VAXGEN INC
JOINT VENTURE AGRMT
<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>6
<FILENAME>d52464_ex10-42.txt
<DESCRIPTION>JOINT VENTURE AGRMT
<TEXT>

                                                                   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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<PAGE>

            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 and manufacturing activities on behalf of any
      third party.

6.2   In the event that the Pilot Plant is utilized to support any third party,
      fee for service development and manufacturing activities or any third
      party commercial manufacturing activities, the Parties shall share any
      related profits based on each Party's pro rata ownership of Shares.

6.3   The Parties shall enter into separate agreements describing the services
      to be provided in support of any third party arrangements under Article
      6.2 above.

                                    ARTICLE 7
              TRANSFER OF SHARES; PURCHASE OPTION; RIGHT OF REFUSAL

7.1   Except as permitted by this Article 7 or with the prior written consent of
      the other Party, no Party shall:

      (a)   transfer any Shares;

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

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

7.2   VaxGen shall have an exclusive option to purchase all of the Shares held
      by Celltrion, exercisable upon notice at any time during the five (5)-year
      period commencing on February 25, 2003 and ending on February 24, 2008;
      provided, that, VaxGen shall be required to purchase such Shares upon
      receiving U.S. Food and Drug Administration approval to market any VaxGen
      product manufactured at the Pilot Plant during such five (5)-year period.
      In such event, VaxGen shall be obligated to continue to facilitate the
      transfer of technology to Celltrion and the training of Celltrion
      employees through the utilization of the Pilot Plant.

7.3   Any purchase of Shares made by VaxGen pursuant to Article 7.2 above shall
      be at the price of one dollar (US$1.00) per share, plus simple interest at
      the U.S. prime rate on each Share accruing from the date the selling Party
      acquired the Shares until the exercise of the option by purchasing Party
      hereunder.

7.4   Either Party may sell or otherwise transfer its Shares to the other Party
      on terms mutually agreeable to the 7.5 Parties, subject to VaxGen's
      purchase option set forth in Article 7.2 above, at any time during the
      five (5)-year period commencing on February 25, 2003 and ending on
      February 24, 2008.


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<PAGE>

7.5   Each Party shall have the right to sell its Shares to a third party at
      then-current fair market value of the Shares at any time after February
      24, 2008 subject to the following right of refusal. In the event that
      either Party proposes to transfer its Shares to a proposed third party
      purchaser ("Third Party Purchaser"), the other Party shall have a right of
      refusal with respect to such Party's Shares. For this purpose, no transfer
      of the Shares shall be made unless the following provisions are complied
      with in respect of such transfer:

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

      (b)   the Offeree Party shall have thirty (30) days from the date of its
            receipt of the Transfer Notice to notify the selling Party that it
            intends to purchase all or any part of the Shares proposed to be
            sold by the selling Party on the terms set forth in the Transfer
            Notice and shall enter into a binding agreement to consummate such
            purchase; and

      (c)   in the event that all of the Shares proposed to be sold by the
            selling Party is not purchased by the Offeree Party in accordance
            with (a) and (b) above within the thirty (30) period set forth above
            ("Option Period"), the selling Party may sell any such remaining
            Shares to the Third Party Purchaser on terms no less favorable to
            the selling Party than those set forth in the Transfer Notice within
            sixty (60) days of the expiration of the Option Period. If any such
            remaining Shares are not sold by the selling Party within sixty (60)
            days after the expiration of the Option Period, then the right of
            the selling Party to sell such Shares shall expire and the
            obligations of this Article 7.5 shall be reinstated.

7.6   Any amounts payable by a Party to the other Party for the purchase of any
      Shares under this Article 7 shall be due within sixty (60) days of the
      exercise of the option or right of refusal, as the case may be.

7.7   VaxGen's purchase option right set forth in Article 7.2 above shall be
      subject to forfeiture pursuant to Article 11.3 herein.

7.8   Since damages arising from breach of the obligations under this Article 7
      may be difficult to compute with precision, the Parties agree that any
      Party found to have sold or transferred any Shares in violation of the
      terms of this Article 7 shall pay to the non-breaching Party twice the
      value of the Shares transferred in violation of this Article 7 (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 either Party from enforcing its rights or
      augmenting its protection by such other remedies as may be available,
      including without limitation, injunctive relief.

                                    ARTICLE 8
                           CONTRIBUTION OF TECHNOLOGY

8.1   VaxGen and the JVC shall enter into the License Agreement and the
      Sub-License Agreement pursuant Article 3, granting the JVC the right to
      use the Technology and under the terms of which, VaxGen shall provide to
      the JVC the relevant documents, materials, designs, data and other
      information necessary for the use of the Technology by the JVC and shall
      use its best efforts to arrange for the operation of the facility as
      contemplated by the Parties.

