Document:

EXHIBIT 10.65 

December 30, 2004

Celltrion,
Inc. 

1001-5, Dongchun-Dong, Yeonsu-Gu

Incheon, 406-130, Korea

Attention: Mr. Jung-Jin
Seo, CEO 

Re:    Exercise of Call Option on Shares of
VCI

Dear Mr. Seo: 

Reference is
made to Section 7.2 of that certain Joint Venture Agreement (the “VCI JVA”), dated June 7, 2002, between
Celltrion, Inc., a corporation organized under the laws of the Republic of
Korea (“Celltrion”), and VaxGen,
Inc., a Delaware corporation (“VaxGen”),
pursuant to which VaxGen has an exclusive option (the “Option”) to purchase all of the shares of
Common Stock of VaxGen-Celltrion, Inc., a California corporation (“VCI”), that are held by Celltrion. 

As you are
aware, on July 5, 2002, Celltrion invested US $3.0 million in VCI in exchange
for 3.0 million shares of Common Stock of VCI, and on December 23, 2002,
Celltrion invested an additional US $4.0 million in VCI, in exchange for 4.0
million shares of Common Stock of VCI (the 7.0 million shares of Common Stock
of VCI owned by Celltrion are collectively referred to herein as the “VCI Shares,” and the US $7.0 million
investment is referred to herein as the “VCI
Investment”). The VCI Investment was used for capital expenses
related to the construction of a 1,000 liter-scale pilot manufacturing facility
located in South San Francisco, California (the “Pilot Plant”). 

As you are
also aware, on even date herewith, VaxGen and Celltrion are entering into a
certain Termination Agreement (“Termination
Agreement”), pursuant to which the parties are terminating certain
agreements between them. In order to induce each other to enter into the
Termination Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto are
hereby entering into this letter agreement (this “Agreement”) and agree to be bound by the following terms:

1.      Exercise of Option. No later than seven (7)
days after the execution and delivery of this Agreement (the “Exercise Date”), VaxGen shall exercise the
Option to purchase all of the VCI Shares by delivering written notice of such
exercise to Celltrion in accordance with Section
7.1 of this Agreement. 

2.      Purchase of VCI Shares. No later than the
Exercise Date, VaxGen shall purchase the VCI Shares from Celltrion by
delivering to Celltrion, by wire transfer, check or other immediately available
funds, an amount (the “Purchase Price”)
equal to US $7.0 million (i.e., US
$1 per share), plus simple interest at the U.S. prime rate (as determined with
reference to the United States Federal Reserve Daily Rate), accruing (a) from
(i) July 5, 2002, with respect to $3.0 million of the VCI Investment, and (ii)
December 23, 2002, with respect to $4.0 million of the VCI Investment, to (b)
the date immediately prior to the date on which the Purchase Price is

delivered.
Concurrently with the receipt by Celltrion of the Purchase Price, Celltrion
shall sell, transfer, convey, and assign the VCI Shares to VaxGen. 

3.      Termination of VCI JVA. Notwithstanding
anything to the contrary set forth in the VCI JVA, concurrently with the
execution and delivery of this Agreement and the delivery of the Purchase Price
to Celltrion by VaxGen, (a) the VCI JVA and any and all other agreements
entered into between the parties hereto in respect of VCI or the Pilot Plant,
but excluding this Agreement (collectively, the “VCI Agreements”), shall, automatically and without any further
action by any party, terminate in their entirety, including any provisions
thereof which purport to survive a termination thereof, and shall not have any
force and effect, and (b) neither VaxGen nor Celltrion shall have any further
rights or obligations thereunder; provided, that nothing in this Section 3 shall in any way affect VaxGen’s
rights and obligations to exercise the Option and to acquire the VCI Shares, or
Celltrion’s obligation to sell, transfer, convey, and assign the VCI Shares or
its right to receive the Purchase Price therefor; it being understood that the
rights and obligations set forth in the proviso of this Section 3 shall
be the parties’ sole remedy for a breach of any of the VCI Agreements.  

4.      Standstill. Prior to the Exercise Date,
Celltrion shall not sell, transfer, pledge, hypothecate, or in any way dispose
of any portion of the VCI Shares, and further agrees not to take or fail to
take any action that would prevent or in any way hinder or impede VaxGen from
exercising the Option or purchasing the VCI Shares in accordance with this
Agreement. 

5.      Effectiveness. This Agreement shall become
effective on the date on which the following three (3) conditions are
satisfied: (a) it has been executed and delivered by the parties hereto, (b)
the parties have executed and delivered the Termination Agreement and that
certain Technical Support & Services Agreement, dated on even date herewith, and (c)
that certain Amended and Restated Joint Venture Agreement, among VaxGen, Nexol
Biotech Co., Ltd., a corporation organized under the laws of the Republic of
Korea, Nexol Co., Ltd., a corporation organized under the laws of the Republic
of Korea, KT&G Corporation (formerly Korea Tobacco & Ginseng Corporation), a corporation organized under the
laws of the Republic of Korea, and J. Stephen & Company Ventures Ltd., a corporation organized under the
laws of the Republic of Korea, is executed and delivered by the parties
thereto. 

6.      Waiver and Release of Claims.

          6.1
     Waiver and Release. Each party
hereby fully and forever releases and discharges the other party, together with
any and all of the other party’s present or former agents, stockholders,
directors, officers, employees, principals, successors and assigns
(collectively the “Released Parties”),
from and against any and all claims, actions, suits, causes of action,
judgments, liens, promises, executions, debts, damages, demands, liabilities and
controversies whatsoever, or every nature and description, in law or in equity,
whether known or unknown and whether arising by statute, at common law or
otherwise, which such party ever had or now has against the Released Parties,
from the beginning of the world to the date of this Agreement, and which arise
out of, or relate to, any or all of the VCI Agreements, including, but not
limited to, for any inaccurate representation or breach of any warranty or
covenant. 

2

          6.2
     Acknowledgement. Each party
represents and warrants to the other party that it (a) has read and understands
this Agreement, including the release set forth in Section 6.1, and has entered into it voluntarily and without
coercion; (b) has been advised, and has had the opportunity, to consult with
legal counsel of its choosing with respect to this Agreement and the matters
contemplated hereby; (c) is entering into this Agreement based upon its own
investigation and is not relying on any representations or warranties of the other
party or any other person not set forth herein; (d) has not assigned or
otherwise transferred any interest in any claim which it may have against any
Released Parties; and (e) acknowledges that it is entering into this Agreement
with full knowledge and understanding that in exchange for the benefits to be
received as described herein, it is giving up certain valuable rights that he
or she may now have or may later acquire, including, but not limited to, his or
her rights under the Collateral Agreements, and is fully and completely waiving
any and all rights which he or she has or may have, under California Civil Code
Section 1542, which states:

	
 

	
“A general release does not extend to claims which the creditor does
  not know or suspect to exist in his favor at the time of executing the
  release, which if known to him must have materially affected his settlement
  with the debtor.” 

7.      Other Provisions.

          7.1
     Notices. All notices, requests,
demands, claims, and other communications permitted or required to be given
under this Agreement shall be in writing. Any such notice, request, demand,
claim, or other communication shall be deemed duly given and received (a) when
delivered personally to the recipient, (b) one (1) business day after being
sent to the recipient by reputable overnight courier service, charges prepaid,
(c) one (1) business day after being sent to the recipient by facsimile
transmission or electronic mail (with electronic verification of its
transmission), or (d) four (4) business days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the intended recipient as set forth below: 

	
 

	
 

	
 

	
 

	
(a)

	
If to
  VaxGen: 

	
 

	
 

	
 

	
 

	
 

	
VaxGen, Inc.

  1000 Marina Boulevard

  Brisbane, California 94005-1841

  Attention: Dr. Lance K. Gordon, CEO

  Facsimile: (650) 624-1001

  Email: lgordon@vaxgen.com

	
 

	
 

	
 

	
 

	
(b)

	
If to
  Celltrion:

	
 

	
 

	
 

	
 

	
 

	
Celltrion,
  Inc.

  1001-5, Dongchun-Dong, Yeonsu-Gu

  Incheon City, 406-130, Korea

  Attention: Mr. Jung-Jin Seo,
  CEO

  Facsimile: 82-32-850-5040

  Email: jjseo@celltrion.com

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8.       Counterparts; Facsimile Signatures. This
Agreement may be executed in one or more counterparts and by facsimile
signature, each of which shall be considered an original and all of which,
together, shall be deemed one and the same agreement. 

9.       Entire Agreement. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof, and supersedes all prior and contemporaneous agreements
and understandings of the parties with respect thereto, whether oral or
written. 

10.     Severability. In the event that any
provision of this Agreement, or the application thereof, becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and effect. The parties
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision. 

11.     Governing Law; Consent to Jurisdiction.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of California without regard to principles of conflicts of law.
Any proceeding which arises out of or relates in any way to the subject matter
of this Agreement shall be brought in the Superior Court of California, County
of San Francisco, or the United States District Court for the Northern District
of California. The parties hereby consent to the jurisdiction of the State of
California and the United States of America, and waive their right to challenge
any proceeding involving or relating to this Agreement on the basis of lack of
jurisdiction over the person or forum non conveniens.

12.     Assignment. Neither party to this Agreement
may assign this Agreement or any of its rights, interests, or obligations
hereunder. 

13.     Waiver. Any term of this Agreement or the
performance thereof may only be waived in writing by the party entitled to the
benefit or performance of such term.

14.     Amendments. This Agreement may not be
amended except in writing signed by the parties.

15.     Successors and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of, and be binding
upon, the respective successors and permitted assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party,
other than the parties hereto or their respective successors and permitted assigns,
any rights, remedies, obligations, or liabilities under, or by reason of, this
Agreement, except as expressly provided in this Agreement.

16.     Titles and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement.

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17.     Further Assurances. Each party to this
Agreement shall take all actions and execute all documents reasonably necessary
to effectuate the purposes and intents of this Agreement.

Please
indicate your acceptance and concurrence with the terms and conditions set
forth in this Agreement by executing the acknowledgement set forth below.

	
 

	
 

	
 

	
 

	
 

	
Sincerely, 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Dr. Lance K. Gordon, CEO

	
 

	
 

	
 

	
AGREED AND
  ACCEPTED THIS

  30th DAY OF DECEMBER, 2004 BY:

	
 

	
 

	
 

	
 

	
 

	
CELLTRION,
  INC.

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
Jung-Jin Seo
CEO

	
 

	
 

5EXHIBIT 10.66 

AMENDED
AND RESTATED JOINT VENTURE AGREEMENT

           This AMENDED AND RESTATED JOINT VENTURE
AGREEMENT (this “Agreement”)
is entered into as of the 30th day of December, 2004, by and
among VaxGen, Inc., a Delaware corporation (“VaxGen”),
Nexol Biotech Co., Ltd., a corporation organized under the laws of the Republic
of Korea (“Nexol”), Nexol Co.,
Ltd., a corporation organized under the laws of the Republic of Korea (“Nexol Co”), KT&G Corporation (formerly
Korea Tobacco & Ginseng Corporation), a corporation organized under the laws of the
Republic of Korea (“KT&G”), and J.
Stephen & Company Ventures Ltd., a corporation organized under the laws of the Republic of Korea (“JS,” and
together with VaxGen, Nexol, Nexol
Co and KT&G, the “Parties” and each a “Party”).

