Document:

RELEASE AND SETTLEMENT AGREEMENT

     THIS RELEASE AND SETTLEMENT  AGREEMENT  ("Agreement")  is made effective on
the 1st day of March, 2001 ("Effective Date") between Xerox  Corporation,  a New
York corporation with offices at Fairport, New York ("Xerox"),  Set Electronique
S.A., a French  corporation with offices at Wissous,  France ("SE"),  and Accent
Color Sciences,  Inc., a Connecticut  corporation with offices at East Hartford,
Connecticut ("ACS").

                                    RECITALS:

WHEREAS,  SET  Electronique  France S.A., a French  corporation  with offices at
Wissons,  France  ("SET"),  entered  into  a  certain  Product  Development  and
Distribution  Agreement  with  ACS  effective  August  27,  1997  ("Distribution
Agreement"); and

WHEREAS,  on or about  February 16, 1999, SET was subject to a share purchase by
Xerox Document  Services SNC, a partnership with its principal office at 134-140
Rue  d'Ambervilliers,  Paris ("XDS"),  as represented by the affiliated  company
Xerox The Document  Company S.A.S.,  a French  corporation,  such share purchase
resulting in SE, becoming a wholly owned subsidiary of XDS; and

WHEREAS,  ACS and SE desire to ratify  the  assignment  to SE of all  rights and
obligations of SET under the terms of the Distribution  Agreement effective with
the share purchase described herein; and

WHEREAS,  ACS and SE  have  each  asserted  certain  claims  against  the  other
respectively with respect to the Distribution Agreement; and

WHEREAS,  each party disputes the validity of the claims and amounts  alleged to
be due and owing by the other party; and

WHEREAS,  the parties  desire to settle any and all claims each may have against
the other, in the manner and upon the terms and conditions herein provided:

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parities hereby agree as follows:

I.   DEFINITIONS

1.   Closing.  "Closing"  shall mean  March 1,  2001,  or such other date as the
     parties mutually agree.

2.   Distribution   Agreement.   "Distribution   Agreement"   shall   mean   the
     Distribution Agreement together with certain amendments to the Distribution
     Agreement  entered  into by ACS and SE from time to time,  such  amendments
     including (without  limitation) the July 21, 1999 letter from Jerry Luckett
     of SE.

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<PAGE>

3.   Products.  "Products"  shall  have the  same  meaning  as set  forth in the
     Distribution  Agreement,  namely the ACS-SET Truecolor System and other ACS
     products listed in Exhibits A through C, including Spares,  Consumables and
     all modifications, improvements, enhancements, additions, updates, releases
     and versions  thereof.  All other  defined terms in this Section shall have
     the meaning ascribed to them in the Distribution Agreement.

4.   Xerox Company. "Xerox Company" shall mean Xerox Corporation, Xerox Limited,
     Fuji Xerox Co.,  Ltd.,  Modi Xerox Co.,  Ltd.,  Xerox The Document  Company
     S.A.S.,  SE, XDS, and any entity which is owned or  controlled  directly or
     indirectly by Xerox Corporation or by any of the foregoing.

II.  OBLIGATIONS OF THE PARTIES

1.   Xerox Obligations.

          (a)  Payment.  At the  Closing  and  concurrently  with  receipt of an
          executed release from ACS in the form attached hereto as Attachment A,
          Xerox will electronically  transfer (wire) the amount of three hundred
          eighty-one thousand five hundred eighty-five dollars  ($381,585.00) to
          ACS. The foregoing  payment  constitutes  Xerox's sole  liability with
          respect to this Agreement.

2.   ACS Obligations.

          (a) Release. At the Closing,  ACS will deliver to each of Xerox and SE
          an original executed release in the form attached hereto as Attachment
          A ("Xerox Company Release").

          (b) Technical  Support.  Commencing  with the Closing  Date,  ACS will
          continue  to  provide  SE, at ACS'  then  current  charges,  telephone
          technical  support,  service  and  software  support  with  respect to
          Products  during the period  continuing  for seven (7) years after the
          date of  delivery  of the last  ACS-SET  Truecolor  System to SE. If a
          technical problem cannot be resolved by telephone  technical  support,
          ACS will provide on site technical  support to SE at ACS' then current
          charges,  plus reasonable  costs of travel,  food and lodging actually
          incurred by ACS and preapproved in writing by SE.

III. TERMINATION OF DISTRIBUTION AGREEMENTS

1.   Distribution  Agreement.  Upon the Closing Date, the Distribution Agreement
     will be deemed  terminated  in its entirety by mutual  agreement of ACS and
     SE, provided that ACS' obligations  under the  Distribution  Agreement with
     respect  to  any  and  all  Products   delivered  in  accordance  with  the
     Distribution  Agreement as of the effective  termination  date will survive
     such termination.  Except with respect to such surviving provisions and the
     technical support  identified in Section 11.2(b),  neither party shall have
     any further liability under the Distribution Agreement.

2.   Product Development and Distribution  Agreement.  In addition,  the Product
     Development and Distribution  Agreement  executed by the parties  effective
     August 27, 1997, will be deemed terminated in its entirety by

                                       39
<PAGE>

     mutual  agreement of ACS and SE as of the Closing  Date,  and neither party
     shall have any further liability thereunder.

IV.  GENERAL

1.   Admission of Liability.  The parties acknowledge and agree that neither the
     execution nor delivery of this  Agreement or of any document to be executed
     or delivered  pursuant to this  Agreement  nor the taking of any  action(s)
     taken or to be taken  pursuant to this  Agreement  shall  constitute  or be
     construed as an admission of any liability by any party.

2.   Covenant Not to Sue. Except for actions to enforce this Agreement,  each of
     the parties  agrees not to file or cause to be filed any  complaint (or any
     motion  or  document  in  the  nature  of  a  complaint)  with  any  court,
     arbitrator,  agency,  commission,  department  or  other  tribunal  in  any
     jurisdiction  against  the other  party (or its  affiliates,  shareholders,
     directors,    officers,   employees,   agents,   attorneys,   insurers   or
     representatives)  with  respect  to any  claims  included  within the Xerox
     Company  Release.  In the event that a lawsuit is brought to enforce any of
     the provisions of this Agreement, the prevailing party shall be entitled to
     recover its reasonable attorneys' fees from the other party.

