applicable to the
transactions contemplated hereby by any court of competent jurisdiction or
governmental entity, that would prohibit their consummation.

                  4.4 Termination of Rights under the Registration Rights
Agreement. As of the Closing, the Company and the Warrant Holder shall terminate
all of their respective rights, liabilities and obligations to the other under
that certain Registration Rights Agreement, dated May 23, 2001 (the
"Registration Rights Agreement"), by executing the Registration Rights
Termination Agreement attached hereto as Exhibit D. Thereafter, neither the
Company nor the Warrant Holder shall have any rights, liabilities or obligations
to the other thereunder, including, without limitation, in connection with the
registration or the filing of any registration statement on behalf of the
Warrant Holder pursuant to the Registration Rights Agreement.

                  4.5 Termination of Rights under the Securities Purchase
Agreement. As of the Closing, the Company and the Warrant Holder shall terminate
all of their respective rights, liabilities and obligations to the other under
that certain Securities Purchase Agreement, dated May 23, 2001 (the "Securities
Purchase Agreement"), by executing the Securities

<PAGE>

Purchase Agreement Termination Agreement attached hereto as Exhibit E.
Thereafter, neither the Company nor the Warrant Holder shall have any rights,
liabilities or obligations to the other thereunder.

                  4.6 Tender of Series A Warrant. At the Closing, the Warrant
Holder shall tender the Series A Warrant for exchange and cancellation.

            5. Conditions to Warrant Holder's Obligations. The Warrant Holder's
obligation to exchange the Series A Warrant for the Exchange Warrants at the
Closing shall be subject to the fulfillment on or prior to the Closing of the
following conditions, any one or more of which may be waived in whole or in
part, by the written consent of the Warrant Holder:

                  5.1 Representations and Warranties True and Correct;
Compliance with Covenants. The representations and warranties made by the
Company in Section 6 hereof shall be true and correct in all material respects
as of the date hereof and as of the Closing Date with the same force and effect
as if they had been made as of the Closing Date, except for those
representations and warranties that address matters only as of a particular
date, which shall be true and correct as of such date. The Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company on or prior to the Closing Date.

                  5.2 Compliance with Laws. The exchange of the Series A Warrant
for the Exchange Warrants by the Warrant Holder hereunder shall be legally
permitted by all laws and regulations to which the Company is subject (including
all applicable federal, state and foreign securities laws).

                  5.3 No Injunction or Regulatory Constraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or governmental entity or other
legal or regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect; nor shall there be any
action taken by any court of competent jurisdiction or governmental entity, or
any law or order enacted, entered, enforced or deemed applicable to the
transactions contemplated hereby by any court of competent jurisdiction or
governmental entity, that would prohibit their consummation.

                  5.4 Consents. The Company shall have obtained all consents and
approvals necessary for the execution, delivery and performance of the Agreement
and Exchange Warrants including, without limitation, any consents and approvals
of the Company's board of directors, stockholders, governmental authorities,
regulatory authorities or third parties, as appropriate.

                  5.5 Issuance of Exchange Warrants. At the Closing the Company
shall issue the Exchange Warrants.

            6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Warrant Holder that as of the Closing:

<PAGE>

                  6.1 Organization. The Company is duly incorporated and validly
existing in good standing under the laws of the State of Delaware. The Company
has full corporate power and authority to own, operate and occupy its properties
and to conduct its business as presently conducted and is registered or
qualified to do business and is in good standing in each jurisdiction in which
it owns or leases property or transacts business and where the failure to be so
qualified would have a material adverse effect on the Company, and, to the
Company's knowledge (as defined below), no proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority or qualification. For purposes of this
Agreement, the term "knowledge" (including any derivation thereof such as "know"
or "knowing" and regardless of whether such word starts with an initial capital)
in reference to the Company shall mean the actual knowledge of the Company's
executive officers.

                  6.2 Due Authorization. The Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and under the Exchange Warrants. This Agreement has been duly
authorized and validly executed and delivered by the Company and no other
corporate action on the part of the Company, its board of directors or its
stockholders is necessary to authorize the execution and delivery by the Company
of this Agreement or the consummation of the transactions contemplated by this
Agreement, including, without limitation, the issuance and delivery of the
Exchange Warrants. Furthermore, the Company's board of directors, after
considering several proposed alternatives to the Exchange, has unanimously
authorized the execution and delivery by the Company of this Agreement and the
transactions contemplated thereunder. Each of this Agreement and each Exchange
Warrant, assuming due and valid authorization, execution and delivery hereof and
thereof by the Warrant Holder, constitutes a legal, valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally, and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

                  6.3 Valid Issuance; Reservation of Shares; Preemptive Rights.
The Exchange Warrants are duly authorized and, when issued and exchanged in
accordance with the terms hereof, (i) will be duly and validly issued, free and
clear of any liens, claims or encumbrances ("Liens") imposed by or through the
Company or by operation of law of which the Company has knowledge and (ii)
assuming the accuracy of the Warrant Holder's representations contained in this
Agreement, will be issued and delivered in compliance with all applicable
Federal and state securities laws. The shares of common stock issuable upon
exercise of the Exchange Warrants are duly authorized and reserved for issuance
and, when issued in accordance with the terms of the Exchange Warrants, will be
duly and validly issued, fully paid and nonassessable, free and clear of any
Liens imposed by or through the Company or by operation of law of which the
Company has knowledge. The Company has duly and validly authorized and reserved
for issuance to the Warrant Holder pursuant to exercise of the Exchange Warrants
at least 135,108 shares of its Common Stock. Assuming the termination of the
Registration Rights Agreement and the Securities Purchase Agreement, and the
cancellation of the Series A Warrant upon the Closing, neither the Exchange nor
the performance by the Company of its obligations under this

<PAGE>

Agreement or under the Exchange Warrants will trigger any preemptive,
"poison-pill", anti-takeover, anti-dilution, reset or other similar rights.

