Exhibit 10.1
NOTE REPURCHASE AGREEMENT
     THIS NOTE REPURCHASE AGREEMENT (this “Agreement”) to repurchase VaxGen,
Inc. 51/2% Convertible Senior Subordinated Notes Due April 1, 2010 is made as of
February 4, 2008, by and between Xmark Opportunity Fund, L.P. (“Fund L.P.”) and
Xmark Opportunity Fund, Ltd. (“Fund Ltd.”, and together with Fund L.P., the
“Holders”), on the one hand, and VaxGen, Inc., a Delaware corporation
(“Company”), on the other hand.
W I T N E S S E T H:
     WHEREAS, the Holders are the owners and holders of those two certain 51/2%
Convertible Senior Subordinated Notes Due April 1, 2010 (together, the “Notes”),
in the aggregate principal amount of One Million Five Hundred Thousand Dollars
($1,500,000), issued under an Indenture, dated as of April 5, 2005 (the
“Indenture”), between the Company and U.S. Bank National Association, as trustee
(the “Trustee”);
     WHEREAS, the Notes, to date, have not matured; and
     WHEREAS, the Holders, desiring to sell the Notes, approached the Company
with respect thereto, and the Company in turn desires to repurchase the Notes.
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Holders and the Company hereby
agree as follows:
          1. Sale of Notes. Subject to the terms and conditions of this
Agreement, the Company agrees to purchase from the Holders, and the Holders
agree to sell to the Company, the Notes at an aggregate purchase price of Seven
Hundred Fifty Thousand Dollars ($750,000), plus accrued and unpaid interest
thereon in the amount of Twenty-Eight Thousand Four Hundred Sixteen Dollars and
Sixty-Seven Cents ($28,416.67) (collectively, the “Purchase Price”). The
purchase and sale of the Notes shall take place at the offices of Cooley Godward
Kronish, 3175 Hanover Street, Palo Alto, California 94304 at 9:00 A.M. (local
time), on the date hereof (which time and place are designated as the
“Closing”). At the Closing, the Holders shall deliver to the Company the Notes,
duly endorsed or accompanied by an assignment duly endorsed and in a form
acceptable to the Trustee, against payment of the Purchase Price therefor by
wire transfer in the amounts and using the wire transfer instructions as set
forth on Exhibit A hereto. Upon receipt by the Holders of the Purchase Price,
the Company shall become the legal and beneficial owner of the Notes and of all
rights and interest therein or related thereto and to the monies due and to
become due under the terms of the Notes. The Holders hereby agree that upon
receipt of the Purchase Price, the Notes shall be cancelled and the Company
shall have no further obligation to the Holders thereunder.

 

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          2. Representations and Warranties of the Holders. Each of the Holders
hereby represents and warrants to the Company with respect to the Note issued to
such Holder that:
               2.1 Ownership of Note. The Holder has, and at the Closing will
have, good and marketable right, title and interest (legal and beneficial) in
and to the Note, free and clear of all liens, pledges, security interests,
charges, contractual obligations, claims or encumbrances of any kind. Upon
payment for the Note in accordance with this Agreement, the Holder will convey
the Note to the Company free and clear of all liens, pledges, security
interests, charges, contractual obligations, claims or encumbrances of any kind.
               2.2 Organization; Authorization. The Holder has full power and
authority to enter into this Agreement. The execution, delivery and performance
by the Holder of this Agreement has been duly authorized by all requisite action
by the Holder and this Agreement constitutes a valid and binding obligation of
the Holder, enforceable against the Holder in accordance with its terms, except
as enforcement may be limited by general principles of equity and by bankruptcy,
insolvency and similar laws affecting creditors’ rights and remedies generally.
               2.3 No Consent Required. No consent, authorization, approval,
order, license, certificate or permit or act of or from, or declaration or
filing with, any foreign, federal, state, local or other governmental authority
or regulatory body or any court or other tribunal or any party to any contract,
agreement, instrument, lease or license to which the Holder is a party, is
required for the execution, delivery or performance by the Holder of this
Agreement or any of the other agreements, instruments and documents being or to
be executed and delivered hereunder or in connection herewith or for the
consummation of the transactions contemplated hereby.
               2.4 Disclosure of Information. The Holder has received all the
information it considers necessary or appropriate to determine whether to sell
the Note to the Company pursuant to this Agreement. The Holder acknowledges
(i) the Company has not made any representation or warranty, express or implied,
except as set forth herein, regarding any aspect of the sale and purchase of the
Note, the operation or financial condition of the Company or the value of the
Note, (ii) that it is not relying upon the Company in making its decision to
sell the Note to the Company pursuant to this Agreement and (iii) that the
Company is relying upon the truth of the representations and warranties in this
Section 2 in connection with the purchase of the Note hereunder.
               2.5 Tax Consequences. The Holder has had an opportunity to review
the federal, state and local tax consequences of the sale of the Note to the
Company and the transactions contemplated by this Agreement with its own tax
advisors. The Holder is relying solely on such advisors and not on any
statements or representations of the Company.
               2.6 No Conflict. Neither the execution and delivery of this
Agreement or the consummation of any of the transactions contemplated hereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default (with or without notice or lapse of time,
or both), or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (i) any material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other authorization,
right, restriction or obligation to which the Holder is a party or by which the
Holder or any of its properties is bound, (ii) any judgment or decree applicable
to, or affecting, the Holder or (iii) any statute, law or rule to which the
Holder is subject.

