Document:

Vaxgen 10-K, Exhibit 10-24

	

Exhibit 10.24

JOINT VENTURE AGREEMENT

This Joint Venture
Agreement (this “Agreement” or the “JVA”) is made on this
25th day of February, 2002, by and among: 

VAXGEN, INC. a company duly
organized and existing under the laws of the State of Delaware, USA, and having its
registered office at 1000 Marina Boulevard, Brisbane, California, U.S.A. (“VaxGen”); 

NEXOL BIOTECH CO., LTD., a company
duly organized and existing under the laws of the Republic of Korea, and having its
registered office at Samwhan Camus Bldg., Suite 300, 17-3, Yoido-dong, Youngdeungpo-ku,
Seoul, Korea (“Nexol”); 

NEXOL CO., LTD., a company duly
organized and existing under the laws of the Republic of Korea, and having its registered
office at Samwhan Camus Bldg., Suite 300, 17-3, Yoido-dong, Youngdeungpo-ku , Seoul,
Korea (“Nexol Co”); 

KOREA TOBACCO &
GINSENG CORPORATION, a company organized and existing under the laws of the
Republic of Korea, and having its registered office at 100, Pyungchon-dong,
Daeduk-gu, Daejon, Republic of Korea
(“KT&G”); and 

J. STEPHEN & COMPANY VENTURES LTD., a
company duly organized and existing under the laws of the Republic of Korea, and having
its registered office at 23rd Floor, City Air Tower, Samsung- Dong, Kangnam-ku, Seoul,
Korea (“JS”). 

(VaxGen, Nexol, Nexol Co,
KT&G and JS shall individually be referred to as a “Party” and
collectively as the “Parties”.) 

WHEREAS:

	(A) 		The
Parties desire to construct and operate a facility in Korea that will use cell culture
technology licensed from VaxGen for the manufacture of a number of pharmaceutical
products including, without limitation, AIDSVAX, an HIV vaccine using certain technology
licensed to VaxGen from Genentech, Inc. (“Genentech”), a U.S. corporation. 

	(B) 		The
Parties executed a Memorandum of Understanding on October 19, 2001, wherein they
expressed their intention to establish a joint venture company in Koreawhich will
construct and operate such facility, manufacture AIDSVAX and other pharmaceutical
products, and carry out certain related product improvement and development projects
under terms and conditions to be agreed by the Parties. 

	

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	(C) 		VaxGen
executed a Land Purchase Agreement with Incheon City on February 25, 2002, pursuant to
which VaxGen shall cause the JVC, which is defined below, to purchase from Incheon City
certain land located in Incheon City for the purpose of establishing the manufacturing
facilities for the production of AIDSVAX and other products as the JVC shall manufacture. 

	(D) 		The
Parties enter into this Agreement to set out the terms governing their investment in the
JVC and their relationship as shareholders in the JVC. 

	

Now, therefore, it is
agreed as follows: 

ARTICLE 1
DEFINITIONS

In this Agreement, unless
otherwise clearly indicated by the context, the following expressions shall have
the following meanings: 

	1.1 		An
“Affiliate” of a Party shall mean any corporation, association, or other entity which,
directly or indirectly, controls the Party or is controlled by the Party or is under
common control with the Party, where "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the affairs or management of
an entity through the ownership of voting securities or otherwise, including, without
limitation, having the power to elect a majority of the board of directors or other
governing body of such entity. 

	1.2 		“Common
Shares” shall mean the common shares issued by the JVC to VaxGen pursuant to Article
4.2 (a) (i) of this Agreement. 

	1.3 		“Contribution
Agreement” shall mean the agreement to be entered into by and among Parties hereto in
accordance with Article 4.2 (a) (i). 

	1.4 		“Government
Approval” of any action to be taken by any Party or by the JVC herein shall mean such
approval of or confirmation or consent to said action, together with such licenses,
permits, or other permissions reasonably required for said action, all as the statutes,
decrees, regulations, and rulings of governmental authority (collectively “Legal
Authority”) within Korea may require to be obtained in connection with said action from
such governmental authority or from political subdivisions thereof. Whenever any form of
the phrase “Government Approval” is used herein, it shall be interpreted and construed to
include the requirement that such approval be in form and substance acceptable to the
Parties hereto. 

	1.5 		“JVC”
shall mean the joint venture company to be formed pursuant to Article 2 of this Agreement. 

	

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	1.6 		“Preferred
Shares” shall mean the preferred shares issued by the JVC to the non-VaxGen shareholders
pursuant to Articles 4.2 and 4.6 of this Agreement. 

	1.7 		“Shares”
shall mean the Common Shares and the Preferred Shares issued by the JVC. 

	1.8 		“Transaction
Documents” shall mean such documents and agreements as are reasonably necessary in order
to give effect to the purpose of this Agreement, including, but not limited to, the
documents and agreements referred to in Articles 2.2, 3.1, and 4.2 of this Agreement. 

	1.9 		“Technology”
shall mean the Licensed Know-How and Licensed Patent Rights as defined in both the
License Agreement and the Sub-License Agreement defined in Article 3.1 of this Agreement. 

	

ARTICLE 2
COMPANY TO
BE INCORPORATED

	2.1 		The
Parties shall incorporate under the laws of the Republic of Korea, promptly after receipt
of the Government Approvals for the in-kind investment by VaxGen, a joint stock company
(chusik hoesa) named in Korean “Chusik Hoesa Celltrion” and in English “Celltrion, Inc.”
(hereinafter referred to as the “JVC”). 

	2.2 		The
Parties shall adopt Articles of Incorporation for the JVC that are substantially similar
in form and substance to the draft attached in Exhibit 1 hereto prior to investment by
VaxGen and KT&G as set forth in Article 4.2 (a) (i) and Article 4.2 (a) (iii),
respectively, and shall approve internal regulations as necessary in conformity with the
terms and conditions of this Agreement. If any discrepancy is found between this
Agreement and the JVC’s Articles of Incorporation and internal regulations, the Parties
shall amend the Articles of Incorporation and internal regulations to be consistent with
this Agreement. The Agreement shall control and prevail prior to the time that the
relevant amendment to the Articles of Incorporation and/or internal regulations is
effective. 

	2.3 		The
duration of the JVC shall be perpetual subject to the provisions of this Agreement. 

	2.4 		The
purpose of the JVC will be to engage in the following business activities: 

			(a) 		the
manufacture and sale of pharmaceutical products using cell culture technology, including
but not limited to AIDSVAX;

			(b) 		research
and development with respect to AIDSVAX and other products; and

			(c) 		any
and all acts, things, business and activities which are related, incidental or conducive,
directly or indirectly, to the attainment of the foregoing objectives.

	

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ARTICLE 3
TRANSACTION
DOCUMENTS

	3.1 		As
soon as practically possible, but no later than within sixty (60) days after the
execution of this Agreement unless otherwise extended by the mutual agreement among the
Parties, the Parties shall cause the JVC to enter into, the Transaction Documents with
the relevant parties, including, but not limited to: 

			(a) 		a
supply agreement with VaxGen, specifying the terms and conditions of the supply of the
Products to VaxGen, as defined therein and during the term provided therein,
substantially similar in form and substance to the draft attached hereto as Exhibit 2 (“Supply
Agreement”);

			(b) 		a
technology license agreement with VaxGen, specifying the terms and conditions of the
license of certain technology by VaxGen to the JVC, substantially similar in form and
substance to the draft attached hereto as Exhibit 3 (“License Agreement”);

			(c) 		a
sub-license agreement with VaxGen, specifying the terms and conditions of the sub-license
to the JVC by VaxGen of certain technology licensed to VaxGen by Genentech relating to
the manufacture of AIDSVAX and Vaccine (as defined therein), substantially similar in
form and substance to the draft attached hereto as Exhibit 4 (“Sub-License Agreement”);
and

			(d) 		an
assignment agreement with VaxGen, specifying the terms and conditions by which the JVC
shall assume VaxGen's rights and obligations under the Land Purchase and Sale Agreement
with Incheon Metropolitan City Government entered into on February 25, 2002,
substantially similar in form and substance to the draft attached hereto as Exhibit 5 (“Assignment
Agreement”).

	

ARTICLE 4
CAPITAL
CONTRIBUTION

	4.1 		The
total capitalization of the JVC during its lifetime shall be not less than US $80 million
and not more than US $120 million, which amount may be adjusted by mutual agreement of
the shareholders and board of directors of the JVC, in accordance with the then-existing
circumstances. Upon the agreement among the Parties, additional investors shall be
invited, as necessary, at the appropriate time to satisfy the financing needs of the JVC. 

	4.2 		Unless
otherwise agreed upon by all the Parties, the capitalization of the JVC for the first
five (5) years from its incorporation shall be effected in several stages, as follows: 

	

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			(a) 		Upon
incorporation of the JVC, and taking place within thirty (30) days from the execution of
this Agreement: 

					(i)  		VaxGen
shall make an in-kind contribution of Technology to the JVC in accordance with the
Contribution Agreement, which has been entered into on the same date as this Agreement by
and among the Parties hereto, in form and substance substantially similar to the document
attached hereto as Exhibit 7, in return for 7,800,000 common shares (“Common Shares”)
in the JVC, with each Common Share having a par value of 5,000Won per share. 

					(ii)  		Nexol
shall invest 13,000,000,000 Won (equivalent to US $10 million at the exchange rate of
1300 Won per USD) in cash in the JVC in return for 2,600,000 preferred shares in the JVC,
issued pursuant to the terms specified in Article 4.6 below (“Preferred Shares”),
with each Preferred Share having a par value of 5,000 Won per share. 

					(iii)  		KT&G shall
invest 13,000,000,000 Won (equivalent to US $10 million at the exchange rate of 1300 Won
per USD) in cash in the JVC, in return for 2,600,000 Preferred Shares. 

					(iv)  		JS
shall invest 9,750,000,000 Won (equivalent to US $7.5 million at the exchange rate of
1300 Won per USD) in cash in the JVC, in return for 1,950,000 Preferred Shares. 

			(b) 		Within
ninety (90) days from the execution of this Agreement, but earlier than the additional
cash investment as contemplated in paragraph (c) of this Article 4.2, Nexol Co shall
invest 2,600,000,000 Won (equivalent to US $2 million at the exchange rate of 1300 Won
per USD) in cash in the JVC, in return for 520,000 Preferred Shares.

			(c) 		No
later than one hundred twenty (120) days from the date of execution of this Agreement,
but prior to the investment under Paragraph (d) hereinbelow, KT&G and JS shall make
additional cash investments in the JVC as follows:

					(i)  		KT&G shall
invest 6,500,000,000 Won (equivalent to US $5 million at the rate of 1300 Won per USD) in
return for 260,000 Preferred Shares to be newly issued by the JVC at the premium price of
25,000 Won per share. 