                  6.4 Non-Contravention. The execution and delivery of this
Agreement, the issuance of the Exchange Warrants, the issuance of shares of
Common Stock upon exercise of the Exchange Warrants and the consummation of the
transactions contemplated hereby and thereby will not (a) conflict with or
constitute a material violation of or default (with the passage of time or
otherwise) under or give rise to any right of termination, material amendment,
cancellation or acceleration or loss of any material rights under (i) any
material contracts to which the Company is a party, or (ii) the certificate of
incorporation or the bylaws of the Company or any similar organizational
document of the Company, or (b) (i) result in the creation or imposition (or the
obligation to create or impose) of any material lien, encumbrance, claim,
security interest, pledge, charge or restriction of any kind upon any of the
properties or assets of the Company or (ii) an acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in agreement or
document to which the Company is a party or is bound, or (c) to the Company's
knowledge, violate any order or decree applicable to the Company, or by which it
or any of its operations are bound, and no such violation or default currently
exists. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency or
other governmental body in the United States is required for the execution and
delivery of the Agreement and the valid issuance of the Exchange Warrants prior
to the Closing except for any securities filings required to be made under state
securities laws.

                  6.5 Exchange Act Compliance. With the exception of the
financial statements and related financial disclosure in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 (including but not
limited to Management's Discussion and Analysis of Financial Condition and
Results of Operations and Selected Financial Data) disclosed therein, the
documents that the Company filed under the Exchange Act since December 31, 2003
(including all exhibits included therein and documents incorporated by reference
therein hereinafter being referred to as the "Required Documents") complied in
all material respects with the requirements of the Exchange Act, and the rules
and regulations of the Commission promulgated thereunder as of their respective
filing dates, and except as to the financial statements and related financial
disclosure (including but not limited to Management's Discussion and Analysis of
Financial Condition and Results of Operations and Selected Financial Data) none
of the Required Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

                  6.6 Non-Public Information. The Company has not disclosed any
material non-public information to the Warrant Holder, other than information
concerning the Exchange and this Agreement, which will be disclosed to the
public in the press release issued pursuant to Section 11.12.

                  6.7 Exemption from Registration. The Exchange is exempt from
the registration requirements of the Securities Act pursuant to the provisions
of Section 3(a)(9)

<PAGE>

thereof. The Company has complied in all material respects with such provisions
and, without limiting the generality thereof, has not paid to any person,
directly or indirectly, any commission or other remuneration for soliciting the
Exchange. Neither the Company nor any of its Affiliates, nor any person acting
on its or their behalf, (i) has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
Exchange, (ii) in the three months prior to closing, has, other than the
transactions contemplated with respect to the Series A Warrant and pursuant to
this Agreement, directly or indirectly, made any offers or sales of any security
or solicited any offers to buy or exchange any security, under any circumstances
that would require registration of the Exchange Warrants or the shares of Common
Stock issuable upon exercise of the Exchange Warrants (the "Shares") under the
Securities Act or (iii) has issued any shares of Common Stock or shares of any
series of preferred stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock which would be integrated with the Exchange or the issuance of
shares of Common Stock upon exercise of the Exchange Warrants for purposes of
the Securities Act or of any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the NASD, nor
will the Company or any of its Affiliates take any action or steps that would
require registration of the Exchange Warrants or such underlying shares of
Common Stock under the Securities Act.

                  6.8 Rule 144(k). At the time of the Closing, assuming the
accuracy of the representation of the Warrant Holder contained in Section 7.5
below, that the Warrant Holder is not an "affiliate", as such term is defined in
Rule 144 under the Securities Act (an "Affiliate"), of the Company and has not
been an Affiliate in the three months preceding the Closing, the Shares, shall
be eligible for public resale pursuant to Rule 144(k) of the Securities Act,
provided that the Warrant Holder exercises its Exchange Warrant(s) pursuant to
Section 1.2 of such Exchange Warrant. At the time of the Closing, the Company
has no knowledge of any fact or circumstance that could form the basis of an
assertion that the Warrant Holder is an Affiliate of the Company.

                  6.9 No Reliance. In entering into this Agreement, the Company
(i) is not relying on any advice or representation of the Warrant Holder or any
of its affiliates (other than the representations of the Warrant Holder
contained herein), (ii) has not received from the Warrant Holder or any of its
affiliates any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of the Exchange or entering into this
Agreement, (iii) has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent that it has deemed
necessary, and (iv) has entered into this Agreement based on its own independent
judgment and on the advice of its advisors as it has deemed necessary, and not
on any view (whether written or oral) expressed by the Warrant Holder or any of
its affiliates. Neither the Warrant Holder nor any of its affiliates is now or
has ever been a financial advisor, or other fiduciary, with respect to the
Company.

                  6.10 Bankruptcy Protection. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to 11 U.S.C. ss.ss. 101 et seq. (the "Bankruptcy Code") or any similar
state bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate an involuntary proceeding under
the Bankruptcy Code or any such state law.

<PAGE>

                  6.11 Solvency. To the Company's knowledge, as of the date of
this Agreement and, based upon fair and reasonable estimates made by the
Company, after giving effect to the Exchange, (a) the fair value of the
Company's assets will exceed the amount of its liabilities, contingent or
otherwise, as determined in accordance with generally accepted accounting
principles, and (b) the Company will be able to pay its debts as they mature.

            7. Representations and Warranties of the Warrant Holder. The Warrant
Holder hereby represents and warrants to the Company as follows:

                  7.1 Investment Experience and Interest. The Warrant Holder
represents and warrants to, and covenants with, the Company that: (a) the
Warrant Holder is an "accredited investor" as defined in Regulation D under the
Securities Act, (b) the Warrant Holder is acquiring the Exchange Warrants in the
ordinary course of its business and for its own account and with no present
intention of distributing any of such Exchange Warrants or any arrangement or
understanding with any other persons regarding the distribution of such Exchange
Warrants, provided that, in making such representation, such Warrant Holder does
not agree to hold any of the Exchange Warrants for any minimum or specific
period of time, (c) the Warrant Holder will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Exchange Warrants
except in compliance with the Securities Act, applicable state securities laws
and the respective rules and regulations promulgated thereunder and (d) the
Warrant Holder has, in connection with its decision to exchange the Series A
Warrant for the Exchange Warrants, relied only upon the representations,
warranties and covenants of the Company contained herein and in the Exchange
Warrants.

