Document:

Exhibit 10.1

                                  VAXGEN, INC.

                             SEVERANCE BENEFIT PLAN

Section 1. INTRODUCTION.

            The VaxGen,  Inc. Severance Benefit Plan (the "Plan") is established
effective  August 1, 2007. The purpose of the Plan is to provide for the payment
of  severance  benefits  to certain  eligible  employees  of VaxGen,  Inc.  (the
"Company")  and Company  affiliates,  if any,  that have been  designated by the
Company on the attached  Appendix A as eligible to participate in the Plan (each
such  affiliate,  an  "Employer"  and  all  such  affiliates  collectively,  the
"Employers") who meets the eligibility criteria set forth in Section 2(a) below.
This Plan  supersedes any severance  benefit plan,  policy or practice,  whether
formal or informal, written or unwritten,  previously announced or maintained by
the  Company  or any  Employer;  provided,  however,  that  this  Plan  does not
supersede  or replace any  severance  benefits to which an Eligible  Employee is
contractually  entitled  pursuant  to the  terms of an  individually  negotiated
written employment agreement between the Eligible Employee and the Company. This
Plan document also is the Summary Plan Description for the Plan.

Section 2. ELIGIBILITY FOR BENEFITS.

            (a) General  Rules.  Subject to the  requirements  set forth in this
Section,  the Company will grant  severance  benefits under the Plan to Eligible
Employees.

                  (1)  Definition of "Eligible  Employee."  For purposes of this
Plan, an Eligible  Employee is a full-time  regular U.S. employee of the Company
or any  Employer  who is notified  by the  Company in writing  that he or she is
eligible for  participation  in the Plan and whose  employment is  involuntarily
terminated  by the Company or an Employer  without  Cause (as defined in Section
2(c) below), whose employment is terminated as a result of a reduction-in-force,
reorganization or job elimination by the Company,  or who is otherwise  selected
by the Plan  Administrator  in its sole  discretion  to receive the benefits set
forth  herein (a  "Qualifying  Termination").  The  determination  of whether an
employee  is an  Eligible  Employee  shall be made by the  Company,  in its sole
discretion,  and such  determination  shall be  binding  and  conclusive  on all
persons.  For purposes of this Plan,  full-time employees are those regular hire
employees who are regularly scheduled to work at least thirty-two (32) hours per
week.  Neither  temporary,  leased or  seasonal  employees  nor  intern,  agency
temporary  employees,  independent  contractors,  consultants  or agents under a
written  contract or purchase  order,  and persons so  classified as such by the
Company (whether or not such classification is upheld on governmental,  judicial
or other review) are eligible for severance benefits under the Plan.

                  (2) In order to be eligible to receive any benefits  under the
Plan,  an Eligible  Employee must remain on the job and  satisfactorily  provide
services to the Company until his or her date of termination as scheduled by the
Company.

                                       1.
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                  (3) In order to be eligible to receive any benefits  under the
Plan,  an Eligible  Employee  also must execute a general  waiver and release in
substantially  the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as
applicable, within the time frame set forth therein and such release must become
effective in accordance  with its terms.  The Company,  in its  discretion,  may
modify the form of the required  release to comply with applicable law and shall
determine the form of the required  release,  which may be  incorporated  into a
termination agreement or other agreement with the Eligible Employee.

            (b)  Exceptions to Benefit  Entitlement.  An employee,  including an
employee who otherwise is an Eligible Employee,  will not receive benefits under
the Plan (or will  receive  reduced  benefits  under the Plan) in the  following
circumstances, as determined by the Company in its sole discretion:

                  (1) The  employee  is  involuntarily  terminated  prior to the
effective  date of his or her  Qualifying  Termination,  for a reason other than
those reasons underlying a Qualifying  Termination  (including,  but not limited
to, any reason  such as  unsatisfactory  performance,  violation  of  applicable
company policy or procedures,  insubordination,  misconduct or the  unauthorized
use or disclosure of  confidential/proprietary/trade  secret  information of the
Company)  regardless  of whether the employee had already been notified that the
employee's  Qualifying  Termination  would have made the  employee  eligible for
benefits under the Plan.

                  (2)  The  employee  is  covered  by  any  other  severance  or
separation pay plan, policy or practice of the Company or an Employer,  in which
case such employee's  severance benefit,  if any, shall be governed by the terms
of such plan,  policy or practice and shall be governed by this Plan only to the
extent that (i) the  employee  elects to waive and release all claims and rights
the  employee  has to  severance  pay or benefits  under such plan,  policy,  or
practice or (ii) the reduction  pursuant to Section 3(c) below does not entirely
eliminate  benefits under this Plan. For the avoidance of doubt,  an employee is
not  disqualified  from  being an  Eligible  Employee  as a result of his or her
rights to receive  severance  benefits  pursuant to the terms of an individually
negotiated  written  employment  agreement between the Eligible Employee and the
Company.

                  (3) The employee's employment is terminated as a result of his
or her death or disability.

                  (4) The employee  voluntarily  terminates  employment with the
Company or an Employer.  Voluntary terminations include, but are not limited to,
resignation,  retirement,  failure  to  return  from a leave of  absence  on the
scheduled  date and/or  termination in order to accept  employment  with another
entity that is wholly or partly owned (directly or indirectly) by the Company or
an affiliate of the Company.

                  (5) The  employee  is offered an  identical  or  substantially
equivalent  or  comparable  position  with the  Company or an  affiliate  of the
Company.  For  purposes  of  the  foregoing,  a  "substantially   equivalent  or
comparable  position"  is one that offers the  employee  substantially  the same
level of  responsibility  and  compensation and does not require a relocation of
the  employee's  place of  employment  to a  location  that would  increase  the
employee's round trip commute by more than forty (40) miles.

                                       2.
<PAGE>

                  (6)  The  employee  is  offered  immediate  reemployment  by a
successor to the Company or an affiliate of the Company or by a purchaser of its
assets,  as the case may be, following a Change of Control.  For purposes of the
foregoing,  "immediate  reemployment" means that the employee's  employment with
the  successor to the Company or an affiliate of the Company or the purchaser of
its assets,  as the case may be, results in  uninterrupted  employment such that
the employee does not incur a lapse in pay as a result of the Change of Control.

                  (7) The  employee is rehired by the Company or an affiliate of
the Company prior to the date benefits under the Plan are scheduled to commence.

                  (8) The employee has not signed the Company's standard form of
confidential/proprietary/trade  secret information non-disclosure and inventions
assignment agreement ("Proprietary Agreement") covering the employee's period of
employment with the Company (and with any  predecessor)  and does not confirm in
writing  that  he or she is and  shall  remain  subject  to the  terms  of  that
agreement.

                  (9) Following  notification of involuntary  termination by the
Company,  the employee does not  satisfactorily  perform his or her assigned job
duties until the date set by the Company or an Employer for the  termination  of
employment.

                  (10) The Company determines, in its sole discretion,  that the
employee's  receipt  of  severance  benefits  would not under the  circumstances
further the purposes of the Plan or would otherwise be inappropriate  and not in
the best interests of the Company.

            (c) An involuntary  termination without "Cause" means an involuntary
termination of an employee's employment by the Company or an Employer other than
for one of the following reasons:

                  (1) an intentional action or intentional failure to act by the
employee  that was  performed in bad faith and to the material  detriment of the
business of the Company or an Employer;

                  (2) an employee's  intentional  refusal or intentional failure
to act in accordance with any lawful and proper direction or order of his or her
superiors;

                  (3)  an   employee's   habitual   neglect  of  the  duties  of
employment;

                  (4) an  employee's  indictment,  charge,  or  conviction  of a
felony or any crime involving moral  turpitude,  or  participation in any act of
theft or  dishonesty  that has had or could  reasonably  be  expected  to have a
material detrimental effect on the business of the Company or an Employer; or

                  (5) an employee's  violation of any material  provision of the
Proprietary  Agreement  or  violation  of any  material  provision  of any other
written Company or Employer policy or procedure.

            (d)  A  "Change  of  Control"  means  the  occurrence,  in a  single
transaction  or in a series of related  transactions,  of any one or more of the
following events:

                                       3.
<PAGE>

                  (1) a sale, lease or other disposition in one transaction or a
series  of  transactions,  of all or  substantially  all  of the  assets  of the
Company;

                  (2) a merger or  consolidation in which the Company is not the
surviving entity or if the Company is the surviving entity, as a result of which
the shares of the Company's  capital  stock are converted  into or exchanged for
cash, securities of another entity, or other property,  unless (in any case) the
holders of the Company's  outstanding shares of capital stock immediately before
such  transaction own more than fifty percent (50%) of the combined voting power
of the  outstanding  securities of the surviving  entity  immediately  after the
transaction;

                  (3) the Company's  stockholders  approve a plan or proposal to
liquidate or dissolve the Company; or

                  (4) a person or group hereafter acquires beneficial  ownership
of more than fifty percent  (50%) of the  outstanding  voting  securities of the
Company (all within the meaning of Section 13(d) of the Securities  Exchange Act
of 1934, as amended, and the regulations promulgated thereunder).

