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Employment Agreement - VaxGen Inc. and Phillip W. Berman

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                              EMPLOYMENT AGREEMENT

      This Employment Agreement  ("Agreement") by and between Phillip W. Berman,
Ph.D. ("Berman") and VaxGen, Inc. ("VaxGen"), is effective February 7, 2002 (the
"Effective  Date"). In consideration of the mutual promises made herein,  VaxGen
and Berman agree as follows:

EMPLOYMENT.  VaxGen hereby employs Berman,  and Berman hereby accepts employment
with VaxGen,  upon all of the terms and conditions  described in this Agreement.
Except with  respect to any stock  options  previously  granted to Berman,  this
Agreement supercedes, replaces and restates any and all prior agreements between
the parties  hereto  relating to the terms of Berman's  employment  with VaxGen,
including any prior agreements  concerning  confidentiality,  non-disclosure and
inventions.

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

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

     a)   Salary/Wages.  VaxGen  agrees to pay Berman a base  salary of $235,000
          per year.  Berman's salary,  less required and authorized  deductions,
          shall be paid in equal,  periodic installments no less frequently than
          semi-monthly   in  accordance   with  VaxGen's  then  current  payroll
          practices.  The  Compensation  Committee  of the Board  will  consider
          Berman's  salary  annually for  potential  increase.  This annual base
          salary shall be retroactive to November 15, 2000.

     b)   Option  Grants.  Berman will be eligible to receive an annual award of
          stock options, which will be issued, if at all, in accordance with the
          terms and  conditions of this Agreement and VaxGen's stock option plan
          as in effect at the time of the award,  in an amount to be  determined
          in the sole  discretion  of the  Board.  In the  event  that  Berman's
          employment  is terminated  by the Company  without  Cause  pursuant to
          paragraph  16(a)(iv)  below or by Berman with Good Reason  pursuant to
          paragraph  16(a)(v) below or following a Change in Control pursuant to
          paragraph 16(d) below, then Berman shall have three (3) years from the
          date of  termination  to exercise all options which are then vested or
          which vest as a result of this Agreement,  provided however that in no
          event will Berman be entitled to exercise such stock options after the
          expiration of 10 years from the date of grant of such stock options.

<PAGE>

     c)   Performance Bonus. Berman is eligible to receive an annual performance
          bonus of up to thirty percent (30%) of his annual base salary in cash,
          VaxGen securities or a combination thereof, provided that no more than
          50% of the performance bonus shall be paid in securities.  The CEO and
          Berman  will  mutually   cooperate  to  establish  annual  performance
          objectives for Berman and the performance bonus will be paid to Berman
          if the performance objectives are met; provided that,  satisfaction of
          the  established   performance   objectives  and  the  amount  of  the
          performance  bonus,  if any,  shall be  determined by the Board in its
          sole discretion. The Compensation Committee of the Board will consider
          Berman's bonus annually for potential increase.

     d)   Benefits.   Berman  shall  be  entitled  to  employment   benefits  in
          accordance  with  policies  established  by or at the direction of the
          Board with respect to senior executives of VaxGen, including holidays,
          leaves of absence,  health insurance,  dental insurance,  vacation and
          other   benefits,   if  any,  in  accordance   with  any   eligibility
          requirements, policies, procedures, or benefit plans adopted by VaxGen
          from time to time during the  existence  of this  Agreement.  Berman's
          rights,  or those  of  Berman's  dependents  under  any such  benefits
          policies  or  plans,  shall be  governed  solely  by the terms of such
          policies or plans. VaxGen's employment benefits,  and policies related
          thereto,  are subject to  termination,  modification  or limitation at
          VaxGen's sole discretion.

     e)   Total  Compensation.  Berman agrees that the compensation stated above
          constitutes  the  full  and  exclusive   monetary   consideration  and
          compensation  for all services  rendered  under this Agreement and for
          all promises and obligations under this Agreement.

     f)   Business  Expenses.  VaxGen  shall pay  Berman's  reasonable  business
          expenses,  including  expenses incurred for travel on VaxGen business,
          in accordance  with the policies and  procedures of VaxGen,  as may be
          adopted or amended from time to time at VaxGen's sole  discretion.  If
          Berman incurs business expenses under this Agreement,  he shall submit
          monthly to VaxGen a request for reimbursement together with supporting
          documentation satisfactory to VaxGen.

VAXGEN  POLICIES.  Berman  agrees to abide by  VaxGen's  written  policies,  and
procedures  that have been  communicated  or made  available to him, as they may
from time to time be  adopted  or  modified  by  VaxGen in its sole  discretion.
VaxGen's written policies and procedures, including the Employee Handbook, shall
be binding on Berman unless  superseded by, or in conflict with, this Agreement.
Copies of written policies and procedures are available to Berman in the offices
of VaxGen,  and Berman  shall be  responsible  at all times to review,  and make
himself familiar with, these policies and procedures.

