Sample Business Contracts

Services Agreement - VaxGen Inc. and Genentech Inc.

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                               SERVICES AGREEMENT

        This Services Agreement ("AGREEMENT") is entered into as of January 1,
1999 (the "EFFECTIVE DATE") by VaxGen, Inc. (formerly known as Genenvax, Inc.),
a Delaware corporation ("VAXGEN"), and Genentech, Inc., a Delaware corporation
("GENENTECH") (each also singularly a "PARTY" and collectively the "PARTIES") as

        WHEREAS, the Parties have entered into that certain License Agreement,
dated as of May 1, 1996 (the "LICENSE AGREEMENT") whereby Genentech has licensed
proprietary technology to VaxGen for purposes of VaxGen's development and
commercialization of a Vaccine against HIV and/or AIDS;

        WHEREAS, in connection with the License Agreement, the Parties entered
into that certain Services Agreement, dated as of January 1, 1996 (the "FIRST
SERVICES AGREEMENT"), under which Genentech provided research and other services
to VaxGen; and

        WHEREAS, the First Services Agreement expired in accordance with its
terms effective December 31, 1998, and the Parties desired to enter into this
new Services Agreement, effective as of January 1, 1999, under which Genentech
shall continue to provide services to VaxGen as provided herein.

        NOW, THEREFORE, in consideration of the foregoing, the Parties hereby
agree as follows:


        The terms defined elsewhere in this Agreement shall have the meanings
specified herein. Capitalized terms used herein without further definition shall
have the meanings ascribed thereto in the License Agreement.


        Subject to the other terms and conditions of this Agreement and the
License Agreement, Genentech shall provide VaxGen with the services set forth in
Schedule 1 attached to this Agreement and incorporated herein. Services in
addition to those set forth in Schedule 1, if any, and the reimbursement rate
therefor shall be agreed upon by the Parties in a written amendment to this


        3.1 TRACKING OF COSTS AND EXPENSES. Genentech shall maintain project
codes for gp120/VaxGen, during the term of this Agreement, under Genentech's
internal systems, which track

<PAGE>   2

internal and out-of-pocket costs and expenses for company activities.

        3.2 REIMBURSEMENT. During the term of this Agreement, Genentech shall be
entitled to pass through to VaxGen and VaxGen shall be obligated to reimburse
Genentech for any and all services provided to VaxGen hereunder, including one
hundred percent (100%) of the internally tracked costs and expenses coded to
gp120/VaxGen, as provided in Section 3.3 of this Agreement.

        3.3 INVOICING AND PAYMENT. Genentech shall invoice VaxGen (attn: Don
Francis) for reimbursement as set forth in Section 3.2 not more frequently than
quarterly (on a calendar quarter basis) during the term of this Agreement, with
the final invoice to be delivered not later than sixty (60) days after
expiration or termination of this Agreement. Genentech' s invoices shall be
prepared using the methodology set forth in Schedule 2 attached to this
Agreement and incorporated herein, and shall be delivered to VaxGen together
with a copy of Genentech's internal cost tracking reports covering services
hereunder for the period under such invoice. VaxGen shall pay Genentech within
thirty (30) days of receipt of each invoice hereunder. VaxGen shall have the
right to review each invoice and the cost tracking reports attached thereto with
Genentech. If any such review or the examination indicates a miscalculation of
the costs and expenses covered by any invoice hereunder, the Parties shall
promptly correct such miscalculation in the case of overpayment, by Genentech
reimbursement of VaxGen, and in the case of underpayment, by additional VaxGen
payment to Genentech).


        4.1 TERM. This Agreement shall commence on the Effective Date and,
unless earlier terminated in accordance herewith or extended by the Parties upon
mutual written agreement, shall expire on December 31, 2000.

        4.2 TERMINATION OF LICENSE AGREEMENT. This Agreement shall terminate
automatically effective upon any termination of the License Agreement.

        4.3 TERMINATION FOR DEFAULT. Failure by either Party to comply with any
of its material obligations set forth in this Agreement shall entitle the
non-defaulting Party to give the defaulting Party a notice specifying the nature
of the default and requiring the defaulting Party to make good its default. If
such default is not cured within sixty (60) days after such notice, the
non-defaulting Party shall be entitled, without prejudice to any of its other
rights under this Agreement or available to it at law or in equity, to terminate
this Agreement effective upon a notice of termination to the defaulting Party.