3.   Non-Assignment of Claims. ACS represents and warrants (a) that it holds all
     right,  title  and  interest  in and to all of the  claims  to be  released
     pursuant  to the Xerox  Company  Release  and that it has not  assigned  or
     otherwise  transferred any right, title or interest in any such claims; (b)
     that it has no knowledge of any third party claims  against  Xerox  Company
     arising out of or related to goods and services provided in connection with
     ACS'  performance  under the  Distribution  Agreement;  and (c) that in the
     event any such claim arises,  ACS shall use best efforts to achieve  prompt
     resolution thereof.  Xerox represents and warrants that it holds all right,
     title and  interest in and to all of the claims to be released  pursuant to
     the ACS Release and that it has not assigned or otherwise  transferred  any
     right, title or interest in any such claims.

4.   Indemnification.  ACS hereby  agrees to  indemnify,  defend and hold Xerox,
     Xerox Companies,  and their  respective  officers,  affiliates,  employers,
     directors, principals, agents and representatives harmless from and against
     any and all  liabilities,  liens,  claims,  damages,  costs  and  expenses,
     together with  reasonable  attorneys'  fees  incurred in connection  with a
     breach of any of its obligations hereunder.

5.   Waiver.  No waiver of any portion of this  Agreement  shall be valid unless
     such waiver is in writing,  is signed by the waiving party and specifically
     designates  the breach  waived.  The waiver by any party in any  particular
     instance of any such party's rights  hereunder shall not be considered as a
     continuing waiver of similar or other rights or breaches.

6.   Severability.  If any  term,  provision,  covenant  or  condition  of  this
     Agreement  is held to be invalid,  void or otherwise  unenforceable  to any
     extent  by any  court of  competent  jurisdiction,  the  remainder  of this
     Agreement shall not be affected thereby, and each term, provision, covenant
     or  condition  of this  Agreement  shall be valid  and  enforceable  to the
     fullest extent permitted by law.

7.   No Joint and Several  Liability.  Nothing in this Agreement shall be deemed
     to create joint and several liability among any of the parties hereto.

                                       40
<PAGE>

8.   Binding  Effect.  This Agreement  shall be binding upon, and shall inure to
     the benefit  of, the parties  hereto and their  respective  successors  and
     assigns.

9.   Costs and Expenses. In the event that any party hereto shall default in the
     performance  or observance  (herein called the  "Defaulting  Party") of the
     Defaulting  Party's  duties  or  obligations  under  this  Agreement,   the
     Defaulting  Party  shall  pay any and all costs  and  expenses  (including,
     without limitation,  reasonable attorneys' fees and disbursements) incurred
     by the other party in  enforcing  or  attempting  to enforce the duties and
     obligations of the Defaulting Party hereunder.

10.  Captions.  The captions in this Agreement are for  convenience of reference
     only and shall not be considered in the construction or  interpretation  of
     any term or provision hereof.

11.  Enforceability. Each of the parties hereto represents and declares that the
     person executing this Agreement on behalf of such party,  together with all
     Attachments  and Exhibits,  is duly  empowered and  authorized to do so and
     that this  Agreement  and  Exhibits  are each a legal,  valid  and  binding
     obligation of such party, enforceable in full accordance with its terms.

12.  Controlling  Language.  This  Agreement  shall be in  English  only,  which
     language  shall be  controlling  in all respects.  All documents  exchanged
     under this Agreement shall be in English only.

13.  Governing Law. This Agreement shall be governed by,  construed and enforced
     in accordance  with the laws of the State of New York without regard to its
     conflict of laws principals.

14.  Entire Agreement. This Agreement,  including the Recitals and together with
     the Xerox Company  Release,  constitutes the entire  agreement  between the
     parties hereto relating to the settlement of the claims  described  herein.
     No amendment, modification or waiver of this Agreement or any provisions of
     this  Agreement  shall be valid  unless the same  shall be in  writing  and
     signed by each party  hereto.  There are no  understandings,  agreements or
     representations or warranties, express or implied, not specified herein.

15.  Counterparts.  This  Agreement  may be  executed in  counterparts  and each
     counterpart  shall be deemed to  constitute a correct and true  original of
     the Agreement.

                                       41
<PAGE>

XEROX CORPORATION                               ACCENT COLOR SCIENCES

By:/s/ Thomas F. Wetjen                         By: /s/ Ronald Derby

Name: Thomas F. Wetjen                          Name: Ronald Derby

Title: VP/GM                                    Title: Chief Financial Officer

SET ELECTRONIQUES S.A.

By: /s/ Karl Certy

Name: Karl Certy

Title: Director

                                       42
<PAGE>

                                  ATTACHMENT A

                              XEROX COMPANY RELEASE

FOR THE CONSIDERATION  set forth in a certain Release and Settlement  Agreement,
dated March 1, 2001,  between Xerox  Corporation,  a New York  corporation  with
offices  at  Fairport,  New York  ("Xerox"),  Set  Electronique  S.A.,  a French
corporation with offices at Wissous,  France ("SE"),  and Accent Color Sciences,
Inc.,  a  Connecticut  corporation  with offices at East  Hartford,  Connecticut
("ACS"),  the receipt of which is hereby  acknowledged,  ACS, for itself and for
its  successors and assigns,  hereby  remises,  releases and forever  discharges
Xerox,  Xerox  Companies,  their  respective  successors  and  assigns  and  its
affiliates,    officers,   employees,   directors,    principals,   agents   and
representatives  ("Releasees"),  of and from any and all  manner of  action  and
actions,  causes and causes of actions,  suits, debts, accounts,  sums of money,
covenants,  contracts,  promises,  agreements,  damages, judgments,  executions,
claims and demands whatsoever,  in law or in equity, which ACS ever had, now has
or which ACS or its  successors  and  assigns,  can,  shall or may have  against
Releasees,  for, upon or by reason of any matter, cause or thing whatsoever from
the beginning of the world to the date of these  presents,  excluding,  however,
any and all claims  arising  by virtue of any  failure by Xerox or SE to perform
any of its obligations pursuant to such Release and Settlement Agreement.