					(ii)  		JS
shall invest 9,750,000,000 Won (equivalent to US $7.5 million at the exchange rate of
1300 Won per USD)in return for 390,000 Preferred Shares to be newly issued by the JVC at
the premium price of 25,000 Won per shares. 

	

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			(d) 		Within
one hundred twenty (120) days from the execution of this Agreement, Nexol or any parties
invited by Nexol and/or Nexol Co shall invest a total of 6,500,000,000 Won (equivalent to
US $5 million at the exchange rate of 1,300 per USD) in the JVC in return for 260,000
Preferred Shares, and within one hundred fifty (150) days from the execution of this
Agreement, the JVC shall invite other investors (“Other Investors”) to invest a
total of 6,500,000,000 Won (equivalent to US $5 million at the exchange rate of 1300 per
USD) in the JVC in return for 260,000 Preferred Shares, to be newly issued by the JVC at
the premium price of 25,000 Won per share (i.e., five times Par Value as defined in
Article 4.5). All shareholders of the JVC shall be entitled to the right of first refusal
to subscribe to these new Preferred Shares to be issued under this paragraph, and in the
event two or more Parties desire to subscribe to and pay for these Preferred Shares, the
JVC shall issue the Preferred Shares in proportion to the relative equity holding of each
Party as of such subscription date; provided, however, that in the event that no Party or
Other Investors are willing to invest the specified amount in the JVC, then Nexol (by
itself or through its Affiliates) shall invest the specified amount in the same manner as
described in this paragraph.

			(e) 		As
soon as practically possible after the U.S. Food and Drug Administration (“U.S. FDA”)
approves AIDSVAX, the JVC shall invite additional other investors (“Additional Other
Investors”) to altogether invest not less than 39,000,000,000 Won but not more than
52,000,000,000 Won (equivalent to approximately US $30 million to US $40 million) in the
JVC in return for the corresponding number of Preferred Shares to be newly issued by the
JVC at the premium price of at least 50,000 Won per share (i.e., ten times Par Value).
All shareholders of the JVC shall be entitled to the right of the first refusal to
subscribe to these new Preferred Shares to be issued under this paragraph, and in case
two or more Parties want to subscribe to and pay for these Preferred Shares, the JVC
shall issue the Preferred Shares in proportion to the relative equity holding of each
Party as of such subscription date; provided, however, that in the event that no Party or
Additional Other Investors are willing to invest such amount in the JVC, the Parties
shall discuss alternative financing.

	4.3 		In
the event that, with respect to any cash or in kind contribution by any of the Parties
provided for in Article 4.2 above, the Won-USD exchange rate on the date of contribution
deviates from 1300 Won per USD by 5% or more, the amount of the contribution shall be
adjusted to equal the Korean Won equivalent of the contribution expressed in USD and
indicated in parentheses in Article 4.2 above, that results from applying the telegraphic
transfer dollar buying rate prevailing at the Korea Exchange Bank on the date of the
contribution. 

	4.4 		Any
funds required by the JVC beyond the capital referred to in Article 4.2 of this Agreement
shall be obtained through debt financing by the JVC as set forth in Article 9.6 hereof
without recourse to the Parties. Except as otherwise agreed upon by the Parties, no Party
shall be obligated to contribute any cash or property to the JVC or extend any financial
assistance to the JVC. 

	4.5 		Unless
otherwise agreed upon by the Parties, the Parties shall cause the JVC to be allowed to
issue only two types of shares throughout the term of this Agreement, common shares and
preferred shares. All the common shares and the preferred shares issued by the JVC shall
have a par value of 5,000 Won per share (“Par Value”). 

	

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	4.6 		The
Preferred Shares to be issued by the JVC under this Article shall have the following
features and/or be subject to the following terms: 

					

			(a) 		Dividend
Preference: Holders of the Preferred Shares shall be entitled to receive dividends at the
rate of one hundred percent (100%) of the Par Value during the Preferred Dividend Term as
defined in Section 4.6 (d) below.

			(b) 		Immediate
Participation: Holders of the Preferred Shares shall be entitled to participate in the
JVC’s profits beyond the amount of the Dividend Preference in the form of “Immediate
Participation” (as opposed to simple participation). Accordingly, the holders of the
Preferred Shares shall participate pro-rata with the holders of Common Shares in all
distributed profits remaining after the preferred dividend is paid.

			(c) 		Cumulative:
The holders of the Preferred Shares shall be entitled to the dividend preference on a
cumulative basis so that any preferred dividend not paid in a given year will be
forwarded to succeeding years as an outstanding obligation of the JVC until paid off. The
JVC shall pay off these accrued dividends in the following order:

					(i)  		the
arrearage of preferred dividends, 

					(ii)  		preferred
dividends for the current year, and 

					(iii)  		dividends
to all shareholders. 

					

			(d) 		Convertible:
All the Preferred Shares shall be converted into Common Shares upon the occurrence of the
earlier of the following events or dates: (i) the Supply Agreement is terminated in
accordance with the terms thereof or (ii) the end of the thirteenth (13th) fiscal year of
the JVC. For the purpose of this Agreement, the period from the incorporation of the JVC
to the last day prior to such conversion shall be referred to as the “Preferred
Dividend Term".

			(e) 		Voting:
The holders of the Preferred Shares shall be entitled to the same voting rights as are
given to the holders of Common Shares.

	4.7 		Notwithstanding
the JVC's dividend obligations or any other provision set forth herein, the JVC shall
maintain sufficient cash flow to purchase that certain land identified in the Land
Purchase Agreement pursuant to the terms thereof. 

	4.8 		During
the term of the Agreement, each stock certificate issued hereunder will bear the
following words: 

	

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“Transfer
of the shares of stock represented by this certificate is restricted subject to the Joint
Venture Agreement dated February 25, 2002, among VaxGen, Inc., Nexol Biotech Co., Ltd.,
Nexol Co., Ltd., Korea Tobacco &Ginseng Corporation and J. Stephen &Company
Ventures Ltd., a copy of which is on file at the principal office of the Company in
Incheon, Korea.”

	

ARTICLE 5
CONDITIONS
TO INVESTMENT

	5.1 		The
investment by the Parties in the JVC shall be subject to the satisfaction of the
following conditions: 

			(a) 		TheLand
Purchase Agreement shall have been entered into by VaxGen and Incheon Metropolitan City
Government on the same date as this Agreement and on the terms and conditions
satisfactory to the Parties to the JVA in connection withthe purchase by the JVC of
certain land in the Songdo New City, which is where the JVC and its manufacturing plant
is to be located.

			(b) 		All
necessary Government Approvals for the in-kind contribution by VaxGen as provided for in
this JVA and the Contribution Agreement have been obtained.

			(c) 		An
appraisal undertaken of the value of the Technology to be licensed by VaxGen to the JVC
shall result in a valuation of no less than 39 billion Won (equivalent to US $30
million), and the relevant court shall have affirmed that the value of the Technology, as
appraised through the appraisal procedures provided for in the Korean Commercial Code,
corresponds to the value of the Common Shares to be issued to VaxGen pursuant to Article
4.2 (a) (i) hereunder.

			(d) 		The
Parties shall have executed (or, where the JVC is a party, finalized for subsequent
execution) all the documents and agreements necessary to implement the transactions
contemplated in this JVA including, but not limited to, the Transaction Documents.

			(e) 		Approval
shall have been obtained from the respective Boards of Directors of the Parties for the
transactions contemplated in this Agreement.

			(f) 		The
investments by KT&G in the JVC under Article 4.2 (a) shall be subject to the satisfaction
of the condition that Nexol and JS shall have made their respective investments in the
JVC under Article 4.2 (a) in full as provided in the JVA at least one day prior to KT&G’s respective
investment.

	

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ARTICLE 6
TRANSFER OF
SHARES

	6.1 		Except
as permitted by this Article 6 or with the prior written consent of all of the other
Parties, no Party shall: 

			(a) 		transfer
any Shares;

			(b) 		grant,
declare, create or dispose of any right or interest in any Shares; or

			(c) 		create
or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over
any Shares.

	6.2 		From
the date of this Agreement until five (5) years thereafter (“Initial Period”),
no Party shall transfer any Shares. After the expiration of said Initial Period, and with
respect to the transfer of shares under Section 6.3 of this Agreement, a Party may
transfer its Shares if all of the following conditions are satisfied: 

			(a) 		the
receipt by the other Parties (“Continuing Parties”) of an accession agreement
executed by the transferee of such Shares;

			(b) 		any
loans (or the relevant part thereof (being in proportion to the shareholding ratio
proportion of the selling Party prior to such transfer)) owing at that time by the JVC to
the Party wishing to sell its Shares (“Seller”) shall first have been assigned
to, or equivalent financing made available by, the transferee of such Shares;

			(c) 		any
obligations of any Seller (or the relevant part thereof (being in proportion to the
shareholding ratio prior to such transfer)) under any guarantees and/or indemnities to
third parties in relation to the JVC’s business or in respect of loans which have not yet
been advanced to the JVC shall first have been assumed by the transferee of such Shares;
and

			(c) 		the
terms of Article 6.4 below.

	6.3 		Notwithstanding
the prohibition on transfer of Shares during the Initial Period set forth in Article 6.2
above and all of the terms of Article 6.4 below, (i) any Party may sell up to one third
of its Shares in the JVC to the extent that the sale of such Shares is between such Party
and its Affiliate, its shareholders or its investors. In relation to this Paragraph, it
is agreed and understood that Nexol and/or Nexol Co shall have the right to sell up to
one third of the Shares of the JVC held by Nexol and Nexol Co. However, in no event shall
such sale of the Shares by Nexol and/or Nexol Co be made in the open market to obtain
higher proceeds. With respect to JS, JS shall have the right to sell its remaining Shares
in the JVC even after the sale of its Shares pursuant to paragraph (i) hereinabove, but
on condition that such sale will be subject to Article 6.4 hereinbelow. 

	6.4 		In
the event that, after the Initial Period, the Seller proposes to transfer its Shares to a
proposed third party purchaser (“Third Party Purchaser”), VaxGen and the other
Continuing Parties shall have a right of first refusal with respect to the Seller's
Shares. For this purpose, no transfer of the Seller's Shares shall be made unless the
following provisions are complied with in respect of such transfer: 

	

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			(a) 		The
Seller shall first give the other Parties (the “Offeree Parties”) a notice (“Transfer
Notice”) of any proposed transfer together with details of the Third Party
Purchaser, the purchase price and other material terms which the Seller and the Third
Party Purchaser have agreed.