                  7.2 Registration or Exemption Requirements. The Warrant Holder
acknowledges and understands that the Exchange Warrants and the Shares may not
be resold or otherwise transferred except in a transaction registered under the
Securities Act, or unless an exemption from such registration is available. The
Warrant Holder understands that the certificates evidencing the Shares will be
imprinted with a legend that prohibits the transfer of such securities unless
(a) the Warrant Holder has complied with the provisions of Section 10.1 below,
(b) they are registered or such registration is not required or (c) if the
transfer is pursuant to an exemption from registration under the Securities Act
and, if the Company shall so request in writing, an opinion of counsel
reasonably satisfactory to the Company is obtained (at the Company's expense) to
the effect that the transaction is so exempt.

                  7.3 Due Authorization. The Warrant Holder has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement, and this Agreement has been duly authorized and validly
executed and delivered by the Warrant Holder and no other corporate action on
the part of the Warrant Holder is necessary to authorize the execution and
delivery by the Warrant Holder of this Agreement. This Agreement constitutes a
legal, valid and binding agreement of the Warrant Holder, enforceable against
the Warrant Holder in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights

<PAGE>

generally, and except as enforceability may be subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

                  7.4 No Legal, Tax or Investment Advice. The Warrant Holder
understands that nothing in this Agreement or any other materials presented to
the Warrant Holder in connection with the Exchange constitutes legal, tax or
investment advice and represents and warrants to the Company that it has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with the Exchange.

                  7.5 Affiliate Status. As of Closing, the Warrant Holder
represents and warrants that the Warrant Holder is not an Affiliate of the
Company, and has not been an Affiliate of the Company for the three months
preceding the Closing.

            8. Amendment and Waiver. No provision of this Agreement may be
amended or modified except upon the written consent of the Company and the
Warrant Holder, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.

            9. Termination.

                  9.1 Termination Events. Without prejudice to other remedies
that may be available to the parties by law or this Agreement, this Agreement
may be terminated and the rights hereunder may be abandoned (i) at any time by
the written consent of both the Company and the Warrant Holder or (ii) by the
Warrant Holder if the Closing has not occurred within two (2) business days of
the date hereof.

                  9.2 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 9.1, all rights and obligations of the
parties hereunder shall terminate without any liability on the part of any party
or its Affiliates in respect thereof; provided, however, that such termination
shall not relieve the Company or the Warrant Holder of any liability for any
willful breach of this Agreement, that occurred prior to the effective date of
such termination.

            10. Legends.

                  10.1 At any time after the issuance of the Exchange Warrants
at the Closing, the Warrant Holder, or its permitted successors or assigns,
exercises any Exchange Warrant pursuant to Section 1.2 of such Exchange Warrant
(the "Exercise"), and provided that the Warrant Holder, or its permitted
successor or assign, has certified in writing to the Company that it is not is
not an Affiliate of the Company and has not been an Affiliate in the three
months preceding the Exercise, such certification to be in the form attached
hereto as Exhibit C, the Company shall issue an instruction letter to the
Company's transfer agent, instructing the transfer agent to issue the stock
certificates covering the Shares pursuant to the Exercise, without any legend or
restriction; provided, however, that if following the date of this Agreement,
Rule 144(k) of the Securities Act is amended or modified so that, as a result of
such amendment or modification, the Warrant Holder, upon a sale of Shares
pursuant to the terms hereof, would be deemed to be an "underwriter" within the
meaning of Section 2(11) of the Securities Act, the

<PAGE>

Company shall not issue such instruction letter until such time as such sale
would not cause the Warrant Holder to be deemed an "underwriter".

                  10.2 In accordance with Section 10.1 above, the Company agrees
to provide any further documentation requested by the Company's transfer agent
in connection with the issuance of the stock certificates representing the
Shares without any legends or restrictions, including an opinion of counsel,
completely at the expense of the Company.

            11. Miscellaneous.

                  11.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by registered mail,
certified mail (return receipt requested) or by internationally recognized
express courier (e.g., FedEx), postage prepaid, or sent by fax or electronic
mail or otherwise delivered by hand or by messenger addressed:

                        (a)   if to the Company, to:

                              VaxGen, Inc.
                              1000 Marina Boulevard, Suite 200
                              Brisbane, CA 94005
                              Attention: James M. Cunha
                              Telephone: (650) 624-1000
                              Telecopy:  (650) 624-1001

                        (b)   with a copy mailed to:

                              Cooley Godward LLP
                              Five Palo Alto Square
                              3000 El Camino Real
                              Palo Alto, CA 94306
                              Attn: Laura A. Berezin
                              Telephone: (650) 843-5000
                              Telecopy: (650) 849-7400

                        (c) if to the Warrant Holder, to such address for the
Warrant Holder as shall appear on the signature page hereof executed by the
Warrant Holder, or at such other address or addresses as may have been furnished
to the Company in writing.

                        (d) Each such notice shall for all purposes of this
Agreement be treated as effective or having been given on the earliest to occur
of the following:

                              (i) The date of personal delivery or delivery by
messenger, or if such date is not a business day, then on the next succeeding
business day;

                              (ii) One (1) business day after transmission by
facsimile or electronic mail, with confirmation of transmission and copy by
first class mail, postage prepaid;

<PAGE>

                              (iii) One (1) business day after deposit with an
internationally recognized express courier for United States deliveries, or
three (3) business days after such deposit for deliveries outside of the United
States; or

                              (iv) Upon receipt if sent by registered or
certified mail (return receipt requested) for United States deliveries.

                  11.2 Attorneys' Fees. In the event that any suit or action is
instituted under or in relation to this Agreement, including without limitation
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

                  11.3 Headings; Construction . The headings of the various
sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be part of this Agreement. The language used in this
Agreement is and will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.

                  11.4 Pronouns. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require.

                  11.5 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

                  11.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of California,
without giving effect to the principles of conflicts of law. The parties agree
that any action brought by either party under or in relation to this Agreement,
including without limitation to interpret or enforce any provision of this
Agreement, shall be brought in, and each party agrees to and does hereby submit
to the jurisdiction and venue of, any state or federal court located in the
County of San Mateo, California.