Dated: March 1, 2001

                                             ACCENT COLOR SCIENCES

                                             By: /s/ Ronald Derby

                                             Name: Ronald Derby

                                             Title: Chief Financial Officer

STATE OF CONNECTICUT       )
                           ) ss: East Hrtford, CT
COUNTY OF HARTFORD         )

     On this 1st day of March,  2001,  before  me,  the  subscriber,  personally
appeared Ronald  Derbyonally  known,  who being by me duly sworn, did depose and
say that he is the Chief Financial  Officer of Accent Color Sciences,  Inc., the
corporation described in and which executed the foregoing instrument and that he
executed the same by order of the Board of Directors of said corporation.

      /s/ Gary W. Sekorski (notary public)
      ------------------------------------

                                       43Exhibit 10.21

                 SEVERANCE AGREEMENT AND MUTUAL GENERAL RELEASE

     THIS SEVERANCE  AGREEMENT AND MUTUAL GENERAL RELEASE  ("Agreement") is made
and entered into by and between (1) Robert C. Nowinski ("Nowinski"),  a resident
of the State of Washington,  and (2) VaxGen,  Inc., a Delaware  corporation with
its  principal  place of  business  in the State of  California,  and all of its
parent, successor, predecessor, affiliate and related entities ("Company").

                                    RECITALS:

     A.  Nowinski  was a  co-founder  of the  Company  and  currently  holds the
position of Chairman of the Board of Directors  and Chief  Executive  Officer of
the Company;

     B. Nowinski and the Company  entered into a written  Employment  Agreement,
which was Amended and Restated as of July 31, 1999 (the "Employment  Agreement")
which is attached hereto as Exhibit "A";

     C. In connection  with the Employment  Agreement,  Nowinski was to hold his
position  with the  Company  as a  resident  of  Seattle,  Washington  until the
expiration of his employment term on December 31, 2002;

     D.  Nowinski  and the  Company  now agree that the  Company  should  have a
Chairman of the Board of Directors  (the  "Board") and Chief  Executive  Officer
that  resides  in the  area of San  Francisco,  California,  where  the  Company
maintains its  executive  offices.  Nowinski and the Company  further agree that
Nowinski  is  unable  to  travel  from  Seattle,  Washington  to San  Francisco,
California  on a daily basis and is unable to relocate his residence to the area
near San Francisco, California;

     E. Nowinski and the Company further agree that each of their interests will
be best  served if  Nowinski  does not remain as  Chairman  and Chief  Executive
Officer for the remainder of the term of his Employment Agreement until December
31,  2002,  due to  his  inability  to  travel  or  relocate  to San  Francisco,
California,  and that the Company will, therefore,  locate a successor for these
positions. As a consequence,  Nowinski and the Company agree that the Employment
Agreement  is  superceded  in all  respects by the terms of this  Agreement,  as
stated herein;

     F. By this  Agreement,  Nowinski  and the  Company  also want to settle and
resolve,  fully and  finally,  all  differences,  whether  known or unknown,  or
potential  differences  between them existing as of the  effective  date of this
Agreement,  including all actual or potential  differences which arise out of or
relate to the  Employment  Agreement,  Nowinski's  employment  or  separation of
employment  with  the  Company  or  compensation  by the  Company  on  terms  as
explicitly set forth in this Agreement;

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<PAGE>

     NOW, THEREFORE, Nowinski and the Company understand and agree as follows:

     FIRST: Non-Admission of Discrimination or Wrongdoing.

     This  Agreement  shall  not in any  way be  construed  as an  admission  by
Nowinski or the Company that they acted wrongfully with respect to the other, or
any other person.  Nowinski and the Company specifically  disclaim any liability
to or wrongful  acts against  each other or any other  person or entity,  on the
part  of  themselves,  their  shareholders,  investors,  parents,  subsidiaries,
affiliates, predecessors, successors, officers, directors, employees, attorneys,
consultants, independent contractors, or agents.

     SECOND: Resignation of Employment and
             Formation of Consulting Relationship.

     Nowinski and the Company  agree that Nowinski will resign from his position
as Chairman and Chief Executive  Officer of the Company and will resign from the
Board, to be effective eight (8) calendar days after this Agreement is signed by
Nowinski  and the  Company.  The letter of  resignation  is  attached  hereto as
Exhibit "D" and shall be executed currently with the execution of this Agreement
by Nowinski.  Following the  effective  date of his  resignation,  Nowinski will
occupy  the role of  "Chairman  Emeritus,"  which  shall be a  non-Board,  and a
non-officer position,  unless the Board determines, at a date after December 31,
2001,  that it is in the Company's  best  interest that such position  should be
abolished.  Unless  specifically  authorized by  resolution  duly adopted by the
Board,  Nowinski  shall  not act or hold  himself  out as a  spokesman  for,  or
representative  of,  the  Company,  and  Nowinski  shall  not have the  power or
authority  to act for or bind the Company in any way.

     Within  three (3)  calendar  days after the  effective  date of  Nowinski's
resignation,  the  Company  shall issue a media or press  release,  disseminated
through  conventional  distribution  channels  by the  Company's  communications
director,  the language of which will be substantially  the same as the language
contained in Exhibit "B" attached hereto.

     This press  release shall be  distributed  to all officers and directors of
the Company and all  officers and  directors  shall be bound and required to use
this  language  when  discussing  Nowinski's  resignation  or roll  as  Chairman
Emeritus with any outside entity or individual.

     Nowinski and the Company agree that any violation of this requirement to be
bound by this press  release,  or any contrary  statement made by any officer or
director of the Company will cause Nowinski  irreparable  injury and damage, the
amount of which will be extremely difficult to quantify. Therefore, Nowinski and
the Company  acknowledge and agree that Nowinski shall be entitled to injunctive
relief  from a Court of  competent  jurisdiction,  in addition to any damages to
which  Nowinski  may be  entitled  under  the  arbitration  provisions  in  this
Agreement.

