Korean Joint Venture Agreement

Exhibit 10.42


JOINT VENTURE AGREEMENT


This Joint Venture Agreement (this "Agreement" or the "JVA") is made on June 7, 2002, by and between:


VAXGEN, INC. a company duly organized and existing under the laws of the State of Delaware, USA and having its registered office at 1000 Marina Boulevard, Brisbane, California, 94005-1841, U.S.A. ("VaxGen"); and


CELLTRION, INC., a company duly organized and existing under the laws of the Republic of Korea and having its registered office at Hanseung Building, 818, Dongchun-dong, Yonsu-gu, Incheon, Korea ("Celltrion").


(VaxGen and Celltrion shall individually be referred to as a "Party" and collectively as the "Parties".)


WHEREAS:


(A) Celltrion is obligated to invest in the construction of the Pilot Plant
(as defined in Section 1.4 herein) pursuant to that certain Joint Venture
Agreement dated February 25, 2002 by and among VaxGen, Nexol Biotech Co.,
Ltd., Nexol Co., Ltd., Korea Tobacco & Ginseng Corporation and J. Stephen
& Company Ventures Ltd. (the "Celltrion Joint Venture Agreement").


(B) VaxGen has certain obligations with respect to the Pilot Plant pursuant to
the Celltrion Joint Venture Agreement.


(C) The Parties wish to establish the JVC (as defined in Section 1.3 herein)
to fulfill their respective obligations under the Celltrion Joint Venture
Agreement.


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


Now, therefore, it is agreed as follows:


ARTICLE 1
DEFINITIONS


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


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


1.2 "Effective Date" shall mean the date first set forth above.


1.3 "JVC" shall mean the corporation formed as a joint venture between the
Parties pursuant to Article 2.1 of this


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Agreement.


1.4 "Pilot Plant" shall mean the pilot manufacturing facility (at a scale
between 500 and 1000 liters) to be constructed by the JVC in South San
Francisco, California, U.S.A. that will use cell culture technology
licensed from VaxGen for the manufacture of a number of pharmaceutical
products including, without limitation, AIDSVAX, an HIV vaccine using
certain technology licensed to VaxGen from Genentech, Inc. ("Genentech").


1.5 "Shares" shall mean the shares of common stock issued by the JVC to
Celltrion and VaxGen pursuant to Article 5 of this Agreement.


1.6 "Transaction Documents" shall mean such documents and agreements as are
reasonably necessary in order to give effect to the purpose of this
Agreement, including, but not limited to, the documents and agreements
referred to in Articles 2.2 and 3 of this Agreement.


1.7 "Technology" shall mean the Licensed Know-How and Licensed Patent Rights
as defined in both the License Agreement and the Sub-License Agreement
defined in Article 3 of this Agreement.


ARTICLE 2
COMPANY TO BE INCORPORATED


2.1 The Parties shall incorporate the JVC under the laws of the State of
California, on or before the Effective Date, a corporation named "VaxGen -
Celltrion, Inc."


2.2 The Parties shall adopt the Articles of Incorporation for the JVC attached
hereto as Exhibit 1 and the Bylaws attached hereto as Exhibit 2, each as
may be amended by the Parties from time to time, and shall approve
internal regulations as necessary in conformity with the terms and
conditions of this Agreement. If any discrepancy is found between this
Agreement and the JVC's Articles of Incorporation, Bylaws and/or internal
regulations, the Parties shall amend the Articles of Incorporation, Bylaws
and/or internal regulations, as applicable, to be consistent with this
Agreement. This Agreement shall control and prevail prior to the time that
the relevant amendment to the Articles of Incorporation, Bylaws and/or
internal regulations is effective.


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


2.4 The purpose of the JVC will be to construct, license and operate the Pilot
Plant, which shall engage in the activities set forth in Article 4 herein.