                  11.7 Entire Agreement. This Agreement, including the Exhibits
hereto, and the Exchange Warrants constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof, and no
party shall be liable or bound to any other in any manner by any oral or written
representations, warranties, covenants and agreements except as specifically set
forth herein. Each party expressly represents and warrants that it is not
relying on any oral or written representations, warranties, covenants or
agreements outside of this Agreement or the Exchange Warrants.

                  11.8 Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall constitute an original, but all of
which, when taken together,

<PAGE>

shall constitute but one (1) instrument, and shall become effective when one (1)
or more counterparts have been signed by each party hereto and delivered to the
other parties.

                  11.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of Shares. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Warrant Holder except by operation of law. No consent of the
Warrant Holder shall be required in connection with the assignment of this
Agreement or any rights or obligations hereunder by the Company in connection
with a merger, consolidation, reorganization or acquisition of all or
substantially all of the Company's assets, provided that the successor company,
if not the Company, shall assume the obligations of the Company under this
Agreement and under the Exchange Warrants. The Warrant Holder may assign some or
all of its rights hereunder without the consent of the Company to an Affiliate
of the Warrant Holder or to a party reasonably acceptable to the Company in
accordance with the terms of the Exchange Warrant, in which event such assignee
shall be deemed to be the Warrant Holder with respect to such assigned rights.

                  11.10 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assignees, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

                  11.11 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  11.12 Press Release; Form 8-K. The Company agrees that it will
(i) on or before 9:30 a.m., eastern time, on the second Business Day immediately
following the date on which this Agreement is executed and delivered by the
Company and the Warrant Holder, issue a press release disclosing the material
terms of this Agreement and the transactions contemplated by this Agreement and
(ii) prior to 5:00 p.m. on such second Business Day, file with the Commission a
Current Report on Form 8-K disclosing the material terms of this Agreement and
the Exchange Warrants and the transactions contemplated hereby and thereby and
including as exhibits this Agreement and the Exchange Warrants; provided,
however, that the Warrant Holder shall have a reasonable opportunity to review
and comment on any such press release or Form 8-K prior to the issuance or
filing thereof; and provided, further, that, if the Company fails to issue a
press release in accordance with clause (i) above, the Warrant Holder shall have
the right to issue a press release containing the information described in
clause (i), without any liability to the Company or any Person, and the Warrant
Holder shall not be deemed to possess material non-public information as a
result of the issuance of any such press release.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this WARRANT EXCHANGE
AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                    WARRANT HOLDERS:

VAXGEN, INC.                                CD INVESTMENT PARTNERS, LTD.

By:                                         By:
       ----------------------------               ------------------------------
Name:  Lance K. Gordon                      Name:
       ----------------------------               ------------------------------
Title: Chief Executive Officer              Title:
       ----------------------------               ------------------------------

                                            Address for Notices:

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

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

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

<PAGE>

                                    EXHIBIT A

                                                                   No. CW - ____

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

                           WARRANT TO PURCHASE SHARES
                               OF COMMON STOCK OF
                                  VAXGEN, INC.
                         (Void after September __, 2005)

      This certifies that ________________________, or its permitted assigns
(the "Holder"), for value received, is entitled to, upon the terms and
conditions hereinafter set forth, subscribe for and purchase from VAXGEN, INC.,
a Delaware corporation (the "Company"), having a place of business at 1000
Marina Boulevard, Suite 200, Brisbane, California 94005, _______ fully paid and
nonassessable shares (the "Warrant Shares") of the Company's common stock, $0.01
par value per share ("Common Stock") at the initial exercise price of $0.01 per
Warrant Share (the "Exercise Price") at any time and from time to time, in whole
or in part, up to and including 5:00 p.m. (Pacific time) on September __, 2005
(the "Expiration Date") upon surrender to the Company at its principal office
(or at such other location as the Company may advise the Holder in writing) of
this Warrant, with the Form of Subscription attached hereto duly filled in and
signed and upon payment in cash or wire transfer of the aggregate Exercise Price
for the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof, or in accordance with the provisions of
Section 1.2 hereof. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.

      This Warrant is subject to the following terms and conditions:

            1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

                  1.1 General. This Warrant is exercisable at the option of the
Holder of record hereof, at any time and from time to time and including, up to
the Expiration Date for all or any part of the Warrant Shares (but not for a
fraction of a share) which may be purchased hereunder. The Company agrees that
the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the

                                       1.
<PAGE>

close of business on the date on which this Warrant shall have been surrendered,
the completed and executed Form of Subscription delivered and (except for an
exercise effected pursuant to Section 1.2 hereof) payment made for such shares.
Certificates for the Warrant Shares so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense on or before the later to occur of (i) the third (3rd)
business day following the Company's receipt of the Form of Subscription by
facsimile transmission and (ii) the business day following the Company's receipt
of the original Warrant and Form of Subscription and, except for an exercise
effected pursuant to Section 1.2 hereof, payment for such shares (the later of
(i) and (ii) being referred to herein as the "Delivery Date"). In case of a
purchase of less than all the Warrant Shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time; provided, however, that the Holder may validly exercise this
Warrant at any time following such purchase without having received such new
Warrant. Provided that the Holder complies with Section 10.1 of the Warrant
Exchange Agreement, dated September 21, 2004 (the "Exchange Agreement"), the
Company shall effect delivery of Warrant Shares to the Holder by, as long as the
Company's transfer agent (the "Transfer Agent") participates in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program ("FAST"),
crediting the account of the Holder or its nominee at DTC (as specified in the
applicable Exercise Notice) with the number of Warrant Shares required to be
delivered, no later than the close of business on the applicable Delivery Date.
In the event that the Transfer Agent is not a participant in FAST, or if the
Warrant Shares are not otherwise eligible for delivery through FAST, or if the
Holder so specifies in an Exercise Notice or otherwise in writing, the Company
shall effect delivery of Warrant Shares by delivering to the Holder or its
nominee physical certificates representing such Warrant Shares, no later than
the close of business on such Delivery Date. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder or in the name of
Holder's affiliate and/or subsidiary as may be requested by the Holder. The
Holder shall have the right to pursue actual damages for the Company's failure
to issue and deliver Warrant Shares (without any restriction legends) on the
applicable Delivery Date (including, without limitation, damages relating to any
purchase of Common Stock by the Holder to make delivery on a sale effected in
anticipation of receiving Warrant Shares upon exercise), and the Holder shall
have the right to pursue all other remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).