     Nowinski and the Company agree that Nowinski will be available to assist in
business  development  or  fundraising  activities  on behalf of the Company for
twenty-four (24) months after this Agreement becomes effective subject to and on
the terms set forth in a consulting  agreement to be separately  negotiated  and
mutually  agreed upon by the parties.  Such  assistance,  if requested,  will be
provided by Nowinski in his capacity as a  consultant  and not as an employee of
the Company.  Unless  Nowinski  agrees  thereto,  Nowinski  will not be asked or
expected to attend Board meetings and material  non-public  information will not
be supplied to him except to the limited extent necessary for Nowinski to render
such  assistance  to the  Company.  Nowinski

                                       72
<PAGE>

will not be subject to black-out  periods  prescribed by the Company but will be
subject to such  restrictions  as may be imposed upon Nowinski by applicable law
respecting trading in securities.

     THIRD: Return of Company Property and
            Participation in Internal Investigation.

     Nowinski  represents  and agrees that he has turned over to the Company all
files, memoranda,  records, and other documents,  and other physical or personal
property  which are the property of the Company or which will assist the Special
Committee of the Board of Directors of the Company in its internal investigation
of certain matters raised by Nowinski on September 6, 2000,  October 2, 2000 and
October 25, 2000.

     Nowinski shall be able to retain,  for his role as Chairman  Emeritus,  the
equipment  provided by the  Company for his home office in Seattle,  Washington,
consisting of computer equipment,  facsimile  equipment,  a printer and scanner,
telephone  connection  and all other  office  equipment  previously  provided to
Nowinski by the Company.

     Nowinski  further  represents and warrants that the aggregate amount of his
personal  expenses  incurred by the Company but not  reimbursed by Nowinski does
not exceed $5,000.

     FOURTH:  No Lawsuits.

     Except  as may be  required  by  law,  Nowinski  promises  never  to file a
lawsuit,  administrative  complaint,  or  charge  of any kind  with  any  court,
governmental or administrative  agency or arbitrator against the Company, or its
shareholders,   investors,  parents,  subsidiaries,   affiliates,  predecessors,
successors, officers, directors, employees, attorneys, consultants,  independent
contractors, agents, or representatives,  asserting any claims that are released
in this Agreement.

     The  Company  also  promises  never  to  file  a  lawsuit,   administrative
complaint, or charge of any kind with any Court,  governmental or administrative
agency or arbitrator against Nowinski, asserting any claims that are released in
this Agreement.

     Nowinski and the Company  represent  and agree that,  prior to signing this
Agreement, each has not filed or pursued any complaints,  charges or lawsuits of
any kind with any court,  governmental or  administrative  agency or arbitrator,
asserting any claims that are released in this Agreement.

     FIFTH: Severance by the Company and
            Consideration for this Agreement

     The Company agrees that,  commencing on the eighth (8th) calendar day after
execution of this  Agreement by Nowinski and the Company  (which shall be deemed
the  "Effective  Date" of this  Agreement),  it will provide or pay Nowinski the
following:

     The sum of $500,000.00,  without any tax  deductions,  in full and complete
settlement  for (i) all of Nowinski's  alleged pain,  suffering and physical and
emotional  stress  and strain  and  medical  treatment  and  expenses  caused by
Nowinski's employment or suffered during Nowinski's employment with the Company,
and (ii) the superceding of the Employment Agreement.

     This sum of $500,000  shall be paid out in 25  intallments of $20,000 each,
with the  first  installment  due on the  eighth  (8th)  calendar  day after the
execution of this  Agreement  and the remaining 24 payments due on or before the
first (1st)  business  day of each  month,  commencing  January  2001 and ending
December 2002.  Such payments shall be made by direct deposit in accordance with
bank account  instructions  to be furnished by Nowinski.  Nowinski hereby agrees
that, in the event  Nowinski  fails to (i) reimburse the Company for any amounts
paid by the  Company on  Nowinski's  behalf to any tax  authority  in respect of
deductions,  withholdings  or other taxes due on success  bonus stock  issued to
Nowinski  under Section 16 of the  Employment  Agreement,  or (ii) indemnify the
Company in

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<PAGE>

accordance with the terms of the immediately  following  paragraph,  the Company
may, without  prejudice to any other rights it may have,  deduct amounts due and
owing to the Company from any payments to be made to Nowinski hereunder.  In the
event the Company  seeks to make  deductions  under this  paragraph  in order to
satisfy obligations arising from the success bonus stock issued to Nowinski, the
Company  undertakes to make deductions from payments due to Nowinski on terms no
more onerous than those being applied to other recipients of success bonus stock
in the same  amount as Nowinski  should the Company be required to make  similar
deductions from amounts due and owing to such persons.

     Nowinski  and the  Company  agree  that  this  payment  in the gross sum of
$500,000.00 represents settlement of claims for (i) personal injury damages, and
(ii) the buy out of rights under the Employment Agreement,  which shall be of no
further force or effect except as otherwise  provided herein with respect to the
arbitration  concerning the success bonus.  However,  should any portion of this
payment in the gross sum of  $500,000.00  ever be determined to be taxable wages
or income to Nowinski, Nowinski agrees to pay all withholding and other taxes or
penalties  assessed by any taxing authority and to defend at his own expense any
controversy,  claim,  investigation or inquiry regarding the payment of any such
taxes and hold the Company  and all of the other  Releasees  identified  in this
Agreement  harmless from any such liability or defense of such claims.

     The gross amount of $150,000.00, to be paid over twenty-five (25) months in
twice-monthly  installments  in accordance  with the Company's  regular  payroll
schedule, beginning December 15, 2000 and ending December 31, 2002, in the gross
amount of $3,000.00 per  installment,  less applicable  withholdings and legally
required deductions. Such payments shall be made by direct deposit into the bank
account to be  furnished  to the Company by  Nowinski.  Immediately  vest 60,000
incentive stock options  previously  granted to Nowinski at $9.50 per share, and
immediately vest 60,000 incentive stock options  previously  granted to Nowinski
at $13.50 per  share,  all of which were  awarded  or  granted  to  Nowinski  in
recognition of his prior performance;

     Allow Nowinski,  at Nowinski's expense, to continue as a participant in the
Company's  healthcare and benefit plans under the Provisions of the Consolidated
Omnibus Reconciliation Act of 1985 ("COBRA") for the maximum period permitted in
such plans.