RECITALS

           WHEREAS, the Parties are parties to a
Joint Venture Agreement dated February 25, 2002, which agreement was
amended by a certain Amendment to Joint Venture Agreement (the “Amendment”) dated July 14th, 2004 (as so
amended, the “Prior Agreement”).

           WHEREAS, pursuant to, and in accordance
with, Section 23.3 of the Prior Agreement, the Parties desire to amend
and restate the Prior Agreement in its entirety, such that upon execution and
delivery of this Agreement, the Prior Agreement shall be of no further force
and effect and shall be superceded in its entirety by this Agreement.

            NOW, THEREFORE, in consideration of the
mutual premises, agreements and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties, intending legally to be bound, hereby agree as follows:

1.      DEFINITIONS. Each capitalized term
use, but not specifically defined in this Agreement, shall have the meaning
ascribed to it in this Section 1.

          “Affiliate” of a Party means 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.  

          “Agreement” means this Joint Venture
Agreement.

          “Amendment” has the meaning set forth in
the Recitals of this Agreement.

          “Assignment
Agreement” means that certain Assignment Agreement, entered into as of March 25, 2002, between
VaxGen and JVC.

          “Board” means the Board of
Directors of the JVC.  

          “Breaching
Party” has the meaning set forth
in Section 12.3 of this Agreement.  

          “Collateral
Agreements” means, collectively, the License Agreement, the Sub-License Agreement, the Supply
Agreement, and any other agreement, whether oral or written, entered into between or among any of
the Parties or between or among any of the Parties and the JVC, in respect of, or in any
way concerning, the JVC or the Korean Facility, but excluding this Agreement, the Assignment
Agreement, and any and all agreements in respect of VCI.  

          “Common
Shares” means the common shares authorized for issuance by the JVC pursuant to Section 4.4 of this
Agreement.  

          “Continuing
Parties” has the meaning set forth in Section
6.2(a) of this Agreement.  

          “Contribution
Agreement” means that certain Contribution Agreement, entered into as of February 25, 2002, by
and among the Parties.  

          “Conversion
Date” has the meaning set forth in Section
4.1(c) of this Agreement.  

          “Declaration
of Persistence” has the meaning set forth in Section 16.1 of this Agreement.  

          “Embarrassed
Party” has the meaning set forth in Section
11.2(d) of this Agreement.  

          “First
Tranche” has the meaning set forth in Section
4.2(a) of this Agreement.  

          “Government
Approval” of any action to be taken by any Party or by the JVC herein means 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 within the Republic
of 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.  

          “Independent
Auditor” has the meaning set forth in Section
9.5(c) of this Agreement.  

          “Initial
Period” has the meaning set forth in Section
6.2 of this Agreement.  

          “JS” means J. Stephen &
Company Ventures Ltd., a corporation organized under the laws of the Republic of
Korea.  

          “JVC” means Celltrion, Inc., a joint stock company
(chusik hoesa)
organized under the laws of the Republic of Korea. The name of the JVC in Korean is “Chusik
Hoesa Celltrion”.  

          “Korean
Facility” means a certain pharmaceutical manufacturing facility located in
Incheon, Korea, which is owned by the JVC and constructed pursuant to the
Original Agreement and certain of the Collateral Agreements.  

          “KT&G” means KT&G Corporation
(formerly Korea Tobacco & Ginseng Corporation), a corporation organized
under the laws of the Republic of Korea.  

2

          “License
Agreement” means that certain License Agreement, entered into as of March 25, 2002, between VaxGen
and the JVC.  

          “Nexol” means Nexol Biotech
Co., Ltd., a corporation organized under the laws of the Republic of Korea.  

          “Nexol
Co” means Nexol Co, Ltd., a
corporation organized under the laws of the Republic of Korea.  

          “Nexol
Required Holding” has the meaning
set forth in Section 9.1(a) of this Agreement.  

          “Nominating Party” has
the meaning set forth in Section 9.1(a)
of this Agreement.  

          “Offeree
Parties”
has the meaning set forth in Section 6.4(a)
of this Agreement.  

          “Option
Period” has the meaning set forth in Section
6.4(d) of this Agreement.  

          “Parties” has the meaning set forth in the
preamble of this Agreement.  

          “Party” has the meaning set forth in the
preamble of this Agreement.  

          “Par
Value”
has the meaning set forth in Section 4.4 of
this Agreement.  

          “Preferred
Shares” means the Preferred Shares of the JVC (all of which shall convert into Common Shares pursuant
to Section 4.1(c) of this
Agreement); it being understood that any reference in this Agreement to Preferred Shares
shall, after such conversion, refer to the Common Shares into which such
Preferred Shares were converted.  

          “Prior
Agreement” has the meaning set forth
in the Recitals of this Agreement. 

          “Regular
Board Meetings” has the meaning set forth in Section 9.1(c) of this Agreement.  

          “Remaining
Shares” has the meaning set
forth in Section 6.4(c) of this
Agreement.  

          “Representative
Director”
has the meaning set forth in Section 9.1(b) of
this Agreement.  

          “Second
Tranche”
has the meaning set forth in Section 4.2(a)
 of this Agreement.  

          “Seller” has the meaning set
forth in Section 6.2(b) of this
Agreement.  

          “Shares” means the Common Shares
and the Preferred Shares.  

          “Special
Board Meetings” has the meaning
set forth in Section 9.1(c) of
this Agreement.  

          “Standstill
Agreement” has the meaning set forth in Section
4.2(b) of the Agreement.  

          “Sub-License
Agreement” means that certain
Sub-License Agreement, entered into as of March 25, 2002, between VaxGen and the JVC.  

3

          “Supply
Agreement” means that certain
Supply Agreement entered into as of March 25, 2002 between VaxGen and
Celltrion.  

          “Terminating
Party” has the meaning set
forth in Section 12.3 of this
Agreement.  

          “Termination
Agreement” has the meaning set forth in Section
3.1 of this Agreement.  

          “Transfer” has the meaning set
forth in Section 6.1(c) of this Agreement. 

          “Transfer
Notice”
has the meaning set forth in Section 6.4(a) of
this Agreement.  

          “Third Party
Purchaser” has the meaning set
forth in Section 6.4 of this
Agreement.  

          “Unsubcribed
Shares” has the meaning set
forth in Section 4.2(a) of this
Agreement.  

          “VaxGen”
means
VaxGen, Inc., a Delaware corporation.  

          “VaxGen
Required Holding” has the meaning
set forth in Section 9.1(a) of
this Agreement.  

          “VCI” means VaxGen-Celltrion,
Inc. a California corporation.  

          “VCI Facility” means the pilot
manufacturing facility (at a scale between 500 and 1000 liters) which was
constructed by the JVC and VaxGen in South San Francisco, California, U.S.A. for the manufacture of a number of
pharmaceutical products with cell culture technology of VaxGen.  

2.
     INCORPORATION AND FORMATION OF CELLTRION

          2.1
     Incorporation. Pursuant to Section
2.1 of the Prior Agreement, the Parties incorporated the JVC under the laws of the
Republic of Korea on February 26, 2002.

          2.2
     Articles
of Incorporation; Internal Regulations. Pursuant to Section 2.2. of the Prior
Agreement, the Parties have adopted Articles of Incorporation for the JVC, a
copy of which is attached as Exhibit A to this Agreement. The Parties shall
approve internal regulations for the JVC as necessary in conformity with the
terms and conditions of this Agreement and the laws of the Republic of Korea.
If, at any time, there is a discrepancy between this Agreement and the Articles of
Incorporation or internal regulations, this Agreement shall govern and the
Parties shall cause the Articles of Incorporation or internal regulations, as
applicable, to be amended so that they are consistent with this Agreement. 

          2.3
     Duration
of JVC.
The duration of the JVC shall be perpetual, subject to the provisions of this
Agreement, including, but not limited to, Section
11, hereof.

          2.4
     Purpose. The purpose of the JVC is to engage in the
following business activities:

                     (a)
     the manufacture and sale of pharmaceutical products using cell culture technology;

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                     (b)
     research
and development with respect to pharmaceutical products using cell culture
technology; 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.

	3. 	TERMINATION
OF COLLATERAL AGREEMENTS; ENTERING INTO TECHNICAL SUPPORT & SERVICES AGREEMENT 

          3.1
     Termination of Collateral Agreements. Pursuant to Section 3.1
of the Prior Agreement, the Parties caused the JVC
to enter into the following agreements with VaxGen: the Supply Agreement, the
License Agreement, the Sub-License Agreement, and the Assignment Agreement. Concurrently
with the execution and delivery of this Agreement, the Parties shall cause the JVC to enter
into the Termination Agreement with VaxGen, in the form attached hereto as Exhibit B (the “Termination
Agreement”), pursuant to which the Collateral
Agreements shall be terminated in their entirety, including, without limitation, any
provisions contained therein that purport to survive a termination thereof, and shall no
longer have any legal force or effect. In addition, concurrently with the
execution and delivery of this Agreement, the Contribution Agreement is hereby
terminated in its entirety, including, without limitation, any provisions thereof that purport to
survive a termination thereof, and shall no longer have any force or effect.

          3.2
     Technical Support &
Services Agreement; Letter Agreement. Concurrently with the
execution and delivery of this Agreement, the Parties shall cause the JVC to enter into with VaxGen (a) the
Technical Support & Services Agreement in the form attached hereto as Exhibit C, pursuant to
which the JVC shall have the right to continue to use certain technology previously transferred
to it by VaxGen (to the extent that, and only for so long as, VaxGen has the right to provide such
technology to Celltrion) and to request future technical support and the provision of certain
services to the JVC by VaxGen (subject to the agreement by VaxGen), and (b) the letter agreement in
the form attached hereto as Exhibit D,
pursuant to which VaxGen will agree to exercise its option to purchase shares
of common stock of VCI, held by the JVC. In the event that the VCI Facility has idle capacity,
VaxGen shall consider, in its sole discretion, the use of the facility to
support Celltrion business activities, including but not limited to process development, technology
transfer and/or product manufacture. In addition, VaxGen will consider, in its sole discretion,
providing on-site training to Celltrion staff at the VCI Facility, if so
requested by
Celltrion. 

4.      CAPITALIZATION
OF JVC

           4.1
    General.

                     (a)
     Prior Contributions. Prior to the date hereof, each Party has
contributed to
the JVC, the money or property set forth opposite such Party’s name on Schedule
4.1(a) hereof, in return for that number of Common Shares and/or Preferred
Shares set forth opposite its name on Schedule 4.1(a) hereof. 

                     (b)
     Reserved. 

5

                     (c)
     Conversion of Preferred Shares.
Concurrently with the termination of the Supply Agreement pursuant to the Termination
Agreement (the “Conversion Date”),
any and all
Preferred Shares issued and outstanding as of the date hereof shall, subject to
the approval at the shareholders meeting of the JVC in accordance with the Korean
Commercial Code, convert into Common Shares on a one for one basis, and each Party, in
its capacity as a shareholder of the JVC, hereby irrevocably votes to approve such
conversion and agrees to take any and all actions necessary in order to effect
the same. Each holder of Preferred Shares on the date hereof shall surrender the
certificates representing such Preferred Shares to the JVC and, in exchange,
the JVC shall
issue to each such holder a certificate representing the Common Shares into
which such Preferred
Shares have converted pursuant to this Section
4.1(c).