        4.4 TERMINATION FOR BANKRUPTCY, ETC. Either Party may, in addition to
any other remedies available to it by law or in equity, terminate this
Agreement, in whole or in part as the terminating Party may determine, by notice
to the other Party in the event the other Party shall have become insolvent or
bankrupt, or shall have made an assignment for the benefit of its creditors, or

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there shall have been appointed a trustee or receiver of the other Party or for
all or a substantial part of its property, or there shall have been issued a
warrant of attachment, execution, distraint or similar process against any
substantial part of the property of the other Party, or any case or proceeding
shall have been commenced or other action taken by or against the other Party in
bankruptcy or seeking reorganization, liquidation, dissolution, winding-up,
arrangement, composition or readjustment of its debts or any other relief under
any bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, provided that in any such case such
event shall have continued for sixty (60) days undismissed, unbonded and

        4.5 EFFECT OF TERMINATION. Expiration or termination of this Agreement
for any reason shall be without prejudice to any rights which shall have accrued
to the benefit of either Party prior to such expiration or termination
(including payment to Genentech for any services provided to VaxGen hereunder
prior to any such expiration or termination of this Agreement), and shall not
relieve either Party from its obligations which are expressly indicated to
survive expiration or termination of this Agreement; such rights and obligations
shall include, without limitation, those under Sections 3.2, 3.3, 4.5, 5.1, 5.2
and 5.5 of this Agreement. On any termination of this Agreement where the
License Agreement has also been terminated, the provisions of Section 10.5(c) of
the License Agreement shall also apply.


        5.1 NOTICES. Any notice, request, delivery, demand, report, accounting,
approval or consent required or permitted to be given under this Agreement shall
be delivered in writing in accordance with Section 11.1 of the License

        5.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California (other than its choice of
law principles).

        5.3 ENTIRE AGREEMENT; GOVERNING AGREEMENT. Except for the License
Agreement, the Supply Agreement and the Stock Agreements, this Agreement is the
entire agreement and understanding between the Parties respecting the subject
matter hereof, and supersedes and cancels any and all prior negotiations,
correspondence, understandings and agreements, whether written or oral, between
the Parties respecting the subject matter hereof, including, without limitation,
that certain Letter of Intent between the Parties dated as of November 17, 1995.
No amendment or other modification of this Agreement shall be binding on either
Party unless reduced to writing and signed by an authorized representative of
each Party. In the event of any conflict between the provisions of this
Agreement and the License Agreement, the provisions of the License Agreement
shall control, except to the extent it has been expressly amended as set forth
in this Agreement.

        5.4 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective permitted
successors and assigns. This Agreement shall not be assignable by VaxGen in
whole or in part without Genentech's prior consent in its sole discretion. This
Agreement shall not be assignable by Genentech in whole or in part

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without VaxGen's consent in its sole discretion, except that Genentech may
assign this Agreement in whole or in part without VaxGen's consent in connection
with any consolidation, merger, redemption, put or sale of stock, conveyance of
substantially all of Genentech's assets, or change-of-control transaction that
involves Genentech, Genentech's parent company F. Hoffmann La-Roche Ltd., a
Swiss corporation, or their affiliates.

        5.5 DISPUTE RESOLUTION. In the event of any dispute, controversy or
claim arising out of or relating to this Agreement, the provisions of Section
11.5 of the License Agreement shall apply.

        5.6 WAIVER. The waiver by either Party of any breach of or default under
any of the provisions of this Agreement or the failure of either Party to
enforce any of the provisions of this Agreement or to exercise any right
thereunder shall not be construed as a waiver of any other breach or default or
a waiver of any such rights or provisions hereunder.

        5.7 SEVERABILITY. If any part of this Agreement shall be held invalid,
illegal or unenforceable by any court of authority having jurisdiction over this
Agreement or either Party, such part shall be ineffective only to the extent of
such invalidity, illegality or unenforceability, and shall be validly reformed
by addition or deletion of wording as appropriate to avoid such result and as
nearly as possible approximate the intent of the Parties. If unenforceable, this
Agreement shall be divisible and deleted in such jurisdiction, but elsewhere
shall not be affected.

        5.8 PUBLICITY. VaxGen and Genentech shall consult and obtain mutual
consent before making any public announcement concerning this Agreement, the
subject matter hereof or use of the other Party's name, except for information
that is already in the public domain or where the nature of such information has
been previously approved, for disclosure in which case this Section 5.8 will no
longer apply to that previously approved information).

        5.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original for all purposes, but
all of which together shall constitute one and the same instrument.

        5.10 NO OTHER RIGHTS. No rights or licenses, express or implied, are
granted to VaxGen by this Agreement to use in any manner any trade name or
trademark of Genentech, or any other intellectual property not expressly covered
by this Agreement.