WARRANTIES.  Berman hereby  represents  and warrants that he has not  unlawfully
misappropriated  any confidential,  proprietary or trade secret information from
Berman's prior employer or employers and, except to the extent such  information
has become publicly  available,  will not knowingly disclose such information to
VaxGen or  improperly  use any such  information  on behalf  of  VaxGen.  Berman
acknowledges that VaxGen has specifically requested that, if Berman has any such
confidential,  proprietary or trade secret knowledge or information,  Berman not
use such information while employed by VaxGen for the benefit of VaxGen.  Berman
further

<PAGE>

warrants  that by entering into this  Agreement  with VaxGen he is not violating
any of  the  terms,  agreements  or  covenants  of any  previous  employment  or
association.

PRIOR INVENTIONS.  Berman acknowledges that, except for the inventions disclosed
on Appendix A, Berman does not have any right or claim to any  invention,  idea,
process, formula, discovery,  copyright, patent or other such item or matter. No
rights are hereby  conveyed by Berman to VaxGen with respect to  inventions,  if
any, made by Berman prior to employment by VaxGen,  which  inventions are listed
in Schedule A, attached hereto.

SUBSEQUENT  INVENTION  DISCLOSURE.  Berman hereby agrees to promptly disclose to
VaxGen  any  and  all  inventions  that  he  develops  during  the  term  of his
employment. Berman will also disclose to the Chief Executive Officer (the "CEO")
all  inventions  made,  conceived,  reduced to practice,  or developed by Berman
within six months of the termination of his employment with VaxGen that resulted
from his prior work with VaxGen. Such disclosures shall be received by VaxGen in
confidence and do not extend the assignment of inventions  disclosed beyond that
required by law.

ASSIGNMENT OF  INVENTIONS.  Berman hereby assigns and agrees to assign to VaxGen
or its  designee,  Berman's  entire  right,  title  and  interest  in and to all
inventions, works of authorship,  developments,  concepts,  discoveries,  ideas,
trademarks  and trade secrets,  whether or not  patentable or registrable  under
copyright or other intellectual  property laws  ("Inventions")  which Berman may
solely or jointly develop,  conceive or reduce to practice, during the period of
employment,  except as provided in  paragraph 10 below.  Berman  agrees that all
such Inventions are the sole property of VaxGen.  Berman further agrees that all
such  Inventions,  including  works of  authorship,  are  "works  for  hire" for
purposes of VaxGen's  rights under  copyright  laws.  Berman  agrees to keep and
maintain  adequate and current  written  records of all  Inventions  made by him
(solely or jointly with others) during the term of his  employment  with VaxGen.
The  records  will be in the form of notes,  sketches,  drawings,  and any other
format that may be  specified  by VaxGen.  The records  will be available to and
remain the sole property of VaxGen at all times.  Berman  understands and agrees
that the  decision  whether  or not to  commercialize  or market  any  Invention
developed  by him  solely  or  jointly  with  others  is  within  VaxGen's  sole
discretion  and for VaxGen's sole benefit and that no royalty will be due to him
as a result of VaxGen's  efforts to  commercialize or market any such Invention.
Berman further agrees to perform,  during and after employment with VaxGen,  all
acts deemed  necessary or desirable  by VaxGen to permit and assist  VaxGen,  at
VaxGen's  expense,  in obtaining  and enforcing  the full  benefits,  enjoyment,
rights and title, throughout the world, of and to the Inventions hereby assigned
by Berman to VaxGen as set forth above.

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

<PAGE>

and interest in and to such Inventions,  and any copyrights,  patents, trademark
and other intellectual  property rights relating thereto.  Berman further agrees
that his obligation to execute or cause to be executed,  when it is in his power
to do so, any such  instrument or papers shall continue after the termination of
this  Agreement.  If VaxGen is unable,  because of  Berman's  mental or physical
incapacity or for any other  reason,  to secure his signature to apply for or to
pursue any  application  for any United  States or foreign  patents or copyright
registrations  covering  Inventions or original works of authorship  assigned to
VaxGen as above, then Berman hereby  irrevocably  designates and appoints VaxGen
and its duly authorized officers and agents as his agent and attorney in fact to
act for and in his behalf and stead to  execute  and file any such  applications
and to do all other  lawfully  permitted  acts to further  the  prosecution  and
issuance of letters  patent or  copyright  registrations  thereon  with the same
legal force and effect as if executed by Berman.

INVENTIONS  NOT ASSIGNED.  The parties  agree that the  assignment of inventions
under this Agreement does not apply to an invention  which  qualifies  fully for
protection  under Section 2870 of the California  Labor Code,  which states that
"Any provision in an employment  agreement which provides that an employee shall
assign,  or offer to assign,  any of his or her rights in an invention to his or
her  employer  shall  not  apply to an  invention  that the  employee  developed
entirely  on his  or her  own  time  without  using  the  employer's  equipment,
supplies,  facilities or trade secret  information  except for those  inventions
that either:  (1) relate at the time of  conception  or reduction to practice of
the invention to the employer's business, or actual or demonstrably  anticipated
research or development  of the employer;  or (2) result from any work performed
by the employee for the employer."