          4.2      Additional
Contributions.

                     (a)
     Approved
Offerings.
The Parties have previously authorized the JVC to issue (i) up to
20,000,000,000 Won of Preferred Shares having a par value of 5,000 Won per
share and
an issue price of 5,000 Won per share (the “First
Tranche”); provided, that such Preferred Shares shall not be
issued after December 31, 2004, and hereby authorize the JVC to issue (ii) up to
10,000,000,000 Won of Common Shares having a par value of 5,000 Won per share and
an issue price of 5,000 Won per share (the “Second
Tranche”); provided, that such Common Shares shall not be issued prior to
January 1, 2005, nor after December 31, 2005. If there are Preferred Shares which the then-existing
shareholders of the JVC do not subscribe for in the First Tranche (the “Unsubscribed
Shares”),
the Board shall dispose of such Unsubscribed Shares as follows: (1) the shareholders of JS
and/or the members of the investment association of JS shall be allowed to
subscribe, with priority, for up to the number of Unsubscribed Shares that JS
was authorized to subscribe for in the First Tranche; and (2) the investors designated by
Nexol and/or Nexol Co shall be allowed to subscribe for the remaining number of
Unsubscribed Shares; it being understood that such disposition of the Unsubscribed Shares shall
occur on or prior to December 31, 2004. JS shall take all actions necessary to ensure that the
offer and sale of any of the Preferred Shares to any shareholders of JS
and/or members of the investment association of JS do not violate the laws of
the Republic of Korean or other applicable securities laws, and Nexol and Nexol
Co shall take all actions to ensure that the offer and sale of any of the Preferred Shares
to investors designated by Nexol and/or Nexol Co do not violate the laws of the
Republic of Korean or other applicable securities laws.  

                     (b)
     Standstill
Agreement.
VaxGen, KT&G and JS (including the investment associations of JS)
shall not subscribe for the Common Shares in the Second Tranche (the “Standstill
Agreement”). Any unsubscribed shares in the Second Tranche shall be sold to
Nexol, Nexol
Co and/or investors who participate in the Second Tranche through the
recommendation of Nexol or Nexol Co; provided, that the Standstill
Agreement shall expire if the Second Tranche is not completed on or prior to December 31, 2005.
The Standstill Agreement shall only come into force if and when Nexol and Nexol
Co. fully and precisely complete the First Tranche by subscribing for the
remaining number of Unsubscribed Shares in accordance with Section 4.2(a).

                     (c)
     Breach
of Standstill Agreement. Since damages arising from a breach of the Standstill
Agreement by VaxGen, KT&G, or JS (including the investment associations of
JS) may be difficult to compute with precision, the Parties agree that any
Party that violates the Standstill Agreement shall pay to Nexol or Nexol Co the
greater of (i) the market price or (ii) the

6

appraised
value (as appraised by a licensed appraisal company) of the Common Shares that
were subscribed
for in violation of the Standstill Agreement. 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.

          4.3
     Additional Funding. Except as otherwise agreed upon by the Parties
or as set forth
herein, no Party shall be obligated to contribute any additional cash or
property to the JVC or extend any financial assistance to the JVC.

          4.4
     Authorized
Shares.
Unless otherwise agreed upon by the Parties, as provided in Section 9.4(b)(ix), the
Parties shall cause the JVC to be authorized to issue only Common Shares. All Common Shares
issued by the JVC shall have a par value of 5,000 Won per share (“Par Value”).  

          4.5
     Reserved.

          4.6
     Reserved.

5.      RESERVED.

6.      TRANSFER OF
SHARES

          6.1
     Restrictions on Transfer. Except as permitted by this Section 6 or with the prior written consent
of all of the other Parties, no Party shall:

                     (a)
     transfer
or sell 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 encumbrance over any
Shares (each action described in clauses (a)
through (c), a “Transfer”).  

          6.2
     Initial Period. Except as otherwise
permitted by this Section 6, during
the period beginning February 25, 2002 and ending February 25, 2007 (“Initial Period”), no Party shall Transfer any
Shares.
After the expiration of the Initial Period, or 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
other Parties (“Continuing Parties”)
shall have received an accession agreement duly executed by the transferee of such
Shares, pursuant to which such transferee agrees to be bound by the terms and
conditions of this Agreement to the same extent that the transferor was bound
prior to such Transfer;  

                     (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 Transfer its Shares (the “Seller”)
shall first have been assigned to, or equivalent financing made available by, the
transferee of such Shares;  

7

                     (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

                     (d)
     the
Seller shall have complied with Section 6.4
of this Agreement.

          6.3
     Notwithstanding the prohibition on Transfer of
Shares during the Initial Period set forth in Section
6.2 above and the terms of Section
6.4 below, any Party may Transfer up to one third of its Shares in
the JVC to the extent that the Transfer of such Shares is between such Party
and its Affiliate, its shareholders or its investors, it being understood that
(a) Nexol and/or Nexol Co shall have the right to Transfer up to one third of
the Shares of the JVC held by Nexol and Nexol Co., but in no event shall such Transfer of
the Shares by Nexol and/or Nexol Co be made in the open market to obtain higher proceeds, and (b)
JS shall have the right to Transfer all of its Shares in the JVC, provided,
that any such Transfer by JS shall be subject to the provisions of Section
6.4 of
this Agreement.

          6.4      In the
event that, after the Initial Period, a
Seller proposes to Transfer its Shares to a proposed third party purchaser (“Third Party Purchaser”), the 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:  

                     (a)
     The
Seller shall first give the other Parties (the “Offeree Parties”) written notice (“Transfer
Notice”) of any proposed Transfer, together with details of the
Third Party Purchaser,
the purchase price and other material terms pursuant to which the Third Party
Purchaser has
offered to acquire the Shares.  

                     (b)
     Each
Offeree Parties shall have thirty (30) days from the date of its receipt of the Transfer Notice
to purchase, on the terms set forth in the Transfer Notice, that percentage of the Shares proposed to
be Transferred by the Seller equal to a fraction, the numerator of which is the
number of Shares held by such Offeree Party, and the denominator of which is
the number of Shares held by all Offeree Parties.

                     (c)
     In
the event that any of the Offeree Parties elects not to purchase all or any
portion of the Shares to which they are entitled pursuant to Section 6.4(b) during such thirty (30) day
period (“Remaining Shares”), 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 Remaining Shares on the terms set
forth in the Transfer Notice; provided, that if there is an
oversubscription for such Remaining Shares, each Offeree Party that desires to purchase
Remaining Shares shall be entitled to purchase that percentage of the Remaining
Shares equal to a fraction, the numerator of which shall be the number of Shares held by such
Offeree Party, and the denominator of which shall be the number of Shares held
by all Offeree Parties desiring to purchase the Remaining Shares.  

                     (d)
     In
the event that all or a part of the Shares proposed to be Transferred by the Seller are not
Transferred in accordance with Section 6.4(a) through (c) within the aggregate
sixty  

8

(60)
day period set forth above (“Option Period”),
the Seller may Transfer such remaining Shares to the Third Party
Purchaser on terms no less favorable to the Seller than those set forth in the Transfer Notice; it
being understood that all such Transfers to the Third Party Purchaser shall be consummated no later
than sixty (60) days after the expiration of the Option Period. If such Shares are not Transferred by
the Seller within such sixty (60) day period, then the Seller shall be prohibited from
Transferring such Shares without first complying again with the provisions of
this Section 6.4.  

          6.5      The
Parties acknowledge and agree that damages
arising from breach of the obligations under this Section
6 may be difficult to compute with precision. Accordingly, the Parties agree that any
Party found to have Transferred any Shares in violation of the terms of this Section
6 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 to it under applicable law,
including without limitation, injunctive relief.

          6.6
     Notwithstanding anything to the contrary contained
in this Agreement, the (a) Preferred Shares issued in the First Tranche (which
Preferred Shares shall convert into Common Shares pursuant to Section 4.1(c) of this Agreement), and (b)
Common Shares to be issued in connection with the Second Tranche shall not be subject
to the provisions of Section 6,
including, but
not limited to, the restrictions on transfer set forth therein.

7.      RESERVED.

8.      RESERVED.

9.      MANAGEMENT
OF THE JVC

          The
JVC shall be managed in accordance with the provisions of this Section 9 and, subject to Section 2.2, the relevant
provisions of the
Articles of Incorporation of the JVC.

          9.1      Board of Directors

                     (a)
     Subject to the provisions of this Section 9.1
(a), the JVC shall be administered and managed by the Board which shall
consist of six (6) directors, two of whom shall be nominated by VaxGen, two of
whom shall be nominated by Nexol, and one of whom shall each be nominated by
KT&G and JS (each, a “Nominating Party”).
VaxGen shall be entitled to nominate two of the six directors for so long as it
retains at least two-thirds of the Shares of the JVC issued to it as of the date on which the JVC
was incorporated (the “VaxGen Required
Holding”), and Nexol shall be entitled to nominate two of the six
directors for so long as Nexol and Nexol Co, including any indirect investor who has
participated in the First Tranche through Nexol and Nexol Co and acquired the
shares of the JVC from Nexol or Nexol Co, but excluding direct investors who
participated in the First Tranche retain, in the aggregate, at least
two-thirds of the shares of the JVC issued to them from the incorporation of the JVC
through the completion of the First Tranche (the “Nexol Required Holding”); provided, that if either the
Nexol Required Holding or VaxGen Required Holding is not maintained, then,
automatically and without any  

9

further
action of the Parties, (A) the number of directors comprising the Board shall
be reduced to five (5), (B) the Board seat held by the most recently elected director
for which Nexol (if it does not maintain the Nexol Required Holding) or VaxGen (if
it does not maintain the VaxGen required holding), as applicable, was the Nominating Party
shall be eliminated, and (C) thereafter, Nexol or VaxGen, as applicable,
shall only be entitled to be the Nominating Party with respect to one (1) director of the Board.
Each Party shall vote its Shares to cause the director or directors nominated by each Nominating
Party to be elected, removed or replaced as the Nominating Party 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 was the Nominating
Party with respect
to the director whose position has become vacant, to fill such vacancy for the
remainder of the
term. In the event that there is any change in the shareholdings of the Parties
of more than one-third of its initial shareholding as at the time of the
incorporation of the JVC through the completion of the First Tranche, 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. In addition, any director for whom any Party is the Nominating Party shall be entitled to
call a meeting of the Board for any legitimate business purpose. 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.

                     (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 may be adopted by the Board only 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;

10

                              (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 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 five percent (5%) of the JVC’s annual turnover;

                              (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; and

                              (x)
     Issuance of Shares or any other shares of the JVC.

