EXHIBIT 10.66
AMENDED AND RESTATED JOINT VENTURE
AGREEMENT
This
AMENDED AND RESTATED JOINT VENTURE AGREEMENT (this “
Agreement ”) is entered into as of the 30
th 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and effect and shall be superceded in its entirety by this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.
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“
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.
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“
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.
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3.
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TERMINATION
OF COLLATERAL AGREEMENTS; ENTERING INTO TECHNICAL SUPPORT &
SERVICES AGREEMENT
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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.
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(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
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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;
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(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
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(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
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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;
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(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
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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
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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.
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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.
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12.4