CONFIDENTIAL, PROPRIETARY AND TRADE SECRET INFORMATION. During the course of his
employment,  Berman  will  come  into  possession  of or  acquire  knowledge  of
confidential,  proprietary and trade secret information of VaxGen. Berman hereby
covenants and agrees that he will not,  either  during his  employment or at any
time  thereafter,  disclose any such  confidential,  proprietary or trade secret
information to any person, firm, corporation,  association, partnership or other
entity (other than those in VaxGen's  organization  qualified and  authorized to
receive  such   information)  for  any  purpose  or  reason   whatsoever.   Such
confidential and proprietary  information shall be deemed to include, but not be
limited to,  manuals,  discs,  tapes,  and summaries or originals of any papers,
documents, plans, specifications, client lists, contracts, licenses or licensing
agreements,  data  bases,  or  portions  thereof,  related to the  research  and
development, products or operations of VaxGen, provided that such information is
confidential,  proprietary  or falls within the  definition of a "trade  secret"
under the Uniform Trade Secrets Act. Berman specifically agrees that he will not
make  use of any  such  confidential  or  proprietary  information  for  his own
purpose,  or for the benefit of any person,  firm,  corporation  or other entity
except  VaxGen.  Berman  will abide by  VaxGen's  policies  and  procedures,  as
established  from  time to time for the  protection  of its  trade  secrets  and
confidential information.

RETURN OF PROPERTY. All confidential,  proprietary and trade secret information,
and all other  documents,  records,  apparatus,  equipment  and  other  physical
property which is furnished to or obtained by Berman in the course of employment
with VaxGen, shall be and remain the sole property of VaxGen. Berman agrees that
upon  request by VaxGen or the  termination  of

<PAGE>

Berman's  employment  (whichever  occurs  first),  Berman  shall return all such
property, and agrees not to make or retain copies, reproductions or summaries of
any such property without the express written consent of VaxGen.

NON-SOLICITATION,  ANTI-RAIDING.  For a  period  of  one  (1)  year  immediately
following the  termination  of his  employment,  Berman agrees that he will not,
either directly or indirectly,  (a) attempt to recruit, solicit or take away any
of the  employees of VaxGen who worked for VaxGen at any time during the term of
this  Agreement;  make known to any  person,  firm or  corporation  the names or
addresses of, or any information  pertaining to, any current or former employees
of VaxGen;  (b) use any  confidential  or proprietary  information to attempt to
call on,  solicit  or take away any  clients  of  VaxGen  or any other  persons,
entities, or corporations with which VaxGen has had or contemplated any business
transaction or relationship during Berman's  employment with VaxGen,  including,
but not limited to, investments,  licenses,  joint ventures,  and agreements for
development.

EQUITABLE RELIEF.  Berman and VaxGen each agree that in the event of a breach or
threatened  breach of paragraphs 7 through 13 of this  Agreement each party will
not have an  adequate  remedy  at law.  Thus,  in the  event of such a breach or
threatened  breach  by one  party,  the other  party  will be  entitled  to such
equitable and injunctive relief in a court of law as may be available to prevent
and  restrain  a breach of the  provisions  of  paragraphs  7 through  13.  Said
availability  to obtain  injunctive  relief will not prevent  either  party from
pursuing any other equitable or legal relief,  including the recovery of damages
from such breach or threatened breach.

AT-WILL  EMPLOYMENT.  Berman understands and agrees that employment at VaxGen is
at-will.  This means that, for any reason or no reason,  Berman's employment may
be terminated, with or without cause, at any time by either Berman or by VaxGen,
subject to the  severance and notice  provisions  contained in Section 16 below.
Nothing in this or any other  document  or  statement  shall  limit the right of
VaxGen  to  terminate  Berman's  employment  at-will.  Only  the  Board  has the
authority  to amend  this  Agreement  on  behalf of  VaxGen,  and then only in a
writing that is signed by both Berman and VaxGen pursuant to authority expressly
granted by the Board.

TERMINATION OF EMPLOYMENT.

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

Death: In the event of Berman's death,  the termination  shall be effective upon
the date thereof.

Disability:  In the event  that  Berman  should  become  "disabled,"  VaxGen may
terminate  Berman's  employment  under  this  Agreement.  For  purposes  of this
paragraph   "disabled"  shall  mean  Berman's   inability,   despite  reasonable
accommodation,  to perform the essential  duties of his position for a period of
five (5) consecutive months, and failure to

<PAGE>

resume the  performance  of such duties on a full-time  basis within thirty (30)
days of  notice  from  VaxGen  of intent to  terminate  this  Agreement  on such
grounds.  The termination shall be effective upon the date specified in VaxGen's
notice to Berman as provided  for herein.  Any base salary  payable to Berman by
VaxGen  may be  offset by any  benefits  paid to  Berman  under  any  applicable
short-term or long-term disability plan.