          9.2
     Representative Director. For so long as VaxGen maintains the VaxGen
Required Holding and Nexol and Nexol Co maintain the Nexol Required Holding,
VaxGen and Nexol shall jointly be
entitled to appoint the Representative Director of the JVC, who shall be
elected by the Board, 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; provided, however, that the
Board shall decide on and elect the Representative
Director of the JVC from the Representative Director candidates nominated by
each of VaxGen and Nexol, in the event VaxGen and Nexol fail to reach an
agreement regarding the appointment of the Representative Director; provided further, that if (a) the
Nexol Required Holding is not maintained, Nexol shall forfeit its right to jointly appoint the
Representative Director pursuant to this Section
9.2, and (b) if the VaxGen
Required Holding is not maintained, VaxGen shall forfeit its right to jointly
appoint the Representative Director pursuant to this Section 9.2.

          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 the 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 to decide the time and place for convening all general meetings of shareholders
in accordance
with the laws of the Republic of Korean 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

11

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;

                              (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;

                              (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;

                              (viii)
  Removal of a director or a statutory auditor or the Representative Director;

                              (ix)
   Issuance of Shares or any other shares of the JVC at a price less than Par
Value.

                              (x)
     Reduction of paid-in capital;

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

                              (xii)
  Share split;

                              (xiii)
  Issuance of convertible bonds or bonds with warrants to those who are not shareholders of the JVC;
provided,
that this provision shall not apply to the issuance of convertible bonds or bonds with warrants to those
who are not shareholders of the JVC in amounts

12

not to exceed the amounts that are permitted by
the Article of
Incorporation of the JVC to be issued without such shareholder approval;

                              (xiv)
   Corporate split; and

                              (xv)
    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 continue to use management planning and accounting systems as in use by VaxGen
both in
format and timetable to the extent feasible, given the requirements of
the law and practice of the Republic of Korea.

                    (b)
     Reserved.

                    (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 principles of the Republic of Korea (“Korean GAAP”) and in a form acceptable to the
Parties. The JVC
shall take necessary measures to convert the financial statements prepared in accordance with Korean GAAP taking
into account the generally accepted accounting principles of the U.S.A.
and provide VaxGen with such converted financial
statements. 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.

                    (e)
     The Parties agree that the accounting
year of the JVC shall be according to the calendar year.

                    (f)
     For so long as any Party owns any
Shares, such 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;
provided,
that this Section 9.5(f) shall not
apply to any information which, if disclosed to such shareholder or its
accountants, would cause the JVC to waive
the attorney-client privilege. All information so disclosed pursuant to this Section 9.5(f) shall be
subject to Section 14. 

                    (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.

13

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
Regular Board Meeting or a Special Board Meeting.

          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 the Republic of Korea shall be taken into consideration.

11.      DURATION AND TERMINATION.

          11.1      This Agreement shall be effective
on the date on which the following two
(2) conditions are satisfied: (a) it has been executed and delivered by the
Parties, (b) the JVC and VaxGen have executed and delivered that certain (i)
Termination Agreement, (ii) Technical Support
& Services Agreement in the form attached hereto as Exhibit C, and (iii) letter agreement in
the form attached hereto as Exhibit D (relating
to the agreement by VaxGen to purchase shares of common stock of VCI held by
the JVC), each dated on even date herewith. Once effective, 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, such Party shall be required to continue keep all information concerning the JVC
and the other Parties confidential, in accordance with Section 14.

          11.2      This Agreement shall be terminable
by any Party upon sending written
notice to the other Parties upon the occurrence of one or more of the
following events:

                       (a)
     if any enactment of law or regulation or
any subsequent act of governmental authority
in the Republic of 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 to
the breaching Party requesting such breach to be remedied;

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

                       (d)
     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

14

(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.

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 Breaching Party’s expense, an appraisal of the net
worth of the 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.

                       (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 Section 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.

15

          12.4
     Notwithstanding anything to the contrary set forth in this
Agreement, in the event that this Agreement is terminated by VaxGen in
consequence of breach of this Agreement by any of the other Parties, then 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.

          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 the
Terminating Party, 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)
     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:

                                 (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 described in Section
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 Section 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.

16

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 (3) 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 the Republic of Korea or the U.S.A. and who shall preside over the
arbitration proceedings.

                       (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.

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)
     becomes part of the public domain through no fault of the receiving party;

17

                       (b)
     is rightfully obtained by the receiving
party from a third party which had the right
to transfer such information without an obligation of confidentiality and
without breaching any agreement to which it was a party;

                       (c)
     is independently developed by the receiving party without reference to, or use of, the disclosing party’s
confidential or
proprietary information, as evidenced by written records; or

                       (d)
     was lawfully in the possession of the receiving party at the time of
disclosure, without restriction on disclosure, as evidenced by written records.

In addition, the receiving party
may disclose confidential or proprietary information of the disclosing
party as may be required by law, court order, governmental agency or quasi
governmental agency, including, but not limited to the United States Securities
and Exchange Commission and The Nasdaq National Market, with jurisdiction; provided,
that before making such a disclosure the
receiving party first notifies the disclosing party promptly and in writing and
cooperates with the disclosing party,
at the disclosing party’s reasonable request and expense, in any lawful
action to contest or limit the scope of such required disclosure.

          14.2
     Each Party shall ensure
that its employees, advisers, and agents are bound by the confidentiality obligations on terms substantially
similar to those set out above.

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 to it, under this Agreement or
applicable law, in lieu of terminating this
Agreement.

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 the
Parties set forth in Section 16.1 above
shall apply mutatis mutandis, if
any of the following events shall occur:

18

                       (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.

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 with any
of its obligations shall not have
caused 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.

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.

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, which consent shall not be unreasonably withheld; provided,
however, that this Agreement shall be automatically assigned to the surviving
entity of any merger or consolidation involving
any Party to the extent that such Party is not the surviving entity of the
merger or consolidation.

20.      NOTICE

          20.1
     Notices. All notices,
requests, demands, claims, and other communications permitted or required to be
given under this Agreement shall be in writing. Any such notice, request, demand, claim, or other communication
shall be deemed duly given and received (a) when delivered personally to the recipient, (b) one (1) business day
after
being sent to the recipient by reputable
overnight courier service, charges prepaid, (c) one (1) business day after
being sent to the recipient by
facsimile transmission or electronic mail (with electronic verification of its
transmission), or (d) four (4) business days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the intended recipient as set forth below:

19

If to
VaxGen:

1000 Marina
Boulevard

Brisbane, California 94005

United States of America

Fax No: (650) 624-1001

Attention: Dr. Lance Gordon

If to
Nexol:

Hanyang
Securities Co., Ltd. Bldg., Suite 300,

17-3, Youido-dong, Youngdeungpo-ku, Seoul, Republic of Korea

Fax No: 82-2-786-6776

Attention: Mr. Hyoung-Ki Kim

If to Nexol
Co:

Hanyang
Securities Co., Ltd. Bldg., Suite 300,

17-3, Youido-dong, Youngdeungpo-ku, Seoul, Republic of Korea

Fax No: 82-2-786-6776

Attention: Mr. Hyoung-Ki Kim

If to
KT&G:

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

Fax No: 82-2-3404-4670

Attention: Mr. Sang-Seock Kim

If to
JS:

23rd Floor, City
Air Tower,
Samsung- Dong, Kangnam-ku, Seoul, Republic of Korea

Fax No: 82-2-2016-6509

Attention: Mr. Taxun Synn

20.2
     Reserved.

         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

          20.4
     Any Party may change the address at any time by written notice to the other
Parties delivered in accordance with this Section 20. 

21.      LANGUAGE

          This
Agreement is written in the English language and may be executed in
counterparts, each of which shall be
deemed an original and all of which, taken together, shall constitute one and the same agreement. The English language text of
the Agreement shall prevail over any translation thereof.

22.      RESERVED.

23.      ENTIRE
AGREEMENT; WAIVER AND RELEASE

          23.1
     This Agreement supersedes
all previous representations, understandings, or agreements, oral or
written, among the Parties with respect to the subject matter hereof,
including, without limitation, the Prior
Agreement, and the agreements and documents contemplated hereby contain the
entire understanding of the Parties as to the terms and conditions of their
relationship.

          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 sections in
this Agreement are for convenience only and shall not in any way affect the interpretation of this
Agreement.

          23.5
     Each Party fully and forever releases and discharges each
other Party, together with any and all of
each other Party’s present or former agents, stockholders, directors, officers,
employees, principals, successors and assigns (collectively the “Released Parties”), from and against any and all
claims, actions, suits,
causes of action, judgments, liens, promises, executions, debts,
damages, demands, liabilities and controversies whatsoever, or every nature and
description, in law or in equity, whether
known or unknown and whether arising by statute, at common law or otherwise,
which such Party ever had or now has against the Released Parties, from the
beginning of the world to the date of this
Agreement, and which arise out of, or relate to, the Prior Agreement, any Collateral Agreement, or the Contribution
Agreement, and including, but not limited to, any inaccurate representation or
breach of any warranty or covenant set forth therein.

21

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.

[Signature Page Follows]

22

          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.

	
 

	
KT&G CORPORATION

	
 

	
 

	
 

	
 

	

	
By:

	

	
 

	
By:

	
 

	

	
 

	
 

	

	
 

	
Name:   Dr. Lance Gordon

	
 

	
 

	
Name: Mr. Young-Kyoon
Kwak

	
 

	
Title:
  Chief Executive Officer

	
 

	
 

	
Title:
  President & CEO

	
 

	
 

	
 

	
 

	
 

	
NEXOL
  CO, LTD.

	
 

	
NEXOL BIOTECH CO., LTD.

	
 

	
 

	
 

	
By:

	

	
 

	
By:

	

	
 

	

	
 

	
 

	

	
 

	
Name:
  Mr. Jung-Jin Seo

	
 

	
 

	
Name:
  Mr. Jung-Jin Seo

	
 

	
Title:
  Representative Director

	
 

	
 

	
Title:
  Representative Director

	
 

	
 

	
 

	
 

	
 

	
J. STEPHEN & COMPANY VENTURES LTD.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
Name:
  Mr. Sun-Dae Kang

	
 

	
 

	
 

	
 

	
Title: CEO &
  Chairman

	
 

	
 

	
 

23

Schedule 4.1(a)

Prior Contributions

	
 

	
 

	
 

	
 

	
 

	
Name

	
Date
  of

  Contribution

	
Type of 

  Contribution

	
Type of Shares

	
Number of Shares

	

	
VaxGen

	
2002.03.27

	
Property

	
Common Share

	
7,800,000

	

	
Nexol

	
2002.02.26

	
Money

	
Preferred
  Share

	
10,000

	
2002.03.27

	
Money

	
Preferred
  Share

	
2,590,000

	

	
Nexol Co

	
2002.05.26

	
Money

	
Preferred
  Share

	
520,000

	

	
Parties
  Invited by Nexol/Nexol Co.

	2002.09.19

	Money

	Preferred
  Share

	130,000

	

	
KT&G

	
2002.03.27

	
Money

	
Preferred Share

	
2,600,000

	
2002.09.19

	
Money

	
Preferred Share

	
130,000

	
2003.01.29

	
Money

	
Preferred Share

	
130,000

	

	
JS

	
2002.02.26

	
Money

	
Preferred Share

	
600,000

	
2002.03.27

	
Money

	
Preferred Share

	
1,350,000

	
2002.09.19

	
Money

	
Preferred Share

	
195,000

	

	
• The above schedule contains information concerning
contributions made and shares held prior to the date hereof, and does not
contain any information regarding the transfer of shares on or after the date hereof.