			(b) 		The
Offeree Parties shall have thirty (30) days from the date of its receipt of the Transfer
Notice to purchase all or a part of the Shares proposed to be sold by the Seller on the
terms set forth in the Transfer Notice in proportion to their then existing shareholding
ratio of the JVC;

			(c) 		In
the event that any of the Offeree Parties elects not to purchase any or all such Shares
during such thirty (30) day period in proportion to their then existing shareholding
ratio of the JVC, such Offeree Party shall notify the other Offeree Parties, and the
other Offeree Parties shall have thirty (30) days to purchase all or a part of the Shares
proposed to be sold by Seller on the terms set forth in the Transfer Notice in proportion
to their then existing shareholding ratio of the JVC;

			(d) 		In
the event that all or a part of the Shares proposed to be sold by the Seller is not sold
in accordance with Paragraph (a) through (c) above within the aggregate sixty (60) day
period set forth above (“Option Period”), the Seller may sell such remaining
Shares to the Third Party Purchaser on terms no less favorable to the Seller than those
set forth in the Transfer Notice within sixty (60) days of the expiration of the Option
Period. If such remaining Shares are not sold by the Seller within sixty (60) days after
the expiration of the Option Period, then the right of the Seller to sell such Shares
shall expire and the obligations of this Article 6.4 shall be reinstated.

	6.5 		Since
damages arising from breach of the obligations under this Article 6 may be difficult to
compute with precision, the Parties agree that any Party found to have sold or
transferred any Shares in violation of the terms of this Article shall pay to the
non-breaching Parties twice the value of the Shares transferred in violation of this
Article (as appraised by a licensed appraisal company) or twice the consideration
received for said Shares, whichever shall be greater. The Parties agree that such
computation of damages is fair and reasonable. Application of this provision shall not
prevent a Party hereto from enforcing its rights or augmenting its protection by such
other remedies as may be available, including without limitation, injunctive relief. 

	

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ARTICLE 7
CONTRIBUTION
OF TECHNOLOGY

	7.1 		VaxGen
shall contribute to the JVC, upon the incorporation of the JVC, the license to use the
Technology in accordance with the Contribution Agreement which shall be entered into by
the Parties on the same date as this Agreement. The Technology to be contributed to the
JVC and the detailed terms for use of the Technology by the JVC shall be specified in the
License Agreement and the Sub-License Agreement. The major terms of these agreements
shall consist of: (i) a non-exclusive sub-license, under the patent rights and know-how
licensed from Genentech relating to gp120, to manufacture AIDSVAX, (ii) an exclusive
license in Korea under certain intellectual property owned by VaxGen, to manufacture
AIDSVAX and other products as the JVC may choose to manufacture in the future (“Licenses”),
(iii) such Technology as may be necessary for designing, constructing, operating and
validating the manufacturing plant that will be used to manufacture AIDSVAX, and for the
manufacture of AIDSVAX, including, but not limited to, technology for fermentation
control and product isolation and processing and formulation, as expressly set forth in
the License Agreement. The Parties agree that the contribution of the Technology shall be
valued at 39,000,000,000 Won which is equivalent to approximately US $30 million. The
above mentioned contribution shall be irrevocable during the term of the License
Agreement, and the JVC shall have the right to register its rights to use the Licenses in
Korea. 

	7.2 		Under
the terms of the License Agreement and the Sub-License Agreement, VaxGen shall provide to
the JVC the relevant documents, materials, designs, data and other information necessary
for the use of the Technology by the JVC and shall use its best efforts to arrange, to
the extent reasonably necessary for the operation of the facility as contemplated by the
Parties, for the employees of the JVC to receive continuing and ongoing professional
training and education at VaxGen and elsewhere, and VaxGen shall dispatch its own
technicians and specialists with appropriate experience and qualifications to the JVC to
assist in the transfer and use of the Technology by the JVC for the manufacture of
AIDSVAX. 

	7.3 		In
the event VaxGen fails to obtain results in its pending clinical trials which, in
VaxGen's sole opinion, support further application for marketing approval by the U.S. FDA
and other regulatory agencies, and if VaxGen fails to commit to develop a “second-generation”product
incorporating AIDSVAX, then the Parties shall cause the Supply Agreement to terminate
without further liability or obligation of the Parties to each other (excepting those
provisions of the Supply Agreement which expressly survive termination). In such case,
VaxGen shall arrange to have the JVC to be contracted as manufacturer and/or supplier of
other products, including gp120 and similar products of VaxGen, and the Parties shall
thereafter make their best efforts to contract for the JVC to manufacture other products,
including those of Genentech. 

	7.4 		VaxGen
shall license, and shall make its best efforts to cause Genentech to license, to the JVC
any new and developed technologies pertaining to the development and/or manufacture of
AIDSVAX and other products, at no additional cost to the JVC. 

	

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ARTICLE 8
ESTABLISHMENT
OF PILOT PLANT

	8.1		
For the purpose of expediting the smooth and efficient transfer of the
Technology, the Parties agree to cause the JVC to invest US $7 million in equity
or debt no later than June 1, 2002, to be used for capital expenses related to
the construction of a 2x500 liter-scale pilot manufacturing facility in South
San Francisco, California (the “Pilot Plant”). 

	8.2		
The $7 million capital would be used to capitalize a corporation
(“Newco”) in which the JVC would initially be the sole shareholder,
receiving 7 million shares of common stock at a price of US $1.00 per share.
VaxGen will supervise the design and construction of the Pilot Plant and manage
its operations. 

	8.3		
VaxGen would be responsible for all costs of validation, operation, and
licensure of the Pilot Plant through additional capital contributions to Newco;
provided, however, that VaxGen shall have the right to suspend or
terminate such commitment in the event that the outcome of the pending Phase III
trials of AIDSVAX are unfavorable or in the event that regulatory approval of
AIDSVAX is otherwise delayed or denied. 

	8.4		
At the end of each calendar year, VaxGen shall document and certify to Newco the
amount of its expenditures during such year directly related to such validation,
operation, and licensure. Newco shall issue to VaxGen shares of Newco common
stock, at a rate of one share for each US $1.00 so expended. VaxGen will ensure
that Genentech transfers to the Pilot Plant the same technologies that are
eventually to be transferred to the Incheon facility. The Pilot Plant would be
used primarily as the launch facility for AIDSVAX and as a site at which to
train employees of the JVC who would eventually be involved in production at the
Incheon facility. 

	8.5		
The Parties agree that the Pilot Plant’s first use priority shall be to: 1)
support AIDSVAX process development and process validation for licensure of the
vaccine; 2) expedite commercial licensure and launch of AIDSVAX; and 3)
facilitate the transfer of AIDSVAX manufacturing technology from VaxGen to the
JVC. Technology transfer will include on-site training of JVC personnel at the
Pilot Plant. Even with first use priority being fully met, it is assumed that
there will be some limited idle capacity in the plant over the coming years.
Thus, the Parties further agree that procedures will be established to allow
VaxGen to use such excess capacity, at VaxGen’s expense, for the
development of new products. Similarly, the Parties further agree that
procedures will be established to allow the JVC to use such excess capacity, at
the JVC’s expense, for other needs such as contract manufacturing. Profits
derived from any pilot plant manufacturing operations will be shared on the
basis of ownership. 

	8.6 		VaxGen
shall have the right to purchase the interest of the JVC in Newco on terms to be agreed
in good faith. 

	

- 12 - 

	

	8.7		
The understanding in this Article 8 shall be incorporated into appropriate
definitive agreements within ninety (90) days after the execution of the
Transaction Documents. 

	

ARTICLE 9
MANAGEMENT
AND FINANCING OF JVC

The Parties undertake to secure
that the administration of the JVC is effected in accordance with the provisions
of this Article 9 in addition to the relevant provisions of the Articles of
Incorporation of the JVC. 

	9.1 		Board
of Directors 

			(a) 		The
JVC shall be administered and managed by the Board of Directors (“Board”) which
shall consist of five (5) directors, two of whom shall be nominated by VaxGen and one of
whom shall each be nominated by Nexol, KT&G and JS. VaxGen shall be entitled to nominate
two of the five directors for so long as it retains two-thirds or more of its initial
shareholding as at incorporation. Each Party shall secure that the directors nominated by
the other Parties are elected, removed or replaced as the other Parties may from time to
time require; provided, however, that if such removal or replacement is without cause,
the Party proposing the removal or replacement shall indemnify and hold the JVC and the
other Parties harmless for any and all damages and other expenses that may arise from
such action. In case the position of a director becomes vacant for any reason, the
Parties shall cause their shares to be voted to elect a person nominated by the
respective Party who nominated the director whose position has become vacant, and such
successor shall fill the remaining term of the predecessor. In the event that there is
any change in the shareholding ratios of the Parties of more than one-third of its
initial shareholding as at incorporation, respectively, then each Party’s right to
designate Directors shall be adjusted in proportion to each Party's shareholding ratio
then in effect.

			(b) 		Meetings
of the Board shall be called by the representative director (“Representative Director”),
and notice of said meetings shall be given as set forth in the Articles of Incorporation
of the JVC. The Representative Director shall serve as the presiding officer of all
meetings of the Board of Directors. If the Representative Director is absent or fails to
serve as Chairman of any meeting, one of the other directors nominated by VaxGen shall
preside over the meeting.

			(c) 		The
Board shall hold four regular meetings annually, once a quarter (“Regular Board
Meetings”) and shall hold additional meetings as necessary (“Special Board
Meetings”).

			(d) 		The
quorum for transacting business at any Regular Board Meeting shall be a majority of
directors of the JVC present in person or by video-conferencing, and the quorum for any
Special Board Meeting shall require the presence of at least one director nominated by
VaxGen.

	

- 13 - 

	

			(e) 		Except
as otherwise provided in this Agreement or unless otherwise provided by applicable laws,
the resolution of the Board at any meeting of the Board shall be adopted by an
affirmative vote of a majority of the Directors represented at such meeting; provided,
however, that the following matters shall be adopted by the Board with the unanimous
votes of all the Directors:

					(i)  		Execution
of a technology transfer related contract with any third party with a contract value in
excess of US$ $1,000,000; 

					(ii)  		Decision
to make an investment in excess of US $1,000,000; 

					(iii)  		Consenting
to a director's transaction with the JVC; 

					(iv)  		Deciding
on matters relevant to the issuance of new shares and convertible debentures that are not
governed by the Articles of Incorporation; 

					(v)  		Authorizing
the issuance of debentures; 

					(vi)  		Acquisition
or disposal of the JVC’s assets in excess of US $1,000,000, which amount shall be
automatically increased as of January the 1st of each year in proportion to any increase
in the Consumer Price Index as published by the Bank of Korea for the previous calendar
year; 

					(vii)  		Any
capital expenditure or commitment thereof involving an amount in excess of US $1,000,000,
which amount shall be automatically increased as of January the 1st of each year in
proportion to any increase in the Consumer Price Index as published by the Bank of Korea
for the previous calendar year; 

					(viii)  		Lending
or borrowing money in excess of 5 percent of the JVC’s annual turnover; and 

					(ix)  		Adoption
of a new business, abolishment of any of its businesses, merger or acquisition of all or
a substantial portion of shares, assets or business of another company. 