     Participate  in  a  binding  arbitration,  before  an  arbitrator  mutually
selected by Nowinski and the Company to be completed  within sixty (60) calendar
days after the Effective  Date of this  Agreement.  Such  arbitration  will take
place  in San  Francisco,  California,  before  an  experienced  employment  law
arbitrator or retired judge licensed to practice law in the State of California.
The  arbitration  shall be conducted by  simultaneous  submission of arbitration
briefs on behalf of Nowinski and the Company followed by simultaneous submission
of reply briefs on behalf of Nowinski  and the  Company.  Each brief shall be no
longer than thirty (30)  double-spaced  pages.  The arbitration  briefs shall be
styled in the form of a memorandum of points and  authorities,  typically  filed
with a California court, and may include affidavits, declarations, and exhibits.
Neither  Nowinski  nor the Company  shall offer oral or live  testimony  or oral
argument in connection with the arbitration.

     The arbitration shall be limited to the issues defined as follows:

               Under  the  express   terms  of  Paragraph  16  of  the
          Employment Agreement,  relating to the Success Bonus, is the
          calculation   of  "days"  based  on   "calendar   days"  or,
          alternatively, based on "trading days"?

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<PAGE>

          Specifically, given that Nowinski and the Company agree that
          the Success  Bonus has been earned  pursuant to Paragraph 16
          of the Employment Agreement,  the arbitrator shall determine
          whether the Success  Bonus was earned on November 6, 2000 or
          November 20, 2000.  If the  arbitrator  determines  that the
          Success Bonus was earned on November 6, 2000, the arbitrator
          shall then determine the amount of monetary damages, if any,
          suffered by Nowinski due to the  Company's  contention  that
          the  Success  Bonus  was  based on  "trading  days"  and not
          "calendar  days" and,  therefore,  not earned until November
          20, 2000, as opposed to November 6, 2000.

          The  arbitrator  shall be asked to issue a written  decision
          within thirty (30) days after all briefs are submitted.  The
          Company shall pay any  arbitration  award within thirty (30)
          days after it is issued.

     The Company shall  continue to make prompt  payment in advance of any costs
and attorneys'  fees incurred by Nowinski in connection  with the arbitration or
in connection  with the collection or enforcement  of any  arbitration  award or
enforcement of the payment terms of this Agreement.

     SIXTH: Mutual General Release.

     As a material  inducement  for  Nowinski and the Company to enter into this
Agreement,  Nowinski and the Company knowingly and voluntarily waive and release
all  rights and  claims  existing  as of the  Effective  Date of this  Agreement
whether  known and unknown,  which  Nowinski or the Company may have against the
other or any of  Nowinski's or the  Company's  related or  affiliated  entities,
shareholders, investors, parents, predecessors, successors, officers, directors,
managers, employees, attorneys, consultants,  independent contractors or agents,
or any of its or their  successors,  or any of their current or former officers,
directors, managers, employees, attorneys, consultants, independent contractors,
agents  or all  other  representatives  ("Releasees"),  including  any  and  all
charges, complaints,  claims, liabilities,  obligations,  promises,  agreements,
contracts,  controversies,  damages,  actions,  causes of action, suits, rights,
demands,  costs, losses,  debts and expenses of any kind.

     This  includes,  but is not limited to,  claims by Nowinski for  employment
discrimination,  harassment,  wrongful  termination,  constructive  termination,
violation of public policy, breach of any express or implied contract, breach of
any  implied  covenant,  fraud,  intentional  or  negligent   misrepresentation,
emotional distress,  defamation, libel, slander, or any other claims relating to
Nowinski's relationship with the Company.

     This also  includes,  but is not  limited  to, a release  of any  claims by
Nowinski  against  the  Company  under  any  federal,  state  or  local  laws or
regulations or ordinances,  including:  (1) Title VII of the Civil Rights Act of
1964, 42 U.S.C. ss. 2000(e) et. seq. (race, color,  religion,  sex, and national
origin  discrimination;  (2) the Age Discrimination in Employment Act, 29 U.S.C.
ss. 621 et. seq. (age discrimination);  (3) Section 1981 of the Civil Rights Act
of 1866, 42 U.S.C. 1981 (race discrimination); (4) the Equal Pay Act of 1963, 29
U.S.C.  ss. 206 (equal pay); (5) the California Fair Employment and Housing Act,
Cal. Gov't. Code ss. 12900, et. seq. (discrimination,

                                       75
<PAGE>

including race, color, national origin, ancestry, disability, medical condition,
marital status, sex, sexual  orientation;  sexual or racial harassment and age);
(6)  the  California  Labor  Code  ss.  200,  et.  seq.   (salary,   commission,
compensation,  benefits and other matters); (7) the Fair Labor Standards Act, 29
U.S.C.  ss. 201, et. seq. (wage and hour matters,  including  overtime pay); (8)
the Consolidated  Omnibus Budget  Reconciliation Act of 1985 (COBRA),  42 U.S.C.
ss. 1395(c) (insurance matters); (9) Executive Order 11141 (age discrimination);
(10) Section 503 of the  Rehabilitation Act of 1973, 29 U.S.C. ss. 701, et. seq.
(disability discrimination); (11) the Employee Retirement Income Security Act of
1974, 29 U.S.C.  ss. 1001,  et. seq.  (employee  benefits);  (12) Title I of the
Americans with  Disabilities Act (disability  discrimination);  California Labor
Code  Section  132(a)  (discrimination  based on filing a workers'  compensation
claim); (13) any applicable California Industrial Welfare Commission Order (wage
matters); and (14) any statute, regulation, ordinance or common law of the State
of California, the State of Washington or the State of Delaware.

     This also  includes,  but is not  limited  to,  any  claims by the  Company
against  Nowinski  for  embezzlement,  misappropriation  of  funds  or  personal
property,  breach of fiduciary duty,  violation of public policy,  breach of any
express or implied contract,  breach of any implied covenant, fraud, intentional
or negligent misrepresentation,  defamation, libel, slander, or any other claims
relating to the Company's  relationship  with  Nowinski  existing as of the date
hereof.