                  1.1 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the executed Form of Subscription
with notice of such election in which event the Company shall issue to the
Holder a number of Warrant Shares computed using the following formula:

                  X = Y (A-B)
                      -------
                        A

                                       2.
<PAGE>

      Where X = the number of Warrant Shares to be issued to the Holder

                        Y = the number of Warrant Shares purchasable under the
                        Warrant or, if only a portion of the Warrant is being
                        exercised, the portion of the Warrant being exercised
                        (at the date of such calculation)

                        A = the fair market value of one share of the Company's
                        Common Stock (at the date of such calculation)

                        B = Exercise Price (as adjusted to the date of such
                        calculation)

      For purposes of the above calculation, if the Common Stock is traded on
any established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, then the fair market value of one share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or market (or the exchange or market
with the greatest volume of trading in the Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal (or such other source as the Company's Board of Directors reasonably
deems reliable). In the event the fair market value of one share of Common Stock
cannot be determined in accordance with the foregoing sentence, such fair market
value shall be the last reported sales price of the Common Stock as reported in
the "pink sheets" by Pink Sheets LLC. In the absence of such markets for the
Common Stock, the fair market value of one share of Common Stock shall be
reasonably determined by the Company's Board of Directors in good faith.

            2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all Warrant Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or market upon
which the Common Stock may be listed or traded; provided, however, that the
Company shall not be required to effect a registration under federal or state
securities laws solely because of such exercise. The Company will not take any
action which would result in any adjustment of the Exercise Price (as set forth
in Section 3 hereof) if the total number of shares of Common Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Common

                                       3.
<PAGE>

Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.

            3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Exercise Price,
the Holder of this Warrant shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Exercise Price resulting
from such adjustment.

                  3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.

                  3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

                        (a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,

                        (b) any cash paid or payable otherwise than as a cash
dividend, or

                        (c) Common Stock or additional stock or other securities
or property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above),

then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of Warrant Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder would
hold on the date of such exercise had such holder been the holder of record of
such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.

                                       4.
<PAGE>

                  3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In the event of
any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant such that the
provisions hereof (including, without limitation, provisions for adjustments of
the Exercise Price and of the number of shares purchasable and receivable upon
the exercise of this Warrant) shall thereafter be applicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.

                  3.4 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Exercise Price or the application of such provisions, so as to
protect such purchase rights as aforesaid. The adjustment shall be such as will
give the Holder of the Warrant upon exercise for the same aggregate Exercise
Price the total number, class and kind of shares as such Holder would have owned
had the Warrant been exercised prior to the event and had such Holder continued
to hold such shares until after the event requiring adjustment.

                  3.5 Notices of Change.

                        (a) Immediately upon any adjustment in the number or
class of shares subject to this Warrant and of the Exercise Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.

                        (b) The Company shall give written notice to the Holder
at least ten (10) calendar days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions or any right to subscribe

                                       5.
<PAGE>

for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right.

                        (c) The Company shall give written notice to the Holder
at least ten (10) calendar days prior to the date on which an Organic Change
shall take place, including in such notice the date as of which the Organic
Change is expected to become effective and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property, if any, deliverable upon such
Organic Change.

                        (d) The Company shall initiate the delivery of written
notice to the Holder of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company (the "Dissolution") on the date such Dissolution is
publicly announced, including in such notice the date as of which the
Dissolution is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property, if any.

            4. LISTING. The Company shall file any forms and do any acts as
shall be required from time to time to secure the listing or quotation of the
Warrant Shares with each national securities exchange or automated quotation
system, if any, upon which shares of such securities are then listed or traded
and shall use its commercially reasonable efforts to maintain, so long as any
other shares of such securities shall be so listed or traded, such listing or
quotation of all securities issued or issuable upon the exercise of this
Warrant.

            5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.

            6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

            7. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except as expressly set forth in Section 3 herein, no dividends or
interest shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by the Holder to purchase Warrant Shares, and
no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.

                                       6.
<PAGE>

            8. REPRESENTATIONS OF HOLDER. Holder further represents that it
understands that neither this Warrant nor the Warrant Shares issuable upon the
exercise thereof have been registered under the Act, and are being offered
pursuant to an exemption from registration contained in the Act based in part
upon Holder's representations contained in this Section 8. Holder represents
that by reason of its own, or of its management's, knowledge and experience in
financial and business matters, Holder is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect its own
interests in connection with the issuance of this Warrant and the Warrant Shares
issuable upon the exercise thereof, and is able to bear risk, including a
complete loss, of the investment. Holder represents that it is an "accredited
investor" within the meaning set forth in Regulation D under the Act. Holder
represents that it is acquiring such securities for its own account for
investment only, and not with a view towards their distribution, except pursuant
to sales that are registered under the Act or are exempt from the registration
requirements of the Act; provided, however, that, in making such representation,
the Holder does not agree to hold such securities for any minimum or specific
term and reserves the right to sell, transfer or otherwise dispose of such
securities at any time in accordance with the provisions hereof and with Federal
and state securities laws applicable to such sale, transfer or disposition.

            9. TRANSFERABILITY. Subject to compliance with any applicable
securities laws, this Warrant may be transferred, provided that Holder provides
prior written notice of such transfer to the Company, such transferee agrees to
be bound by the obligations hereunder and such transferee agrees to execute
certain documentation requested by the Company including an investment letter.
Upon the transfer of the Warrant, the Company may treat such transferee as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this Warrant.

            10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights
and obligations of the Company, of the Holder of this Warrant and of the holder
of Warrant Shares issued upon exercise of this Warrant, shall survive the
exercise of this Warrant.

            11. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

            12. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
in writing, shall refer specifically to this Warrant and shall be delivered and
deemed received in accordance with Section 11.1 of the Exchange Agreement.