Section 3. AMOUNT OF BENEFIT.

            (a)  Severance  Benefits.  Subject  to the  exceptions  set forth in
Section 2(b),  severance  benefits  under the Plan, if any, shall be provided to
Eligible Employees  described in Section 2(a) in the amount provided in Appendix
B.

            (b) Additional Benefits.  Notwithstanding the foregoing, the Company
may, in its sole  discretion,  (i)  authorize  benefits in an amount and/or form
different  from or in addition to those  benefits  set forth in Section  3(a) to
Eligible Employees; (ii) waive or modify, in respect to one or more employees or
classes of employees, the eligibility requirements for receipt of benefits under
this Plan and/or (iii) modify the method of  calculating  the amount of benefits
to be received under the Plan. The provision of any such benefits to an Eligible
Employee  or to any other  employee  shall in no way  obligate  the  Company  to
provide such benefits to any other Eligible  Employee or to any other  employee,
even if similarly situated. An employee for whom any eligibility requirement has
been waived or  modified,  or who is offered  benefits  under this Plan that are
different  than, or in addition to, those set forth in Section 3(a) will receive
specific written notice that the Plan Administrator is exercising  discretion in
that regard. Receipt of benefits under this Plan pursuant to such exceptions may
be subject to a covenant of confidentiality and non-disclosure.

            (c)  Certain  Reductions.  The  Company  shall  reduce  an  Eligible
Employee's  severance benefits under this Plan by any other severance  benefits,
pay in lieu of  notice,  or  other  similar  benefits  payable  to the  Eligible
Employee by the Company or an affiliate  of the Company  that become  payable in
connection with the Eligible  Employee's  termination of employment  pursuant to
(i) any applicable legal requirement,  including, without limitation, the Worker
Adjustment and Retraining Notification Act, the California Plant Closing Act, or
any other similar  state law or (ii) any Company or Employer  policy or practice
providing for  severance,  termination  pay, or otherwise  allowing the Eligible
Employee to remain on the payroll for a

                                       4.
<PAGE>

limited  period of time  after  being  given  notice of the  termination  of the
Eligible Employee's employment, and the Plan Administrator shall so construe and
implement  the  terms  of the  Plan.  In the  Company's  sole  discretion,  such
reductions  may be applied  on a  retroactive  basis,  with  severance  benefits
previously  paid being  re-characterized  as payments  pursuant to the Company's
statutory  obligation.  Notwithstanding  the foregoing,  an Eligible  Employee's
severance  benefits  under  this Plan will not be  reduced  by the amount of any
severance  benefits to which an  Eligible  Employee  is  contractually  entitled
pursuant to the terms of an individually negotiated written employment agreement
between the Eligible Employee and the Company.

            (d) Best After Tax.  If any payment or benefit  (including  payments
and benefits  pursuant to this Plan) that an Eligible  Employee would receive in
connection  with a Change of Control from the Company or  otherwise  ("Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G of
the Internal  Revenue Code of 1986,  as amended (the  "Code"),  and (ii) but for
this sentence,  be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"),  then the Company shall cause to be  determined,  before any
amounts of the Payment are paid to the Eligible Employee, which of the following
two  alternative  forms  of  payment  would  maximize  the  Eligible  Employee's
after-tax  proceeds:  (i) payment in full of the entire amount of the Payment (a
"Full  Payment"),  or (ii)  payment  of only a part of the  Payment  so that the
Eligible  Employee  receives the largest payment possible without the imposition
of the  Excise  Tax (a  "Reduced  Payment"),  whichever  amount  results  in the
Eligible Employee's receipt, on an after-tax basis, of the greater amount of the
Payment  notwithstanding  that all or some portion of the Payment may be subject
to the Excise Tax. For purposes of determining whether to make a Full Payment or
a  Reduced  Payment,  the  Company  shall  cause to be taken  into  account  all
applicable  federal,  state and local income and employment taxes and the Excise
Tax (all computed at the highest  applicable  marginal  rate, net of the maximum
reduction in federal  income  taxes which could be obtained  from a deduction of
such state and local taxes). If a Reduced Payment is made, (i) the Payment shall
be paid only to the extent permitted under the Reduced Payment alternative,  and
the Eligible  Employee  shall have no rights to any additional  payments  and/or
benefits  constituting  the  Payment,  and (ii)  reduction  in  payments  and/or
benefits shall occur in the following order unless the Eligible  Employee elects
in writing a different  order  (provided,  however,  that such election shall be
subject to Company approval if made on or after the date on which the event that
triggers the Payment occurs):  (1) reduction of cash payments;  (2) cancellation
of  accelerated  vesting  of  equity  awards  other  than  stock  options;   (3)
cancellation of accelerated vesting of stock options; and (4) reduction of other
benefits  paid to the  Eligible  Employee.  In the event  that  acceleration  of
compensation from the Eligible  Employee's equity awards is to be reduced,  such
acceleration  of vesting  shall be canceled in the reverse  order of the date of
grant  unless the  Eligible  Employee  elects in writing a  different  order for
cancellation.

                  The independent  registered  public accounting firm engaged by
the Company for general audit purposes as of the day prior to the effective date
of the Change of Control shall make all determinations required to be made under
this Section 3(d).  If the  independent  registered  public  accounting  firm so
engaged by the Company is serving as accountant  or auditor for the  individual,
entity or group  effecting  the Change of Control,  the Company  shall appoint a
nationally recognized  independent registered public accounting firm to make the
determinations  required  hereunder.  The Company  shall bear all expenses  with
respect

                                       5.
<PAGE>

to the  determinations  by such independent  registered  public  accounting firm
required to be made hereunder.

                  The independent  registered  public accounting firm engaged to
make the determinations hereunder shall provide its calculations,  together with
detailed  supporting  documentation,  to the Company and the  Eligible  Employee
within  fifteen  (15)  calendar  days  after  the  date on  which  the  Eligible
Employee's  right to a Payment is  triggered  (if  requested at that time by the
Company or the Eligible Employee) or such other time as requested by the Company
or the Eligible Employee.  If the independent  registered public accounting firm
determines  that no Excise Tax is  payable  with  respect  to a Payment,  either
before or after the  application  of the Reduced  Amount,  it shall  furnish the
Company and the Eligible Employee with an opinion  reasonably  acceptable to the
Eligible  Employee  that no Excise  Tax will be  imposed  with  respect  to such
Payment.  Any good faith  determinations  of the accounting  firm made hereunder
shall be  final,  binding  and  conclusive  upon the  Company  and the  Eligible
Employee.

            (e) Code  Section  409A.  If the  Company  (or, if  applicable,  the
successor  entity thereto)  determines  that the payments and benefits  provided
under the Plan (the "Plan Payments")  constitute  "deferred  compensation" under
Code  Section 409A  (together,  with any state law of similar  effect,  "Section
409A") and an Eligible Employee is a "specified  employee" of the Company or any
successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) (a
"Specified  Employee"),  then,  solely  to the  extent  necessary  to avoid  the
incurrence of the adverse  personal tax  consequences  under  Section 409A,  the
timing of the Plan  Payments  shall be delayed as  follows:  on the  earliest to
occur of (i) the date that is six months and one day after the termination date,
(ii) the date of the Eligible  Employee's  death, or (iii) such earlier date, as
reasonably  determined  in good faith by the  Company (or any  successor  entity
thereto),  as would not  result in any of the Plan  Payments  being  subject  to
adverse  personal tax  consequences  under Section 409A (such earliest date, the
"Delayed  Initial Payment Date"),  the Company (or the successor entity thereto,
as applicable) shall (A) pay to the Eligible Employee a lump sum amount equal to
the sum of the Plan Payments that the Eligible  Employee  would  otherwise  have
received  through the Delayed  Initial  Payment Date if the  commencement of the
payment of the Plan Payments had not been delayed  pursuant to this Section 3(e)
and (B) commence  paying the balance of the Plan Payments in accordance with the
applicable  payment  schedules  set forth in on Appendix B. For the avoidance of
doubt, it is intended that (1) each installment of the Plan Payments provided on
Appendix B is a separate  "payment" for purposes of Section  409A,  (2) all Plan
Payments  provided on Appendix B satisfy,  to the greatest extent possible,  the
exemptions  from  the  application  of  Section  409A  provided  under  Treasury
Regulations Sections  1.409A-1(b)(4) and  1.409A-1(b)(9)(iii),  and (3) the Plan
Payments  consisting  of COBRA  premiums also  satisfy,  to the greatest  extent
possible,  the exemption  from the  application  of Section 409A provided  under
Treasury Regulations Sections 1.409A-1(b)(9)(v).