	9.2 		Representative
Director 

	 	
For
so long as VaxGen holds two-thirds or more of its initial shareholding at incorporation,
VaxGen shall be entitled to appoint the Representative Director of the JVC in its sole
discretion, who shall represent the JVC and shall be in charge of the administration of
all the daily business affairs of the JVC in accordance with the polices established by
the Board and the shareholders.

	

- 14 - 

	

	9.3 		Statutory
Auditor 

	 	
The
Parties shall cause the JVC to have one statutory auditor elected at a general meeting of
shareholders of the JVC. VaxGen or other Parties shall be entitled to nominate the
statutory auditor upon mutual agreement among the Parties.

	9.4 		General
Meetings of Shareholders 

			(a) 		The
Parties shall cause the Board of Directors to decide the time and place for convening all
general meetings of shareholders in accordance with Korean law and shall give notice to
the shareholders thereof as set forth in the Articles of Incorporation of the JVC. The
Representative Director shall serve as the presiding officer of general meetings of
shareholders. If the Representative Director is absent or fails to so serve, one of the
other directors nominated by VaxGen shall act as chair.

			(b) 		The
Parties agree that the following matters shall require the affirmative vote of
shareholders holding at least two-thirds of the total voting Shares represented at a
general shareholder meeting, provided that the affirmative vote represents at least
one-half of the total issued and outstanding Shares:

					(i)  		Amendment
of the Articles of Incorporation; 

					(ii)  		Merger,
consolidation, sale or transfer of the whole or of an important part of the business or
assets of the JVC, including the sale, transfer, or license of intellectual property
other than in the ordinary course of business; 

					(iii)  		Repurchase
or redemption of equity securities, or payment of dividends or other distributions on
equity securities, except as provided herein and except for repurchases of stock held by
officers, employees, directors, or consultants of the Company pursuant to agreement
approved by the Board of Directors; 

					(iv)  		Dissolution,
liquidation, recapitalization, or reorganization of the JVC; 

					(v)  		Any
fundamental change in the business or amendment to a business plan approved by the Board
of Directors; 

					(vi)  		Making,
altering, or rescinding a contract for leasing the whole business, for giving authority
to manage such business, or for sharing with another person all profits and losses; 

					(vii)  		Assuming
the entire business of another company in excess of US $1,000,000; 

	

- 15 - 

	

					(viii)  		Entering
into an agreement within two years of incorporation to acquire, for value equivalent to
not less that one-twentieth of the capital of the JVC, property existing prior to its
incorporation and intended to be continuously used for purposes of the business; 

					(ix)  		Removal
of a director or a statutory auditor or the representative director; 

					(x)  		Issuance of Shares or any other shares of the JVC at a price less than Par Value; (xi) Reduction
of paid-in capital; 

					(xii)  		Continuation
of the JVC after its dissolution or after it becomes dormant; 

					(xiii)  		Share
split; 

					(xiv)  		Issuance
of convertible bonds or bonds with warrants to those who are not shareholders of the
company; 

					(xv)  		Corporate
split; and 

					(xvi)  		Appointment
of organizing committee members in the event of consolidation. 

	9.5 		Management
Planning and Accounting Systems 

			(a) 		The
Parties shall cause the JVC to adopt management planning and accounting systems as in use
by VaxGen both in format and timetable to the extent feasible, given the requirements of
Korean law and practice.

			(b) 		The
Parties shall cause the JVC to retain sufficient cash reserves, as a priority, prior to
the declaration of any dividends on any Shares or any other shares issued by the JVC, to
purchase the land identified in the Land Purchase Agreement pursuant to the terms thereof
and on the date identified therein.

			(c) 		The
Parties agree to cause the books and records of the JVC to be audited at the end of each
accounting year during the term of this Agreement by an accounting firm which shall be
appointed by the shareholders from among reputable accounting firms with international
affiliates (“Independent Auditor”).

			(d) 		The
Parties shall cause the JVC to cause the Independent Auditor to provide the Parties on an
annual basis with audited financial statements in Korean and English prepared in
accordance with generally accepted accounting principle of Korea and of the U.S.A. and in
a form acceptable to the Parties. The audited financial statements shall be final and
binding on the Parties as to the revenue, costs, fees, expenses, losses and profits of
the JVC, in the absence of manifest error or fraud.

	

- 16 - 

	

			(e) 		The
Parties agree that the accounting year of the JVC shall be according to the calendar
year; provided, however, that the first accounting year shall begin on the date on which
the JVC is incorporated and shall end on the last day of December immediately following.

			(f) 		Each
Party shall be entitled, at its own expense, to examine, or to appoint a firm of
accountants to examine the books, records, and accounts to be kept by the JVC and to be
supplied with all information in such form as the Board determines to keep it properly
informed about the business and affairs of the JVC and generally to protect its interests
as a shareholder.

			(g) 		The
Parties shall cause the JVC to provide each Party with an unaudited semi-annual report as
well as an unaudited quarterly report of the JVC.

	9.6 		Financing. 

	 	
Within
one hundred fifty (150) days from the execution of this Agreement, Nexol Co shall secure,
on behalf of the JVC, a loan on competitive terms, from a bank in an amount equal to the
Korean Won equivalent of approximately US $40 million; provided, however, that Nexol Co
shall procure additional financing as necessary to accommodate funding of the Pilot
Plant. Any other debt financing for the JVC shall be determined by the Board of Directors
of the JVC.

	

ARTICLE 10
COMPENSATION

	10.1 		The
Parties agree in principle that only the directors serving in a full time management
capacity (“standing directors”) shall receive compensation from the JVC. The
non-standing directors and statutory auditor shall not receive any compensation from the
JVC, but they shall be reimbursed for such travel and other expenses as they may
reasonably incur in the event the Representative Director calls a special meeting of the
Board of Directors other than the annual meeting of the Board of Directors. 

	10.2 		Salaries,
bonuses and other emoluments of standing directors and employees of the JVC shall be
reviewed annually by the Parties in consultation with the directors of the JVC, and the
general practice current in Korea shall be taken into consideration. 

	

- 17 - 

	

ARTICLE 11
EFFECTIVE DATE,
DURATION AND TERMINATION

	11.1 		This
Agreement shall not enter into effect until all Government Approvals for the in-kind
investment by VaxGen have been obtained. 

	11.2 		This
Agreement shall continue in effect until terminated pursuant to the provisions of this
Agreement or by mutual agreement of the Parties hereto. If any Party transfers all of its
shares in the JVC in accordance with the terms and conditions of this Agreement, then all
Parties shall be entitled to adequate continuing protection with respect to the
proprietary information of said Party in any resulting termination agreement. 

	11.3 		This
Agreement shall be terminable forthwith by any Party upon sending written notice upon the
occurrence of one or more of the following events: 

			(a) 		if
Government Approval of this Agreement has not been obtained within six months of the date
this Agreement is executed by the Parties hereto or if any subsequent enactment of law or
regulation or any subsequent act of governmental authority in Korea shall, in the
reasonable opinion of such Party, (i) make performance of this Agreement impossible or
unreasonably expensive or unreasonably difficult for such Party, (ii) alter the rights
and obligations of the Parties from those agreed and contemplated by this Agreement, or
(iii) interfere with the benefits contemplated herein to be received by such Party;

			(b) 		if
any other Party shall commit a material breach of any of its obligations under this
Agreement, which, if remediable, is not remedied within sixty (60) days from the giving
of written notice requiring said breach to be remedied;

			(c) 		if
any of the Transaction Documents is not duly executed within three (3) months of the
incorporation of the JVC, or if all required confirmations, acceptances and consents of
third parties and Government Approvals for the Transaction Documents, if necessary, are
not obtained (in form and substance acceptable to the Parties) within three (3) months of
the execution of the Transaction Documents;

			(d) 		if
any other Party shall be or becomes incapable for a period of six (6) months of
performing any of its said obligations under this Agreement because of force majeure as
defined in Article 17 hereof; or

			(e) 		if
any other Party (“Embarrassed Party”) or its creditors or any other eligible
party shall file for said Embarrassed Party's liquidation, bankruptcy, reorganization,
compulsory composition, or dissolution, or if the Embarrassed Party is unable to pay any
debts as they become due, has explicitly or implicitly suspended payment of any debts as
they became due (except debts contested in good faith), or if the creditors of the
Embarrassed Party have taken over its management, or if the relevant financial
institutions have suspended the Embarrassed Party's clearing house privileges, or if any
material or significant part of the Embarrassed Party's undertaking, property, or assets
shall be intervened in, expropriated, or confiscated by action of any government.

	

- 18 - 

	

	11.4 		If
the License Agreement is terminated by VaxGen pursuant to Articles 9.2 and 9.3 therein,
this Agreement shall be terminable forthwith by VaxGen sending written notice to such
effect. 

	

ARTICLE 12
CONSEQUENCES
OF TERMINATION

	12.1 		Termination
of this Agreement shall be without prejudice to the accrued rights and liabilities of the
Parties at the date of termination, unless waived in writing by mutual agreement of the
Parties. 

	12.2 		Upon
termination, each Party shall (at the request of the other Parties) take all steps
necessary to ensure that the name of the JVC is immediately changed so that it no longer
contains any reference to any company/corporation name, trade name, trademark or service
mark then owned by the other Party or any of its Affiliates (other than the JVC), nor the
Korean equivalent of any such name or mark. 

