NOTE REPURCHASE AGREEMENT

Exhibit 10.1

EXECUTION COPY

NOTE REPURCHASE AGREEMENT

THIS NOTE REPURCHASE AGREEMENT (this “ Agreement ”) to repurchase VaxGen, Inc. 5 ¹ / 2 % Convertible Senior Subordinated Notes Due April 1, 2010 is made as of October 27, 2008, by and between Drawbridge Special Opportunities Fund LP , a Delaware limited partnership (“ Holder ”), 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 Holder is the owner and holder of that certain 5 ¹ / 2 % Convertible Senior Subordinated Note Due April 1, 2010 (the “ Note ”) identified on Schedule A hereto, 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 Note, to date, has not matured; and

WHEREAS, the Holder desires to sell the Note, and the Company in turn desires to repurchase the Note.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Holder and the Company hereby agree as follows:

1.  Sale of Note . Subject to the terms and conditions of this Agreement, the Company agrees to purchase from the Holder, and the Holder agrees to sell to the Company, the Note identified on Schedule A hereto, in the principal amount and for an aggregate purchase price set forth on Schedule A hereto. The purchase and sale of the Note shall take place at the offices of Cooley Godward Kronish, 3175 Hanover Street, Palo Alto, California 94304 at 10:00 A.M. (local time), on October 28, 2008 (which time and place are designated as the “ Closing ” and the date thereof the “ Settlement Date ”). At the Closing, the Holder shall deliver to the Company the Note, duly endorsed or accompanied by an assignment duly endorsed and in a form acceptable to the Trustee, against payment of the aggregate purchase price described on Schedule A hereto (the “ Purchase Price ”), by wire transfer in the amounts and using the wire transfer instructions to be provided separately to the Company by Holder. Upon receipt by the Holder of the Purchase Price, the Company shall become the legal and beneficial owner of the Note and of all rights and interest therein or related thereto and to the monies due and to become due under the terms of the Note. The Holder hereby agrees that upon receipt of the Purchase Price, the Note shall be cancelled and the Company shall have no further obligation to the Holder thereunder.

2.  Representations and Warranties of the Holder . The Holder hereby represents and warrants to the Company with respect to the Note issued to the Holder that:

2.1 Ownership of Note . The Holder has, and at the Closing will have, good and valid 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 principles of equity and by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to, limiting or 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, nor 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, agree