Section 4. COMPANY PROPERTY.

            (a) Return of Company  Property.  Except as provided in Section 4(b)
below, an Eligible Employee will not be entitled to any severance under the Plan
unless and until the Eligible  Employee returns all Company  Property.  For this
purpose,  "Company  Property"  means  all paper and  electronic  Company  and/or
Employer  documents  (and all copies  thereof)

                                       6.
<PAGE>

created  and/or  received by the Eligible  Employee  during his or her period of
employment with the Company and other Company and/or Employer property which the
Eligible  Employee  had in  his  or  her  possession  or  control  at any  time,
including,  but not limited to, Company and/or Employer files,  notes,  drawings
records, plans, forecasts,  reports, studies, analyses,  proposals,  agreements,
financial information, research and development information, sales and marketing
information,  operational  and  personnel  information,   specifications,  code,
software,  databases,   computer-recorded  information,  tangible  property  and
equipment (including, but not limited to, leased vehicles,  computers,  computer
equipment,  software programs, facsimile machines, mobile telephones,  servers),
credit and calling cards, entry cards,  identification  badges and keys; and any
materials of any kind which contain or embody any  proprietary  or  confidential
information of the Company and/or an Employer (and all reproductions  thereof in
whole or in part). As a condition to receiving benefits under the Plan, Eligible
Employees must not make or retain copies, reproductions or summaries of any such
Company or Employer property.  However,  an Eligible Employee is not required to
return  his  or  her  personal  copies  of  documents  evidencing  the  Eligible
Employee's hire, termination,  compensation,  benefits and stock options and any
other documentation received as a shareholder of the Company

            (b)  Retention of Certain  Company  Equipment.  Notwithstanding  the
provisions of Section 4(a),  the Company may, in its sole  discretion,  agree to
allow the  Eligible  Employee to retain  certain  Company or Employer  equipment
(e.g., cell phones) ("Company  Equipment") for his or her personal use following
the Eligible Employee's termination of employment, and the Company will transfer
title to the Company  Equipment  to the Eligible  Employee.  The receipt of such
Company  Equipment  will be  subject  to the same  terms and  conditions  as the
receipt of severance under this Plan,  including the execution of the applicable
form of release.  The Eligible Employee  acknowledges that the Company Equipment
is provided  "as is" without  warranty of any kind.  Furthermore,  the  Eligible
Employee  acknowledges  that the  Eligible  Employee  will have  imputed  income
related to the retention of any Company Equipment, the Eligible Employee will be
solely responsible for any tax assessments made by any taxing authority based on
this  transfer  of  title,  and  that  the  Eligible  Employee  will  be  solely
responsible for the use and  maintenance of the Company  Equipment and all costs
associated  therewith arising after the termination of employment.  The Eligible
Employee will follow all Company  instructions  as to the return and/or deletion
of any Company  information and any licensed  software  contained on the Company
Equipment.

            (c) Prepayment of Advanced Amounts. An Eligible Employee will not be
entitled  to any  severance  benefit  under  the Plan if the  Eligible  Employee
previously received an advance(s) for business travel and entertainment expenses
unless and until the Eligible  Employee (i)  properly  completes  and submits an
expense  reimbursement  form(s) and supporting receipts to his or her manager no
later than seven (7) days after the Eligible Employee's  Qualifying  Termination
and (ii) repays (via check payable to "VaxGen,  Inc.") any amounts  advanced but
not used and approved for reimbursement.

            (d) Transition of Work. An Eligible Employee will not be entitled to
any severance  benefit under the Plan unless and until the Eligible Employee (i)
has satisfactorily  transitioned his or her work and information  concerning his
or her work to the Company to the extent  requested  by the Company and (ii) has
provided  the  Company  with  all  logins,  passwords,   passcodes  and  similar
information created by the Eligible Employee for documents, email and

                                       7.
<PAGE>

electronic files that the Eligible Employee created or used on Company systems.

Section 5. TIME OF PAYMENT AND FORM OF BENEFIT.

            All severance  benefits  under the Plan shall be paid as provided in
Appendix  B  following  the  Eligible  Employee's  satisfaction  of  all  of the
requirements  set forth in Sections 2 and 4. All payments under the Plan will be
subject to  applicable  withholding  for federal,  state and local taxes.  If an
Eligible Employee is indebted to the Company at his or her termination date, the
Company  reserves the right to offset any severance  payments  under the Plan by
the  amount of such  indebtedness.  Additionally,  if an  Eligible  Employee  is
subject to withholding for taxes related to any non-Plan benefits, including but
not limited to any imputed  income  related to  perquisites  or the retention of
Company Equipment,  the Company may offset any severance payments under the Plan
by the amount of such withholding taxes.  However,  payments under the Plan will
not be subject to any other  deductions such as, but not limited to, 401(k) plan
contributions  and/or loan repayments or other employee benefit and benefit plan
contributions.

Section 6. REEMPLOYMENT.

            In the event of an Eligible  Employee's  reemployment by the Company
or an Employer or other  affiliate  of the Company  during the period of time in
respect of which  severance  benefits  pursuant to the Plan have been paid,  the
Company, in its sole and absolute discretion, may require such Eligible Employee
to repay  to the  Company  all or a  portion  of such  severance  benefits  as a
condition of reemployment.

Section 7. RIGHT TO INTERPRET PLAN; AMENDMENT AND TERMINATION.

            (a) Exclusive Discretion.  The Plan Administrator is the Company. As
Plan  Administrator,  the  Company  is the  named  fiduciary  charged  with  the
responsibility for administering the Plan. The Plan Administrator shall have the
exclusive discretion and authority to establish rules, forms, and procedures for
the  administration  of the Plan and to construe and  interpret  the Plan and to
decide any and all questions of fact, interpretation, definition, computation or
administration  arising in connection with the operation of the Plan, including,
but not limited to, the  eligibility  to  participate  in the Plan and amount of
benefits paid under the Plan. The Plan  Administrator may delegate any or all of
its  administrative  duties to an officer of the Company and any such delegation
shall convey with it the full discretionary  authority of the Plan Administrator
to carry out the delegated duties. The Company or the Plan  Administrator  shall
indemnify   and  hold   harmless   any   person   to  whom  it   delegated   its
responsibilities;  provided,  however,  such  person  does  not act  with  gross
negligence or willful misconduct. The rules,  interpretations,  computations and
other  actions of the Plan  Administrator  or its delegate  shall be binding and
conclusive on all persons.

            (b)  Amendment  or  Termination.  The Company  reserves the right to
amend or  terminate  this Plan  (including  Appendix  A and  Appendix  B) or the
benefits  provided  hereunder  at any time  prior to a Change of  Control of the
Company;  provided,  however, that no such amendment or termination shall affect
the right to any unpaid benefit of any Eligible  Employee whose termination date
has occurred  prior to  amendment  or  termination  of the Plan.  Any  purported
amendment or termination  of this Plan (and the exhibits and appendices  hereto)

                                       8.
<PAGE>

upon or following a Change of Control of the Company will not be effective as to
any Eligible  Employee who has not consented,  in writing,  to such amendment or
termination. Any action amending or terminating the Plan shall be in writing and
executed by a duly authorized executive officer of the Company.

Section 8. NO IMPLIED EMPLOYMENT CONTRACT.

            The Plan  shall  not be  deemed  (i) to give any  employee  or other
person any right to be  retained  in the employ of the Company or an Employer or
(ii) to interfere  with the right of the Company or an Employer to discharge any
employee  or other  person at any time,  with or without  cause,  which right is
hereby reserved.

Section 9. LEGAL CONSTRUCTION.

            This Plan is intended to be  governed by and shall be  construed  in
accordance  with the Employee  Retirement  Income Security Act of 1974 ("ERISA")
and, to the extent not  preempted by ERISA,  the laws of the State of California
(without regard to principles of conflict of laws).

Section 10. CLAIMS, INQUIRIES AND APPEALS.