Cause:  VaxGen may terminate  Berman's  employment under this Agreement upon the
occurrence of "cause" for termination as herein defined.  "Cause" shall mean (A)
Berman  being  found by the  Board to have  committed  fraud,  misappropriation,
embezzlement or other willful commission of a dishonest or unlawful act that has
the  effect of  materially  injuring  VaxGen  or its  reputation,  (B)  Berman's
conviction  of a crime  involving  moral  turpitude  or a felony,  (C)  Berman's
willful or reckless  violation of VaxGen's  written  policies or procedures that
has the  effect  of  materially  injuring  VaxGen,  or  Berman's  breach  of the
confidential  information and invention assignment provisions of this Agreement,
and,  if any such  violation  or breach  under  this  Section  16(a)(iii)(C)  is
curable,  Berman's  failure to cure such  violation or breach within 15 business
days of  receiving  notice of such  violation  or breach from the Board,  or (D)
Berman's  habitual failure to perform his job duties, as determined by the Board
in its reasonable  judgment,  and after notice of such failure has been given to
Berman by the Board and Berman has had a 15 business-day  period within which to
cure such failure.  The Parties  acknowledge that the reference to a "for Cause"
termination  herein  does not alter the  employment  at-will  relationship,  but
merely sets forth  circumstances  under which  VaxGen has no  obligation  to pay
severance to Berman.  The termination shall be effective upon the date specified
in VaxGen's notice to Berman.

Without Cause:  Either VaxGen or Berman may terminate Berman's  employment under
this Agreement without Cause at any time upon thirty (30) days written notice to
the other party.  The termination  shall be effective upon the date specified in
the notice given pursuant hereto.

By Berman with Good  Reason:  Berman may  terminate  his  employment  under this
Agreement  for Good  Reason (A) in the event  VaxGen  breaches  a material  term
hereof and, after  receiving  written notice from Berman  detailing the specific
provision  allegedly  breached,  does not remedy said breach  within thirty (30)
days of receiving notice, (B) there is a demotion of Berman from the position of
Senior Vice President,  Research and Development or the assignment of job duties
or responsibilities materially inconsistent with such position, (C) VaxGen moves
Berman's  principal  place of  business  more than  thirty-five  (35) miles from
VaxGen's  current  principal  place of business at 1000 Marina  Blvd,  Brisbane,
California, (D) there is a reduction in Berman's then-current base salary and/or
performance  bonus  opportunity,  or (E)  there is a  material  and  substantial
reduction in the aggregate of Berman's employee benefits.  The termination shall
be effective on the date  specified  in the notice given  hereunder,  which date
shall not be earlier  than the date such notice is given,  nor more than 30 days
after the date such notice is given.

In the event that  Berman's  employment  under this  Agreement is  terminated by
VaxGen under paragraphs  16(a)(i),  16(a)(ii) or 16(a)(iii)  above, or by Berman
under paragraph 16(a)(iv) above,

<PAGE>

no  severance  pay will be due to Berman;  however  Berman  shall be entitled to
payment for any earned but unpaid base salary through the date of termination as
well as  payment  for any  accrued  but  unused  vacation  time and any  accrued
employee  benefits,  subject  to the terms of the  applicable  employee  benefit
plans.

In the event that  Berman's  employment  under this  Agreement is  terminated by
VaxGen under paragraph  16(a)(iv)  above or by Berman under  paragraph  16(a)(v)
above,  Berman shall be entitled to receive:  (i) severance pay in the amount of
six (6) months of his then-existing annual base salary plus one additional month
of base  salary for each full year of  employment  with VaxGen  (such  severance
being  limited  strictly  to annual  base salary and will not include any amount
paid or  payable  as a bonus or stock  option  grant) up to a maximum  severance
payment of twelve (12) months annual base salary,  less required and  authorized
deductions,  payable on VaxGen's  ordinary  payroll cycles until fully paid out;
and (ii)  accelerated  vesting  of all his  outstanding  stock  options to fully
vested status as of the date of termination.

Berman shall be entitled to the severance  benefits  provided for in 16(c) above
if, within twelve (12) months  following a Change in Control (as defined below),
VaxGen or its  successor  in interest  terminates  Berman's  employment  for any
reason  other  than for  Cause (as  defined  above)  or  Berman  terminates  his
employment on account of any of the following:  (i) in the event VaxGen breaches
a material term hereof and, after receiving written notice from Berman detailing
the specific provision  allegedly  breached,  does not remedy said breach within
thirty (30) days of receiving notice;  or (ii) there is a material  reduction in
Berman's job duties or responsibilities, including, without limitation, demotion
from the position of Senior Vice President,  Research and Development;  or (iii)
VaxGen or its successor in interest moves Berman's  principal  place of business
more than  thirty-five  (35)  miles from  VaxGen's  current  principal  place of
business at 1000 Marina Blvd, Brisbane, California; or (iv) there is a reduction
in Berman's  then-current base salary and/or performance bonus  opportunity;  or
(v) there is a material and  substantial  reduction in the aggregate of Berman's
employee benefits.