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               2.7 No Solicitation. The Holder has made no general solicitation
in connection with the sale of the Note, acknowledges that it independently
approached the Company regarding the transactions contemplated hereby and that
the Company did not initiate or attempt to initiate the transactions
contemplated hereby.
          3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Holders that:
               3.1 Organization; Authorization. The Company has full power and
authority to enter into this Agreement. The execution, delivery and performance
by the Company of this Agreement has been duly authorized by all requisite
action by the Company and this Agreement constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforcement may be limited by general principles of equity
and by bankruptcy, insolvency and similar laws affecting creditors’ rights and
remedies generally.
               3.2 No Consent Required. No consent, authorization, approval,
order, license, certificate or permit or act of or from, or declaration or
filing with, any foreign, federal, state, local or other governmental authority
or regulatory body or any court or other tribunal or any party to any contract,
agreement, instrument, lease or license to which the Company is a party, is
required for the execution, delivery or performance by the Company of this
Agreement or any of the other agreements, instruments and documents being or to
be executed and delivered hereunder or in connection herewith or for the
consummation of the transactions contemplated hereby.
               3.3 No Conflict. Neither the execution and delivery of this
Agreement or the consummation of any of the transactions contemplated hereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default (with or without notice or lapse of time,
or both), or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (i) any material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other authorization,
right, restriction or obligation to which the Company is a party or by which the
Company or any of its properties is bound, (ii) any judgment or decree
applicable to, or affecting, the Company or (iii) any statute, law or rule to
which the Company is subject.
               3.4 No Litigation. There is no action, suit, proceeding,
judgment, claim or investigation pending or, to the knowledge of the Company,
threatened against the Company which could reasonably be expected in any manner
to challenge or seek to prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement.

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          4. Securities Act; Transfer Restrictions. The Company hereby
acknowledges that the (i) securities are not registered pursuant to the
Securities Act of 1933, as amended, and (ii) the Notes and the common stock
underlying the Notes may only may be disposed of in compliance with Federal and
State securities laws.
          5. Miscellaneous.
               5.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, without regard to its choice
of law provisions. The parties hereto hereby agree that any action brought under
this Agreement or related to the transactions contemplated hereby shall be
brought in a Federal or State court located in the County of San Francisco in
the State of California.
               5.2 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile or electronic signature, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
               5.3 Publicity. The Holders will use reasonable commercial efforts
to keep the terms and existence of this transaction confidential, provided that
the Holder may share the details of this transaction in confidence with its
attorneys, investors and financial and tax advisors, and may advise other
potential purchasers of the Notes that the Notes have been repurchased by the
Company. The Holders shall not be prohibited from referring communications with
any other party regarding the transactions contemplated hereby to the Company.
               5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
               5.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified, (ii) when sent by
confirmed facsimile if sent during the normal business hours of the recipient;
if not, then on the next business day, (iii) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage prepaid
or (iv) one (1) day after deposit with a nationally-recognized overnight
courier, specifying next-day delivery, with written verification of receipt. All
communications shall be sent to the respective parties at the addresses set
forth on the signature pages attached hereto (or at such other addresses as
shall be specified by notice given in accordance with this Section 5.5).
               5.6 Amendment and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Holders and the Company.
               5.7 Further Assurances. Each party hereby agrees to execute any
additional documents and take any additional actions as may be reasonably
necessary to carry out the terms of this Agreement.

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               5.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
               5.9 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.

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     IN WITNESS WHEREOF, the Holders and the Company have executed this
Agreement effective as of the date and year first above written.

      XMARK OPPORTUNITY FUND, L.P.
By:
  XMARK OPPORTUNITY GP, LLC, its General Partner
By:
  XMARK OPPORTUNITY PARTNERS, LLC, its Sole Member
By:
  XMARK CAPITAL PARTNERS, LLC, its Managing Member

         
By:
Name:
  /s/ Mitchell D. Kaye
 
Mitchell D. Kaye    
Title:
  Chief Executive Officer    

      XMARK OPPORTUNITY FUND, LTD.
By:
  XMARK OPPORTUNITY MANAGER, LLC, its Investment Manager
By:
  XMARK OPPORTUNITY PARTNERS, LLC, its Sole Member
By:
  XMARK CAPITAL PARTNERS, LLC, its Managing Member

         
By:
Name:
  /s/ Mitchell D. Kaye
 
Mitchell D. Kaye    
Title:
  Chief Executive Officer    

Address for notices:
Xmark Capital Partners, LLC
90 Grove Street
Suite 201
Ridgefield, CT 06877
VAXGEN, INC.

         
By:
Name:
  /s/ James P. Panek
 
James P. Panek    
Title:
  President and Chief Executive Officer    

Address for notices:
VaxGen, Inc.
349 Oyster Point Boulevard
South San Francisco, CA 94080

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