            (a)  Applications  for Benefits and Inquiries.  Any  application for
benefits,  inquiries  about the Plan or inquiries about present or future rights
under the Plan must be  submitted  to the Plan  Administrator  in  writing by an
applicant (or his or her authorized representative). The Plan Administrator is:

                           VaxGen, Inc.
                           Attn: Chief Financial Officer
                           349 Oyster Point Blvd
                           South San Francisco, CA 94080

            (b) Denial of Claims. In the event that any application for benefits
is denied in whole or in part, the Plan Administrator must provide the applicant
with written or electronic  notice of the denial of the application,  and of the
applicant's  right to review the denial.  Any electronic notice will comply with
the  regulations of the U.S.  Department of Labor.  The notice of denial will be
set  forth in a manner  designed  to be  understood  by the  applicant  and will
include the following:

                  (1) the specific reason or reasons for the denial;

                  (2) references to the specific Plan  provisions upon which the
denial is based;

                  (3) a description  of any  additional  information or material
that the Plan  Administrator  needs to complete the review and an explanation of
why such information or material is necessary; and

                                       9.
<PAGE>

                  (4) an  explanation  of the Plan's review  procedures  and the
time  limits  applicable  to  such  procedures,  including  a  statement  of the
applicant's  right  to  bring a civil  action  under  Section  502(a)  of  ERISA
following a denial on review of the claim, as described in Section 10(d) below.

            This notice of denial will be given to the  applicant  within ninety
(90) days after the Plan Administrator receives the application,  unless special
circumstances   require  an  extension  of  time,   in  which  case,   the  Plan
Administrator  has up to an  additional  ninety  (90)  days for  processing  the
application.  If an extension of time for processing is required, written notice
of the  extension  will be  furnished  to the  applicant  before  the end of the
initial ninety (90) day period.

            This notice of extension  will  describe  the special  circumstances
necessitating  the additional time and the date by which the Plan  Administrator
is to render its decision on the application.

            (c) Request for a Review.  Any person (or that  person's  authorized
representative)  for whom an application for benefits is denied,  in whole or in
part,  may appeal the denial by  submitting  a request  for a review to the Plan
Administrator  within sixty (60) days after the application is denied. A request
for a review shall be in writing and shall be addressed to:

                             VaxGen, Inc.
                             Attn: Chief Financial Officer
                             349 Oyster Point Blvd
                             South San Francisco, CA 94080

            A request  for review  must set forth all of the grounds on which it
is based,  all facts in support of the  request and any other  matters  that the
applicant  feels are  pertinent.  The applicant  (or his or her  representative)
shall have the opportunity to submit (or the Plan  Administrator may require the
applicant to submit) written comments, documents, records, and other information
relating to his or her claim. The applicant (or his or her representative) shall
be provided,  upon request and free of charge,  reasonable access to, and copies
of, all documents,  records and other information  relevant to his or her claim.
The review shall take into account all  comments,  documents,  records and other
information  submitted by the applicant (or his or her representative)  relating
to the claim,  without  regard to whether  such  information  was  submitted  or
considered in the initial benefit determination.

            (d)  Decision  on Review.  The Plan  Administrator  will act on each
request for review within sixty (60) days after  receipt of the request,  unless
special  circumstances require an extension of time (not to exceed an additional
sixty (60) days),  for processing the request for a review.  If an extension for
review is required,  written  notice of the  extension  will be furnished to the
applicant  within the initial  sixty (60) day period.  This notice of  extension
will describe the special  circumstances  necessitating  the additional time and
the date by which  the Plan  Administrator  is to  render  its  decision  on the
review. The Plan Administrator will give prompt, written or electronic notice of
its  decision  to the  applicant.  Any  electronic  notice  will comply with the
regulations  of the  U.S.  Department  of  Labor.  In the  event  that  the Plan
Administrator

                                       10.
<PAGE>

confirms the denial of the  application  for  benefits in whole or in part,  the
notice will set forth, in a manner calculated to be understood by the applicant,
the following:

                  (1) the specific reason or reasons for the denial;

                  (2) references to the specific Plan  provisions upon which the
denial is based;

                  (3) a  statement  that the  applicant  is entitled to receive,
upon  request  and free of  charge,  reasonable  access  to,  and copies of, all
documents, records and other information relevant to his or her claim; and

                  (4) a  statement  of the  applicant's  right  to bring a civil
action under Section 502(a) of ERISA.

            (e) Rules and  Procedures.  The Plan  Administrator  will  establish
rules and procedures,  consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out its  responsibilities  in reviewing  benefit claims.
The Plan  Administrator may require an applicant who wishes to submit additional
information in connection with an appeal from the denial of benefits to do so at
the applicant's own expense.

            (f)  Exhaustion of Remedies.  No legal action for benefits under the
Plan may be brought until the applicant (i) has submitted a written  application
for benefits in accordance with the procedures described by Section 10(a) above,
(ii) has been notified by the Plan Administrator that the application is denied,
(iii) has filed a written  request for a review of the application in accordance
with the appeal  procedure  described in Section 10(c) above,  and (iv) has been
notified that the Plan Administrator has denied the appeal.  Notwithstanding the
foregoing,  if the Plan Administrator does not respond to a applicant's claim or
appeal  within the  relevant  time  limits  specified  in this  Section  10, the
applicant may bring legal action for benefits under the Plan pursuant to Section
502(a) of ERISA.

Section 11. BASIS OF PAYMENTS TO AND FROM PLAN.

            The Plan shall be unfunded, and all benefits under the Plan shall be
paid only from the general assets of the Company.  An Eligible  Employee's right
to  receive  payments  under the Plan is no greater  than that of the  Company's
unsecured general creditors. Therefore, if the Company were to become insolvent,
the Eligible Employee might not receive benefits under the Plan.

Section 12. OTHER PLAN INFORMATION.

            (a)  Employer  and  Plan   Identification   Numbers.   The  Employer
Identification  Number  assigned to the Company  (which is the "Plan Sponsor" as
that term is used in ERISA) by the Internal  Revenue Service is 36-3855489.  The
Plan  Number  assigned  to  the  Plan  by  the  Plan  Sponsor  pursuant  to  the
instructions of the Internal Revenue Service is 501.

                                       11.
<PAGE>

            (b) Ending Date for Plan's Fiscal Year and Type of Plan. The date of
the end of the fiscal year for the purpose of maintaining  the Plan's records is
December 31. The Plan is a welfare benefit plan.

            (c)  Agent  for the  Service  of Legal  Process.  The  agent for the
service of legal process with respect to the Plan is:

                             VaxGen, Inc.
                             Attn: Chief Financial Officer
                             349 Oyster Point Blvd
                             South San Francisco, CA 94080

            (d) Plan Sponsor and  Administrator.  The Plan Sponsor and the "Plan
Administrator" of the Plan is:

                             VaxGen, Inc.
                             Attn: Chief Financial Officer
                             349 Oyster Point Blvd
                             South San Francisco, CA 94080

            The Plan  Sponsor's  and Plan  Administrator's  telephone  number is
(650) 624-1000 and facsimile number is (650) 624-1001.

Section 13. STATEMENT OF ERISA RIGHTS.

            Participants  in this  Plan  are  entitled  to  certain  rights  and
protections under ERISA. If you are an Eligible  Employee,  you are considered a
participant in the Plan and, under ERISA, you are entitled to:

            (a) Receive Information About Your Plan and Benefits

                  (1)  Examine,  without  charge,  at the  Plan  Administrator's
office  and at other  specified  locations,  such as  worksites,  all  documents
governing the Plan and a copy of the latest annual report (Form 5500 Series), if
applicable, filed by the Plan with the U.S. Department of Labor and available at
the Public Disclosure Room of the Employee Benefits Security Administration;

                  (2) Obtain,  upon written  request to the Plan  Administrator,
copies of documents governing the operation of the Plan and copies of the latest
annual report (Form 5500 Series),  if applicable,  and an updated (as necessary)
Summary Plan Description. The Administrator may make a reasonable charge for the
copies; and

                  (3) Receive a summary of the Plan's annual  financial  report,
if  applicable.  The Plan  Administrator  is  required  by law to  furnish  each
participant with a copy of this summary annual report.

            (b)  Prudent  Actions by Plan  Fiduciaries.  In addition to creating
rights  for Plan  participants,  ERISA  imposes  duties  upon the people who are
responsible  for the  operation

                                       12.
<PAGE>

of  the  employee  benefit  plan.  The  people  who  operate  the  Plan,  called
"fiduciaries" of the Plan, have a duty to do so prudently and in the interest of
you and other  Plan  participants  and  beneficiaries.  No one,  including  your
employer, your union or any other person, may fire you or otherwise discriminate
against  you  in any  way to  prevent  you  from  obtaining  a Plan  benefit  or
exercising your rights under ERISA.

            (c) Enforce Your Rights.  If your claim for a Plan benefit is denied
or ignored,  in whole or in part, you have a right to know why this was done, to
obtain  copies of documents  relating to the  decision  without  charge,  and to
appeal any denial,  all within  certain time schedules as set forth in detail in
Section 10 herein.