            13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
permitted assigns of the Holder hereof.

            14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do

                                       7.
<PAGE>

not constitute a part of this Warrant. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of California.

            15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

            16. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Exercise Price.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       8.
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this ___ day of September, 2004.

                                                  VAXGEN, INC.

                                                  By:
                                                     ---------------------------
                                                     Lance K. Gordon
                                                     Chief Executive Officer

<PAGE>

                                SUBSCRIPTION FORM

                                          Date: _________________, 200_

VaxGen, Inc.
1000 Marina Boulevard, Suite 200
Brisbane, California  94005
Attn:  Chief Financial Officer

Ladies and Gentlemen:

|_|   The undersigned hereby elects to exercise the warrant issued to it by
      VaxGen, Inc. (the "Company") and dated September ____, 2004 Warrant No.
      CW-___ (the "Warrant") and to purchase thereunder
      __________________________________ shares of the Common Stock of the
      Company (the "Shares") at a purchase price of $0.01 per Share or an
      aggregate purchase price of ________________ Dollars ($__________) (the
      "Purchase Price"). Pursuant to the terms of the Warrant the undersigned
      has delivered the Purchase Price herewith in full in cash or wire
      transfer.

|_|   The undersigned hereby elects to convert ______________________ percent
      (___%) of the value of the Warrant pursuant to the provisions of Section
      1.2 of the Warrant.

                                         Very truly yours,

                                         ---------------------------------------
                                             Print Entity Name, if applicable

                                         By:
                                            ------------------------------------

                                         Print Name:
                                                    ----------------------------

                                         Title:
                                               ---------------------------------

<PAGE>

                                    EXHIBIT B

                                                                   No. CW - ____

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

                           WARRANT TO PURCHASE SHARES
                               OF COMMON STOCK OF
                                  VAXGEN, INC.
                         (Void after September __, 2007)

      This certifies that ________________________, or its permitted assigns
(the "Holder"), for value received, is entitled to, upon the terms and
conditions hereinafter set forth, subscribe for and purchase from VAXGEN, INC.,
a Delaware corporation (the "Company"), having a place of business at 1000
Marina Boulevard, Suite 200, Brisbane, California 94005, _______ fully paid and
nonassessable shares (the "Warrant Shares") of the Company's common stock, $0.01
par value per share ("Common Stock") at the initial exercise price of $16.00 per
Warrant Share (the "Exercise Price") at any time and from time to time, in whole
or in part, up to and including 5:00 p.m. (Pacific time) on September __, 2007
(the "Expiration Date") upon surrender to the Company at its principal office
(or at such other location as the Company may advise the Holder in writing) of
this Warrant with the Form of Subscription attached hereto duly filled in and
signed and upon payment in cash or wire transfer of the aggregate Exercise Price
for the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof, or in accordance with the provisions of
Section 1.2 hereof. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.

      This Warrant is subject to the following terms and conditions:

            1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

                  1.1 General. This Warrant is exercisable at the option of the
Holder of record hereof, at any time and from time to time and including, up to
the Expiration Date for all or any part of the Warrant Shares (but not for a
fraction of a share) which may be purchased hereunder. The Company agrees that
the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the

                                       1.
<PAGE>

close of business on the date on which this Warrant shall have been surrendered,
the completed and executed Form of Subscription delivered and (except for an
exercise effected pursuant to Section 1.2 hereof) payment made for such shares.
Certificates for the Warrant Shares so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense on or before the later to occur of (i) the third (3rd)
business day following the Company's receipt of the Form of Subscription by
facsimile transmission and (ii) the business day following the Company's receipt
of the original Warrant and Form of Subscription and, except for an exercise
effected pursuant to Section 1.2 hereof, payment for such shares (the later of
(i) and (ii) being referred to herein as the "Delivery Date"). In case of a
purchase of less than all the Warrant Shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time; provided, however, that the Holder may validly exercise this
Warrant at any time following such purchase without having received such new
Warrant. Provided that the Holder complies with Section 10.1 of the Warrant
Exchange Agreement, dated September 21, 2004 (the "Exchange Agreement"), the
Company shall effect delivery of Warrant Shares to the Holder by, as long as the
Company's transfer agent (the "Transfer Agent") participates in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program ("FAST"),
crediting the account of the Holder or its nominee at DTC (as specified in the
applicable Exercise Notice) with the number of Warrant Shares required to be
delivered, no later than the close of business on the applicable Delivery Date.
In the event that the Transfer Agent is not a participant in FAST, or if the
Warrant Shares are not otherwise eligible for delivery through FAST, or if the
Holder so specifies in an Exercise Notice or otherwise in writing, the Company
shall effect delivery of Warrant Shares by delivering to the Holder or its
nominee physical certificates representing such Warrant Shares, no later than
the close of business on such Delivery Date. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder or in the name of
Holder's affiliate and/or subsidiary as may be requested by the Holder. The
Holder shall have the right to pursue actual damages for the Company's failure
to issue and deliver Warrant Shares (without any restriction legends) on the
applicable Delivery Date (including, without limitation, damages relating to any
purchase of Common Stock by the Holder to make delivery on a sale effected in
anticipation of receiving Warrant Shares upon exercise), and the Holder shall
have the right to pursue all other remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).

                  1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the executed Form of Subscription
with notice of such election in which event the Company shall issue to the
Holder a number of Warrant Shares computed using the following formula:

                  X = Y (A-B)
                      -------
                         A

                                       2.
<PAGE>

      Where X = the number of Warrant Shares to be issued to the Holder

                        Y = the number of Warrant Shares purchasable under the
                        Warrant or, if only a portion of the Warrant is being
                        exercised, the portion of the Warrant being exercised
                        (at the date of such calculation)

                        A = the fair market value of one share of the Company's
                        Common Stock (at the date of such calculation)

                        B = Exercise Price (as adjusted to the date of such
                        calculation)

      For purposes of the above calculation, if the Common Stock is traded on
any established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, then the fair market value of one share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or market (or the exchange or market
with the greatest volume of trading in the Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal (or such other source as the Company's Board of Directors reasonably
deems reliable). In the event the fair market value of one share of Common Stock
cannot be determined in accordance with the foregoing sentence, such fair market
value shall be the last reported sales price of the Common Stock as reported in
the "pink sheets" by Pink Sheets LLC. In the absence of such markets for the
Common Stock, the fair market value of one share of Common Stock shall be
reasonably determined by the Company's Board of Directors in good faith.