For purposes of this  Agreement,  a "Change in Control"  shall be deemed to have
occurred  if: (i) there is an  acquisition  by any  individual,  entity or group
(within the meaning of Section  13(d)(3) or 14(d)(2) of the Securities  Exchange
Act of 1934, as amended (the "Exchange Act")) (for the purposes of this Section,
a  "Person")  of  beneficial   ownership  (within  the  meaning  of  Rule  13d-3
promulgated  under the  Exchange  Act) of 50% or more of the voting power of the
then outstanding  voting  securities of VaxGen entitled to vote generally in the
election of directors (the "Outstanding Company Voting  Securities");  provided,
however,  that for purposes of this  subsection  16(e),  any  acquisition by any
employee  benefit plan (or related  trust)  sponsored or maintained by VaxGen or
any  corporation  controlled by VaxGen shall not constitute a Change in Control;
or (ii)  individuals  who,  as of the date  hereof,  constitute  the Board  (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board;  provided,  however,  that any individual (other than an individual whose
initial  assumption  of office  occurs  as a result  of an actual or  threatened
solicitation  of proxies or consents by or on behalf of a Person  other than the
Board) who becomes a director  subsequent  to the date hereof whose  election or
nomination  for election by VaxGen's  shareholders  was approved by a vote of at
least a majority of the directors then  comprising the Incumbent  Board shall be
considered as though such

<PAGE>

individual  were  a  member  of  the  Incumbent  Board;  or  (iii)  there  is  a
consummation  of a  reorganization,  merger  or  consolidation  or sale or other
disposition  of all or  substantially  all of the assets of VaxGen (a  "Business
Combination") unless,  following such Business Combination,  (A) individuals and
entities  who were the  beneficial  owners  of the  Outstanding  Company  Voting
Securities  immediately  prior to such Business  Combination  beneficially  own,
directly  or  indirectly,  more  than  50%  of the  voting  power  of  the  then
Outstanding  Company Voting  Securities of the  corporation  resulting from such
Business Combination  (including,  without limitation,  a corporation which as a
result of such transaction  owns VaxGen or all or substantially  all of VaxGen's
assets either directly or through one or more  subsidiaries)  and (B) at least a
majority of the members of the board of directors of the  corporation  resulting
from such Business  Combination  were members of the Incumbent Board at the time
of the  execution  of the  initial  agreement,  or of the  action of the  Board,
providing for such Business Combination; or (iv) approval by the shareholders of
VaxGen of a complete liquidation or dissolution of VaxGen.

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

INDEMNIFICATION.  VaxGen shall maintain, for the benefit of Berman, director and
officer  liability  insurance  in form at least as  comprehensive  as, and in an
amount that is at least equal to, that  maintained by VaxGen as of the Effective
Date of this  Agreement for officers and  directors.  In addition,  VaxGen shall
indemnify  Berman against  liability as an officer and director of VaxGen or any
subsidiary or affiliate of VaxGen to the maximum extent  permitted by applicable
law. Berman's rights under this Paragraph 17 shall continue so long as he may be
subject to such  liability,  whether or not his employment  may have  terminated
prior thereto.

SURVIVABILITY.  The respective rights and obligations of the Parties  hereunder,
including, without limitation,  Sections 7, 8, 9, 10, 11, 12, 13, 14, 16(c), 17,
19 and 28 of  this  Agreement,  shall,  to the  extent  necessary,  survive  any
termination of Berman's employment or this Agreement.

GOVERNING LAW. This Agreement shall be construed in accordance with and governed
by the laws of the State of  California  without  regard to its  conflict of law
rules.  This Agreement shall be interpreted in accordance with the plain meaning
of its terms and not strictly for or against either party.

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

<PAGE>

WAIVER.  The failure of either  party to insist,  in any one or more  instances,
upon  performance  of the terms or  conditions  of this  Agreement  shall not be
construed  as a waiver or a  relinquishment  of any  right  granted  under  this
Agreement or of the future performance of any such term, covenant or condition.

INVALIDITY. Should any provision, portion or part of this Agreement be held by a
court of  competent  jurisdiction  to be  invalid,  void or  unenforceable,  the
remaining  provisions,  portions or parts shall be unaffected and shall continue
in full force and effect, and said invalid, void or unenforceable  provision(s),
portion(s) or part(s) shall be deemed not to be part of this Agreement.

NO THIRD PARTY BENEFICIARIES.  This Agreement is not intended by either party to
create  any  third-party  beneficiaries,  and shall not be so  construed  in any
proceeding.  The sole parties to this Agreement are Berman and VaxGen, and it is
their  mutual  intent  that they  alone  shall  have  standing  to  enforce  the
provisions of this Agreement, subject to the provisions of Section 26 below.

VOLUNTARY  AGREEMENT.  Berman  and  VaxGen  represent  and  agree  that each has
reviewed all aspects of this Agreement, has carefully read and fully understands
all  provisions  of  this  Agreement,  and is  voluntarily  entering  into  this
Agreement.  Each  party  represents  and  agrees  that  such  party  has had the
opportunity to review any and all aspects of this Agreement with the legal,  tax
or other  advisor or advisors  of such  party's  choice  before  executing  this
Agreement.

CAPTIONS.  The captions of the various  paragraphs of this  Agreement are placed
herein for the  convenience  of the parties and the reader,  do not constitute a
substantive term or terms of this Agreement,  and shall not be considered in any
issue involving the interpretation or application of this Agreement.