	12.3 		In
the event this Agreement is terminated by a Party (“Terminating Party”) in
consequence of breach of this Agreement by any of the other Parties (“Breaching Party”),
then 

					

			(a) 		the
Breaching Party shall discontinue use, cancel and return the Terminating Party's
confidential and/or proprietary information, together with all reproductions and copies
thereof and other written documents related thereto, retaining no reproductions or copies
of or other written documents relating to said confidential and/or proprietary
information; and

			(b) 		the
Terminating Party shall enjoy (without prejudice to any right it may have to receive
damages in consequence of breach of this Agreement) the right to secure, at the JVC's
expense, an appraisal of the net worth of the JVC's shares from an internationally
recognized firm of accountants on a going-concern basis, and the Terminating Party shall
have either of the following rights, at its option, and the Breaching Party shall have
the corresponding obligations:

					(i)  		to
require the Breaching Party (and its Affiliates, if applicable) to sell all of its shares
of the JVC to the Terminating Party at the value as thus appraised. In the event that
there is more than one Terminating Party, then the Terminating Parties shall purchase
such shares in proportion to their then current shareholding ratio; or 

					(ii)  		to
require the Breaching Party to purchase all or any portion of the shares of the
Terminating Party at their value as thus appraised. 

	

- 19 - 

	

			(c) 		A
contract for the sale and purchase of shares shall be deemed to have been entered into
upon the dispatch of written notice to the Breaching Party of the election of the
Terminating Party to exercise the option given in Article 12.3 (b) above, and payment for
the shares shall be due within sixty (60) days of the completion of the appraisal of the
shares.

	12.4 		Notwithstanding
anything to the contrary: 

			(a) 		In
the event that this Agreement is terminated by VaxGen in consequence of breach of this
Agreement by any of the other Parties, then all of the Parties agree to cause the
termination of the License Agreement and Sub-License Agreement, and the other Parties
shall discontinue use, cancel and return, and shall cause the JVC to discontinue use,
cancel and return VaxGen's confidential and/or proprietary information, together with all
reproductions and copies thereof and other written documents related thereto, retaining
no reproductions or copies of or other written documents relating to said confidential
and/or proprietary information.

			(b) 		In
the event that this Agreement is terminated by the other Parties in consequence of breach
of the Agreement by VaxGen, the Parties agree that upon the termination of the Agreement
for such reason, the Parties shall cause the termination of the Sub-License Agreement,
but will not cause the termination of the License Agreement.

			(c) 		In
the event that VaxGen and any other Parties other than the Breaching Party desire to
continue this Agreement, the Sub-License Agreement and the License Agreement, then VaxGen
and other Parties other than the Breaching Party, shall meet and discuss, in good faith,
a possible solution for continuing those agreements.

	12.5 		If
this Agreement is terminated for any reason other than breach of one of the Parties, then: 

			(a) 		The
Terminating Party shall have the right, by written notice, to require the other Parties
to discontinue use, cancel, and return (and to cause the JVC to discontinue use, cancel,
and return) the confidential and/or proprietary information, supplied by such Party
giving the notice, together with all reproductions and copies thereof and other written
documents related thereto, retaining no reproductions or copies of or other written
documents relating to said confidential and/or proprietary information; provided,
however, that if the Agreement is terminated by VaxGen, then the Parties agree to cause
the termination of the Sub-License Agreement but not the License Agreement.

			(b) 		Upon
written request from the Terminating Party, all Parties shall meet and negotiate in good
faith in order to reach a mutually acceptable agreement concerning the ultimate
disposition of their ownership rights in the JVC. However, should such an agreement not
be achieved within ninety (90) days of such notice, then any of the Parties may secure,
at the JVC’s expense, an appraisal of the net worth of the JVC’s shares from an
internationally recognized firm of accountants on a going-concern basis, and the
Terminating Party shall have either of the following rights, at its option, and the other
Parties shall have corresponding obligations:

	

- 20 - 

	

					(i)  		to
require the other Parties (and their Affiliates, if applicable) to sell all of their
shares in the JVC to the Terminating Party or to any designee of the Terminating Party at
the value as thus appraised; or 

					(ii)  		the
right to require the other Parties to purchase all or any portion of the shares of the
Terminating Party and its Affiliates at the value as thus appraised. 

			(c) 		In
the event any non-Terminating Party fails to respond to the Terminating Party’s request,
the contract for the sale or purchase of shares shall be deemed to have been entered into
upon the lapse of thirty (30) days from the dispatch of written notice to the other
Parties of the election of the Terminating Party to exercise the option given in Article
12.5 (b) hereof, and payment for the shares shall be due within sixty (60) days of the
completion of the appraisal of the shares.

	12.6		
The rights of the Terminating Party provided in this Article 12 shall be
cumulative to, and not exclusive of, other rights to which the Terminating Party
is entitled at law and/or under this Agreement. 

	

ARTICLE 13
DISPUTE
RESOLUTION AND GOVERNING LAW

	13.1 		Any
controversy or claim arising out of or in relation to this Agreement, or breach hereof,
shall be finally settled by arbitration in Seoul, Korea if raised by VaxGen, and in
California, U.S.A., if raised by any Party other than VaxGen. 

			(a) 		The
arbitration shall be conducted before three arbitrators in accordance with the Rules of
Arbitration and Conciliation of the International Chamber of Commerce then in effect.

			(b) 		The
Party or Parties requesting arbitration shall appoint one arbitrator and the other
Parties in the position of defendant shall jointly appoint a second arbitrator within
thirty (30) days after receipt of a demand for arbitration. The arbitrators shall be
freely selected, and the Parties shall not be limited to any prescribed list. The two
arbitrators thus appointed shall, within thirty (30) days after both shall have been
appointed, appoint a third arbitrator, who shall not be a national of Korea or the U.S.A.
and who shall preside over the arbitration proceedings.

	

- 21 - 

	

			(c) 		If
any appointment required herein shall not be made within the prescribed time, then such
appointment may be made by the President of the International Chamber of Commerce in
Paris.

			(d) 		The
proceedings shall be conducted in English, and all arbitrators shall be conversant in and
have a thorough command of the English language.

			(e) 		The
award of the arbitrators shall be final and conclusive. All Parties taking part in the
arbitration shall be bound by the award rendered by the arbitrators and judgment thereon
may be entered in any court of competent jurisdiction.

			(f) 		Notwithstanding
any other provision of this Agreement, any Party shall be entitled to seek preliminary
injunctive relief from any court of competent jurisdiction pending the final decision or
award of the arbitrators.

	13.2 		The
validity, performance, construction and effect of this Agreement shall be governed by the
substantive laws of the Republic of Korea. 

	

ARTICLE 14
CONFIDENTIALITY

	14.1		
Except as required by law or as reasonably required in order to secure the
financing contemplated herein, each Party agrees to maintain the confidentiality
of all information and data relating to the other Parties’ business,
including, without limitation, economic, financial and/or technical information,
disclosed, directly or indirectly, or disclosed by visual inspection, and shall
not disclose such information and data to a third party without the prior
written consent of the other Parties; provided, however, that the
preceding obligation shall not apply to information which: 

			(a) 		was
in the public domain at the time of disclosure; or

			(b) 		enters
the public domain after the time of disclosure, without the receiving Party’s fault; or

			(c) 		was
in the receiving Party’s possession at the time of disclosure as evidenced by such
Party’s prior written documents; or

			(d) 		is
required to be disclosed by law or order of the court, in which case, the receiving Party
shall notify the other Parties of such statutory requirement or court order prior to the
disclosure; or

	

- 22 - 

	

			(e) 		has
been acquired from third parties which had not previously acquired it, directly or
indirectly, from a disclosing Party, provided that such third parties are not and were
not bound by a duty of confidentiality when making such disclosure to the receiving Party.

	14.2 		Each
Party shall procure that its employees, advisers, and agents are bound by the
confidentiality obligations on terms set out above. 

	

ARTICLE 15
NON-WAIVER
AND OTHER REMEDIES

	15.1 		Failure
of any Party to insist upon the strict and punctual performance of any provision hereof
shall not constitute waiver of nor estoppel against asserting the right to require such
performance, nor shall a waiver or estoppel in one instance constitute a waiver or
estoppel with respect to a later breach whether of similar nature or otherwise. 

	15.2 		Nothing
in this Agreement shall prevent a Party from enforcing its rights by such remedies as may
be available in lieu of termination. 

	

ARTICLE 16
UNENFORCEABLE
TERMS

	16.1 		In
the event any material term or provision of this Agreement shall for any reason be
invalid, illegal or unenforceable in any respect, any Party materially and adversely
affected thereby shall have the right either to terminate this Agreement by giving at
least thirty (30) day’s prior written notice to the other Parties or to declare by
such notice that such invalidity, illegality or unenforceability shall not affect any
other term or provision hereof (“Declaration of Persistence”). If each Party
shall make a Declaration of Persistence, this Agreement shall be interpreted and
construed as if such term or provision, to the extent unenforceable, had never been
contained herein, and such declaration shall be deemed to have been made unless notice of
termination hereunder is given within three (3) months of a written request therefor from
the other Parties. 

	16.2 		The
rights and obligations of Article 16.1 above shall apply mutatis mutandis, if any of the
following events shall occur: 

	

- 23 - 

	

			(a) 		the
introduction of any legislation or regulation overriding the rights of the shareholders
of the JVC to appoint, replace or remove the directors;

			(b) 		any
restrictions or limitation being imposed upon the essential powers of the directors of
the JVC to administer its business; or

			(c) 		the
JVC being required to dispose (or otherwise being deprived) of its business or a
substantial part thereof by governmental authority.

	

ARTICLE 17
FORCE MAJEURE

	17.1 		The
failure or delay of any of the Parties hereto to perform any obligation under this
Agreement solely by reason of acts of God, acts of government (except as otherwise
enumerated herein), riots, wars, embargoes, strikes, lockouts, accidents in
transportation, port congestion or other causes beyond its control (“force majeure”)
shall not be deemed to be a breach of this Agreement; provided, however, that the Party
so prevented from complying herewith shall not have procured such force majeure, shall
have used reasonable diligence to avoid such force majeure and ameliorate its effects,
and shall continue to take all actions within its power to comply as fully as reasonably
possible with the terms of this Agreement. 

	17.2 		Except
where the nature of the event shall prevent it from doing so, the Party suffering such
force majeure shall notify the other Parties in writing within fourteen (14) days after
the occurrence of such force majeure and shall in every instance, to the extent
reasonable and lawful under the circumstances, use its best efforts to remove or remedy
such cause with all reasonable dispatch. 

	

ARTICLE 18
DISCLAIMER
OF AGENCY

This Agreement shall not be
deemed to constitute any Party the agent of another Party hereto, nor shall it
constitute the JVC an agent of any Party. 

ARTICLE 19
ASSIGNABILITY

Except as otherwise
provided herein, this Agreement and each and every covenant, term and condition
hereof shall be binding upon and inure to the benefit of the Parties and their
respective heirs, devisees and successors, but neither this Agreement nor any
rights hereunder shall be assignable, directly or indirectly, by any Party
hereto without the prior written consent of the other Parties of which consent
shall not be unreasonably withheld; provided, however, that this
Agreement shall be automatically assigned by any Party as a result of or
pursuant to any merger or consolidation. 