            2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all Warrant Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or market upon
which the Common Stock may be listed or traded; provided, however, that the
Company shall not be required to effect a registration under federal or state
securities laws solely because of such exercise. The Company will not take any
action which would result in any adjustment of the Exercise Price (as set forth
in Section 3 hereof) if the total number of shares of Common Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Common Stock then outstanding and all shares of Common

                                       3.
<PAGE>

Stock then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's Certificate of Incorporation.

            3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Exercise Price,
the Holder of this Warrant shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Exercise Price resulting
from such adjustment.

                  3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.

                  3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

                        (a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,

                        (b) any cash paid or payable otherwise than as a cash
dividend, or

                        (c) Common Stock or additional stock or other securities
or property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above),

then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of Warrant Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (b) and (c) above) which such Holder would
hold on the date of such exercise had such holder been the holder of record of
such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.

                                       4.
<PAGE>

                  3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In the event of
any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant such that the
provisions hereof (including, without limitation, provisions for adjustments of
the Exercise Price and of the number of shares purchasable and receivable upon
the exercise of this Warrant) shall thereafter be applicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.

                  3.4 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Exercise Price or the application of such provisions, so as to
protect such purchase rights as aforesaid. The adjustment shall be such as will
give the Holder of the Warrant upon exercise for the same aggregate Exercise
Price the total number, class and kind of shares as such Holder would have owned
had the Warrant been exercised prior to the event and had such Holder continued
to hold such shares until after the event requiring adjustment.

                  3.5 Notices of Change.

                        (a) Immediately upon any adjustment in the number or
class of shares subject to this Warrant and of the Exercise Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.

                        (b) The Company shall give written notice to the Holder
at least ten (10) calendar days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions or any right to subscribe

                                       5.
<PAGE>

for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right.

                        (c) The Company shall give written notice to the Holder
at least ten (10) calendar days prior to the date on which an Organic Change
shall take place, including in such notice the date as of which the Organic
Change is expected to become effective and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property, if any, deliverable upon such
Organic Change.

                        (d) The Company shall initiate the delivery of written
notice to the Holder of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company (the "Dissolution") on the date such Dissolution is
publicly announced, including in such notice the date as of which the
Dissolution is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property, if any.

            4. LISTING. The Company shall file any forms and do any acts as
shall be required from time to time to secure the listing or quotation of the
Warrant Shares with each national securities exchange or automated quotation
system, if any, upon which shares of such securities are then listed or traded
and shall use its commercially reasonable efforts to maintain, so long as any
other shares of such securities shall be so listed or traded, such listing or
quotation of all securities issued or issuable upon the exercise of this
Warrant.

            5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.

            6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

            7. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except as expressly set forth in Section 3 herein, no dividends or
interest shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by the Holder to purchase Warrant Shares, and
no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.

                                       6.
<PAGE>

            8. REPRESENTATIONS OF HOLDER. Holder further represents that it
understands that neither this Warrant nor the Warrant Shares issuable upon the
exercise thereof have been registered under the Act, and are being offered
pursuant to an exemption from registration contained in the Act based in part
upon Holder's representations contained in this Section 8. Holder represents
that by reason of its own, or of its management's, knowledge and experience in
financial and business matters, Holder is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect its own
interests in connection with the issuance of this Warrant and the Warrant Shares
issuable upon the exercise thereof, and is able to bear risk, including a
complete loss, of the investment. Holder represents that it is an "accredited
investor" within the meaning set forth in Regulation D under the Act. Holder
represents that it is acquiring such securities for its own account for
investment only, and not with a view towards their distribution, except pursuant
to sales that are registered under the Act or are exempt from the registration
requirements of the Act; provided, however, that, in making such representation,
the Holder does not agree to hold such securities for any minimum or specific
term and reserves the right to sell, transfer or otherwise dispose of such
securities at any time in accordance with the provisions hereof and with Federal
and state securities laws applicable to such sale, transfer or disposition.

            9. TRANSFERABILITY. Subject to compliance with any applicable
securities laws, this Warrant may be transferred, provided that Holder provides
prior written notice of such transfer to the Company, such transferee agrees to
be bound by the obligations hereunder and such transferee agrees to execute
certain documentation requested by the Company including an investment letter.
Upon the transfer of the Warrant, the Company may treat such transferee as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this Warrant.

            10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights
and obligations of the Company, of the Holder of this Warrant and of the holder
of Warrant Shares issued upon exercise of this Warrant, shall survive the
exercise of this Warrant.

            11. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

            12. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
in writing, shall refer specifically to this Warrant and shall be delivered and
deemed received in accordance with Section 11.1 of the Exchange Agreement.

            13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
permitted assigns of the Holder hereof.

            14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do

                                       7.
<PAGE>

not constitute a part of this Warrant. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of California.

            15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

            16. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Exercise Price.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       8.
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this ___ day of September, 2004.

                                                VAXGEN, INC.

                                                By:
                                                   -----------------------------
                                                   Lance K. Gordon
                                                   Chief Executive Officer

<PAGE>

                                SUBSCRIPTION FORM

                                          Date: _________________, 200_

VaxGen, Inc.
1000 Marina Boulevard, Suite 200
Brisbane, California 94005
Attn: Chief Financial Officer

Ladies and Gentlemen:

|_|   The undersigned hereby elects to exercise the warrant issued to it by
      VaxGen, Inc. (the "Company") and dated September, 2004 Warrant No. CW-___
      (the "Warrant") and to purchase thereunder
      __________________________________ shares of the Common Stock of the
      Company (the "Shares") at a purchase price of $16.00 per Share or an
      aggregate purchase price of ________________ Dollars ($__________) (the
      "Purchase Price"). Pursuant to the terms of the Warrant the undersigned
      has delivered the Purchase Price herewith in full in cash or wire
      transfer.

|_|   The undersigned hereby elects to convert ______________________ percent
      (___%) of the value of the Warrant pursuant to the provisions of Section
      1.2 of the Warrant.