                  Under ERISA, there are steps you can take to enforce the above
rights.  For  instance,  if you request a copy of Plan  documents  or the latest
annual  report from the Plan, if  applicable,  and do not receive them within 30
days,  you may file suit in a Federal  court and you are not  required to follow
the claims  procedure set forth in Section 10 herein.  In such a case, the court
may require the Plan  Administrator  to provide the  materials and pay you up to
$110 a day until you receive the  materials,  unless the materials were not sent
because of reasons beyond the control of the Plan Administrator.

                  If  you  have  completed  the  claims  and  appeals  procedure
described  in  Section  10 and have a claim  for  benefits  which is  denied  or
ignored, in whole or in part, you may file suit in a state or Federal court.

                  If you are  discriminated  against for asserting  your rights,
you may seek assistance from the U.S.  Department of Labor, or you may file suit
in a Federal  court.  The court will decide who should pay court costs and legal
fees. If you are successful, the court may order the person you have sued to pay
these  costs and fees.  If you lose,  the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.

            (d) Assistance with Your Questions.  If you have any questions about
the Plan, you should contact the Plan  Administrator.  If you have any questions
about this statement or about your rights under ERISA, or if you need assistance
in  obtaining  documents  from the Plan  Administrator,  you should  contact the
nearest office of the Employee Benefits Security Administration, U.S. Department
of Labor,  listed in your  telephone  directory  or the  Division  of  Technical
Assistance  and  Inquiries,  Employee  Benefits  Security  Administration,  U.S.
Department of Labor, 200 Constitution Avenue N.W.,  Washington,  D.C. 20210. You
may also obtain  certain  publications  about your  rights and  responsibilities
under  ERISA by  calling  the  publications  hotline  of the  Employee  Benefits
Security Administration or accessing its website at http://www.dol.gov/ebsa/.

Section 14. GENERAL PROVISIONS.

            (a) Notices. Any notice,  demand or request required or permitted to
be given by either the Company or an Eligible  Employee pursuant to the terms of
this  Plan  shall  be in  writing  and  shall be  deemed  given  when  delivered
personally or deposited in the U.S. mail, with postage prepaid, and addressed to
the  parties,  in the case of the  Company,  at the address set forth in Section
12(d) and, in the case of an Eligible  Employee,  at the address as set forth in
the

                                       13.
<PAGE>

Company's  employment  file  maintained for the Eligible  Employee as previously
furnished by the Eligible  Employee or such other address as a party may request
by notifying the other in writing.

            (b)  Transfer  and  Assignment.  The  rights and  obligations  of an
Eligible Employee under this Plan may not be transferred or assigned without the
prior written consent of the Company. This Plan shall be binding upon any person
who is a successor  by merger,  acquisition,  consolidation  or otherwise to the
business  formerly  carried on by the Company  without  regard to whether or not
such person or entity actively assumes the obligations hereunder.

            (c)  Waiver.  Any  party's  failure  to  enforce  any  provision  or
provisions  of this Plan  shall not in any way be  construed  as a waiver of any
such provision or provisions,  nor prevent any party from  thereafter  enforcing
each and every  other  provision  of this Plan.  The rights  granted the parties
herein are  cumulative and shall not constitute a waiver of any party's right to
assert all other legal remedies available to it under the circumstances.

            (d)  Severability.  Should any provision of this Plan be declared or
determined to be invalid, illegal or unenforceable,  the validity,  legality and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired.

            (e) Section Headings. Section headings in this Plan are included for
convenience of reference only and shall not be considered  part of this Plan for
any other purpose.

Section 15. CIRCULAR 230 DISCLAIMER.

            THE FOLLOWING DISCLAIMER IS PROVIDED IN ACCORDANCE WITH THE INTERNAL
REVENUE SERVICE'S  CIRCULAR 230 (21 CFR PART 10). ANY ADVICE IN THIS PLAN IS NOT
INTENDED OR WRITTEN TO BE USED,  AND IT CANNOT BE USED BY YOU FOR THE PURPOSE OF
AVOIDING ANY  PENALTIES  THAT MAY BE IMPOSED ON YOU. ANY ADVICE IN THIS PLAN WAS
WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF  PARTICIPATION IN THE COMPANY'S
SEVERANCE  BENEFIT  PLAN.  YOU  SHOULD  SEEK  ADVICE  BASED  ON YOUR  PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

Section 16. EXECUTION.

            To record the adoption of the Plan as set forth herein, effective as
of August 1,  2007,  VaxGen,  Inc.  has caused  its duly  authorized  officer to
execute the same this _____ day of _______________, 2007.

                                            VAXGEN, INC.

                                            By:____________________________

                                            Title:_________________________

                                       14.
<PAGE>

                                                   For Employees Age 40 or Older
                                                          Individual Termination

                                    EXHIBIT A

                                RELEASE AGREEMENT

      I understand  and agree  completely  to the terms set forth in the VaxGen,
Inc. Severance Benefit Plan (the "Plan").

      I understand  that this Release,  together with the Plan,  constitutes the
complete,  final and exclusive  embodiment of the entire  agreement  between the
Company,  affiliates  of the Company  and me with  regard to the subject  matter
hereof. I am not relying on any promise or  representation by the Company or the
Employers that is not expressly stated therein.  Certain  capitalized terms used
in this Release are defined in the Plan.

      I hereby  confirm my obligations  under my Proprietary  Agreement with the
Company and/or the Employer.

      Except as otherwise  set forth in this  Release,  I hereby  generally  and
completely  release the Company,  the  Employers,  and their  current and former
directors, officers, employees,  stockholders,  shareholders,  partners, agents,
attorneys,  predecessors,  successors, parent and subsidiary entities, insurers,
affiliates, and assigns (collectively,  the "Released Parties") from any and all
claims,  liabilities and obligations,  both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring prior
to my signing this Agreement (collectively, the "Released Claims"). The Released
Claims include,  but are not limited to: (1) all claims arising out of or in any
way  related  to  my  employment  with  the  Company,  the  Employers  or  their
affiliates, or the termination of that employment;  (2) all claims related to my
compensation or benefits, including salary, bonuses, commissions,  vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any  other  ownership  interests  in  the  Company,  the  Employers,   or  their
affiliates;  (3) all claims for breach of contract,  wrongful  termination,  and
breach of the  implied  covenant  of good faith and fair  dealing;  (4) all tort
claims,  including  claims  for  fraud,  defamation,   emotional  distress,  and
discharge in violation of public policy;  and (5) all federal,  state, and local
statutory claims, including claims for discrimination,  harassment, retaliation,
attorneys'  fees, or other claims  arising under the federal Civil Rights Act of
1964 (as amended),  the federal  Americans  with  Disabilities  Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) ("ADEA"),  the
federal Employee  Retirement  Income Security Act of 1974 (as amended),  and the
California  Fair  Employment and Housing Act (as amended).  Notwithstanding  the
foregoing,  the following are not included in the Released Claims (the "Excluded
Claims"):  (1) any rights or claims for  indemnification  I may have pursuant to
any written  indemnification  agreement  with the Company to which I am a party,
the charter, bylaws, or operating agreements of the Company, or under applicable
law; or (2) any rights  which are not  waivable as a matter of law. In addition,
nothing  in  this  Release  prevents  me  from  filing,   cooperating  with,  or
participating  in  any  proceeding  before  the  Equal  Employment   Opportunity
Commission,  the  Department  of Labor,  or the  California  Department  of Fair
Employment  and  Housing,  except that I hereby  waive my right to any  monetary
benefits in  connection  with any such  claim,  charge or  proceeding.  I hereby
represent and warrant that,  other than the Excluded

                                       1.
<PAGE>

                                                   For Employees Age 40 or Older
                                                          Individual Termination

Claims,  I am not aware of any  claims I have or might have  against  any of the
Released Parties that are not included in the Released Claims.

      I acknowledge  that I am knowingly and  voluntarily  waiving and releasing
any rights I may have under the ADEA. I also acknowledge that the  consideration
given for the Released Claims is in addition to anything of value to which I was
already  entitled.  I  further  acknowledge  that I have  been  advised  by this
writing,  as required by the ADEA, that: (a) the Released Claims do not apply to
any rights or claims that arise after the date I sign this Release; (b) I should
consult with an attorney  prior to signing  this Release  (although I may choose
voluntarily  not to do so);  (c) I have  twenty-one  (21) days to consider  this
Release  (although I may choose to  voluntarily  to sign it sooner);  (d) I have
seven (7) days  following  the date I sign this Release to revoke the Release by
providing written notice to an officer of the Company;  and (e) the Release will
not be  effective  until the date upon which the  revocation  period has expired
unexercised,  which will be the eighth day after I sign this Release ("Effective
Date").