24

Exhibit A

ARTICLES OF INCORPORATION

CELLTRION, INC.

Established
February 26, 2002

Wholly Amended March 25, 2002

Amended
April 30, 2002

Amended
July 19, 2002

Wholly
Amended February 22, 2003

Amended September 23, 2003

CHAPTER I. GENERAL
PROVISIONS

Article 1.
Corporation Name

The name of the Company shall be Chusik Hoesa
Celltrion, which shall be written in English as “Celltrion, Inc.” (hereinafter
referred to as “the Company”).

Article 2.
Purposes

The purposes of the Company shall include but not be
limited to:

	
 

	
 

	
 

	
 

	
(1)

	
The manufacture, export, and sale of pharmaceutical
  products using mammalian cell culture technology, including but not
  limited to a vaccine for HIV;

	
 

	
 

	
 

	
 

	
(2)

	
Research
  and development with respect to pharmaceutical products:

	
 

	
 

	
 

	
 

	
(3)

	
Any
  and all business activities incidental to the foregoing activities.

- 1 -

Article 3.
Location of Head Office and Branches

The Principal Office of the
Company will be located in Incheon City, Republic of Korea and branches,
sub-offices or other business offices shall be established or closed elsewhere
as required according to resolutions of the
Board of Directors.

Article 4.
Method of Notice

Public notice of the Company
shall be given by publication in The Maeil
Business Newspaper, a daily newspaper of general circulation in
Korea.

CHAPTER II. CAPITAL
AND SHARES

Article 5.
Number of Authorized Shares

	
 

	
 

	
5.1

	
The
  total number of shares that the Company is authorized to issue shall be as
  follows:

	
 

	
 

	
 

	
Common
  Shares: 7,800,000 shares with a par value of 5,000 Won per share; 

	
 

	
Preferred
  Shares: 12,515,000 shares with a par value of 5,000 Won per share.

	
5.2

	
No additional shares of the Company, whether common or
  preferred, may be authorized except pursuant to a resolution of a
  General Meeting of Shareholders.

Article 6.
In-Kind Contribution

	
 

	
 

	
 

	
6.1

	
VaxGen, Inc. (“VaxGen”) shall be permitted to
  subscribe for shares of the Company by way of investment in-kind.

	
 

	
 

	
6.2

	
The in-kind investment by VaxGen shall be made as
  follows:

	
 

	
 

	
 

	
(1)
  

	
The
  in-kind investment shall take the form of the contribution of a package of technology relating to the manufacture of
  AIDSVAX, an HIV vaccine, consisting of (i) a non-exclusive sub-license, under the patent rights and know-how
  licensed from

- 2 -

	
 

	
 

	
 

	
 

	
 

	
Genentech
  Inc. relating to gp120, to manufacture AIDSVAX, (ii) a non-exclusive license,
  under certain intellectual property owned by VaxGen, to manufacture AIDSVAX
  and other products as the Company may choose to manufacture in the future,
  and such technologies as may be necessary for designing, operating, and
  validating the manufacturing plant that will be used to manufacture AIDSVAX, including technology for fermentation control
  and product isolation and processing and
  formulation.

	
 

	
 

	
 

	
 

	
(2)

	
Valuation
  of the technology: 39,000,000,000 Won, equivalent to approximately USD $30 million.

	
 

	
 

	
 

	
 

	
(3)

	
Shares
  to be issued: 7,800,000 Common Shares.

Article 7.
Class and Par Value of Shares

	
 

	
 

	
 

	
 

	
 

	
7.1

	
Shares issued by the Company may be common and
  preferred shares in nominative form, and each share shall have a par value
  of 5,000 Won, all with full voting rights.

	
 

	
 

	
 

	
 

	
 

	
7.2

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

	
 

	
 

	
 

	
 

	
 

	
(1)

	
Dividend
  Preference: Holders of the Preferred Shares shall be
  entitled to receive dividends at the rate
  of One Hundred per cent (100%) of the Par Value until such time that
  the Preferred Shares are converted to Common Shares per Article 7.2(d) below.

	
 

	
 

	
 

	
 

	
 

	
 

	
(2)

	
Immediate
  Participation: Holders of the Preferred Shares shall be
  entitled to participate in the Company’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. 

	
 

	
 

	
 

	
 

	
 

	
 

	
(3)

	
Cumulative: Holders of the preferred shares shall be entitled
to the dividend preference on an 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 Company until paid off.
  The Company shall pay off these accrued dividends in the

- 3 -

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
following order:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(i)

	
the
  arrearage of preferred dividends,

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 (ii)

	
preferred
  dividends for the current year, and

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
  (iii)

	
dividends
  to all shareholders.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(4)

	
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 entered into by and between the
  Company and VaxGen, Inc. is terminated in accordance with the terms thereof,
  or (ii) the end of the thirteenth (13th) fiscal year of the JVC.

	
 

	
 

	
 

	
 

	
 

	
 

	
(5)

	
Voting:
  Holders of the Preferred Shares shall be entitled to the same voting rights
  as the holders of the Common Shares

	
	
	

	
 

	
 

	
7.3

	
The
  Company shall issue eight (8) types of share certificates: one (1) share
  certificate, five (5) share certificate,
  ten (10) share certificate, fifty (50) share certificate, one hundred (100) share certificate, five hundred (500) share
  certificate, one thousand (1,000) share certificate, and ten thousand
  (10,000) share certificate.

	
 

	
 

	
Article 8. Share Certificates/Register
  of Shareholders

	
 

	
 

	
8.1

	
The share certificates of the Company shall be
  numbered, shall set forth the number of shares represented thereby and
  the holder’s name thereof, and shall be entered into the Register of
  Shareholders of the Company as soon as they are issued.

	
 

	
 

	
8.2

	
The
  share certificates of the Company shall be nominative and registered
  certificates and shall be in denomination
  and form as prescribed by the Board of Directors, but in any case, shall bear the following words: “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 Inc., 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.”

- 4 -

	
 

	
 

	
8.3

	
Certificates shall be signed by a Representative
  Director of the Company certifying the class and number of shares owned by
  each shareholder in the Company.

	
 

	
 

	
8.4

	
The Company shall maintain a Register of Shareholders
  in which all the operations effected with the shares shall be registered,
  within 30 days following the date of execution, indicating the name of
  the subscriber or previous owner and the assignee or acquirer. The Company,
  absent judicial resolution to the contrary, shall consider as owner of the
  shares the persons registered as such in the Register of Shareholders.

Article 9.
Payment of Shares

Payment for subscribed shares
shall be made in cash payable to a bank or banks designated by the Company
or in kind or in combination of both. Only those shares that have been fully
paid can be issued.

Article 10.
Transfer of Shares

Transfer of shares shall be made
by delivery of the appropriate share certificates to the transferee. Transfer
of a registered share shall not be binding on the Company until the name and
address of the transferee are duly entered in the Register of Shareholders
upon application therefor.

	
 

	
 

	
Article 11. Preemptive Rights to New
  Shares

	
 

	
 

	
11.1

	
Each
  of the shareholders shall have a preemptive right to subscribe for any
  additional shares to be issued by the
  Company in proportion to its shareholding immediately prior to the time the
  shares are issued.

	
 

	
 

	
11.2

	
Notwithstanding the provision of Paragraph (11.1)
  above, the Company may allocate new shares to persons other than
  shareholders in compliance with the laws and regulations or in the following
  cases by resolution of Board of Directors: 

	
 

	
 

	
 

	
 

	
(1)

	
 When the Company offers to
  subscribe for new shares or makes the underwriters to subscribe for new
  shares in accordance with the Securities Exchange Act (“SEA”);

- 5 -

	
 

	
 

	
 

	
 

	
(2)

	
when the Company issues new shares to increase its
  capital through public offering with the
  resolution of the Board of Directors;

	
 

	
 

	
 

	
 

	
(3)

	
when the Company issues new shares to the members of
  the Employee Stock Ownership Association;

	
 

	
 

	
 

	
 

	
(4)

	
when the Company issues new shares upon exercising
  stock purchase option in accordance with the Korea Commercial Code;

	
 

	
 

	
 

	
 

	
(5)

	
when the Company issues new shares by the issuance
  of DR in accordance with the relevant regulations of SEA;

	
 

	
 

	
 

	
 

	
(6)

	
when the Company issues new shares to foreign
  investors in accordance with the Foreign Investment Promotion Act;

	
 

	
 

	
 

	
 

	
(7)

	
when the Company issues new shares to the venture
  capital firms in accordance with the Small
  and Medium Enterprise Inauguration Support Act; or

	
 

	
 

	
 

	
 

	
(8)

	
when the Company issues new shares to the
  domestic/overseas companies or persons to achieve the business objects such
  as introduction of new technology, improvement of the financial status, or reorganization of the business structure.

	
 

	
 

	
 

	
 

	
 

	
11.3

	
In case any shareholder waives or loses its
  preemptive right, or odd lots occur in the allocation
  of new shares, those available shall be disposed of in accordance with a resolution
  of the Board of Directors.

Article
12. Capital Increase by Public Subscription, etc.

	
 

	
 

	
12.1

	
The Company may issue new shares by the resolution
  of the Board of Directors, to the extent
  not exceeding 30/100 of the total number of issued shares, with the method of
  subscription for new shares and underwriting by underwriters in accordance
  with the Securities and Exchange Act and other relevant laws and regulations.

	
 

	
 

	
12.2

	
The Company may issue new shares by the resolution
  of the Board of Directors, to the extent
  not exceeding 30/100 of the total number of issued shares, with the method of
  capital increase by public subscription.

- 6 -

	
 

	
 

	
12.3

	
The Company may issue new
  shares by the resolution of the Board of Directors, to the extent not
  exceeding 30/100 of the total number of issued shares, to preferably allocate
  the new shares to the Employee Stock Ownership Association.

	
 

	
 

	
12.4

	
The Company may issue new shares by the resolution
  of the Board of Directors, to the extent
  not exceeding 30/100 of the total number of issued shares, with the method of
  issuance of stock depository receipt.

	
 

	
 

	
12.5

	
The Company may issue new
  shares by the resolution of the Board of Directors, to the extent not
  exceeding 30/100 of the total number of issued shares, to allocate the new
  shares to the foreign investors in
  accordance with the Foreign Investment Promotion Act.

	
 

	
 

	
12.6

	
The Company may issue new
  shares by the resolution of the Board of Directors, to the extent not
  exceeding 30/100 of the total number of issued shares, to allocate the new
  shares to the Small and Medium Enterprise
  Start-up Business Investment Companies in accordance with Support for
  Small and Medium Enterprise Establishment Act.

	
 

	
 

	
12.7

	
The Company may issue new
  shares by the resolution of the Board of Directors, to the extent not
  exceeding 30/100 of the total number of issued shares, for the purpose of
  achieving the management goals including the introduction of new
  technologies, improvement of financial structure, and restructuring of
  business structure of the Company, to
  allocate the new shares to domestic or foreign individual or corporations.

