Sample Business Contracts

Employment Agreement - VaxGen inc. and Donald Francis

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                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

of January 1, 1998, that AGREEMENT made and entered into as of December 19,
1995, by and between Donald Francis, a resident of California ("Francis"),
VaxGen, Inc. (formerly Genenvax Inc.), a Delaware corporation (the "Company"),
and Genentech Inc., a Delaware corporation ("Genentech").


        WHEREAS, the Company and Francis desire to set forth in writing the
terms of their amended agreement with respect to Francis's employment;

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

        1. Employment. The Company hereby employs Francis as its President and
Francis hereby accepts such employment upon the terms and conditions set forth
in this Agreement.

        2. Term. Francis's employment, which began on January 4, 1996, will
continue for a term ending December 31, 2002. Thereafter, Francis's employment
will be automatically renewed for successive one-year terms, unless notice of
termination is given by either party to the other at least thirty days before
the expiration of the then current term.

        3. Business Plan. The Business Plan of the Company will be to develop,
test, and market a vaccine for human immune deficiency virus (HIV).

        4. Duties. Francis will perform such executive and administrative duties
consistent with his position as President of the Company as are reasonably
assigned to him by the Board and will be given such executive and administrative
powers and authority as may be needed to carry out those duties, and as are
consistent with the office of the President as set forth in the Charter and
Bylaws of the Company. Francis will be responsible as President for scientific
strategy, clinical testing, regulatory activities, and day-to-day management of
the Company. Francis will also be Chairman of the Scientific Advisory Board to
the Company. The Company will provide to Francis an office and staff in South
San Francisco as are required for the performance of his duties. Francis agrees
to serve as Director of the Company and the Company agrees to cause Francis to
be elected to the Board of Directors.

        5. Compensation. The Company will pay Francis an annual base salary of
$250,000, commencing January 1, 1998. Francis's annual base salary will be
payable in equal installments not less frequently than monthly. Francis will
have the opportunity for an annual bonus of up to 30% of annual salary, such
bonus to be determined by the

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Board of Directors. Payment of the bonus will occur within 30 days of the first
Board meeting of each calendar year.

        6. Expenses. The Company will reimburse Francis for travel,
entertainment and other expenses reasonably incurred by him in connection with
his employment under this Agreement upon presentation of appropriate vouchers or

        7. Benefits. During the terms of his employment, Francis will be
entitled to the fringe benefits that are generally made available to all
employees of the Company.

        8. Early Termination of Employment. Employment under this Agreement will
terminate prior to expiration of the term upon any of the following:

                (a) Death. Francis's employment hereunder shall terminate upon
his death.

                (b) Disability. The Company may terminate Francis's employment
hereunder if he has been unable to perform his duties hereunder for a period of
six consecutive months and if he has not resumed on a full-time basis the
performance of such duties within thirty days after written notice from the
Company of its intent to terminate his employment due to disability.

                (c) Cause. The Company may terminate Francis's employment
hereunder for Cause. For purposes of this Agreement, the term "Cause" means (i)
willful and repeated failure by Francis to perform his duties hereunder which is
not remedied within thirty days after written notice from the Company, (ii)
conviction of Francis for a felony, or (iii) Francis's dishonesty that is
demonstrably and materially injurious to the Company.

                (d) Termination by Francis. Francis may terminate his employment
hereunder for Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean (i) the Company substantially reducing Francis's duties,
position, authority or responsibility hereunder and not reinstating the same
within thirty days after written notice from Francis, or (ii) breach by the
Company of its obligations under paragraphs 4 through 8 hereof if not remedied
within thirty days after written notice from Francis, (iii) reduction of
Francis's compensation, (iv) change of control of the Company (see Section 18),
(v) Francis's loss of board position.

                (e) Termination without Cause. The Company shall be obligated,
if termination by the Company occurs without cause or if termination by Francis
for Good Reason occurs, to pay in full all compensation due for the remaining
duration of this contract within 10 days of the notice of termination.

        9. Restrictive Covenants.

                (a) Confidential Information. Francis acknowledges that, during
the course of his employment with the Company, he will have access to

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information and biological materials not generally known outside the Company
(whether conceived or developed by Francis or others) and confidential
information and biological materials entrusted to the Company by third parties,
including, without limitation, trade secrets, techniques, formulae, biological
materials, marketing and other business plans, data, strategies and forecasts
(collectively, "Confidential Information"). Any Confidential Information
conceived or developed by Francis during employment will be the exclusive
property of the Company. Except as may be necessary in connection with the
Company's business, Francis will not (during or after his employment with the
Company) disclose Confidential Information to any third person, firm or entity
or use Confidential Information for his own purposes or for the benefit or any
third person, firm or entity. In his work for the Company, Francis will refrain
from unauthorized use or disclosure of information and biological materials
owned by former employers or other third parties.

                (b) Inventions. Francis will promptly disclose to the Company
any discoveries, inventions, formulae and techniques, whether or not patentable,
made, conceived or first reduced to practice by him, either alone or together
with others, during his employment with the Company (collectively, the
"Inventions"). Francis hereby assigns to the Company all of his right, title and
interest in and to any Inventions. Francis will execute such documents and take
such other actions as may be reasonably requested by the Company (at the
Company's expense) to enable the Company to apply for, obtain, maintain and
enforce patents on any of the Inventions or to facilitate the transfer or
assignment of any of the Company's rights with respect to the Inventions and

                (c) Company Documents. Upon the termination of his employment,
Francis will deliver to the Company all documents and other tangible property
containing Confidential Information which are then in his possession or control.