SUCCESSORS AND ASSIGNS.  This  Agreement  shall be binding upon and inure to the
benefit of and shall be enforceable by and against Berman's heirs, beneficiaries
and legal  representatives.  It is agreed  that the  rights and  obligations  of
Berman may not be delegated or assigned except as specifically set forth in this
Agreement.  In the event of a Change in Control (as defined  above),  VaxGen may
assign   its   rights   and   obligations    under   this   Agreement   to   its
successor-in-interest,  and in that  event such  successor-in-interest  shall be
deemed to have acquired all rights and assumed all  obligations  of VaxGen under
this Agreement.

NOTICES. Notices given under the terms of this Agreement shall be in writing and
shall be deemed  delivered when  personally  delivered to the person  identified
below, or three (3) days after deposited, proper first class postage prepaid, in
the U. S. Mail and  addressed  as set  forth  below,  or one day after  properly
consigned to a recognized  national  next-day  delivery  service (e.g.,  Federal
Express)  prepaid  and  addressed  as set forth  below,  or faxed to the  number
provided  below  and  confirmed  by a  delivery  report  from  the  sending  fax
transmitter.  The officer,  addresses and facsimile numbers below may be changed
by written notice given pursuant to this paragraph. Notices shall be given:

<PAGE>

                        If to VaxGen:   Chief Executive Officer of VaxGen
                                        1000 Marina Blvd., Suite 200
                                        Brisbane, California 94005
                                        Fax number: 650-624-1001

                        With a copy to: Garrett Waltzer, Esq.
                                        Skadden, Arps, Slate, Meagher & Flom LLP
                                        525 University Avenue, Suite 1100
                                        Palo Alto, California 94301
                                        Fax number: 650-470-4570

                        If to Berman:   Phillip W. Berman



ALTERNATIVE DISPUTE RESOLUTION PROGRAM.  Except as to efforts to seek injunctive
relief as  specifically  addressed  in  paragraphs  7 through  14,  the  parties
understand  and agree that any dispute  arising out of  Berman's  employment  by
VaxGen,  the  termination of that  employment,  or arising out of or relating to
this Agreement shall be submitted to binding  arbitration in accordance with the
terms of the  Alternative  Dispute  Agreement  set forth in  Appendix  B to this
Agreement and incorporated herein.


   Dated:_________________                    ______________________________
                                              Phillip W. Berman, Ph.D.

   Dated:_________________                    VaxGen, Inc.

                                              By:___________________________

                                              Title:________________________

<PAGE>

                                   APPENDIX A

Inventions.  Except as set forth below, I hereby acknowledge that at this time I
have no right,  title or other interest in any invention,  patent,  copyright or
other such material other than the following (if none, so state):

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Dated:__________________________        _____________________________
                                        Phillip W. Berman, Ph.D.

<PAGE>

                                   APPENDIX B

                          ALTERNATIVE DISPUTE AGREEMENT

                            o Agreement To Arbitrate

     In the event  that any  employment  dispute  arises  between  VaxGen,  Inc.
("VaxGen") and Phillip W. Berman,  Ph.D.  ("Berman"),  the parties involved will
make all efforts to resolve any such dispute through informal means. However, if
within thirty (30) days of the event giving rise to the dispute,  these informal
attempts at  resolution  fail and if the dispute  arises out of or is related to
Berman's Employment Agreement,  Berman's employment, the termination of Berman's
employment  or alleged  unlawful  discrimination,  including  but not limited to
sexual or other unlawful harassment (an "Arbitrable Dispute"), VaxGen and Berman
will submit the dispute to final and binding arbitration, except as set forth in
Paragraphs 7-14 of the Employment Agreement.

     The  parties  expressly  understand  and  agree  that  arbitration  is  the
exclusive  remedy  for  all  such  Arbitrable  Disputes;  with  respect  to such
disputes,  no other  action may be brought in court or any other  forum  (except
actions  to compel  arbitration  or  enforce an award  issued  hereunder).  THIS
ALTERNATIVE  DISPUTE  RESOLUTION  ("ADR")  AGREEMENT IS A WAIVER OF THE PARTIES'
RIGHTS TO A CIVIL COURT ACTION FOR A DISPUTE  RELATING TO BREACH OF THE PARTIES'
EMPLOYMENT  AGREEMENT,  TERMINATION  OF  THAT  EMPLOYMENT  OR  ALLEGED  UNLAWFUL
DISCRIMINATION,   WHICH  INCLUDES   RETALIATION  OR  SEXUAL  OR  OTHER  UNLAWFUL
HARASSMENT; ONLY AN ARBITRATOR, NOT A JUDGE OR JURY, WILL DECIDE THE DISPUTE.

     Arbitrable  Disputes  arising  out  of or  related  to  employment,  or the
termination of such  employment or alleged  unlawful  discrimination,  including
retaliation or sexual or other unlawful  harassment,  shall include,  but not be
limited to, the  following:  alleged  violations of federal,  state and/or local
constitutions,  statutes or regulations; claims based on any purported breach of
contractual obligation,  including breach of the covenant of good faith and fair
dealing;  and  claims  based on any  purported  breach of duty  arising in tort,
including violations of public policy.