	
 

	
 

	
12.8

	
In the cases of issuing new
  shares with the method of 12.1 through 12.7, the class, the number of
  shares to be issued and the issue price shall be decided by the resolution of
  the Board of Directors.

Article
13. Stock Options

	
 

	
 

	
13.1

	
The Company may grant to its
  directors, statutory auditors and employees, who contribute to, or have the ability to contribute to, the
  improvement of the managerial performance of the Company and technical
  innovation, etc., stock options as prescribed in Article 340-2 of the Korean Commercial Code (‘Stock Option’) to
  the extent not exceeding 10% of its total issued and outstanding shares by
  the special resolution of the general meeting of shareholders.
  Notwithstanding the above, the Stock Options may not be granted to the

- 7 -

          following persons:

	
 

	
 

	
 

	
 

	
(1)

	
Any shareholder holding more than 10% of the total
  issued and outstanding shares of the Company excluding non-voting shares;

	
 

	
 

	
 

	
 

	
(2)

	
Any person who exercises actual influence over such
  important managerial matters as the
  appointment or dismissal of directors and/or statutory auditors; or

	
 

	
 

	
 

	
 

	
(3)

	
A spouse and direct ascendant or descendant of any
  person described in subsection (1) or (2) above

	
 

	
 

	
13.2

	
Shares to be delivered upon exercise of Stock Option
  (in the event the difference between the exercise price and market price of
  the Stock Option is converted into cash or treasury stocks, it shall mean
  the shares that form the basis for calculation of the amount of such difference) shall be registered common shares or
  registered preferred shares.

	
 

	
 

	
13.3

	
The total number of directors,
  statutory auditors and employees of the Company to be granted the
  Stock Options shall not exceed 99% of the total number of directors,
  statutory auditors and employees of the Company.

	
 

	
 

	
13.4

	
The exercise price of the Stock Options shall not be
  less than the following amount (This will also apply to the case where the
  exercise price is adjusted after the Stock Options is granted);

	
 

	
 

	
 

	
 

	
(1)

	
In the case of issuing new shares, the higher of the
  actual value of the shares as of the date
  of granting the Stock Option and the par value of such shares; and

	
 

	
 

	
 

	
 

	
(2)

	
In the event the Company transfers its treasury
  stocks, the actual value of the shares as of the date of granting the Stock
  Option.

	
 

	
 

	
13.5

	
The Stock Options may be
  exercised in accordance with an agreement to be separately executed,
  during the period commencing on the date (‘Commencing Date’) when two (2) years have been passed after the date of
  special resolution of the general meeting of shareholders approving the grant
  of the Stock Options and ending on the date when ten (10) years would
  have been passed after the Commencing Date.

	
 

	
 

	
13.6

	
The Stock Options may be
  exercised by the directors, statutory auditors and employees,

- 8 -

	
 

	
 

	
 

	
who have been in office for at least two (2) years
  from the date of special resolution of the general
  meeting of shareholders approving the grant of such Stock Options. Provided,
  however, if any director, statutory auditor or employee who has been granted
  the Stock Option, dies, resigns or retires due to mandating age limit or any
  cause not attributable to such director, statutory auditor or employee
  respectively during the above two (2) year period, such director,
  statutory auditor or employee or his/her successor may exercise the Stock
  Option during the exercise period.

	
 

	
 

	
13.7

	
Any Stock Option granted may be cancelled by the
  resolution of the board of directors of the Company in any of the following
  cases:

	
 

	
 

	
(1)

	
A director, statutory auditor or employee
  voluntarily retires or resigns after being
  granted Stock Option;

	
 

	
 

	
(2)

	
A director, statutory auditor or employee causes
  material damage to the Company due to his or her willful or negligent
  misconduct;

	
 

	
 

	
(3)

	
Due to bankruptcy or liquidation of the Company, the
  director, statutory auditor or employee is
  not able to exercise the Stock Options; or

	
 

	
 

	
(4)

	
Any of the causes for cancellation prescribed in the
  Stock Option Agreement has occurred.

	
 

	
 

	
13.8

	
Article 14 shall apply mutatis mutandis to the
  distribution of dividend for the new shares issued pursuant to the exercise
  of the Stock Option.

Article
14. Dividends calculation date for new shares

If the Company issues new shares by way of capital increase
with or without consideration or share dividends, for the purposes of the
distribution of dividends for such new shares, the new shares shall be deemed
to have been issued at the end of the fiscal year immediately preceding the
fiscal year in which such new shares are issued.

Article
15. Alteration of Entry and Registration of Pledge

- 9 -

	
 

	
 

	
15.1

	
A shareholder desiring an
  alteration of entry due to transfer of shares by assignment, sale or
  other similar cause shall submit an application to the Company in the form
  prescribed by the Company together with the relevant share certificates.

	
 

	
 

	
15.2

	
A shareholder desiring an alteration of entry due to
  causes other than transfer of shares by
  assignment, sale or other similar cause shall submit an application to the
  Company, and evidence of cause, in the form prescribed by the Company
  together with the relevant share certificates.

	
 

	
 

	
15.3

	
A shareholder requiring registration of a pledge on
  his shares shall submit an application to
  the Company in the form prescribed by the Company together with the relevant
  share certificates.

	
 

	
 

	
15.4

	
Upon receiving the above application, the Company
  shall examine the documents and enter the
  transfer into the Register of Shareholders and return to the applicant the
  effected share certificates concerned, on which a Representative Director of
  the Company shall have affixed his
  registered seal for confirmation.

Article
16. Reissuance of Share Certificates

	
 

	
 

	
16.1

	
A shareholder desiring
  reissuance of a share certificate for reason of partition or amalgamation of
  shares, or damage or soiling to share certificates shall submit an application
  to the Company in the form prescribed by the Company together with the share certificates to be canceled. However, when the
  damage or soiling is so extreme that the share certificates are not legible,
  they shall be deemed as lost, and the following provision shall apply
  for their replacement.

	
 

	
 

	
16.2

	
A shareholder desiring issue of
  new share certificates due to loss of the share certificates shall submit to
  the Company an application in the form prescribed by the Company together
  with the original or the certified copy of a judgment of nullification with
  respect to the share certificates lost.

Article 17. Fees

In cases where Articles 15 and 16
apply, fees may be collected from the applicants as prescribed

- 10 -

by the Company.

Article 18. Transfer Agent

Notwithstanding the provisions of
Article 15 through Article 16, the Company may have the transfer agent. In this case, the transfer agent,
the location where its services are to be rendered and the scope of its duties shall be determined by
the Board of Directors of the Company and shall be publicly announced. The
Company shall keep the Register of Shareholders or a duplicate thereof
at the location where the transfer agent perform its duties, and have the
transfer agent handle the activities of
making entries in the Register of Shareholders, registering the creation and
cancellation of pledges, representing and canceling the trusts, issuing share certificates, receiving reports, and perform
other related duties. The procedures relating to the activities of the
transfer agent shall be in accordance with the Regulations on Securities
Transfer Agency Services.

Article 19. Report of Address and Seals

	
 

	
 

	
19.1

	
Shareholders, registered pledgees, and their
  attorneys shall be reported immediately to the Company (or to the transfer
  agent when the Company has the transfer agent in accordance with Article 18) with their names, addresses and
  seals, and changes thereto.

	
 

	
 

	
19.2

	
An attorney for a shareholder or registered pledgee
  shall submit to the Company (or to the
  transfer agent when the Company has the transfer agent in accordance with
  Article 18) a certificate of his Power of Attorney. Any change thereof
  must be reported to the Company (or to the
  transfer agent when the Company has the transfer agent in accordance with Article
  18) by submission of necessary certificate or evidence.

Article 20. Suspension of Entry to Register of Shareholders

	
 

	
 

	
20.1

	
In order to ascertain which persons are entitled to
  exercise voting rights, receive dividends, or
  exercise other rights as shareholders or pledges, the Company shall suspend
  entry or alteration in the Register of Shareholders during the period
  from the day following the last day of
  each fiscal year to the closing of the ordinary general meeting of
  shareholders held

- 11 -

	
 

	
 

	
 

	
for such fiscal year.

	
 

	
 

	
20.2

	
The Company shall deem any
  shareholder whose name appears in the Register of

  Shareholders on December 31 to be the shareholders who shall be
  entitled to exercise the

  rights at the ordinary general meeting
  held for such fiscal year.

	
 

	
 

	
20.3

	
This provision may also apply
  during the period from the date or posting of notice for

  calling an extraordinary general meeting of shareholders to the date
  on which such meeting

  is held.

Chapter III. BONDS

Article
21. Issuance of Convertible Bonds

	
 

	
 

	
21.1

	
The company may issue convertible bonds by the
  resolution of the Board of Directors to
  persons other than shareholders provided that the sum of the face value of
  the issued convertible bonds shall not exceed fifty billion (50,000,000,000)
  Won.

	
 

	
 

	
21.2

	
In the case mentioned in Paragraph 1 above, in
  accordance with a resolution of the Board
  of Directors, convertible bonds may be issued on condition that only a part
  thereof can be converted into shares.

	
 

	
 

	
21.3

	
Shares to be issued as a result
  of conversion shall be common shares or preferred shares and the
  conversion price, which shall be determined by the Board of Directors at the
  time of issuance of the convertible bonds, shall be equal to or exceed the
  face value of shares.

	
 

	
 

	
21.4

	
The period during which
  conversion may be requested shall commence on the date three month
  after the date of issuance of the convertible bonds and end on the date one
  day prior to the date of redemption,
  provided that the Board of Directors may resolve to adjust the conversion
  period within the above period.

	
 

	
 

	
21.5

	
The allocation of the profit for the shares to be
  issued as a result of conversion and the payment of interest for convertible
  bonds shall be in accordance with Article 14.

Article 22. Issuance of Bonds with Warrants

- 12 -

	
 

	
 

	
22.1

	
The
  Company may issue bonds with warrants by the resolution of the Board of
  Directors to persons
  other than shareholders, provided that the total sum of the face value of the
  issued bonds with warrants shall not exceed twenty billion (20,000,000,000)
  won.

	
 

	
 

	
22.2

	
The total amount of new
  shares which may be subscribed for by warrant holders shall be determined by the Board of Directors, provided
  that total amount of such new shares shall not exceed the face value of the
  bonds with warrants.

	
 

	
 

	
22.3

	
The shares to be
  subscribed for by warrant holder shall be common shares or preferred shares and the subscription price, which shall
  be determined by the Board of Directors at the time of the issuance of the
  bonds with warrants, shall be equal to or exceed the face value of shares.

	
 

	
 

	
22.4

	
The
  period during which a warrant holder may exercise warrant rights for new
  shares shall be from the date three (3) month after the date of issuance of the
  bonds with warrants to the date one day before the redemption date. The Board
  of Directors may resolve to adjust the conversion period within the above period.

	
 

	
 

	
22.5

	
The
  allocation of the profit for the shares to be issued as a result of
  exercising warrant
  rights shall be in accordance with Article l4.

CHAPTER IV. GENERAL MEETING OF
SHAREHOLDERS

Article 23. Types and Times of General
Meetings

	
 

	
 

	
23.1

	
General meetings of the
  shareholders of the Company shall be ordinary or extraordinary.