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


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<PAGE>

                                    ARTICLE 9
                         MANAGEMENT AND FINANCING OF JVC

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

9.1   Board of Directors

      (a)   As long as VaxGen and Celltrion maintain an ownership position in
            the JVC, the JVC shall be administered and managed by the Board of
            Directors ("Board") which shall consist of three (3) directors,
            consisting of the Senior Vice President of Manufacturing Operations
            of VaxGen, the Senior Vice President of Manufacturing Operations of
            Celltrion and the VaxGen officer serving on the board of directors
            of Celltrion ("Directors"). Each Party shall secure that the
            Directors are elected, removed or replaced, as applicable, as may be
            required from time to time to reflect the composition of the Board
            as set forth above. The Senior Vice President of Manufacturing
            Operations of VaxGen shall serve as the Chairman of the Board and
            the President of the JVC.

      (b)   Meetings of the Board shall be called and notice shall be given as
            set forth in the Bylaws of the JVC. The Chairman of the Board shall
            serve as the presiding officer of all meetings of the Board of
            Directors.

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

      (d)   The quorum for transacting business at any regular meeting of the
            Board shall be a majority of Directors present in person or by
            teleconference or videoconference, provided that quorum for any
            special meeting of the Board shall require the Director nominated by
            Celltrion.

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

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

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

            (iii)  Authorizing the issuance of debentures;

            (iv)   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 US equivalent
                   for the previous calendar year;

            (v)    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 US equivalent for the previous calendar
                   year;

            (vi)   Lending or borrowing money in excess of 5 percent of the
                   JVC's annual turnover;

            (vii)  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

            (viii) Approval of the quarterly expenditure reports submitted by
                   VaxGen pursuant to Article 5.3 herein.


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<PAGE>

9.2   Officers.

      As long as VaxGen and Celltrion maintain an ownership position in the JVC,
      the Board shall have the right to appoint and approve the officers of the
      JVC, who shall initially be, in addition to the President as provided in
      Article 9.1(a), VaxGen's Vice President of Finance, who shall serve as the
      JVC's Chief Financial Officer, and VaxGen's corporate counsel, who shall
      serve as the JVC's Secretary. The officers of the JVC shall have the
      rights and responsibilities set forth in the Bylaws of the JVC and shall
      be in charge of the administration of all the daily business affairs of
      the JVC as set forth therein and in accordance with the polices
      established by the Board.

9.3   Meetings of Shareholders

      Meetings of the JVC's shareholders shall be called and notice shall be
      given as set forth in the Bylaws of the JVC. The Chairman of the Board
      shall serve as the presiding officer of all such shareholder meetings.

9.4   Management Planning and Accounting Systems

      (a)   VaxGen shall establish all management planning and financial and
            accounting controls and systems on behalf of the JVC, consistent
            with generally accepted accounting principles of the U.S. and as in
            use by VaxGen, pursuant to the Consulting Services Agreement.

      (b)   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
            Board from among reputable accounting firms with international
            affiliates ("Independent Auditor").

      (c)   The JVC shall provide the Parties with annual financial statements,
            prepared in accordance with generally accepted accounting principles
            of the U.S.A. and audited by the Independent Auditor. Once approved
            by the Board, 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.

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

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

      (e)   The JVC shall provide each Party with an unaudited quarterly report
            of the JVC.

                                   ARTICLE 10
                            DURATION AND TERMINATION

10.1  This Agreement shall continue in effect until terminated pursuant to the
      provisions of this Agreement or by mutual agreement of the Parties hereto.

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

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


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<PAGE>

            to be remedied;

      (b)   if any of the Transaction Documents is not duly executed within the
            time period set forth in Article 3 herein;

      (c)   if the other Party shall be or becomes incapable for a period of six
            (6) months of performing any of its said obligations under this
            Agreement because of force majeure as defined in Article 16; or

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

                                   ARTICLE 11
                           CONSEQUENCES OF TERMINATION

11.1  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.

11.2  Upon termination, each Party shall 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.

11.3  In the event this Agreement is terminated by a Party ("Terminating Party")
      in consequence of breach of this Agreement by the other Party ("Breaching
      Party"), then

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

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

            (i)   to require the Breaching Party (and its Affiliates, if
                  applicable) to sell all of its shares of the JVC to the
                  Terminating Party at the value as thus appraised. In the event
                  that there is more than one (1) 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)   The Breaching Party shall forfeit its purchase option rights set
            forth in Articles 7.2 and 7.3, as applicable, and a contract for the
            sale and purchase of Shares shall be deemed to have been entered
            into upon the


                                       36
<PAGE>

            dispatch of written notice to the Breaching Party of the election of
            the Terminating Party to exercise the option given in Article
            11.3(b) above, and payment for the Shares shall be due within sixty
            (60) days of the completion of the appraisal of the shares.