     This  also  includes,  but is not  limited  to, a  release  of any known or
unknown claims by the Company against  Nowinski based on any conduct,  events or
occurrences  that could be deemed or argued to be in  violation  of any federal,
state,  or local laws or regulations or ordinances,  including,  but not limited
to: (1) violation of the Articles or By-Laws of VaxGen,  Inc.;  (2) violation of
the  California  Business  Professions  Code;  (3)  violation of the  California
Corporations Code; (4) violation of the California Penal Code; and (5) violation
of any statute, regulation, ordinance, or common law of the State of California,
the State of Washington, or the State of Delaware.

     Nowinski  and the Company  acknowledge  and agree that this Mutual  General
Release does not waive,  release or in any way affect any claims or demands made
in the name of the Company (but not  instigated  by the officers or directors of
the  Company  and  without  the  solicitation  of,   assistance  of,  or  active
participation of the Company) under federal or state  securities laws.  However,
Nowinski's rights to defense,  indemnification and insurance under the Company's
Articles,  By-Laws,  Insurance Policies and under applicable statutes and common
law shall in no way be impaired or delayed by this Agreement.

     Nowinski  and the  Company  also  acknowledge  and agree  that this  Mutual
General Release does not prevent  Nowinski from obtaining prompt advance payment
of any and all costs or  attorneys'  fees  incurred  by or on behalf of Nowinski
prior to the Effective  Date hereof or pursuant to the terms of this  Agreement.

     Nowinski  and the  Company  also  acknowledge  and agree  that this  Mutual
General  Release  does not  waive,  release  or in any way  effect the rights or
obligations of the parties in connection with taxes,  withholdings or deductions
on compensation paid to Nowinski,  including without  limitation stock issued to
Nowinski  in  respect  of  the  success  bonus  provided  in  Section  16 of the
Employment Agreement.

     SEVENTH: Unknown Claims.

     Nowinski and the Company acknowledge and agree that, as a condition of this
Agreement,  each expressly releases all rights and claims against the other that
each knows  about

                                       76
<PAGE>

as well as those each may not know about.  Nowinski  and the  Company  expressly
waive  all  rights  under  Section  1542  of the  Civil  Code  of the  State  of
California, which reads as follows:

           "A general  release  does not extend to claims  which
           the creditor does not know or suspect to exist in his
           favor at the time of executing the release,  which if
           known  by  him  must  have  materially  affected  his
           settlement with the debtor."

     Notwithstanding  the  provisions  of Section  1542,  and for the purpose of
implementing  a full and  complete  release and  discharge  of Nowinski  and the
Company,  and  others  released  herein,  Nowinski  and  the  Company  expressly
acknowledge  that this  Agreement is intended to include and does include in its
effect,  without  limitation,  all claims which each does not know or suspect to
exist in their favor against the other, and that this Agreement contemplates the
extinguishment of any such claim or claims, without any limitation whatsoever.

     EIGHTH: Ownership of Claims.

     Nowinski and the Company  represent and agree that each has not assigned or
transferred, or attempted to assign or transfer, to any person or entity, any of
the claims each is releasing in this Agreement.

     NINTH: No Representations.

     Nowinski and Company  represent  and agree that no promises,  statements or
inducements have been made to them that caused them to sign this Agreement other
than those expressly stated in this Agreement.

     TENTH: Confidentiality of this Agreement.

     Except as may be required by applicable law, Nowinski and the Company agree
to keep the fact and terms of this Agreement completely  confidential and not to
disclose such  information  to anyone other than their  attorneys,  accountants,
auditors,  insurance  carriers  and  Board  of  Directors,  all of whom  will be
informed of and be bound by this confidentiality provision. Neither Nowinski nor
the Company shall disclose the fact, amount or terms of this Agreement to anyone
including, but not limited to, any representative of any print, radio, internet,
electronic,  or television media, to any past, present or prospective  applicant
for employment with the Company,  executive  recruiter or  "headhunter,"  to any
counsel for any current or former employee of the Company,  to any other counsel
or third  party,  or to the public at large,  except as may be  required by law.

     Nowinski  and the  Company  understand  and agree  that any  disclosure  of
information in violation of this confidentiality  provision may cause injury and
damage,  the actual amount of which would be impractical or extremely  difficult
to  determine.  Accordingly,  Nowinski and the Company  agree that each shall be
entitled to  injunctive  relief to prohibit  any  violation of the terms of this
confidentiality  provision.  With the limited and sole  exception of  injunctive
relief from a Court of  competent  jurisdiction,  any alleged  violation of this
confidentiality  provision  shall be resolved in accordance with the arbitration
provisions  set  forth in  Article  13  herein.  If any  proceeding  is  brought
concerning  an  alleged  violation  of  this  confidentiality   provision,   the
prevailing  party shall recover from the losing party all reasonable  attorneys'
fees and costs  incurred in connection

                                       77

<PAGE>

with such  proceeding.  Nowinski  and the Company  shall each have the burden of
proving such violation by a preponderance of the evidence.

     ELEVENTH: Trade Secrets and Confidential Information.

     Nowinski  understands  and agrees that in the course of employment with the
Company he has acquired  confidential  information and trade secrets  concerning
the Company's past, present or future scientific  advances and research results,
clinical trials, test results,  finances, assets,  liabilities,  legal claims or
potential legal claims,  personnel  information,  operations,  plans, methods of
doing business, projected and historical revenues, marketing, costs, production,
growth  and  distribution,   and  confidential  business  strategies.   Nowinski
understands  and agrees  that it would be  extremely  damaging to the Company if
such  information  were disclosed to a competitor or made available to any other
person,  corporation or other entity.  Nowinski understands and agrees that such
information  has been  disclosed  to him in  confidence,  that he will keep such
information  secret  and  confidential  and  that  he will  not in any way  use,
distribute or disclose such  information.

