VaxGen Addresses MPM Claims in Letter to St... (nd obligations particularly in a ...)

VaxGen Addresses MPM Claims in Letter to Stockholders

Date:12/20/2007

obligations, particularly in a liquidation scenario.

3. It implicitly assumes a rapid timeline for the distribution of

proceeds to stockholders.

I will discuss each of these points in some more detail below. However, you should be aware that we continue to market some of the assets in question. Accordingly, it is not appropriate for me to publicly disclose the details regarding these potential asset sales.

In summary, the facts are these: For ten months, VaxGen's Board, management and advisors pursued a full range of potential strategic transactions, including regularly analyzing the likely return to stockholders from liquidation. Much more detail on this process will be available to you in our S-4, which we expect will be filed shortly with the SEC. The most up-to-date liquidation analysis was done immediately prior to our signing the Raven merger agreement. As of early November, this analysis showed a potential distribution of approximately 95 cents per share.

In the event a liquidation option were pursued today, the proceeds would be materially lower, given the expenses and liabilities associated with ongoing operations and the costs of terminating the proposed merger with Raven. By contrast, the analyses performed by management and its advisors suggested valuations for the merged companies at a significant premium to liquidation value. Moreover, any potential liquidation proceeds would only be available to stockholders at some undefined future time after a very extensive and time consuming process, which would itself require a proxy solicitation and stockholder vote.

On the question of timing of a distribution if the liquidation option were selected, we have been informed that the process would likely take anywhere from one to two years from the point that it is initiated. Stockholders should not therefore be under any illusion that this is a quick route to a payout.

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VaxGen Addresses MPM Claims in Letter to St...(nd obligations particularly in a ...)