- 24 - 

	

ARTICLE 20
NOTICE

	20.1 		All
written notices, requests, demands, and other communications under this Agreement or in
connection herewith shall be given by letter (delivered by hand, by air courier, or by
registered air mail) or by cable, telex, or facsimile transmission confirmed by such a
letter, which shall be addressed to the respective Parties as follows: 

	 	
To:    VaxGen

Address: 1000 Marina Boulevard, Brisbane, California, U.S.A.

Fax No: (650) 624-1001

Marked for the attention of: Dr. Lance Gordon

	 	
To:    Nexol

Address: Samwhan Camus Bldg., Suite 300, 17-3, Yoido-dong, Youngdeungpo-ku, Seoul,
Korea

Fax No: 82-2-2127-6995

Marked for the attention of: Mr. Keun-Kyung Lee

	 	
To:    Nexol Co

Address: Samwhan Camus Bldg., Suite 300, 17-3, Yoido-dong, Youngdeungpo-ku,
Seoul, Korea

Fax No: 82-2-2127-6998

Marked for the attention of: Mr. Hyoung-Ki Kim

	 	
To:    KT&G

Address: 100, Pyungchon-dong, Daeduk-gu, Daejon, Republic of Korea

Fax No: 82-2-3404-4670

Marked for the attention of: Mr. Sang-Seock Kim

	 	
To:    JS

Address: 23rd Floor, City Air Tower, Samsung- Dong, Kangnam-ku, Seoul, Korea

Fax No: 82-2-2016-6509

Marked for the attention of: Mr. Taxun Synn

	20.2 		Any
notice so given shall be deemed to be received forty-eight (48) hours after dispatch in
case of cable, telex or facsimile transmission, or in case of letter, (i) upon receipt or
fourteen (14) days after posting, whichever is earlier, for airmail or air courier sent
between Korea and the U.S.A. or any other country, or (ii) upon receipt, or seven (7)
days after posting, whichever is earlier, for mail sent within Korea, the U.S.A. or any
other country. 

	

- 25 - 

	

	20.3 		To
prove service of notice, it shall be sufficient to prove that a telex, cable, or
facsimile transmission containing the notice was properly addressed and properly
dispatched or to show that a letter was properly addressed and posted, provided, that a
return receipt or registered mail receipt has been returned to the sender indicating
delivery of said letter. 

	20.4 		Any
Party may change the address at any time by written notice to the other Parties pursuant
to the terms of this Article 20. 

	

ARTICLE 21
LANGUAGE

This Agreement is written
in the English language and executed in five counterparts, each of which shall
be deemed an original. The English language text of the Agreement shall prevail
over any translation thereof. 

ARTICLE 22
GOVERNMENT
APPROVAL

	22.1 		Nexol
shall use its best efforts to assist VaxGen in obtaining Government Approvals necessary
for this Agreement. Nexol, however, shall have the JVC apprise VaxGen of any and all
actions it plans to take with Korean governmental authorities well in advance of the
proposed action, and shall take no action to which VaxGen objects. If such Government
Approval is conditioned upon changes in the terms and conditions of this Agreement, such
changes shall be effective only if accompanied by a formal amendment hereto executed by
all the Parties. No provision of this Agreement shall be construed to require any Party
to enter into any such amendment. 

	22.2 		If,
after the Effective Date of this Agreement, as provided in Article 11.1, further
government review and approval of this Agreement or of any amendment thereto are required
under the laws or regulations or other Legal Authority of the Republic of Korea, Nexol
shall use its best efforts to assist VaxGen to obtain such approval. Nexol shall provide
VaxGen with copies of all correspondences and documents transmitted to and received from
the governmental authorities relating to such approval. 

	

ARTICLE 23
ENTIRE
AGREEMENT

	23.1 		This
Agreement supersedes all previous representations, understandings, or agreements, oral or
written, among the Parties with respect to the subject matter hereof, and the agreements
and documents contemplated hereby contain the entire understanding of the Parties as to
the terms and conditions of their relationship. 

	

- 26 - 

	

	23.2 		Terms
included herein may not be contradicted by evidence of any prior oral or written
agreement or of a contemporaneous oral or written agreement. 

	23.3 		No
changes, alterations, or modifications hereto shall be effective unless they are in
writing and are signed by authorized representatives of all Parties and, if required,
until they have received any necessary Government Approvals. 

	23.4 		Headings
of Articles in this Agreement are for convenience purpose only and do not substantively
affect the terms of this Agreement. 

	

ARTICLE 24
NON-COMPETITION

During the term of this
Agreement, no Party shall, without prior written consent from the other Parties,
solicit, or permit any of its Affiliates to solicit, directly or indirectly, any
employee of the JVC to become employed by or otherwise to perform any services
for such Party or any third party. 

- 27 - 

	

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their respective
representatives thereunto duly authorized as of the date first hereinabove set
forth. 

	VAXGEN, INC.

By:
——————————————

Name: Dr. Lance Gordon
Title: Chief Executive Officer		KOREA TOBACCO &
GINSENG CORPORATION

By:
——————————————

Name: Mr. Joo-Young Kwak
Title: President & CEO

	NEXOL CO., LTD. 

By:
——————————————

Name: Mr. Jung-Jin Seo
Title: Representative Director		NEXOL BIOTECH CO., LTD.

By:
——————————————

Name: Mr. Jung-Jin Seo
Title: Representative Director

	J. STEPHEN & COMPANY VENTURES LTD. 

By:
——————————————

Name: Mr. Seung-Yong Yeum
Title: Managing Director		

	

- 28 - 

	

[Execution Copy]

JOINT
VENTURE AGREEMENT

FEBRUARY 25,
2002

VAXGEN, INC.

KOREA
TOBACCO & GINSENG CORPORATION

NEXOL CO.,
LTD.

NEXOL
BIOTECH CO., LTD.

J. STEPHEN
& COMPANY VENTURES LTD.Exhibit 10.25

	

Exhibit 10.25

LAND
PURCHASE AND SALE AGREEMENT

FEBRUARY 25,
2002

INCHEON
METROPOLITAN CITY

VAXGEN, INC

	

LAND
PURCHASE AND SALE AGREEMENT

This Land Purchase and
Sale Agreement (“Agreement”) is entered into as of this
25th day of February 2002 (the “Effective Date”), by and between: 

INCHEON METROPOLITAN
CITY, a municipal government in the Republic of Korea (“Korea”)
with its City Hall at 1090, Mansoo 6-dong, Namdong-gu, Incheon Metropolitan City
(“Incheon Metropolitan City”), represented by Mr.
Hong Shik Oh, a special delegate for city planning; and 

VAXGEN, INC., a company
having its head office at 1000 Marina Boulevard, Brisbane, California, U.S.A. (“VaxGen”). 

(Incheon Metropolitan City
and VaxGen shall individually be referred to as a Party and collectively as the
Parties.) 

WITNESSETH:

WHEREAS, VaxGen and
certain other investors (“Other Investors”) executed a Memorandum of
Understanding on October 19, 2001, whereby they expressed their intention to
establish a joint venture company in Korea (“JVC”) for the purpose of
constructing and operating a facility in Korea that will use cell culture
technology licensed from VaxGen for the manufacture of a number of
pharmaceutical products including, without limitation, AIDSVAX, an HIV vaccine
using certain technology licensed to VaxGen from Genentech, Inc.; 

WHEREAS, VaxGen and
the Other Investors executed on the same date as this Agreement a certain Joint
Venture Agreement (“JVA”), wherein they agreed to the terms and
conditions by which they would establish and operate the JVC; and 

WHEREAS, VaxGen
wishes to purchase from Incheon Metropolitan City certain land located within
Incheon Songdo New City, as described in further detail in Exhibit 1 attached
hereto (“Land”), as the site for the manufacturing facilities of the
JVC, and Incheon Metropolitan City agrees to sell the Land to VaxGen, under the
terms and conditions herein. 

NOW, THEREFORE,
intending to be bound, the Parties hereto agree as follows: 

Article 1.     Assignment of VaxGen’s Rights and Obligations to JVC

	1.1		
VaxGen and the Other Investors have agreed in the JVA to establish the JVC as
soon as possible after the execution of this Agreement, but no later than sixty
(60) days following the execution of this Agreement. 

	

-1-

	

	1.2		
Immediately following the establishment of the JVC, VaxGen and the JVC shall
enter into an assignment agreement, in form and substance substantially similar
to the Assignment Agreement attached hereto as Exhibit 2, whereby VaxGen shall
assign to the JVC its rights, obligations, and liabilities under this Agreement
in accordance with the terms and conditions set forth therein and herein. As of
the effective date of the Assignment Agreement, this Agreement shall no longer
be binding with respect to VaxGen, and VaxGen shall have no further rights,
obligations, or liabilities under this Agreement with respect to the Land.
Thereafter, this Agreement, including the terms, conditions, covenants,
agreements, and exhibits contained herein, shall be binding only on the JVC and
Incheon Metropolitan City. The JVC shall further agree to release VaxGen from
responsibility for all existing and future obligations and liabilities arising
under this Agreement. 

	1.3		
Incheon Metropolitan City hereby consents to VaxGen’s assignment to the JVC
of its rights, obligations, and liabilities under this Agreement as set forth in
Article 1.2 above, and agrees to release VaxGen from responsibility for all
existing and future obligations and liabilities arising under this Agreement, as
of the date of VaxGen and the JVC’s execution of the Assignment Agreement. 

	

Article 2.     Purchase and Sale of Land

Following the assignment of
this Agreement to the JVC, and subject to the terms and conditions of this
Agreement, Incheon Metropolitan City shall sell the Land to the JVC and the JVC
shall purchase the same. 

Article 3.     Purchase Price

	3.1		
The Parties acknowledge that because the Land is owned by a local government,
the determination of the purchase price of the Land is subject to special
procedures specified in the Local Government Budget Act, which, among other
things, requires that the price of land owned by a local government be
determined through appraisal(s) carried out by licensed real estate appraisal
firms. The Parties further acknowledge that the JVC’s purchase price of the
Land shall be 50% of the price appraised under such special procedures as
described above. 

	3.2		
The Parties agree to an initial purchase price of the Land of 14,501,292,000 Won
(“Initial Purchase Price”). This Initial Purchase Price shall remain
in effect until such time as the rezoning of the Land as referred to in Article
11 (c) has been completed, and a revised purchase price (“Revised Purchase
Price”) has been determined, which shall reflect solely the increase in the
value of the Land caused by the rezoning. (The term Purchase Price may be used
to refer to the Initial Purchase Price and Revised Purchase Price individually
or collectively). 