                (d) Covenant Not to Compete. Francis acknowledges that his
duties hereunder and the services he will provide to the Company are of a
special, unique, unusual and extraordinary character, which gives this Agreement
particular value to the Company, and that it would be difficult to employ any
individual or individuals to replace Francis in the performance of such duties
and services. Therefore, during employment and for a period of one year after
the termination of his employment with the Company, Francis will not, directly
or indirectly, enter into, organize, control, engage in, be employed by, serve
as a consultant to, be an officer or director of or have any direct or indirect
investment in any business, person, partnership, association, firm or
corporation engaged in any business activity (including, but not limited to,
research, development, manufacturing, selling, leasing, licensing or providing
services) which is competitive with the business and/or scientific activities
that the Company is developing or exploiting during Francis's employment with
the Company. Nothing contained in this Agreement shall be construed to prevent
Francis from owning at any time, directly or indirectly, as much as 5% of any
class of equity securities issued by any corporation or other entity which are
publicly traded and registered under the Securities and Exchange Act of 1934, as

<PAGE>   4

                (e) Miscellaneous. The restrictive covenants set forth in the
preceding Section 9(d) will not be applicable or enforceable if Francis's
employment is terminated prior to the expiration of the term of this Agreement
either by the Company without Cause and for disability pursuant to subparagraph
8(b) or by Francis for Good Reason.

        10. Indemnification. The Company will indemnify Francis to the fullest
extent permitted by law and will hold harmless from and against any claim,
liability or expense (including reasonable attorneys' fees) made against or
incurred by Francis in connection with his relationship with the Company. This
obligation will include, without limitation, prompt payment in advance of any
and all costs of defending the same, including attorney fees.

        11. No Impediment to Agreement. Except as otherwise disclosed herein,
Francis hereby represents to the Company that he is not, as of the date hereof,
and will not be, during employment with the Company, employed under contract,
oral or written, by any other person, firm or entity and is not and will not be
bound by the provisions of any restrictive covenant or confidentiality agreement
which would constitute an impediment to, or restriction upon, his ability to
enter into this Agreement and to perform the duties of his employment.

        12. Notices. Any notice under this Agreement must be in writing and will
be deemed to have been given when personally delivered or mailed by first-class
or express mail to the recipient at the following address (or such other address
as shall be specified by prior written notice):

        To the Company:                     VaxGen, Inc.
                                            501 Forbes Blvd.
                                            So.  San Francisco, CA 94080
        Copy to:

        To Donald Francis:                  Dr.  Donald Francis
                                            VaxGen, Inc.
                                            501 Forbes Blvd.
                                            So.  San Francisco, CA 94080

        13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or the interpretation of this Agreement in any other jurisdiction.

<PAGE>   5

        14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the law of

        15. Successors and Assigns. The services and duties to be performed by
Francis hereunder are personal and may not be assigned. This Agreement shall be
binding upon and inure to the benefit of the Company, its successors and
assigns, and Francis, his heirs and representatives.

        16. Success Bonus. In recognition of the success of the Company, Francis
shall receive a one-time success bonus. Success shall be considered to have been
achieved if either of the followings tests is met (either of which shall be an
Event of Success): (i) the public market valuation of a share of the Company's
stock as computed on a 30 day trailing average is equal to or greater than 4
times the valuation of the initial private placement ($3.50 per share), or (ii)
there is an acquisition of the Company through tender offer or otherwise in
which all shareholders have the opportunity to participate and realize a value
equal to or greater than 4 times the valuation of the initial private placement
($3.50 per share). The Company shall notify Francis when an Event of Success has
occurred. In either case Francis shall be entitled to receive a success bonus of
250,000 shares of common stock which shall be delivered to Francis at Francis's
request within 24 months of becoming entitled to receive such shares. The
effective date of this section shall be the date on which the transfer of
control occurs.

        17. Change of Control. In the event following the closing of the
original public offering or private financing, the Company undergoes a change of
control by virtue of any person or entity, or affiliated group of persons or
entities, increasing its shareholding in the Company to a level of 50% or more
of the voting stock of the Company, this Agreement shall terminate and (i) all
salary obligations to Francis outstanding in this Agreement shall be paid in

        18. Complete Agreement. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements between the parties concerning the subject matter hereof.

        19. Waiver. Failure by either party to insist upon strict adherence to
any one or more of the provisions of this Agreement on one or more occasions
shall not be construed as a waiver, nor shall it deprive that party of the right
to require strict compliance thereafter.

        20. Survival. The obligations set forth in paragraphs 10(a) and 11 shall
survive termination of this Agreement.

        21. Amendments. No amendment hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by the parties hereto.

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        22. Withholding. The Company may deduct and withhold from the payments
to be made to Francis hereunder any amounts required to be deducted and withheld
by the Company under the provisions of any statute, law, regulation or ordinance
now or thereafter enacted.

        IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.

VaxGen, Inc.

Its:  Chairman                            

Donald Francis