	
 

	
 

	
23.2

	
The ordinary general
  meeting of shareholders shall be convened within three months following the end of each fiscal period.
  Extraordinary general meetings of shareholders may be convened, when
  necessary, by the resolution of the Board of Directors or other relevant laws
  and regulations.

Article 24. Place and Notice of General
Meetings

- 13 -

	
 

	
 

	
24.1

	
All ordinary and
  extraordinary general meetings of the shareholders may be held at the
  Principal Office of the Company or at such
  other place as may be determined by the Board
  of Directors, within or outside the Republic of Korea.

	
 

	
 

	
24.2

	
Notice from a
  Representative Director, of each general meeting of the shareholders of the
  Company, stating the date, time and place of the meeting and purposes for
  which the meeting has been called, shall be delivered in writing or e-mail at
  least two (2) weeks prior to the date set for such general meeting; provided
  that a general meeting shall, notwithstanding that it has been called by
  shorter notice than that specified in this Article, be deemed to have been
  duly called if it is so agreed by all the shareholders entitled to attend and vote at such meeting.

	
 

	
 

	
24.3

	
The
  general meeting of shareholders shall not resolve matters other than those
  stated in the notice of
  the meeting unless all the shareholders of the Company agree otherwise.

Article 25. Quorum Requirement and Method of Resolution

	
 

	
 

	
25.1

	
Except
  as otherwise provided for in the following paragraph of this Article 19 or
  required by mandatory
  provisions of the Korean Commercial Code or by any provision of these Articles of Incorporation, resolutions of a
  general meeting of shareholders shall be adopted by a simple majority vote of shares entitled to
  vote which are present in person or by proxy and such vote shall
  constitute at least one-fourth (1/4) of the then issued and outstanding shares of the Company.

	
 

	
 

	
25.2

	
The
  following matters shall require the special resolution of a general meeting
  of shareholders
  which shall be adopted by the affirmative vote of at least two-thirds (2/3)
  of the shares which are
  present in person or by proxy and such vote shall constitute at least one half of the then issued and outstanding
  shares of the Company:

	
 

	
 

	
 

	
 

	
(1)

	
Amendment
  of the Articles of Incorporation;

	
 

	
 

	
 

	
 

	
(2)

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

	
 

	
 

	
 

	
 

	
(3)

	
Repurchase or redemption
  of equity securities, or payment of dividends or other

- 14 -

	
 

	
 

	
 

	
 

	
 

	
distributions on equity
  securities, except for repurchases of stock held by officers, employees,
  directors, or consultants of the Company pursuant to agreement approved by
  the Board of Directors;

	
 

	
 

	
 

	
 

	
(4)

	
Dissolution, liquidation,
  recapitalization, or reorganization of the Company;

	
 

	
 

	
 

	
 

	
(5)

	
Any fundamental change in the business

	
 

	
 

	
 

	
 

	
(6)

	
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;

	
 

	
 

	
 

	
 

	
(7)

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

	
 

	
 

	
 

	
 

	
(8)

	
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 Company, property existing
  prior to its incorporation and intended to be continuously used for purposes
  of the business;

	
 

	
 

	
 

	
 

	
(9)

	
Removal of a director or a
  statutory auditor or a representative director;

	
 

	
 

	
 

	
 

	
(10)

	
Issuance of shares at a price
  less than par value;

	
 

	
 

	
 

	
 

	
(11)

	
Reduction of paid-in capital;

	
 

	
 

	
 

	
 

	
(12)

	
Continuation of the company
  after its dissolution or its dormancy;

	
 

	
 

	
 

	
 

	
(13)

	
Share split;

	
 

	
 

	
 

	
 

	
(14)

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

	
 

	
 

	
 

	
 

	
(15)

	
Corporate split;

	
 

	
 

	
 

	
 

	
(16)

	
Appointment of organizing
  committee members in the event of consolidation; and

	
 

	
 

	
 

	
 

	
(17)

	
Any other matters that require a special resolution
  of the shareholders at a general

- 15 -

	
 

	
 

	
 

	
meeting under the Korean Commercial Code or as
  agreed upon by the shareholders.

Article 26. Right to Vote, Voting by Proxy

	
 

	
 

	
26.1

	
In all matters, each
  shareholder shall have one vote for each share registered in his name.

	
 

	
 

	
26.2

	
The Company shall not be
  entitled to vote in respect of its own shares.

	
 

	
 

	
26.3

	
A shareholder may exercise his voting right by
  proxy, having another person represent him. Any
  corporation which is a shareholder of the Company may authorize such person
  as it thinks fit to act as its representative at any meeting of the Company
  and the person so authorized shall be entitled to exercise the same
  powers on behalf of that corporation as the corporation
  could exercise if it were an individual shareholder of the Company. Any such representative
  must submit documentation acceptable to the Company establishing his power
  of representation.

Article 27. Presiding Officer of General Meeting

The Representative Director
nominated by the foreign shareholder shall preside at all general meetings
of shareholders. If the Representative Director nominated by the foreign
shareholder is absent or fails to preside over a meeting, then the other
Representative Director shall preside over the
meeting. If both Representative Director are absent or fails to preside over
the meeting, then one of other directors nominated by the foreign shareholders
shall preside over the meeting.

Article 28. Maintenance of Order by Chairman

	
 

	
 

	
28.1

	
The Chairman of the General
  Meeting of Shareholders may order any person who speaks or takes actions to willfully disturb the
  General Meeting to be prohibited from speaking, or to be dismissed
  from the General Meeting.

	
 

	
 

	
28.2

	
The Chairman of the General Meeting of Shareholders
  may restrict the time and frequency of speech of Shareholders when he deems
  such action to be necessary to smoothly preside the General Meeting.

- 16 -

Article 29. Minutes

Minutes of the proceedings of general meeting shall be
prepared in English and Korean, and shall be
signed or sealed by the Presiding Officer of the meeting and all Directors
present. The minutes shall be kept in
the Company’s records.

CHAPTER
V. DIRECTORS AND AUDITORS

Articles
30. Number, Qualification and Method of Election

	
 

	
 

	
30.1

	
The Company shall have five (5) Directors and one Statutory
  Auditor who shall be elected at a general
  meeting of shareholders as prescribed by the Korean laws.

	
 

	
 

	
30.2

	
The Directors and the Statutory Auditor shall not be
  required to hold any shares of stock in the
  Company as a condition or qualification for holding office. Nor shall they be
  disqualified by reason of their
  being officers, directors, or shareholders of any other company.

	
 

	
 

	
30.3

	
Directors shall be elected at
  the shareholders meeting by affirmative votes of majority of the shareholders
  attending the General Meeting of Shareholders and the approval of the holders
  of at least 1/4 of total issued and outstanding shares of the Company. And
  the cumulative voting provided in Article 382-2 of the Commercial Code
  does not apply to the election of Directors.

	
 

	
 

	
30.4

	
The agenda for election of Statutory Auditor shall
  be separately resolved from the agenda for election of Directors.

	
 

	
 

	
30.5

	
The Statutory Auditor shall be
  elected by affirmative votes of majority of the shareholders present at the
  General Meeting of Shareholders and the approval of the holders of at least
  1/4 of total issued and outstanding shares of the Company. Provided, however,
  that any shareholder who holds more than 3/100 of the total
  outstanding shares may not exercise his vote
  in respect of the shares in excess of the above limit, in the election of
  auditors under Article 23.1. For the purpose of calculating the number of
  shares held by a shareholder, the number of voting shares held by the largest
  shareholder and the specially related persons,

- 17 -

	
 

	
 

	
 

	
by the persons holding shares in the calculation of
  the largest shareholder or the specially related
  persons, and by the person who have entrusted his voting rights to the
  largest shareholder or the specially related persons shall be added up.

Article
31. Term of Office and Vacancies

	
 

	
 

	
31.1

	
The term of office of a Director shall be one (1)
  year. That term of office, however, shall be
  extended until the closing of the general meeting of shareholders convened
  first following the last fiscal period comprising the incumbent’s term of
  office.

	
 

	
 

	
31.2

	
The Directors shall be eligible
  for re-election upon the expiration of their terms of office.

	
 

	
 

	
31.3

	
The term of office of the
  Statutory Auditor shall be effective until the closing of the ordinary
  general meeting of shareholders held for the last accounts closing period
  within three (3) years after the
  assumption of office of Statutory Auditor.

	
 

	
 

	
31.4

	
In the event of any vacancy in the office of
  Director or Statutory Auditor, the shareholders shall agree upon and elect a replacement. Replacements shall be
  elected in accordance with Article 18 at a general meeting of shareholders
  that shall be convened as soon as possible after the vacancy occurs. A
  substitute Director shall serve the balance of the term of the person being
  replaced but a Statutory Auditor elected as replacement shall serve a new full term of office.

Article
32. Powers and Duties of the Board of Directors

Except as otherwise provided
herein, or in the Korean Commercial Code, or in resolutions adopted at general
meetings, the Board of Directors shall decide by resolution all important matters
relating to the daily management of the business of the Company and shall
supervise the management of the Company carried out by the Representative
Directors of the Company. The Board of
Directors shall discuss and decide at least all major matters concerning the
Company.

Article 33. Composition of the Board of Directors, Meetings,
Notice and Place of Meetings

	
 

	
 

	
33.1

	
The Board of Directors of the
  Company shall consist of all the directors elected at the

- 18 -

	
 

	
 

	
 

	
general meeting of
  shareholders. Meetings of the Board of Directors shall be convened by a
  Representative Director when he deems the same to be necessary or advisable,
  or promptly upon the request of any
  Director in writing.

	
 

	
 

	
33.2

	
A Representative Director
  shall send a notice of each meeting of the Board of Directors, setting forth
  the date, time, place and agenda of the meeting via facsimile or e-mail to
  all Directors and Statutory Auditor, at
  lease one (1) week prior to the date set for such meeting.

	
 

	
 

	
33.3

	
At
  the meeting, Directors may act only with respect to matters set forth in the
  notice, unless all Directors in office otherwise so agree.

	
 

	
 

	
33.4
  

	
Irrespective
  of the foregoing Paragraph 2, meetings of the Board of Directors may be held without conforming to such procedure set
  forth above when written consent thereto has been obtained, prior to the
  meeting, from all the Directors and the Statutory Auditor.

	
 

	
 

	
33.5

	
The meeting of the Board
  of Directors shall in principle be held at the registered office of the Company or at other place designated by the
  Chairman in convening the meeting, or, as a matter of exception, outside of
  Korea as decided by the Board.

	
 

	
 

	
33.6

	
Upon
  the written request of one of the Directors specifying the matters to be
  discussed, the Chairman
  of the Board of Directors shall convene an interim meeting of the Board of Directors at a convenient location.

	
 

	
 

	
33.7

	
Expenses
  incurred by the Directors and the Statutory Auditor in attending meetings of
  the Board of Directors
  shall be borne by the Company. Further, incidental expenses, such as the
  renting of conference rooms, translators, etc., shall be paid by the Company.

	
 

	
 

	
33.8

	
The
  meeting of the Board of Directors may be held via video conference subject to
  requirement of valid notice per Paragraph 2.