ARTICLE 3
TRANSACTION DOCUMENTS


As soon as practically possible, but no later than within thirty (30) days after the execution of this Agreement unless otherwise extended by the mutual agreement among the Parties, the JVC shall enter certain agreements with VaxGen, including, but not limited to:


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


(b) sub-license agreement with VaxGen, specifying the terms and
conditions of the sub-license to the JVC by VaxGen of certain
technology licensed to VaxGen by Genentech, Inc. relating to the
manufacture of AIDSVAX and Vaccine (as defined therein),
substantially similar in form and substance to the draft


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attached hereto as Exhibit 4 ("Sub-License Agreement"); and


(c) consulting services agreement with VaxGen, specifying the terms and
conditions of the services to be provided by VaxGen to the JVC, upon
the JVC's request, for the management of the design, construction,
licensure and operation of the Pilot Plant and the provision of all
personnel requirements of the JVC, substantially similar in form and
substance to the draft attached hereto as Exhibit 5 ("Consulting
Services Agreement").


ARTICLE 4
UTILIZATION OF PILOT PLANT


4.1 The JVC shall utilize the Pilot Plant to engage in the following
activities (listed in order of priority):


(a) support process development and process validation for the licensure
of AIDSVAX;


(b) expedite commercial development and launch of AIDSVAX;


(c) facilitate the technology transfer of AIDSVAX or other mammalian
cell culture manufacturing technology from VaxGen to Celltrion,
including the provision of on-site training;


(d) to the extent that priorities (a) through (c) above have been
satisfied and the Pilot Plant has idle capacity, further utilization
of the Pilot Plant shall be discussed by the Parties and shall be
prioritized between (i) support of product development and licensure
related activities for a non-AIDSVAX product of VaxGen and (ii)
support of other non-AIDSVAX Celltrion business activities,
including, without limitation, process development, technology
transfer and/or contract manufacturing; and


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


4.2 Utilization of the Pilot Plant pursuant to Article 4.1 above shall be
subject to the following rights and obligations of the Parties:


(a) use of the Pilot Plant and any other VaxGen facilities to support
technology transfer and training, as contemplated in Articles 4.1(c)
and (d) above, shall be coordinated by the Parties, provided,
however, that VaxGen shall have authority over access to VaxGen and
JVC facilities, and provided further, that, VaxGen shall not
unreasonably deny Celltrion access to the JVC facilities in support
of such activities;


(b) VaxGen shall be responsible for all operating costs and expenses,
including, but not limited to, costs and expenses of validation and
licensure, of the Pilot Plant associated with the commercial
production of any VaxGen product;


(c) to the extent that the Pilot Plant is utilized for support of any
non-AIDSVAX VaxGen product and process development activities,
VaxGen shall have control over the use of the Pilot Plant, shall
track and report such usage to the boards of directors of the JVC
and Celltrion, and shall be responsible for all associated operating
costs and expenses; provided, that, Celltrion may propose a use for
any idle capacity of the Pilot Plant, which VaxGen shall reasonably
consider;


(d) to the extent that the Pilot Plant is utilized for support of any
non-AIDSVAX Celltrion business activities, use of VaxGen staff to
operate the facility and perform such activities shall be discussed
and agreed by the Parties, Celltrion shall be responsible for all
associated operating costs and expenses, and any use of VaxGen's
services shall be the subject of a specific production services
agreement between VaxGen and the JVC; and


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(e) to the extent that the full capacity of the Pilot Plant is not being
utilized or is not required to support the licensure or
commercialization of any VaxGen product or any non-AIDSVAX Celltrion
business, the JVC's board of directors shall meet to discuss and
determine the best use of such capacity.


4.3 Once the Pilot Plant has been utilized in support of any non-AIDSVAX
Celltrion business activities pursuant to Article 4.2(d) above, such
activities may only be suspended by the unanimous vote of the Board (as
defined in Article 9.1 herein).


4.4 Notwithstanding anything to the contrary in this Agreement, VaxGen shall
at all times have operational control of the Pilot Plant as long as it
maintains an ownership position in the JVC.