        5.11 FORCE MAJEURE. Neither Party shall be liable to the other for loss
or damages or shall have any right to terminate this Agreement (except as
otherwise provided in this Agreement) for any default or delay of the other
Party in its performance under this Agreement that is attributable to an act of
God, flood, fire, explosion, strike, lockout, labor dispute, casualty or
accident, war, revolution, civil commotion, act of public enemies, blockage or
embargo, injunction, law, order, proclamation, regulation, ordinance, demand or
requirement of any government or subdivision, authority or representative of any
such government, or any other cause beyond the reasonable control of the
affected Party, if the Party affected shall give prompt notice of any such cause
to the other Party.

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The Party giving such notice shall thereupon be excused from such of its
obligations hereunder for the period of time that it is so disabled.

        5.12 HEADINGS. Headings are for the convenience of reference only and
shall not control the construction or interpretation of any of the provisions of
this Agreement.

        5.13 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, employer-employee, or joint venture
relationship between the Parties. Neither Party shall incur any debts or make
any commitments for the other Party.

        IN WITNESS WHEREOF, the Parties each have caused this Agreement to be
duly executed by its duly authorized representative as of the Effective Date set
forth above.

GENENTECH, INC.                                   VAXGEN, INC.

By: /s/ W.D. YOUNG                                By: /s/ DONALD FRANCIS
    ------------------------------                    --------------------------
Name: W.D. YOUNG                                  Name: DONALD FRANCIS
      ----------------------------                      ------------------------
Title: COO                                        Title: PRESIDENT
       ---------------------------                       -----------------------

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                                   Schedule 1


        Where a specific Genentech employee has been identified hereinbelow,
Genentech will attempt to accommodate VaxGen's request for such Genentech
employee to provide services pursuant to this Agreement, but Genentech reserves
the right to have other employees or agents of Genentech perform services
hereunder. In no event shall Genentech's obligations to provide services under
this Agreement exceed the scope of work set forth hereinbelow (either in terms
of the groups or types of work specified or the percentages or other amounts of
time indicated), except with prior written amendment of this Agreement.
Notwithstanding the foregoing, if services exceeding the scope of work set forth
hereinbelow are provided, Genentech shall be entitled to full reimbursement
therefor as provided in Article 3.0 of this Agreement.

                                               PERCENTAGE OF SPECIFIED EMPLOYEE'S
        GROUP / EMPLOYEE                            TIME SPENT ON gp120/VAXGEN
        ----------------                            --------------------------
<S>                                            <C>
Supervisory/Advisory Personnel                                   10%
        Tim Gregory

Research Assistant Staff
      RA (Assay) (cell culture yield improvement process,
      preclinical)                                          Up to 1.3 FTEs
      RA in Jeffrey Gorrell's group                         Up to  .8 FTEs
      RA in Gian Polastri's group                           Up to  .5 FTEs


        Genentech's manufacture and supply of Clinical Vaccine and Commercial
Vaccine to VaxGen will be pursuant to the License Agreement, on the
reimbursement and other terms set forth therein.

Virology Lab

        VaxGen personnel to have access to the lab until June 30, 1999, and
VaxGen to pay for 50% of the work performed in the lab through such date.

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Occasional Assistance (<5% of time of one employee in the specified group)

      Nucleotide Synthesis
      Peptide Synthesis
      Hybridoma Assistance
      QA/QC, ongoing stability
      Production planning/distribution
      Pharm R&D for adjuvant
      development (Jeff Cleland)

Regulatory Affairs
      Larry Davenport                                                5%

General Administrative Services

Occasional Assistance.  (<5% of time of one employee in the specified group)

      Corporate Communications
      Library Services
      Central Records
      Information Technology (lab)
      Product Development (Jim Vannice)
      Security Operations

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                                   SCHEDULE 2

                              INVOICING METHODOLOGY

For each invoice hereunder, using Genentech's internal cost tracking systems
Genentech will identify the total amount of wages and direct costs for services
provided to VaxGen during the period covered by the invoice.

Genentech will then multiply the aggregate total of such wages and direct costs
by the following factors (which may be reviewed and revised by Genentech on an
annual basis during the term of this Agreement):

A = Factor for benefits and uncoded direct costs = 1.40
B = Factor for project administration, supervision and technology = 1.57
C = Factor for overhead (including depreciation and utilities) = 1.63

A x B x C = 3.58 (subject to annual review as noted above).

Sample invoice from Genentech hereunder:

<S>            <C>    
Wages        = $500,000
Direct costs = $ 48,000
Total          $548,000

$548,000 x 3.58 = $1,962,000 total under invoice.