	
 

	
 

	
33.9

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

Article 34. Representative Directors

The Company shall have two
(2) independent Representative Directors, who shall be elected by

- 19 -

the Board of Directors from among its
members. Each of the Representative Directors shall represent the Company independently and shall manage the daily affairs
of the Company, subject to such policies established by the Board of
Directors and the shareholders.

Article 35. Presiding Officer of the Board of Directors

The
Representative Director nominated by the foreign shareholder shall serve as the
Chairman of the Board and preside over all meetings of the Board of Directors.
If the Representative Director nominated by the foreign shareholder is absent
or fails to serve as Chairman of any meeting, then the other Representative
Director shall preside over the meeting. If both Representative Directors are absent or fails to preside over the
meeting, then one of other directors nominated by the foreign shareholders shall preside over the meeting.

Article 36. Adoption of Resolutions

	
 

	
 

	
 

	
36.1

	
Should
  any director be unable to attend the meeting of the Board of Directors, the
  absent director shall
  be deemed to have waived his right to vote in such meeting. Each director
  including the Chairman of the Board of Directors shall have only one (1) vote
  with no deciding vote in case of a tie.

	
 

	
 

	
36.2

	
The quorum for transacting
  business at any meeting of the Board of Directors shall be a majority of Directors of the Company present in
  person or by video-conferencing, provided that such quorum shall
  require the presence of at least one (1) director nominated by the foreign shareholder.

	
 

	
 

	
36.3

	
Unless otherwise provided
  by applicable laws or any agreements by and among the shareholders, the resolution of the Board at any meeting of the Board
  shall be adopted by an affirmative vote of a majority of the Directors
  present at such meeting; provided, however, that the following matters shall
  be adopted by the Board with the unanimous votes
  of all the Directors:

	
 

	
 

	
 

	
 

	
(1) 

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

	
 

	
 

	
 

	
 

	
(2)

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

- 20 -

	
 

	
 

	
 

	
 

	
(3)

	
Consenting to a director’s
  transaction with the Company;

	
 

	
 

	
 

	
 

	
(4)

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

	
 

	
 

	
 

	
 

	
(5)

	
Authorizing
  the issuance of debentures;

	
 

	
 

	
 

	
 

	
(6)

	
Acquisition
  or disposal of the Company’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;

	
 

	
 

	
 

	
 

	
(7)

	
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;

	
 

	
 

	
 

	
 

	
(8)

	
Lending
  or borrowing money in excess of 5 percent of the Company’s annual turnover;
  and

	
 

	
 

	
 

	
 

	
(9)

	
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.

Article 37. Minutes

	
 

	
 

	
37.1

	
All
  copies of the minutes of the meetings of the Board of Directors shall be
  prepared in English and
  Korean. The Chairman of the meeting, all other Directors present and the Statutory Auditor if present at the meeting
  shall sign such minutes and affix their seals thereon. The minutes shall be kept in the Company’s records.

	
 

	
 

	
37.2

	
Board meetings shall be
  conducted in English with an interpreter present to facilitate simultaneous translation into or from Korean, to
  the extent necessary. Minutes of all meetings of the Board of
  Directors and resolutions adopted in lieu of a meeting, in both Korean and English, shall be kept in the
  minutes book of the Company at the Company’s

- 21 -

	
 

	
 

	
 

	
legal address.

Article 38. Duties of the Statutory Auditor

	
 

	
 

	
38.1

	
The Statutory Auditor shall
  inspect the performance of the Directors, and may at any time ask the
  directors for a report on the operation of the Company or may examine the
  business and financial conditions of the Company.

	
 

	
 

	
38.2

	
The statutory auditor shall
  examine the agenda and all documents to be submitted by a Director to the
  general meeting of shareholders, and shall present his opinions at meetings
  of shareholders as to whether or not the documents contain provisions which
  infringe the applicable statutes or the Articles of Incorporation, or
  include other matters of undisputable impropriety.

	
 

	
 

	
38.3

	
The Statutory Auditor shall
  examine the financial statements and other necessary or pertinent
  papers and documents to be submitted by a Representative Director pursuant to
  Article 42 of the Articles of
  Incorporation, and submit the Audit Report to the Board of Directors within
  four (4) weeks from the date of receipt of such documents.

	
 

	
 

	
38.4

	
The Statutory Auditor may attend and present his
  opinions at meetings of the Board of Directors,
  and shall report to the Board of Directors when he deems any Director has
  infringed or is likely to infringe applicable statutes or the Articles of
  Incorporation.

	
 

	
 

	
38.5

	
The Statutory Auditor may
  demand to convene an extraordinary general meeting of shareholders by
  filing with the Board of Directors a written application which shall state the object and reasons for the convening of the
  meeting.

	
 

	
 

	
38.6

	
The Statutory Auditor may not concurrently hold a
  position of director, manager or employee of the Company or its subsidiary.

	
 

	
 

	
38.7

	
The Statutory Auditor may attend and present his
  opinion at a general meeting of shareholders deliberating his termination.

	
 

	
 

	
38.8

	
The Statutory Auditor shall
  maintain a record in respect to his auditing activities. In the record, there shall be recorded the main points
  on which the auditing activities has been conducted, and the results
  of the auditing activities, and the auditors who have carried out

- 22 -

	
 

	
 

	
 

	
the auditing activities shall
  sign or seal on it.

Article 39. Election, Duty and Compensation of Officers

	
 

	
 

	
39.1

	
The Officers of the Company
  shall be the Senior Vice President, the Vice President and any other officer
  the Board of Directors may wish to appoint. All Officers shall be elected or
  appointed by the Board of Directors and shall hold office at the pleasure of
  such Board.

	
 

	
 

	
39.2

	
The Officers shall have powers, responsibilities and
  duties as shall be designated by the Board of Directors.

	
 

	
 

	
39.3

	
In principle, only the
  directors serving in a full time management capacity (“standing directors”)
  shall receive compensation from the Company. The non-standing directors and
  statutory auditor shall not receive any compensation from the Company, but
  they shall be reimbursed for such travel and other expenses as they may
  reasonably incur to participate at meeting of the Board of Directors.

	
 

	
 

	
39.4

	
Salaries, bonuses and other emoluments of officers
  and employees of the Company shall be determined in consultation with the
  Directors of the Company.

	
 

	
 

	
39.5

	
Salaries, bonuses and other
  emoluments of Directors and Statutory Auditor shall be determined by
  the resolution of the Board of Directors meeting within the range resolved in
  the General Meeting of Shareholders. The
  agenda for determining the compensation of Statutory Auditor shall be separately resolved from the agenda for
  determining the compensation of Directors.

	
 

	
 

	
39.6

	
Payment of retirement allowance of Directors,
  Statutory Auditor and officers shall be made in accordance with the
  Regulations on Payment of Retirement Allowance of Directors and Officers
  adopted at General Meeting of Shareholders.

- 23 -

CHAPTER VI. ACCOUNTING 

Article 40. Fiscal Period

The fiscal period of the Company shall begin on the
first date of January each year and end on the last day of December of that
year.

However, the first fiscal period
shall begin on the date of incorporation and end on December 31st of that year.

Article
41. Management Planning and Accounting System

	
 

	
 

	
41.1 

	
The Company shall adopt management planning and
  accounting systems as in use by the foreign
  shareholder, both in format and timetable to the extent feasible, given the requirements
  of Korean law and practice.

	
 

	
 

	
42.2 

	
The books and records of the
  Company shall be audited at least once a year by an accounting firm
  which shall be appointed from among reputable accounting firms with
  international affiliates (“Independent Auditor”).

	
 

	
 

	
42.3 

	
The Company shall cause the Independent Auditor to
  provide the shareholders meeting on an
  annual basis with audited financial statements prepared in accordance with
  generally accepted accounting principle of Korea and of the U.S.A. The
  audited financial statements shall be
  final and binding on the shareholders as to the revenue, costs, fees,
  expenses, losses and profits of the Company, in the absence of manifest error
  or fraud.

	
 

	
 

	
42.4 

	
Each shareholder shall be
  entitled to examine, or to appoint a firm of accountants to examine
  the books, records. In case of appointment of an accounting firm, it shall be
  resolved in the shareholders meeting.

	
 

	
 

	
42.5 

	
The Company shall keep an
  unaudited semi-financial statements as well as an unaudited quarterly
  financial statements in the Company. And the shareholders who want to see
  these financial statements can see within
  the Company’s business hour.

Article
42. Preparing and Compiling Financial Statements

	
 

	
 

	
42.1

	
A Representative Director shall prepare the following
  documents, with their supplementary data and submit them to the Statutory
  Auditor six (6) weeks prior to the date of the general meeting of shareholders after obtaining the
  approval of the Board of Directors:

- 24 -

	
 

	
 

	
 

	
 

	
(1)

	
A Balance Sheet as of the end
  of the fiscal year;

	
 

	
 

	
 

	
 

	
(2)

	
A Profit and Loss Statement for
  the previous fiscal year;

	
 

	
 

	
 

	
 

	
(3)

	
Proposals for the appropriation
  of the retained earnings or deficits; and

	
 

	
 

	
 

	
 

	
(4)

	
A Business Report for the
  previous fiscal year.

	
 

	
 

	
 

	
The Statutory Auditor shall
  submit the Audit Report the Directors within four (4) weeks from receipt of
  the aforesaid documents from a Representative Director. The aforesaid documents
  shall be placed at the registered office of the Company for inspection by the
  shareholders for one week prior to presentation of the same to the ordinary
  general meeting of shareholders for approval thereof.

	
 

	
 

	
42.2

	
A Representative Director shall, when the financial
  statements referred to above have been approved by the general meeting of
  shareholders, make public notice of the Balance Sheet without delay.

Article
43. Disposition of Profit and Loss

In calculating the profit or loss of the Company for
any fiscal period, the balance remaining form the
gross income for such period, after deducting business expenses including
depreciation, interest and corporate and other taxes, shall be the profit for
such fiscal period, and shall be disposed of in the following order of
priority:

	
 

	
 

	
 

	
 

	
(1)

	
Replenishment of any capital
  deficit carried over from prior years, if any;

	
 

	
 

	
 

	
 

	
(2)

	
Contributions to reserves required by law and such
  other reserves as may be decided by the general meeting of shareholders; and

	
 

	
 

	
 

	
 

	
(3)

	
Payment of dividends to shareholders, within one (1)
  month of the date of declaration of such
  dividends.

	
 

	
 

	
 

Article
44. Payment of Dividends

- 25 -

Dividends shall be paid to the shareholders or the
pledges of the Company who have been duly entered
in the Register of Shareholders as of the end of each fiscal year.

CHAPTER VII. ADDENDA

Article
45. Application of the
Commercial Code

Matters not specifically provided
for herein shall be determined in conformity with resolutions adopted at
meetings of the Board of Directors, with resolutions adopted at general
meetings of shareholders and/or with the relevant provisions of the
Korean Commercial Code as the case may be.

Article
46. Language of Company Documents

All notices, agenda, financial statements, and related
documents and reports made or utilized in relation
to meetings of shareholders and Board of Directors meetings shall be prepared
in the English and Korean languages, unless the shareholders or directors on
any specific occasion otherwise so agree.

- 26 -

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