ARTICLE 5
CAPITAL CONTRIBUTION; USE OF PROCEEDS


5.1 Celltrion shall purchase seven million (7,000,000) Shares, at the price of
one dollar (US$1.00) per share for an aggregate capital contribution of
seven million dollars (US$7,000,000), of which three million (3,000,000)
Shares shall be purchased within thirty (30) days of the Effective Date,
and the remainder of the Shares shall be purchased on or before December
31, 2002 pursuant to a schedule to be agreed by the JVC and Celltrion.
Celltrion's capital contribution shall be used by the JVC in accordance
with Article 5.6 below.


5.2 VaxGen shall fund all non-capitalizable costs and expenses of the JVC
pursuant to Article 5.7 below, as well as any capitalizable assets of the
JVC in excess of the capital contribution provided by Celltrion pursuant
to Article 5.1 above; provided, however, that VaxGen shall have the right
to suspend or terminate its obligation to make such additional capital
contributions in the event that the outcome of its pending Phase III
clinical trials of AIDSVAX are unfavorable or in the event that regulatory
approval of AIDSVAX is otherwise delayed or denied. In such event, VaxGen
shall have the right to choose ongoing utilization of the Pilot Plant for
the development of and licensure of one or more VaxGen products, at
VaxGen's cost and expense, and such efforts may be used to provide the
basis for licensure of the Pilot Plant and Celltrion technology transfer
and training in lieu of AIDSVAX. Once VaxGen exercises its right for
ongoing utilization of the Pilot Plant, VaxGen shall fund all
non-capitalizable costs and expenses of the JVC pursuant to Article 5.7
below, as well as any capitalizable assets of the JVC for such utilization
in excess of the capital contribution provided by Celltrion pursuant to
Article 5.1 above. In the event that VaxGen does not exercise its right
for ongoing utilization of the Pilot Plant, Celltrion shall have the right
to the utilization of the JVC, and shall fund any necessary capital and
operating expenses required.


5.3 All amounts provided by VaxGen to the JVC pursuant to Article 5.2 above
prior to commercial production of the first VaxGen product manufactured by
the JVC shall be deemed capital contributions by VaxGen. At the end of
each calendar quarter, VaxGen shall document and certify to the JVC the
aggregate amount of its expenditures deemed capital contributions
hereunder, and the JVC shall issue to VaxGen one (1) Share for each one
dollar (US$1.00) so expended.


5.4 Notwithstanding, Article 5.2 above, any additional funds required by the
JVC, if any, to enable greater utilization of the Pilot Plant in support
of Celltrion non-AIDSVAX business and/or Celltrion non-AIDSVAX products,
except technology transfer, shall be discussed and mutually agreed by the
parties.


5.5 In addition to any legends required under federal and state securities
laws in the U.S., including, without limitation, the Securities Act of
1933, as amended, and state blue sky laws, during the term of the
Agreement, each stock certificate issued hereunder will bear the following
words:


"Transfer of the shares of stock represented by this certificate is
restricted subject to the Joint Venture Agreement dated June 1, 2002, by
and between VaxGen, Inc. and Celltrion, Inc., a copy of which is on file
at


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the principal office of the Company in South San Francisco, California,
U.S."


5.6 The capital contribution provided by Celltrion pursuant to Article 5.1
above shall be used by the JVC, to the extent practicable, to fund the
capitalizable assets of the JVC, including, without limitation,
architecture and engineering costs and construction costs of the Pilot
Plant and the purchase of equipment to be utilized in the operation of the
Pilot Plant.


5.7 The capital contributions provided by VaxGen pursuant to Article 5.2 above
shall be used by the JVC, to the extent practicable, to fund operating
expenses and other non-capitalizable expenses.


ARTICLE 6
REVENUE AND PROFIT SHARING


6.1 Subject to the Pilot Plant utilization provisions set forth in Article 4
above, VaxGen and Celltrion may use the facility and assets of the JVC
free of charge, except for out-of-pocket expenses and direct costs, prior
to the licensure of any VaxGen or Celltrion product or the initiation of
any contract development ...