     The  following  types of  employment  disputes  are not subject to this ADR
Agreement:  (1)  disputes  related to  workers'  compensation  and  unemployment
insurance;  (2) claims for  benefits  covered  by a separate  benefit  plan that
provides for arbitration; and (3) claims subject to Sections 7 through 14 of the
Employment  Agreement.  Also, nothing in the Employment  Agreement or in the ADR
Agreement shall be construed as precluding  Berman from filing a charge with the
Equal Employment  Opportunity  Commission ("EEOC"), the National Labor Relations
Board ("NLRB") or other federal, state or local agencies, seeking administrative
assistance  in  resolving  claims.  However,  any claim that  cannot be resolved
administratively  through  such an agency  shall be  subject  to the  Employment
Agreement and the ADR Agreement.

                            o Request For Arbitration

                  o Attempt At Informal Resolution Of Disputes

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

     Berman  and  VaxGen  will  select a mediator  from a list  provided  by the
Federal  Mediation and  Conciliation  Service or other  similar  agency who will
assist the parties in  attempting  to reach a  settlement  of the  dispute.  The
mediator may make  settlement  suggestions to the Parties but shall not have the
power to impose a settlement upon them. If the dispute is resolved in mediation,
the matter shall be deemed  closed.  If the dispute is not resolved in mediation
and goes to the next step (binding  arbitration),  any proposals or  compromises
suggested by either of the parties or the  mediator  shall not be referred to in
or have any bearing on the arbitration procedure. The mediator cannot also serve
as the  arbitrator in the  subsequent  proceeding  unless all parties  expressly
agree in writing.

                            o Arbitration Procedures

     The party desiring  arbitration,  whether  Berman or VaxGen,  must submit a
"Request For Arbitration" in

<PAGE>

writing to the other  party  within  the time  period  required  by the law that
applies  to the claim  under  the  applicable  statute  of  limitations.  If the
"Request for Arbitration" is not submitted in accordance with the aforementioned
time  limitations,  the  party  failing  to do so will not be able to bring  his
claims to this or any other forum.  The requesting  party may use a "Request for
Arbitration" form supplied by VaxGen (Appendix C). Alternatively, the requesting
party may  create a  "Request  For  Arbitration"  form  that,  unless  otherwise
required by law,  clearly states  "Request For  Arbitration" at the beginning of
the first page and includes the following information:

     1. A factual  description of the dispute in sufficient detail to advise the
other party of the nature of the dispute;

     2. The date when the dispute first arose;

     3. The names,  work  locations  and telephone  numbers of any  individuals,
including employees or supervisors, with knowledge of the dispute; and

     4. The relief requested by requesting party.

     The  responding  party  may  submit   counterclaim(s)  in  accordance  with
applicable law.

                         o Selection Of The Arbitrator

     All disputes will be resolved by a single  Arbitrator,  the Arbitrator will
be mutually  selected by VaxGen and Berman.  If the parties  cannot  agree on an
Arbitrator,  then a list of seven (7)  arbitrators,  experienced  in  employment
matters,  shall be  provided  by the  Judicial  Arbitration  Mediation  Services
("JAMS/Endispute").  The  Arbitrator  will be  selected  by the parties who will
alternately strike names from the list. The last name remaining on the list will
be  the  Arbitrator  selected  to  resolve  the  dispute.  Upon  selection,  the
Arbitrator  shall set an appropriate  time, date and place for the  arbitration,
after conferring with the parties to the dispute.

                          o The Arbitrator's Authority

     The Arbitrator shall have the powers enumerated below:

     1. Ruling on motions  regarding  discovery,  and ruling on  procedural  and
evidentiary issues arising during the arbitration.

     2.  Ruling on  motions to  dismiss  and/or  motions  for  summary  judgment
applying the standards  governing  such motions under the Federal Rules of Civil
Procedure.

     3.  Issuing  protective  orders on the  motion of any party or third  party
witness. Such protective orders may include, but are not limited to, sealing the
record of the arbitration,  in whole or in part (including discovery proceedings
and motions, transcripts, and the decision and award), to protect the privacy or
other constitutional or statutory rights of parties and/or witnesses.

     4. Determining only the issue(s) submitted to him/her. The issue(s) must be
identifiable  in the "Request For  Arbitration"  or  counterclaim(s).  Except as
required by law, any issue(s) not identifiable in those documents is outside the
scope of the  Arbitrator's  jurisdiction  and any award involving such issue(s),
upon motion by a party, shall be vacated.

                                  o Discovery

     The discovery process shall proceed and be governed by the standards of the
California Code of Civil Procedure and the Federal  Arbitration  Act. Each party
may obtain  discovery  necessary  to  adequately  explore  and  arbitrate  their
respective   claims.  The  Arbitrator  shall  have  the  power  to  enforce  the
aforementioned  discovery  rights and  obligations by the imposition of the same
terms, conditions, consequences,  liabilities, sanctions and penalties as can or
may be imposed in like circumstances in a civil action under the California Code
of Civil  Procedure,  except the power to order the arrest or  imprisonment of a
person.