     Nowinski further agrees that he will not use any  confidential  information
or trade  secrets  obtained  during  Nowinski's  employment  with the Company to
solicit or participate in or assist in the direct  solicitation of any employees
of the Company.  Nothing  contained  herein shall  prevent  Nowinski from making
public  announcements  concerning or otherwise  publicizing  any other  business
ventures in which he is affiliated or advertising  for employment  opportunities
with such ventures,  provided such advertising is not  specifically  targeted at
employees of the Company. In view of the nature of Nowinski's employment and the
confidential  information  and trade  secrets  which he has received  during the
course  of his  employment,  Nowinski  also  agrees  that the  Company  would be
irreparably  harmed by any violation or threatened  violation of this  Agreement
and that, therefore,  the Company shall be entitled to an injunction prohibiting
from any violation or threatened  violation of this Trade Secrets provision,  in
addition to any other relief,  including monetary damages,  to which the Company
may be entitled.  The obligations  described in this paragraph shall continue in
effect after the payment of the sums described herein.

     For purposes of this  Agreement,  "Trade  Secrets"  shall be defined by the
Uniform  Trade  Secrets Act, and the  applicable  common law  interpreting  this
statute.

     TWELFTH: Successors.

     This  Agreement  shall  be  binding  upon  Nowinski  and  upon  his  heirs,
administrators,  representatives,  executors,  successors and assigns, and shall
inure to the  benefit of the Company and other  Releasees,  and to their  heirs,
administrators, representatives, executors, successors and assigns.

                                       78
<PAGE>

     THIRTEENTH: Arbitration.

     Any  dispute  arising  out  of,  in  connection  with  or  relating  to the
Agreement,  including but not limited to disputes  regarding  any aspect,  term,
enforceability  or  interpretation  of this  Agreement,  or any act which  would
violate any  provision  in this  Agreement  shall be resolved by an  experienced
employment law  arbitrator  licensed to practice law in the State of California,
as the exclusive remedy for such dispute.  The arbitration  shall be governed by
the National Rules for the Resolution of Employment Disputes  promulgated by the
American  Arbitration  Association.  Judgment  on any  award  rendered  by  such
arbitrator may be entered in any court having proper jurisdiction.

     Except for any action brought to enforce this arbitration  provision or any
arbitration award,  should Nowinski or the Company institute any legal action or
administrative  proceeding with respect to any claim waived by this Agreement or
pursue any dispute or matter  covered by this paragraph by any method other than
arbitration,  the  responding  party shall be entitled to recover from the other
party all damages,  costs,  expenses and attorneys' fees incurred as a result of
such action.

     FOURTEENTH: Future Recognition of Participation
                 in the VaxGen Vaccine.

     Nowinski and the Company agree that, in recognition of Nowinski's  years of
service,  Nowinski  shall receive  recognition  by name in the  announcement  or
publication  of any results of clinical  trials,  tests,  or  completion  of any
vaccine  developed by the Company (if such  development  commenced  prior to the
date hereof) from the Effective  Date of this  Agreement and  continuing for the
next  thirty-six  (36) months.  Nowinski and the Company  further agree that any
vaccine developed by the Company during Nowinski's employment or during the next
thirty-six (36) months shall not, insofar as the Company is concerned,  be named
after  any one  individual  as  opposed  to the  Company  itself.  Specifically,
Nowinski  and the  Company  agree that the  contributions  of  Nowinski,  Philip
Berman, Ph.D., and Donald Francis, M.D., D.Sc., will be expressly recognized and
acknowledged in any such  announcement,  as attached hereto as Exhibit "C." This
shall  apply to any  publication  or  announcement  made by the  Company  to any
representative of any print, radio, internet,  electronic,  or television media.
Nowinski and the Company  agree that all  officers and  directors of the Company
shall be bound and required to act in conformance with this provision.

     Within three calendar days after the Effective Date of this Agreement,  the
public  relations  office of the Company and Nowinski shall adjust the Company's
internet  website and  boilerplate  language for press  releases to reflect,  in
principle,  the  language  in  Exhibit  "C"  attached  hereto  for  use  only in
connection with announcements or publications of our results of clinical trials,
test or completion  of any vaccine  developed by the Company  during  Nowinski's
tenure.

     Nowinski and the Company  agree that any violation of this  requirement  to
recognize  Nowinski or any contrary statement made by any officer or director of
the Company,  will cause irreparable injury and damage, the amount of which will
be  extremely  difficult  to  quantify.  Therefore,  Nowinski  and  the  Company
acknowledge and agree that Nowinski shall be entitled to injunctive  relief from
a Court of competent jurisdiction,  in addition to any damages to which Nowinski
may be entitled under the arbitration provisions in this Agreement.

     The language contemplated herein shall not be required for announcements or
publications in peer-reviewed  scientific journals,  as that term is customarily
identified in the scientific community.

                                       79
<PAGE>

     FIFTEENTH: Release of Age Discrimination Claims.

     Age  discrimination  is specifically  intended to be included as a Released
Action:  Nowinski  specifically  intends  that this  Agreement  shall  include a
complete  release of claims under the Age  Discrimination  in Employment  Act of
1967 (ADEA;  29 U.S.C.  ss.ss.  621 et seq.),  as amended by the Older  Workers'
Benefit  Protection Act of 1990, except for any allegation that a breach of this
Act  occurred  following  the  effective  date  of  this  Agreement.

     Additional Consideration:  Nowinski agrees and promises that this Agreement
by the Company  represents  obligations  by the Company to Nowinski  that are in
addition to anything of value to which Nowinski was otherwise  entitled from the
Company.   In  addition,   Nowinski  agrees  and  acknowledges  that  additional
consideration  has been  provided by the Company  (beyond  that which would have
otherwise been provided) in order to effect a valid waiver of Nowinski's  claims
under the federal age discrimination laws.

     Advice To Consult An Attorney:  Nowinski is hereby  advised to consult with
his  attorney  prior  to  signing  this  Agreement,  because  he  is  giving  up
significant legal rights.  Nowinski acknowledges that he has been so advised and
has, in fact, consulted fully with his attorney, Jon D. Meer, of the law firm of
Troop Steuber Pasich Reddick & Tobey, LLP, prior to signing this Agreement.