	

-2-

	

	3.3		
An additional interest payment shall be charged on the outstanding balance of
the Initial or Revised Purchase Price, which shall accrue at the rate of four
percent (4 %) per annum, commencing as of the date of payment of the Down
Payment as defined in Article 4.1 (“Interest”) and ending upon the
payment of the Purchase Price in its entirety pursuant to Article 4. 

	3.4 		The
Parties shall determine the Revised Purchase Price as follows: 

			(a)		
Within thirty (30) days following the rezoning of the Land, in satisfaction of
the covenant under Article 11 (c) by Incheon Metropolitan City, each Party shall
choose a real estate appraisal firm at its own expense to appraise the value of
the Land upon the completion of the rezoning. Any adjustment to the appraisal
value of the rezoned Land from the Initial Purchase Price shall reflect only the
effect of the rezoning of the Land. No other factors or variables shall be
considered in the appraisal, including but not limited to inflation, the state
of development of the Land, or the increased availability of access roads or
utilities on the Land. The Parties shall ensure that the appraisal firms, which
are selected by the Parties, follow these instructions.

			(b)		
In the event that the appraised values of the rezoned Land, as determined
independently by the two (2) appraisal firms in the manner set forth herein, are
determined to differ by less than thirty percent (30%) of the lower appraised
price, then the Parties hereby agree that the Revised Purchase Price of the Land
shall be equal to fifty percent (50%) of the average of such two (2) appraised
values. The Parties acknowledge that such fifty percent reduction is a special
incentive granted under Article 39-4 (Reduction of Price) of Public Asset
Management Ordinance of Incheon City Ordinance.

			(c)		
In the event that the appraised values of the rezoned Land, as determined
independently by the two (2) appraisal firms in the manner set forth herein, are
determined to differ by thirty percent (30%) or more of the lower appraised
price, then the Parties shall repeat the appraisal process and undertake to have
new appraisals made on the Land until such time as the appraised values of the
rezoned Land differ by less than thirty percent (30%) as set forth in 3.4 (b)
above. The Revised Purchase Price shall be equal to fifty percent (50%) of the
average of the two appraised values of the Land.

	

Article 4.     Payment of the Purchase Price

	4.1		
The JVC shall pay 1,450,129,200 Won, which is equal to ten percent (10%) of the
Initial Purchase Price, to Incheon Metropolitan City as a down payment
(“Down Payment”) within ten (10) days from the date of the execution
of the Assignment Agreement. (The date of payment of the Down Payment shall be
referred to as the “Down Payment Date.”) 

	4.2		
The remainder of the Initial Purchase Price shall be paid in five equal
installments (each installment payment shall be referred to as “Installment
Payment”), which shall be made within thirty (30) days following the
second, fourth, sixth, eighth, and tenth anniversaries of the date of payment of
the Down Payment (“Installment Payment Date”), and shall also include
any accrued Interest, as set forth in Article 3.3. Notwithstanding the
foregoing, as soon as the Parties have agreed to the Revised Purchase Price,
subsequent Installment Payments should be adjusted so that the total payments
made equal the Revised Purchase Price, plus any accrued Interest, less the
amount of the Down Payment and any Installment Payments already made, if any. 

	

-3-

	

	4.3		
Details of each Installment Payment of the Purchase Price and its payment
schedule shall be the same as described in Exhibit 6 attached hereto. 

	

Article 5.     Default Interest

	5.1 		In
the event that the JVC fails to pay any Installment Payment by the due date as set
forth in Article 4.2 above, the JVC shall pay to Incheon Metropolitan City a late payment
interest, which shall be calculated by the interest rate as specified under the relevant
regulations of Incheon Metropolitan City for the period from the date following the due
date until the date of actual payment.  

	5.2 		The
JVC may pay to Incheon Metropolitan City any installment payment prior to the due date. In
such case, Incheon Metropolitan City shall reduce the installment payment by the amount
calculated by applying the prepayment discount rate, as applied by the bank designated by
Incheon Metropolitan City as of the date of such prepayment.  

	

Article 6.     Acceleration of Payment

In the event that any one
of the following events takes place with respect to the JVC’s payment of
the Purchase Price as set forth under this Agreement, the JVC shall be required
to pay all the remaining installment payments without delay: 

			(a) 		If
the JVC is late with payment of any installment payments by ninety (90) days or longer;

			(b)		
In the event any creditor of the JVC effects an attachment, injunction order,
statutory auction or other similar encumbrances on the Land, or in the JVC
becomes subject to compulsory “work out” (composition);

			(c) 		If
any party files an application for company reorganization or bankruptcy proceedings for
the JVC; or

			(d)		
If the JVC sells, leases or provides the Land as collateral to a third party for
purposes other than the JVC’s intended business objectives.

	

-4-

	

Article 7.     Transfer of Rights and Possession

	7.1		
Incheon Metropolitan City shall, on the Down Payment Date, surrender and deliver
to the JVC sole possession of the Land, free from any encumbrances and any
rights of tenants or any other person to occupy such Land or any portion thereof
and in such condition that the JVC may immediately use the Land for construction
of manufacturing facilities. 

	7.2		
Incheon Metropolitan City shall transfer title to the Land to the JVC upon the
payment of the entire Purchase Price or upon the JVC providing a payment
guarantee, issued by a local bank acceptable to Incheon Metropolitan City, in
the amount equal to the remainder of the Purchase Price. 

	

Article 8.     Risk of Loss

In the event of a natural
disaster, force majeure, or any other accident beyond the control of the Parties
damages the Land before title to the Land is duly transferred to the JVC
pursuant to this Agreement, Incheon Metropolitan City shall assume the entire
risk from such disaster, force majeure or accident. 

Article 9.     Prohibition of Disposition of the Property

	9.1 		After
the Parties execute this Agreement, Incheon Metropolitan City shall not, without the
prior written consent of the JVC, do anything that may hinder the full exercise of
ownership rights, such as transferring, leasing, or mortgaging the Land to a third party.
Incheon Metropolitan City shall not encumber the Land in any manner and shall maintain
the full value of the Land.  

	9.2 		When
the title to the Land is transferred to the JVC in accordance with the provisions of this
Agreement, it shall allow Incheon Metropolitan City to register a repurchase option in
the Land Registry in favor of Incheon Metropolitan City in accordance with Article 95-2
paragraph 1 of the Presidential Decree of the Local Budget Act, and Article 39-4,
paragraph 6 of the Public Asset Management Ordinance of Incheon City. In the event that,
within five (5) years after title to the Land has transferred to the JVC, the JVC sells
or provides as collateral the Land to a third party, Incheon Metropolitan City shall
purchase back the Land from the JVC at the price equal to the Purchase Price by
exercising such repurchase option; provided, however, that the JVC may provide the
Land as collateral to a third party in order to secure a loan necessary for conducting
its intended business objectives, and in this case, Incheon Metropolitan City shall not
exercise its repurchase option to purchase back the Land. For the avoidance of doubt,
after five (5) years have lapsed after the transfer of title to the Land to the JVC, the
JVC shall be free to mortgage, sell, or otherwise dispose of the Land without any
repurchase or other intervention by Incheon Metropolitan City.  

	

-5-

	

Article 10.     Representations and Warranties of the Parties

	10.1 		Incheon
Metropolitan City represents and warrants to VaxGen and the JVC that, as of the time of
execution of this Agreement:  

			(a)		
Incheon Metropolitan City has the legal right, power and authority to execute
this Agreement and to sell the Land to the JVC.

			(b) 		There
are no mortgages, provisional registrations, superficies, servitudes, liens, leases,
unpaid taxes or any other charges or encumbrances on the Land. There are no defects which
may prevent the JVC from acquiring title to the Land. 

			(c) 		There
are no civil, administrative or any other legal actions and disputes against or involving
the Land, including but not limited to contemplated or pending condemnations or
confiscations of all or part of the Land. 

			(d)		
Incheon Metropolitan City has not left, buried or disposed of any pollutant,
contaminant, industrial waste, or hazardous material on or in the Land, or
caused any pollutant, contaminant, industrial waste, or hazardous material to be
left, buried, or disposed of on or in the Land. Incheon Metropolitan City does
not have any knowledge of the existence of such waste or material on the Land.

			(e)		
There are no legal restrictions, which would prevent, hinder, or delay the JVC
from obtaining the government approvals necessary for construction on the Land
of the Plant as defined herein.

			(f)		
Except for the restrictions caused by the present zoning classification of the
Land as a “green area and residential area”, which will be removed
immediately after the Land is converted to an “industrial area” in
accordance with Article 11 (c), there are no other environmental, zoning or
legal restrictions which may prevent the JVC from building, operating and
maintaining its intended manufacturing plant as described herein.

			(g) 		The
physical description and condition of the Land and the industrial infrastructure to be
constructed with respect to the Land satisfies or shall satisfy each of the terms,
conditions, descriptions, and representations provided herein, including but not limited
to those set forth in the Exhibits attached hereto. The delivery of possession of the
Land shall further satisfy the terms and conditions set forth herein. 

	10.2 		VaxGen
represents and warrants to Incheon Metropolitan City that as of the time of execution of
this Agreement: 

			(a) 		VaxGen
has the legal right, power and authority to execute this Agreement and to agree to the
terms and conditions of this Agreement;

			(b) 		There
are no legal restrictions which would prevent, hinder, or delay the JVC from obtaining
the government approvals necessary for construction on the Land of the Plant as defined
herein. 

	

-6-

	

			(c) 		The
JVC shall be incorporated as a small and medium-sized enterprise as defined under the
Small and Medium-sized Enterprise Basic Act. 

	

Article 11.     Covenants of Incheon Metropolitan City

Incheon Metropolitan City
acknowledges that the purpose of the JVC acquiring the Land is to establish on
the Land a manufacturing facility for the production of pharmaceutical products,
including AIDSVAX, which will be constructed in three phases, and which shall
have the specifications and be subject to the terms set forth in Exhibit 3 of
this Agreement (“Plant”). In this connection, Incheon Metropolitan
City covenants that: 

			(a)		
By the Down Payment Date, it will have carried out the civil engineering work
specified in Exhibit 4 of this Agreement to enable the JVC to commence
construction of the Plant for Phase I as set forth in Exhibit 3 without delay;

			(b)		
It will provide the access road, electricity, water pipes, sewage facilities,
telecommunications facilities and other infrastructure as specified in Exhibit 5
of this Agreement in accordance with the schedule also specified in Exhibit 5;

			(c)		
It shall do any and all things necessary to achieve rezoning of the Land from
the current designation of “green area and residential” under the
Urban Planning Law to “industrial area” by no later than June 30,
2002, so that the JVC may build, expand, operate and maintain the Plant on the
Land on the scale satisfying the minimum requirements for Phase II and Phase III
of construction, as set forth in Exhibit 3.