      I  acknowledge  that  I have  read  and  understand  Section  1542  of the
California Civil Code which reads as follows: "A general release does not extend
to claims  which the  creditor  does not know or  suspect to exist in his or her
favor at the time of executing  the  release,  which if known by him or her must
have  materially  affected  his or her  settlement  with the  debtor."  I hereby
expressly  waive and  relinquish  all rights and benefits under that section and
any law of any  jurisdiction of similar effect with respect to my release of any
claims hereunder.

      I hereby represent that I have been paid all compensation owed and for all
hours worked,  I have received all the leave and leave benefits and  protections
for which I am eligible, and I have not suffered any on-the-job injury for which
I have not already filed a workers' compensation claim.

      I  acknowledge  that to  become  effective,  I must sign and  return  this
Release to the Company so that it is  received  not later than  twenty-one  (21)
days  following  the  date  it is  provided  to me,  and I must  not  revoke  it
thereafter.

                                         EMPLOYEE

                                         Name:________________________

                                         Date:________________________

                                       2.
<PAGE>

                                                   For Employees Age 40 or Older
                                                               Group Termination

                                    EXHIBIT B

                                RELEASE AGREEMENT

      I understand  and agree  completely  to the terms set forth in the VaxGen,
Inc. Severance Benefit Plan (the "Plan").

      I understand  that this Release,  together with the Plan,  constitutes the
complete,  final and exclusive  embodiment of the entire  agreement  between the
Company,  affiliates  of the Company  and me with  regard to the subject  matter
hereof. I am not relying on any promise or  representation by the Company or the
Employers that is not expressly stated therein.  Certain  capitalized terms used
in this Release are defined in the Plan.

      I hereby  confirm my obligations  under my Proprietary  Agreement with the
Company and/or the Employer.

      Except as otherwise  set forth in this  Release,  I hereby  generally  and
completely  release the Company,  the  Employers,  and their  current and former
directors, officers, employees,  stockholders,  shareholders,  partners, agents,
attorneys,  predecessors,  successors, parent and subsidiary entities, insurers,
affiliates, and assigns (collectively,  the "Released Parties") from any and all
claims,  liabilities and obligations,  both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring prior
to my signing this Agreement (collectively, the "Released Claims"). The Released
Claims include,  but are not limited to: (1) all claims arising out of or in any
way  related  to  my  employment  with  the  Company,  the  Employers  or  their
affiliates, or the termination of that employment;  (2) all claims related to my
compensation or benefits, including salary, bonuses, commissions,  vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any  other  ownership  interests  in  the  Company,  the  Employers,   or  their
affiliates;  (3) all claims for breach of contract,  wrongful  termination,  and
breach of the  implied  covenant  of good faith and fair  dealing;  (4) all tort
claims,  including  claims  for  fraud,  defamation,   emotional  distress,  and
discharge in violation of public policy;  and (5) all federal,  state, and local
statutory claims, including claims for discrimination,  harassment, retaliation,
attorneys'  fees, or other claims  arising under the federal Civil Rights Act of
1964 (as amended),  the federal  Americans  with  Disabilities  Act of 1990, the
federal Age Discrimination in Employment Act of 1967 (as amended) ("ADEA"),  the
federal Employee  Retirement  Income Security Act of 1974 (as amended),  and the
California  Fair  Employment and Housing Act (as amended).  Notwithstanding  the
foregoing,  the following are not included in the Released Claims (the "Excluded
Claims"):  (1) any rights or claims for  indemnification  I may have pursuant to
any written  indemnification  agreement  with the Company to which I am a party,
the charter, bylaws, or operating agreements of the Company, or under applicable
law; or (2) any rights  which are not  waivable as a matter of law. In addition,
nothing  in  this  Release  prevents  me  from  filing,   cooperating  with,  or
participating  in  any  proceeding  before  the  Equal  Employment   Opportunity
Commission,  the  Department  of Labor,  or the  California  Department  of Fair
Employment  and  Housing,  except that I hereby  waive my right to any  monetary
benefits in  connection  with any such  claim,  charge or  proceeding.  I hereby
represent and warrant that,  other than the Excluded

                                       1.
<PAGE>

                                                   For Employees Age 40 or Older
                                                               Group Termination

Claims,  I am not aware of any  claims I have or might have  against  any of the
Released Parties that are not included in the Released Claims.

      I acknowledge  that I am knowingly and  voluntarily  waiving and releasing
any rights I may have under the ADEA. I also acknowledge that the  consideration
given for the Released Claims is in addition to anything of value to which I was
already  entitled.  I  further  acknowledge  that I have  been  advised  by this
writing,  as required by the ADEA, that: (a) the Released Claims do not apply to
any rights or claims that arise after the date I sign this Release; (b) I should
consult with an attorney  prior to signing  this Release  (although I may choose
voluntarily  not to do so);  (c) I have  forty-five  (45) days to consider  this
Release  (although I may choose to  voluntarily  to sign it sooner);  (d) I have
seven (7) days  following  the date I sign this Release to revoke the Release by
providing written notice to an officer of the Company;  and (e) the Release will
not be  effective  until the date upon which the  revocation  period has expired
unexercised,  which will be the eighth day after I sign this Release ("Effective
Date").

      I have received with this Release all of the  information  required by the
ADEA, including without limitation a detailed list of the job titles and ages of
all employees who were terminated in this group  termination and the ages of all
employees of the Company in the same job  classification or organizational  unit
who were not terminated,  along with information on the eligibility factors used
to select employees for the group  termination and any time limits applicable to
this group termination program.

      I  acknowledge  that  I have  read  and  understand  Section  1542  of the
California Civil Code which reads as follows: "A general release does not extend
to claims  which the  creditor  does not know or  suspect to exist in his or her
favor at the time of executing  the  release,  which if known by him or her must
have  materially  affected  his or her  settlement  with the  debtor."  I hereby
expressly  waive and  relinquish  all rights and benefits under that section and
any law of any  jurisdiction of similar effect with respect to my release of any
claims hereunder.

      I hereby represent that I have been paid all compensation owed and for all
hours worked,  I have received all the leave and leave benefits and  protections
for which I am eligible, and I have not suffered any on-the-job injury for which
I have not already filed a workers' compensation claim.

      I  acknowledge  that to  become  effective,  I must sign and  return  this
Release to the Company so that it is  received  not later than  forty-five  (45)
days  following  the  date  it is  provided  to me,  and I must  not  revoke  it
thereafter.

                                         EMPLOYEE

                                         Name:________________________

                                         Date:________________________

                                       2.
<PAGE>

                                                      For Employees Under Age 40
                                                Individual and Group Termination

                                    EXHIBIT C

                                RELEASE AGREEMENT

      I understand  and agree  completely  to the terms set forth in the VaxGen,
Inc. Severance Benefit Plan (the "Plan").

      I understand  that this Release,  together with the Plan,  constitutes the
complete,  final and exclusive  embodiment of the entire  agreement  between the
Company,  affiliates  of the Company  and me with  regard to the subject  matter
hereof. I am not relying on any promise or  representation by the Company or the
Employers that is not expressly stated therein.  Certain  capitalized terms used
in this Release are defined in the Plan.

      I hereby  confirm my obligations  under my Proprietary  Agreement with the
Company and/or the Employer.

      Except as otherwise  set forth in this  Release,  I hereby  generally  and
completely  release the Company,  the  Employers,  and their  current and former
directors, officers, employees,  stockholders,  shareholders,  partners, agents,
attorneys,  predecessors,  successors, parent and subsidiary entities, insurers,
affiliates, and assigns (collectively,  the "Released Parties") from any and all
claims,  liabilities and obligations,  both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring prior
to my signing this Agreement (collectively, the "Released Claims"). The Released
Claims include,  but are not limited to: (1) all claims arising out of or in any
way  related  to  my  employment  with  the  Company,  the  Employers  or  their
affiliates, or the termination of that employment;  (2) all claims related to my
compensation or benefits, including salary, bonuses, commissions,  vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, or
any  other  ownership  interests  in  the  Company,  the  Employers,   or  their
affiliates;  (3) all claims for breach of contract,  wrongful  termination,  and
breach of the  implied  covenant  of good faith and fair  dealing;  (4) all tort
claims,  including  claims  for  fraud,  defamation,   emotional  distress,  and
discharge in violation of public policy;  and (5) all federal,  state, and local
statutory claims, including claims for discrimination,  harassment, retaliation,
attorneys'  fees, or other claims  arising under the federal Civil Rights Act of
1964 (as amended),  the federal Americans with Disabilities Act of 1990, and the
California  Fair  Employment and Housing Act (as amended).  Notwithstanding  the
foregoing,  the following are not included in the Released Claims (the "Excluded
Claims"):  (1) any rights or claims for  indemnification  I may have pursuant to
any written  indemnification  agreement  with the Company to which I am a party,
the charter, bylaws, or operating agreements of the Company, or under applicable
law; or (2) any rights  which are not  waivable as a matter of law. In addition,
nothing  in  this  Release  prevents  me  from  filing,   cooperating  with,  or
participating  in  any  proceeding  before  the  Equal  Employment   Opportunity
Commission,  the  Department  of Labor,  or the  California  Department  of Fair
Employment  and  Housing,  except that I hereby  waive my right to any  monetary
benefits in  connection  with any such  claim,  charge or  proceeding.  I hereby
represent and warrant that,  other than the Excluded  Claims,  I am not aware of
any claims I have or might have against any of the Released Parties that are not
included in the Released Claims.