     Twenty-One Days To Consider  Settlement  Agreement:  Nowinski  acknowledges
that he has been given 21 days to consider this  Agreement  prior to his signing
this  Agreement.  Nowinski  understands  that he has seven  days  following  his
signing of this  Agreement  to  rescind  it,  after  signing.  To  rescind  this
Agreement,  Nowinski  agrees to fax a letter  signed by  Nowinski to the Company
directed to George Baxter at (650) 624-2313 by the end of the seven-day  period.
No consideration provided for herein shall be due and payable to Nowinski and no
release by either party shall become effective if this Agreement does not become
effective.

     Non-Release  of  Future  Claims:  Nowinski  is  hereby  advised  that  this
Agreement  does not waive or release any rights or claims that Nowinski may have
under  the  ADEA,  or  otherwise,  which  arise  after  the date he  signs  this
Agreement.

     SIXTEENTH: Severability and Governing Law.

     Should any of the provisions in this Agreement be declared or be determined
to be illegal or invalid,  all remaining  parts,  terms or  provisions  shall be
valid, and the illegal or invalid part, term or provision shall be deemed not to
be a part of this Agreement.

     This  Agreement  is made and entered  into in the State of  California  and
shall in all respects be  interpreted,  enforced and governed  under the laws of
California,  without  consideration of the choice of law provisions of any other
States.

     SEVENTEENTH: Proper Construction.

     The language of all parts of this Agreement shall in all cases be construed
as a whole according to its fair meaning, and not strictly for or against any of
the parties.

     As used in this  Agreement,  the term "or" shall be deemed to  include  the
term  "and/or" and the singular or plural  number shall be deemed to include the
other whenever the context so indicates or requires.

     The  paragraph  headings  used in this  Agreement  are intended  solely for
convenience of reference and shall not in any manner amplify,  limit,  modify or
otherwise be used in the  interpretation of any of the provisions  hereof.

     This Agreement was prepared jointly by counsel for Nowinski and counsel for
the Company and, therefore, shall not be construed in favor of or against either
Nowinski or the Company.

                                       80
<PAGE>

     EIGHTEENTH: Entire Agreement.

     This Agreement is the entire agreement between Employee and the Company and
fully  supersedes  any and all prior  agreements or  understandings  between the
parties pertaining to its subject matter.  This Agreement also is intended to be
a  fully  integrated  document,  and  shall  not be  modified  by any  prior  or
subsequent representation, statement, writing or understanding, unless contained
in a document  entitled  "Amended and Restated  Severance  Agreement  and Mutual
General  Release"  that is  signed  on the same  page by both  Nowinski  and the
Company.

     PLEASE READ CAREFULLY. THIS DOCUMENT INCLUDES A MUTUAL RELEASE OF ALL KNOWN
AND UNKNOWN CLAIMS.

     Executed at Seattle, Washington, this ___ day of December, 2000.

                                             Robert C. Nowinski  ("NOWINSKI")

                                             By: ___________________________
                                                         Robert C. Nowinski

     Executed at Brisbane, California, this ___ day of December, 2000.

                                             VaxGen, Inc.  ("COMPANY")

                                             By: ___________________________
                                             Name: ________________________
                                             Title: _________________________

     The  individual  executing  this Agreement on behalf of the Company is duly
authorized  and  permitted to bind the Company and its Board of Directors or any
Special  Committee of the Board of  Directors to each and every term,  clause or
condition listed or contained above.

                                       81
<PAGE>

                                   Exhibit "A"

                       [Copy of the Employment Agreement]

                                       82
<PAGE>

                                   Exhibit "B"

                      VaxGen Chairman and CEO Steps Down to
                      Occupy New Role as Chairman Emeritus

               VaxGen,  Inc.,  announced  today  that  its  Chairman  and  Chief
               Executive  Officer,  Dr. Robert  Nowinski,  has resigned from the
               Board of Directors and full-time  employment.  He will occupy the
               honorary  role of Chairman  Emeritus and serve as a consultant to
               the company.

               Dr. Nowinski,  a cofounder of VaxGen, has been traveling for five
               years, since the origin of the company, from his home in Seattle,
               WA to VaxGen's  headquarters  in Brisbane,  CA.  "Developing  the
               first vaccine for HIV has been the most fulfilling opportunity of
               my career," said Dr. Nowinski, "unfortunately, it also has become
               prohibitive for me to continue  commuting  across a thousand mile
               distance."

               Dr.  Nowinski's  principal  roles in VaxGen  have been  Corporate
               Financing  and  Investor  Relations.  In  1999,  he  successfully
               brought VaxGen through an Initial Public  Offering.  Dr. Nowinski
               will  continue  as Chairman  Emeritus  and will be  available  to
               assist in the area of corporate financing,  strategy and investor
               relations,  but he will no longer be  responsible  for managerial
               functions.

               The Board of  Directors  of  VaxGen  will  soon be  announcing  a
               successor  for Dr.  Nowinski as VaxGen's  next Chairman and Chief
               Executive Officer.

                                       83
<PAGE>

                                   Exhibit "C"

               VaxGen  was  cofounded  by Dr.  Donald  Francis  and  Dr.  Robert
               Nowinski.  Dr.  Francis was the  clinical  director and leader in
               developing the preventive HIV vaccine,  AIDSVAX. Dr. Nowinski was
               the company's  entrepreneur,  financing the company at its origin
               and key early stages.  AIDSVAX,  the vaccine, was invented by Dr.
               Philip  Berman,   head  of  research  and  other   colleagues  at
               Genentech, where Dr. Berman did his initial work on the vaccine.

                                       84
<PAGE>

                                   Exhibit "D"

                             DR. ROBERT C. NOWINSKI
                             23210 Woodway Park Road
                                Edmonds, WA 98020
                               Tel. (206) 533-6114

                                December 5, 2000

The Board of Directors
VaxGen, Inc.
1000 Marina Boulevard, Suite 200
Brisbane, CA  94005

Dear Directors,

     I am writing to inform the Board of  Directors  of my decision to resign as
Chief Executive  Officer,  Chairman and Director of VaxGen,  Inc. As provided in
the Severance  Agreement and Mutual General  Release between me and the Company,
my resignation will be effective eight calendar days after the execution of this
letter.

                                                              Sincerely,

                                                              Robert C. Nowinski

cc:  George Baxter, Esq.

                                       85

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