			(d)		
It shall provide all administrative assistance and support necessary to ensure
that the JVC will obtain all approvals, licenses, registrations, and permits.

			(e) 		The
Land shall be fit for the specific purpose expressly set forth herein.

	

Article 12.     Covenants of the JVC

	12.1 		The
JVC shall be registered as a foreign-invested entity as defined under the Foreign
Investment Promotion Law, and the amount of the foreign investment in the JVC, whether it
be in cash or in-kind, shall be equal to, or greater than US $5 million; and  

	12.2 		The
business objectives of the JVC shall include those activities which are recognized as
“advanced technology accompanied”.  

	

-7-

	

Article 13.     Conditions Precedent

	13.1		
The obligation of the JVC to pay the Down Payment and any of the Installment
Payments is conditional upon the following. For the avoidance of doubt, the JVC
will have no obligation to pay the Down Payment or any of the Installment
Payments, unless the following condition precedent is fully satisfied or
expressly waived by the JVC. 

	 	
The
representations, warranties, and covenants contained in Articles 10 and 11 and
elsewhere in this Agreement shall be true and correct as of the Down Payment Date and as
of each Installment Payment Date. 

	13.2		
In addition to the conditions precedent in Article 13.1, the obligation of the
JVC to pay the first Installment Payment is conditional upon the occurrence of
the following events: 

			(a)		
Incheon Metropolitan City shall have performed, on or before the first
Installment Payment Date, all the infrastructure specified in Exhibit 5 pursuant
to Article 11 (b) that Incheon Metropolitan City has agreed to perform or
provide by the corresponding target dates specified in Exhibit 5, which target
dates fall on or before the first Installment Payment Date.

			(b)		
Incheon Metropolitan City shall have successfully effected the rezoning of the
Land from “green area and residential area” to “industrial
use” as obligated under Article 11 (c).

	13.3		
The obligation of the JVC to pay the remaining Installment Payments is
conditional upon Incheon Metropolitan City performing, on or before each of the
relevant Installment Payment Dates, the covenants specified in Exhibit 5
pursuant to Article 11 that Incheon Metropolitan City has agreed to satisfy by
the corresponding target dates specified in Exhibit 5, which target dates fall
on or before the relevant Installment Payment Date. For the avoidance of doubt,
if any of the conditions precedent set forth in this Article 13 have not been
satisfied on or before the scheduled Installment Payment Date, then the JVC will
withhold making the scheduled Installment Payments in question until the
conditions precedent for payment have in fact been satisfied. 

	

Article 14.     Termination of Agreement

	14.1 		This
Agreement shall automatically terminate upon the occurrence of any of the following
events: 

			(a) 		The
JVC is not established within eighty (80) days following the date of execution of this
Agreement;

			(b) 		VaxGen
and the JVC do not execute the Assignment Agreement within thirty (30) days following the
establishment of the JVC; or

	

-8-

	

			(c)		
The JVC fails to obtain approval from the relevant government agency of its
application for tax exemptions, which are available with respect to the
inducement of advanced technology pursuant to the relevant provisions of the Tax
Incentive Limitations Law and its regulations, within ninety (90) days following
the establishment of the JVC.

	14.2		
Incheon Metropolitan City may terminate this Agreement, effective immediately,
in the event of any of the following occurrences, upon giving written notice to
the JVC: 

			(a) 		If
any of the representations and warranties of the JVC as set forth herein is found to be
false;

			(b) 		If
the JVC delays any payment due to Incheon Metropolitan City under this Agreement for more
than ninety (90) days; or

			(c)		
If the JVC otherwise breaches any of its obligations hereunder and fails to cure
such violation within sixty (60) days from receipt of notice from Incheon
Metropolitan City demanding correction.

	14.3		
The JVC may immediately terminate this Agreement, effective immediately, in the
event of any of the following occurrences, upon giving written notice to Incheon
Metropolitan City: 

			(a) 		If
any of the representations and warranties of Incheon Metropolitan City set forth herein
are found to be false;

			(b)		
If Incheon Metropolitan City fails to provide any of the civil engineering work
specified in Exhibit 4 by the target dates as specified in Exhibit 4 or fails to
provide any of the infrastructure specified in Exhibit 4 by the target dates as
specified in Exhibit 4;

			(c) 		The
Land is not rezoned as an industrial area on or before June 30, 2002; or

			(d)		
If Incheon Metropolitan City otherwise breaches any of its obligations hereunder
and fails to cure such violation within sixty (60) days following receipt of
notice from the JVC demanding correction.

	

Article 15.     Consequences of Termination

	15.1		
In the event this Agreement is terminated for any reason, Incheon Metropolitan
City shall immediately return to the JVC any portion of the Purchase Price that
has already been paid as of the date of such termination, and the JVC shall
surrender the Land to Incheon Metropolitan City, subject to the terms and
conditions provided below in this Article 15. 

	15.2		
In the event this Agreement is terminated pursuant to Article 14.2, the Parties
shall discuss and agree, within sixty (60) days from the termination, as to
whether to remove any buildings and structures on the Land or sell such
buildings and structures to Incheon Metropolitan City, or a third party
designated by Incheon Metropolitan City. If the Parties agree to remove such
buildings and structures, the JVC shall remove such buildings and structures at
its own cost within one hundred eighty (180) days following the termination of
this Agreement. If the Parties agree for such buildings and structures to be
sold to Incheon Metropolitan City or its designee, the parties will cause such
buildings and structures to be appraised by the same method as that provided in
Article 3.4, and upon payment of the appraised price by Incheon Metropolitan
City or its designee to the JVC, the JVC shall surrender the Land, buildings and
structures to Incheon Metropolitan City or the designee, within one hundred
eighty (180) days following the termination of this Agreement. If the Parties
fail to reach an agreement on such sale, the JVC shall remove such buildings and
structures at its expense. The Parties agree that in the event of sale of the
buildings and structures to Incheon Metropolitan City or its designee, the sale
and purchase agreement for the buildings and structures shall be retroactively
effective as of the date of termination of this Agreement. The JVC shall provide
Incheon Metropolitan City with an appropriate insurance policy to ensure that
the JVC shall remove at its expenses all such buildings and structures. 

	

-9-

	

	15.3		
In the event that this Agreement is terminated pursuant to Article 14.3 or due
to any other reason attributable to Incheon Metropolitan City, Incheon
Metropolitan City shall purchase the buildings and structures on the Land at the
appraised price as determined in the same manner as provided in Article 3.4
above. 

	

Article 16.     Notices

All notices or other
communications required hereunder shall be in writing and shall be deemed to
have been duly given upon delivery by facsimile with confirmation back or by
registered mail to the following addresses: 

	 	
To:      Incheon Metropolitan City:

Mr. Hong Sik Oh

Chief of Incheon Urban Development Authority

1090, Mansoo 6-dong, Namdong-gu, Incheon

Tel. No.: 032-469-4811   Fax No.: 032-469-4822

To:    VaxGen, Inc.:

CEO, Lance K. Gordon, Ph.D.

VaxGen Inc.

1000 Marina Boulevard, Blisbane

CA 94005-1841,  U.S.A

Tel. No. 650-624-1000   Fax.No. 650-624-1001

	

In the event of a change (or in the
case of the JVC, any additions) to the name, designation, or address to which notices
shall be sent pursuant to this Article 16, then such notification must be given
immediately. 

-10-

	

Article 17.     Jurisdiction

	17.1 		The
interpretation of this Agreement shall in accordance with the laws of the Republic of
Korea. 

	17.2 		All
disputes or controversies arising under this Agreement or connected with this Agreement,
its interpretation, performance, or termination shall be settled before Seoul District
Court.  

	

Article 18.     Entire Agreement

This Agreement, along with
the Exhibits attached hereto, contains the entire understanding of the Parties
with respect to the subject matter contained herein, and supercedes all prior
understandings and agreements, whether written or oral, of the Parties related
to the purchase of the Land, as set forth herein. There are no restrictions,
promises, covenants, or understandings other than those expressly set forth
herein, and no rights or duties on the part of either Party are to be implied or
inferred beyond those expressly provided for herein. The Parties hereto may,
from time to time during the term of this Agreement, modify, vary, or alter any
of the provisions of this Agreement but only by written agreement duly executed
by the Parties. 

Article 19.     Force Majeure

The failure of any Party to
perform any obligation pursuant to this Agreement by reason of “acts of
God”, acts of governments, riots, wars, accidents, or deficiencies in
materials or transportation or other causes of any nature beyond its control
shall not be deemed to be a breach of this Agreement, provided that the
non-performing or delayed Party provides to the other Party written notice of
the existence and nature of such reason for the nonperformance and delay, and
that, in the event of a force majeure event, which continues unabated for a term
of one hundred eighty (180) days, the Party not subject to force majeure shall
have the ability to terminate the Agreement. 

Article 20.     Waivers

No waiver by either Party
of any breach of this Agreement, no matter how long continuing or how often
repeated, shall be deemed a waiver of any subsequent breach thereof, nor shall
any delay or omission on the part of either Party to exercise any right, power,
or privilege hereunder be deemed a waiver of such right, power, or privilege. 

Article 21.     Severance

If any provision of this
Agreement is held unenforceable or in conflict with the law of any jurisdiction,
the validity of the remaining provisions shall not be affected by such holding.
The Parties agree to negotiate and amend in good faith such provision in a
manner consistent with the intentions of the parties as expressed in the
Agreement if any invalid or unenforceable provision affects the consideration of
either Party. 

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Article 22.     Governing Languages

This Agreement shall be in
written in the Korean and English languages, and in the event of a discrepancy,
the Korean version of this Agreement shall prevail over the English version
thereof. 

Article 23.     Counterparts

This Agreement may be
executed in two (2) counterparts, each of which shall be deemed an original, but
both of which together shall constitute one and the same instrument. 

IN WITNESS WHEREOF,
the Parties hereto have caused this Agreement to be executed in two (2) copies
by their duly authorized representatives as of the date first written. 

	
Incheon Metropolitan City

By:

——————————————

Name: Ki Sun Choi

Title: Mayor of Incheon Metropolitan City
		
VaxGen, Inc.

By: 

——————————————

Name: Lance K. Gordon

Title CEO

	
By:

——————————————

Name: Hong Shik Oh

Title: Special Delegate of Incheon Metropolitan City
		 

	

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