<PAGE>

                               o Hearing Procedure

     The  hearing  shall  be  held at a  location  mutually  agreed  upon by the
parties, or as determined by the Arbitrator in the absence of an agreement,  and
shall  proceed  according  to the current  version of the  American  Arbitration
Association's  "National  Rules for the Resolution of Employment  Disputes" (the
"Rules") with the following amendments:

     1. The Arbitrator shall rule at the outset of the arbitration on procedural
issues that bear on whether the arbitration is allowed to proceed.

     2. Each  party has the  burden of  proving  each  element  of its claims or
counterclaims,  and each party has the burden of proving any of its  affirmative
defenses.

     3. In addition to, or in lieu of closing argument,  either party shall have
the right to present a post-hearing  brief,  and the due date for exchanging any
post-hearing  briefs  shall  be  mutually  agreed  on by  the  parties  and  the
Arbitrator, or determined by the Arbitrator in the absence of agreement.

     4. The Rules shall  otherwise  be modified  to the extent  necessary  to be
consistent with applicable law.

                               o Substantive Law

     1. The  parties  agree  that they will be  afforded  the  identical  legal,
equitable,  and statutory  remedies as would be afforded them were they to bring
an action in a court of competent jurisdiction.

     2.  The  applicable  substantive  law  shall  be the  law of the  State  of
California  and/or federal law.  Choice of substantive law in no way affects the
procedural  aspects of the  arbitration,  which are exclusively  governed by the
provisions of this ADR Agreement.

                              o Opinion And Award

     The Arbitrator shall issue a written opinion and award, in conformance with
the following requirements:

     1. The opinion and award must be signed and dated by the Arbitrator.

     2. The Arbitrator's opinion and award shall decide all issues submitted.

     3. The Arbitrator's  opinion and award shall set forth the findings of fact
and conclusions of law supporting each part of the opinion.

     4. The Arbitrator shall have the same authority to award remedies,  damages
and costs as provided to a judge and/or jury under parallel circumstances.

                      o Enforcement Of Arbitrator's Award

     Following the issuance of the Arbitrator's decision, any party may petition
a court to  confirm,  enforce,  correct or vacate the  Arbitrator's  opinion and
award under the Federal Arbitration Act, and/or applicable State law.

                                o Fees And Costs

     Unless otherwise  required by law, fees and costs shall be allocated in the
following manner:

     1. Each party shall be responsible for its own attorneys'  fees,  except as
otherwise provided by law for the particular claim(s) at issue.

     2.  VaxGen  shall pay the entire  cost of the  arbitrator's  services,  the
facility in which the  arbitration  is to be held,  and any  similar  costs that
Berman would not have  otherwise  incurred if the dispute were  adjudicated in a
court of law

<PAGE>

rather than through arbitration.

     3. VaxGen shall pay the entire cost of a court  reporter to transcribe  the
arbitration  proceedings.  Each party shall  advance  the cost for said  party's
transcript  of the  proceedings.  Each  party  shall  advance  its own costs for
witness fees, service and subpoena charges,  copying,  or other incidental costs
that each party would bear during the course of a civil lawsuit.

     4. Each party shall be responsible for its costs associated with discovery,
except as required by law or court order.

                                 o Severability

     Each term,  clause and  provision  of this ADR  Agreement  is separate  and
independent,  and should any term,  clause or provision of this ADR Agreement be
found to be invalid or  unenforceable,  the  validity  of the  remaining  terms,
clauses,  and provisions shall not be affected.  As to those terms,  clauses and
provisions  found to be invalid or  unenforceable,  they shall be replaced  with
valid and  enforceable  terms,  clauses or provisions  or shall be modified,  in
order to achieve,  to the fullest extent  possible,  the economic,  business and
other purposes of the invalid or unenforceable terms, clauses or provisions.

Dated:_________________                    ______________________________
                                           Phillip W. Berman, Ph.D.

Dated:_________________                    VaxGen, Inc.

                                           By:___________________________

                                           Title:________________________

<PAGE>

                                   APPENDIX C

                          REQUEST FOR ARBITRATION FORM

                    ALTERNATIVE DISPUTE RESOLUTION AGREEMENT

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

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State the nature of the claim in detail:

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(Continue on reverse and add pages if necessary)

Enter the date of termination or date(s) of alleged  incident(s)  (i.e., date of
last instance of unlawful discrimination,  sexual or other unlawful harassment):
_______/________/_______

                                                 Month         Day        Year

Provide the names and work locations of any individuals,  including employees or
supervisors, with knowledge of the dispute:

Name                             Job Title                        Work Location

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<PAGE>

Describe the relief requested (i.e., what you want done):

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(Please attach any documents relevant to the dispute.)

Signature of Party Requesting Arbitration:

DATED:______________                            ______________________________
                                                Phillip W. Berman, M.D., D.Sc.

-- or --

DATED:______________                            VaxGen, Inc.

                                                By:___________________________

                                                Title:________________________