                                         Very truly yours,

                                         ---------------------------------------
                                             Print Entity Name, if applicable

                                         By:
                                            ------------------------------------

                                         Print Name:
                                                    ----------------------------

                                         Title:
                                               ---------------------------------

<PAGE>

                                    EXHIBIT C

                              FORM OF CERTIFICATION

[Date]

VaxGen, Inc.
Attn: Corporate Secretary
1000 Marina Boulevard, Suite 200
Brisbane, California, 94005

The undersigned is submitting this letter to you in order to present you with
the facts necessary, pursuant to subparagraph (k) of Rule 144 of the Securities
Act of 1933, as amended, to authorize the transfer agent for VaxGen, Inc. (the
"Company") to issue shares of common stock in connection with the exercise of a
warrant to purchase common stock issued in connection with the Warrant Exchange
Agreement, dated September __, 2004 (the "Agreement"), without a restrictive
legend on the stock certificate. In connection with the following, the
undersigned represents to the Company that:

      1. The undersigned is not at present and has not been during the preceding
three months an officer, director, or 10% shareholder of the Company and during
said period has not been an "affiliate" of the Company within the meaning of
Rule 144(a);

      2. The undersigned has exercised the warrant issued in connection with the
Agreement, pursuant to Section 1.2 of such warrant, and in accordance with
section 10.1 of the Agreement; and

      3. The undersigned agrees that, at any time or times that the undersigned
proposes to offer for sale or sell any of the above common stock, the
undersigned will make reasonable inquiry to assure that he/she is not and has
not been during the three months preceding any sale of the above common stock an
affiliate of the Company.

Very truly yours,

-----------------------------
[SIGNATURE]

<PAGE>

                                    EXHIBIT D

                                  VAXGEN, INC.

                    REGISTRATION RIGHTS TERMINATION AGREEMENT

      This Registration Rights Termination Agreement (the "Registration Rights
Termination Agreement") is entered into as of this ___ day of September, 2004,
by and between VaxGen, Inc., a Delaware company (the "Company"), and CD
Investment Partners, Ltd. (the "Holder"):

      WHEREAS, the Holder is a party to that certain Registration Rights
Agreement, dated as of May 23, 2001 (the "Rights Agreement");

      WHEREAS, the Company and the Holder intend to enter into that certain
Warrant Exchange Agreement of even date herewith (the "Agreement"); and

      WHEREAS, as a condition to consummating the transactions contemplated by
the Agreement, the Holder's and the Company's respective rights and obligations
(if any) to the other under the Rights Agreement shall be terminated.

      NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Registration Rights
Termination Agreement, the parties mutually agree as follows:

1.    The Company and the Holder hereby agree that, effective immediately prior
      to, and conditioned upon, the Closing (as defined in the Agreement), all
      of the Holder's and the Company's respective rights and obligations (if
      any) to the other under the Rights Agreement shall be and hereby are
      terminated in their entirety and shall be of no further force or effect,
      and upon such termination being effective, neither the Company nor the
      Holder shall have any liability to the other whatsoever thereunder or
      thereto.

2.    This Registration Rights Termination Agreement may be executed in
      counterparts, each of which shall be deemed an original, but all of which
      together shall constitute one instrument.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Termination Agreement as of the date first set forth above.

COMPANY
VAXGEN, INC.

By:
    -------------------------------------
    Lance K. Gordon
    President and Chief Executive Officer

HOLDER:

CD INVESTMENT PARTNERS, LTD.
By: CD Capital Management  LLC
Its: Investment Advisor

By:
   --------------------------------------

Name:
     ------------------------------------

Title:
      -----------------------------------

<PAGE>

                                    EXHIBIT E

                                  VAXGEN, INC.

                    SECURITIES PURCHASE TERMINATION AGREEMENT

      This Securities Purchase Termination Agreement (the "Securities Purchase
Termination Agreement") is entered into as of this ___ day of September, 2004,
by and between VaxGen, Inc., a Delaware company (the "Company"), and CD
Investment Partners, Ltd. (the "Holder"):

      WHEREAS, the Holder is a party to that certain Securities Purchase
Agreement, dated as of May 23, 2001 (the "Purchase Agreement");

      WHEREAS, the Company and the Holder intend to enter into that certain
Warrant Exchange Agreement of even date herewith (the "Agreement");

      WHEREAS, as a condition to consummating the transactions contemplated by
the Agreement, the Holder's and the Company's respective rights and obligations
(if any) to the other under the Purchase Agreement shall be terminated; and

      WHEREAS, pursuant to Section 7.5(a) of the Purchase Agreement, such
agreement may be amended by the Holder and the Company.

      NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Securities Purchase
Termination Agreement, the parties mutually agree as follows:

1.    In accordance with the provisions of Section 7.5(a) of the Purchase
      Agreement, the Company and the Holder hereby waive the rights of the
      Holder set forth in the Purchase Agreement and further waive compliance
      with all provisions of the Purchase Agreement by the Company and the
      Holder.

2.    The Company and the Holder hereby agree that, effective immediately prior
      to, and conditioned upon, the Closing (as defined in the Agreement), all
      of the Holder's and the Company's respective rights and obligations (if
      any) to the other under the Purchase Agreement are hereby terminated in
      their entirety and shall be of no further force or effect, and upon such
      termination being effective, neither the Company nor the Holder shall have
      any liability to the other whatsoever thereunder or with respect thereto.

3.    This Securities Purchase Termination Agreement may be executed in
      counterparts, each of which shall be deemed an original, but all of which
      together shall constitute one instrument.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Securities Purchase
Termination Agreement as of the date first set forth above.

COMPANY
VAXGEN, INC.

By:
    -------------------------------------
    Lance K. Gordon
    President and Chief Executive Officer

HOLDER:

CD INVESTMENT PARTNERS, LTD.
By: CD Capital Management  LLC
Its: Investment Advisor

By:
   --------------------------------------

Name:
     ------------------------------------

Title:
      -----------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]