11.4  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 Party 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 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, the 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.

11.5  The rights of the Terminating Party provided in this Article 11 shall be
      cumulative to, and not exclusive of, other rights to which the Terminating
      Party is entitled at law and/or under this Agreement.

                                   ARTICLE 12
                      DISPUTE RESOLUTION AND GOVERNING LAW

12.1  Any controversy or claim arising out of or in relation to this Agreement,
      or breach hereof, shall be finally settled by arbitration in San
      Francisco, California, U.S.A.

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

      (b)   Each Party shall appoint one (1) arbitrator within thirty (30) days
            after receipt of a demand for arbitration. The arbitrators shall be
            freely selected, and the Parties shall not be limited to any
            prescribed list. The two arbitrators thus appointed shall, within
            thirty (30) days after both shall have been appointed, appoint a
            third arbitrator, who shall not be a national of Korea or the U.S.A.
            and who shall preside over the arbitration proceedings.

      (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. The
            Parties 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, each Party
            shall be entitled to seek preliminary injunctive relief from any
            court of competent jurisdiction pending the final decision or award
            of the arbitrators.

12.2  The validity, performance, construction and effect of this Agreement shall
      be governed by the laws of the


                                       37
<PAGE>

      State of California, U.S.A., without regard to conflict-of-law principles.

                                   ARTICLE 13
                                 CONFIDENTIALITY

13.1  Except as required by law, each Party agrees to maintain the
      confidentiality of all information and data relating to the other Party's
      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 Party;
      provided, however, that the preceding obligation shall not apply to
      information which:

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

      (b)   enters the public domain after the time of disclosure through no act
            or omission of the receiving Party; or

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

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

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

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

                                   ARTICLE 14
                          NON-WAIVER AND OTHER REMEDIES

14.1  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.

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

                                   ARTICLE 15
                               UNENFORCEABLE TERMS

In the event that any provision of this Agreement becomes or is declared by a
court or other tribunal of competent jurisdiction to be illegal, invalid
unenforceable or void, such provision(s) shall be limited or eliminated to the
maximum extent necessary so that this Agreement shall otherwise remain in full
force and effect without said provision.


                                       38
<PAGE>

                                   ARTICLE 16
                                  FORCE MAJEURE

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

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

                                   ARTICLE 17
                              DISCLAIMER OF AGENCY

This Agreement shall not be deemed to constitute either Party as the agent of
the other Party hereto, nor shall it constitute the JVC an agent of either
Party.

                                   ARTICLE 18
                                  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 Party, which
consent shall not be unreasonably withheld; provided, however, that this
Agreement shall be automatically assigned by any Party as a result of or
pursuant to any merger or consolidation.

                                   ARTICLE 19
                                     NOTICE

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

         If to VaxGen:     VaxGen, Inc.
                           1000 Marina Boulevard
                           Brisbane, California 94005-1841
                           U.S.A.
                           Attention: Lance Gordon, CEO
                           Fax No.: (650) 624-1001


                                       39
<PAGE>

         If to Celltrion:  Celltrion, Inc.
                           Hanmi Bank Building,13th Floor
                           1127, Guwol-dong, Namdong-gu,
                           Incheon, 405-711, Korea
                           Attention: Jung-jin Seo, CEO
                           Fax No.: (32) 439-1197

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

19.3  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.

19.4  Either Party may change its address at any time by written notice to the
      other Party given pursuant to the terms of this Article 19.

                                   ARTICLE 20
                                    LANGUAGE

This Agreement is written in the English language and executed in two (2)
counterparts, each of which shall be deemed an original and both of which
together shall constitute one and the same instrument. The English language text
of the Agreement shall prevail over any translation thereof.

                                   ARTICLE 21
                                ENTIRE AGREEMENT

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

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

21.3  No changes, alterations, or modifications hereto shall be effective unless
      they are in writing and are signed by an authorized representative of each
      Party.

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


                            [Signature Page Follows]


                                       40
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their respective representative thereunto duly authorized as of the Effective
Date.

VAXGEN, INC.                               CELLTRION, INC.


By:                                        By:
   ---------------------------                --------------------------
   Lance Gordon,                              Jung-jin Seo,
   CEO                                        CEO


                                       41
<PAGE>

                                LIST OF EXHIBITS

1. Articles of Incorporation

2. Bylaws

3. Technology License Agreement

4. Sub-License Agreement

5. Consulting Services Agreement


                                       42

</TEXT>
</DOCUMENT>