                                       1.
<PAGE>

                                                      For Employees Under Age 40
                                                Individual and Group Termination

      I  acknowledge  that  I have  read  and  understand  Section  1542  of the
California Civil Code which reads as follows: "A general release does not extend
to claims  which the  creditor  does not know or  suspect to exist in his or her
favor at the time of executing  the  release,  which if known by him or her must
have  materially  affected  his or her  settlement  with the  debtor."  I hereby
expressly  waive and  relinquish  all rights and benefits under that section and
any law of any  jurisdiction of similar effect with respect to my release of any
claims hereunder.

            I hereby represent that I have been paid all  compensation  owed and
for all hours  worked,  I have  received  all the leave and leave  benefits  and
protections  for which I am eligible,  and I have not  suffered  any  on-the-job
injury for which I have not already filed a workers' compensation claim.

      I  acknowledge  that to  become  effective,  I must sign and  return  this
Release to the Company so that it is received not later than  fourteen (14) days
following the date it is provided to me.

                                           EMPLOYEE

                                           Name:___________________

                                           Date:___________________

                                       2.
<PAGE>

                                   APPENDIX A

                                  VAXGEN, INC.
                             SEVERANCE BENEFIT PLAN

Affiliates of the Company whose  employees  are eligible to  participate  in the
VaxGen, Inc. Severance Benefit Plan (each an "Employer") are as follows:

      NONE

The  foregoing  list of  Employers  is  subject to such  change as the  Company,
pursuant  to  Section  1 of the Plan,  may  determine  in its sole and  absolute
discretion. Any such change to the participating Employers shall be set forth in
a revised version of this Appendix A.

                                     Appendix A Adopted: August 1, 2007

                                     VaxGen, Inc.

                                     By:_______________________________

                                     Title:____________________________

                                       1.
<PAGE>

                                   APPENDIX B

                                  VAXGEN, INC.
                             SEVERANCE BENEFIT PLAN

Severance  benefits  provided  to  Eligible  Employees  under the  VaxGen,  Inc.
Severance Benefit Plan (the "Plan") are as follows:

1.    Severance  Benefits.  Subject to the  exceptions set forth in Section 2 of
      the Plan, each Eligible  Employee who meets all the requirements set forth
      in Sections 2 and 4 of the Plan, including, without limitation,  executing
      a general  waiver and release in  substantially  the form  attached to the
      Plan as Exhibit  A,  Exhibit B or  Exhibit  C, as  applicable,  within the
      applicable  time period set forth  therein and provided  that such release
      becomes  effective in accordance with its terms,  shall receive  severance
      benefits  as set  forth  in this  Appendix  B.  The  Company,  in its sole
      discretion, may modify the form of the required general waiver and release
      to comply with applicable law, and may incorporate such waiver and release
      into  a  termination  agreement  or  other  agreement  with  the  Eligible
      Employee.

      (a)   Salary Continuation  Payment Benefit.  The Company shall continue to
            pay, as severance,  an Eligible  Employee's Base Salary for a period
            after  his or her  Qualifying  Termination,  based  on the  Eligible
            Employee's  Years of Service  with the Company as of the date of his
            or her  Qualifying  Termination.  The period for which the  Eligible
            Employee's  Salary  Continuation  Payment  Benefit will  continue is
            calculated as follows:

            2 months and one week of Base Salary plus
            1 week of Base Salary if the Eligible Employee has completed two
            Years of Service plus
            1 week of Base Salary for each additional complete Year of Service.

            Except  as  the  Plan  Administrator  may  otherwise  determine,  no
            Eligible  Employee  shall  receive  a  Salary  Continuation  Payment
            Benefit in an amount exceeding twenty-six (26) weeks of Base Salary.

            Subject to Section 3(e) of the Plan, the Salary Continuation Payment
            Benefit will be paid on the same schedule as the  Company's  regular
            payroll as in effect  from time to time,  commencing  with the first
            regular payroll pay date following the effective date of the release
            of claims.

      (b)   COBRA Premium  Benefit.  If the Eligible  Employee was enrolled in a
            group health plan (e.g., medical,  dental, or vision plan) sponsored
            by the Company or an affiliate of the Company  immediately  prior to
            termination,  the  Eligible  Employee  may be  eligible  to continue
            coverage  under  such  group  health  plan  (or  to  convert  to  an
            individual   policy),   at  the  time  of  the  Eligible  Employee's
            termination of  employment,  under the  Consolidated  Omnibus Budget
            Reconciliation  Act of 1985  (together with any state law of similar
            effect,  "COBRA").  The Company will notify the Eligible Employee of
            any such right to continue such coverage at the

                                       1.
<PAGE>

            time of  termination  pursuant to COBRA.  No  provision of this Plan
            will affect the continuation coverage rules under COBRA, except that
            the Company's payment, if any, of applicable insurance premiums,  or
            waiver of any cost of coverage  under any  self-funded  group health
            plan,  will be  credited  as payment by the  Eligible  Employee  for
            purposes of the Eligible  Employee's  payment  required under COBRA.
            Therefore, the period during which an Eligible Employee may elect to
            continue the Company's or its affiliate's group health plan coverage
            at his or her own  expense  under  COBRA,  the length of time during
            which  COBRA  coverage  will  be  made  available  to  the  Eligible
            Employee,  and all other  rights  and  obligations  of the  Eligible
            Employee  under  COBRA  (except  the  obligation  to  pay  insurance
            premiums  that the  Company  pays,  if any,  or,  with  respect to a
            self-funded  plan, any obligation to pay the cost of coverage to the
            Company that the Company waives, if any) will be applied in the same
            manner that such rules would apply in the absence of this Plan.

            If an Eligible  Employee  timely  elects  continued  coverage  under
            COBRA,  the  Company  shall  pay the  full  amount  of the  Eligible
            Employee's  COBRA  premiums,  or shall  provide  coverage  under any
            self-funded  plan,  on  behalf  of the  Eligible  Employee  for  the
            Eligible  Employee's  continued  coverage under the Company's  group
            health  plans,   including  coverage  for  the  Eligible  Employee's
            eligible dependents, for up to two (2) months following the Eligible
            Employee's  termination of employment;  provided,  however,  that no
            such  premium  payments  shall be  made,  and no  coverage  shall be
            provided  under any  self-funded  group health plan,  following  the
            Eligible  Employee's  death,  the  effective  date of  cessation  of
            continued  coverage  under  COBRA,  or  the  effective  date  of the
            Eligible  Employee's coverage by a group health plan of a subsequent
            employer.  Each  Eligible  Employee  shall be required to notify the
            Company  immediately if the Eligible  Employee  becomes covered by a
            group health plan of a subsequent  employer.  Upon the conclusion of
            such period of insurance  premium  payments made by the Company,  or
            the provision of coverage under a self-funded group health plan, the
            Eligible  Employee will be responsible for the timely payment of the
            full  amount  of  premiums  (or  payment  for the cost of  coverage)
            required under COBRA for the duration of the COBRA period.

            For purposes of this Section 1(b), any applicable insurance premiums
            that are paid by the Company  shall not include any amounts  payable
            by the Eligible  Employee under an Internal Revenue Code Section 125
            health care reimbursement  plan, which amounts, if any, are the sole
            responsibility of the Eligible Employee.

      (c)   Additional  PTO Accrual.  The Company shall pay an  additional  cash
            amount,  as  severance,  equal to 1/6th of the  Eligible  Employee's
            annual paid time off ("PTO") accrual,  at the accrual rate in effect
            immediately  prior to the date of the Qualifying  Termination  (such
            amount,  the "PTO Bonus").  The PTO Bonus will be paid in a lump sum
            on the first regular  payroll pay date  following the effective date
            of the release of claims.  For the  avoidance of doubt,  the Company
            will pay the Eligible Employee for any accrued but unused PTO in the
            Eligible  Employee's  final  paycheck,  regardless  of  whether  the
            Eligible Employee receives

                                       2.
<PAGE>

            any severance  under this Plan or executes a release;  the PTO Bonus
            is in addition to any such amount.

      (d)   Pro-Rata Bonus. If the Eligible Employee is not an executive officer
            of the  Company,  the Company  shall pay such  Eligible  Employee an
            additional  cash  amount,  as  severance,   equal  to  the  Eligible
            Employee's  target  incentive  bonus  for the  quarter  in which the
            Qualifying  Termination occurs (the "Pro-Rata Bonus").  The Pro-Rata
            Bonus will be paid in a lump sum on the first  regular  payroll  pay
            date following the effective date of the release of claims.  For the
            avoidance of doubt, the Pro-Rata Bonus shall not include any portion
            of any performance bonus to which executive  officers of the Company
            may otherwise be entitled.

2.    Definitions:  The following  definitions  shall apply for purposes of this
      Appendix B:

      (a)   "Base  Salary"  shall mean the  Eligible  Employee's  base salary or
            regular  wage  rate in  effect  immediately  prior  to the  Eligible
            Employee's  receipt of  written  notice of the  Eligible  Employee's
            termination.  "Base  Salary"  does  not  include  variable  forms of
            compensation  such as but not limited to  overtime,  lead  premiums,
            shift differentials,  bonuses, incentive compensation,  commissions,
            expenses or expense allowances.

      (b)   "Year of  Service"  shall mean each full 12 month  period of regular
            and active  employment  with the Company from the effective  date of
            the Eligible  Employee's most recent date of hire or rehire with the
            Company  through  the  effective  date  of the  Eligible  Employee's
            termination. Leaves of absence periods greater than 3 months are not
            periods of active employment with the Company. Periods of employment
            prior to the Eligible  Employee's most recent date of hire or rehire
            with the Company are disregarded.

      The  foregoing  severance  benefits  are  subject  to all of the terms and
conditions of the Plan,  including reduction against any other severance owed to
the Eligible Employee.

                                   Appendix B Adopted: August 1, 2007

                                   VaxGen, Inc.

                                   By:________________________________

                                   Title:_____________________________

                                       3.Second Amendment, dated as of July 12, 2007 to the Purchase Contract

 EXHIBIT 10.09 
 SECOND AMENDMENT TO PURCHASE CONTRACT 
 THIS SECOND AMENDMENT dated as of July 12, 2007 (the
“Second Amendment”), to the PURCHASE CONTRACT dated as of February 12, 1996 (the “Purchase Contract”), is entered into between THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, a limited purpose
national banking association with trust powers, in its capacity as successor trustee of the Rio Grande Resources Trust II (the “Trustee”), (said Trustee being the successor to JPMorgan Chase Bank, National Association, formerly
known as JPMorgan Chase Bank, successor by merger to The Chase Manhattan Bank, successor by merger to Chase Bank of Texas, National Association, successor by change of name to Texas Commerce Bank National Association, as trustee of the
Rio Grande Resources Trust II (the “Prior Trustee”)), and EL PASO ELECTRIC COMPANY, a Texas corporation (“El Paso”). 
 RECITALS 
 A. El Paso and the Prior Trustee were parties to that certain Credit Agreement dated as of
February 12, 1996 (the “Credit Agreement”) among El Paso and the Prior Trustee as borrowers, Chase Manhattan Bank (successor by merger to Chemical Bank) as issuing bank, as administrative agent and as collateral agent for
the financial institutions party thereto as lenders (such financial institutions, the “Lenders”), and the Lenders. Pursuant to the Credit Agreement, the Lenders agreed to extend credit in the form of loans and letters of credit to
the Prior Trustee, in an aggregate amount not to exceed $60,000,000, (i) to finance the purchase of Nuclear Fuel by the Prior Trustee, (ii) to provide backup liquidity for commercial paper issued pursuant to a commercial paper program to
be established by the Prior Trustee, and (iii) to pay interest and other amounts payable under the Credit Agreement by the Prior Trustee (the foregoing items (i), (ii) and (iii), the “Trust Credit Purposes”). Consequently,
the Purchase Contract provided in Section 2(g) thereof that El Paso will not permit the total Net Investment of the Prior Trustee, at any one time, in all Nuclear Fuel to exceed $60,000,000. 
 B. Effective as of February 8, 1999, the Credit Agreement was amended and restated in its entirety, and the lenders thereunder agreed to extend
credit in the form of loans and letters of credit to the Prior Trustee for Trust Credit Purposes in an aggregate amount not to exceed $70,000,000. Consequently, El Paso and the Prior Trustee amended Section 2(g) of the Purchase Contract (the
“First Amendment”) to provide that El Paso would not cause or permit the total Net Investment of the Prior Trustee, at any one time, in all Nuclear Fuel to exceed $70,000,000. 
 C. The Credit Agreement was amended and restated again in its entirety on January 28, 2002, December 17, 2004 and April 11, 2006. The

 
amended and restated credit agreement dated as of April 11, 2006 (the “2006 Credit Agreement”) provided that the $70,000,000 available to the
Prior Trustee for Trust Credit Purposes could be increased from time to time pursuant to Section 2.21 of the 2006 Credit Agreement. Subsequent to the execution of the 2006 Credit Agreement but prior to the date hereof, the Trustee succeeded the
Prior Trustee as trustee under the Rio Grande Resources Trust II. 
 D. On May 30, 2007, El Paso delivered a written notice pursuant to
Section 2.21 of the 2006 Credit Agreement to JPMorgan Chase Bank, N.A. (in its capacity as the administrative agent for the lenders under the 2006 Credit Agreement), requesting that the amount available to the Trustee in the form of loans and
letters of credit for Trust Credit Purposes be increased from a total amount not to exceed $70,000,000 to a total amount not to exceed $120,000,000, such increase to be effective as of July 16, 2007. 
 E. As a result of the foregoing, El Paso and the Trustee desire to amend the Purchase Contract in the manner set forth below. 
 F. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Purchase Contract. 
 AGREEMENT 
 In consideration of the
mutual agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: 
 SECTION 1. Amendment to Section 2(g) of the Purchase Contract. Section 2(g) of the Purchase Contract is hereby amended and restated to
read in its entirety: 
  

	 	(g)	El Paso shall not cause or permit the total Net Investment of the Trustee, at any one time, in all Nuclear Fuel to exceed $120,000,000. 

 SECTION 2. Conditions to Effectiveness. This Amendment shall become effective as of the date first written above upon its execution by both
parties hereto. 
 SECTION 3. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or
otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Purchase Contract, all of which are ratified and affirmed in all respects and shall continue in full force and
effect. This Amendment shall apply and be effective only with respect to the provision of the Purchase Contract specifically referred to herein. 

 SECTION 4. Counterparts. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed counterpart hereof. 
 SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. 
 SECTION 6. Headings. The headings of this amendment
are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 
 IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed by their duly authorized officers, all as of the date first above written. 
  

			
	THE BANK OF NEW YORK TRUST
	 COMPANY, NATIONAL ASSOCIATION,
 not in its
individual capacity but solely in
 its capacity as Trustee of the Rio Grande

	Resources Trust II
		
	By:	 	 /s/ Kathryn M. Houston

	Name:	 	Kathryn M. Houston
	Title:	 	Vice President
	
	EL PASO ELECTRIC COMPANY
		
	By:	 	 /s/ Steven P. Busser

	Name:	 	Steven P. Busser
	Title	 	V.P., Treasurer & Chief
		 	Risk Officer

			
	STATE OF TEXAS	  	)
		  	)
	COUNTY OF EL PASO	  	)

 BEFORE ME, the undersigned authority, on this day personally appeared Steven P. Busser, a V.P.,
Treasurer & Chief Risk Officer of El Paso Electric Company, a Texas corporation, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he/she executed the same for the purposes
and consideration therein expressed, in the capacity stated, and as the act and deed of said corporation. 
 Given under my hand and seal of
office, this 12th day of July, 2007. 
  

					
		 		 	 /s/ Hilda Vargas

		 		 	Notary Public – State of Texas
			
	My Commission Expires:	 		 	  

	     6-26-09
	 		 	

			
	STATE OF TEXAS	  	)
		  	)
	COUNTY OF TRAVIS	  	)

 BEFORE ME, the undersigned authority, on this day personally appeared Kathryn Houston, a Vice
President of The Bank of New York Trust Company, National Association, acting in its capacity as Trustee of the Rio Grande Resources Trust II, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to
me that he/she executed the same for the purposes and consideration therein expressed, in the capacity stated, and as the act and deed of said corporation. 
 Given under my hand and seal of office, this 11th day of July, 2007. 
  

					
		 		 	 /s/ Karen L. Kupecki

		 		 	Notary Public – State of Texas
			
	My Commission Expires:	 		 	  

	 05-04-2011

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