Note 15 — Commitments and Contingencies

Operating Leases

The Company conducts its operations from leased facilities, under operating leases with terms expiring through 2023, in Rockville/Gaithersburg, Maryland. The leases obligate the Company to also pay building operating costs. In November 2011, the Company entered into lease agreements, under which the Company will lease its new manufacturing, laboratory and office space in Gaithersburg, Maryland. The lease agreements provide that, among other things, as of January 1, 2012, the Company subleases from the current facility tenant, and subsequently leases from the landlord approximately 74,000 total square feet, with rent payments for such space commencing April 1, 2014. Under the terms of one lease agreement, the Landlord will provide the Company with a tenant improvement allowance of $2.5 million and an additional tenant improvement allowance of $3 million dollars, which additional tenant improvement allowance is paid back to the Landlord during the remainder of the term of such lease agreement (collectively, the “Improvement Allowance”). Since December 31, 2011 through March 8, 2012, the Company has been funded $1.3 million under the Improvement Allowance. In addition, the Company entered into an agreement with the current facility tenant to purchase laboratory equipment to be used at the space. The Company is currently considering its plans for the Rockville, Maryland facility subsequent to relocation to the Gaithersburg, Maryland facilities, which plans include remarketing the facility through the end of the remaining lease term of January 31, 2017. The Company also leased space in Malvern, Pennsylvania, its former corporate headquarters, under an operating lease with a term expiring in 2014. The Company has subleased this facility under an amended sublease agreement expiring in 2014.

Future minimum rental commitments under non-cancelable leases as of December 31, 2011 are as follows (in thousands):


Year	Operating Leases		Sublease			Net Operating Leases
2012	$	2,680	$	(288	)	$	2,392
2013		2,179		(295	)		1,884
2014		3,549		(201	)		3,348
2015		3,925		—			3,925
2016		4,023		—			4,023
Thereafter		15,268		—			15,268
Total minimum lease payments	$	31,624	$	(784	)	$	30,840

Total rent expenses approximated $1.6 million, $1.6 million and $1.5 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Purchase Obligations

In March 2009, the Company and Cadila entered into a master services agreement pursuant to which the Company may request services from Cadila in the areas of biologics research, pre-clinical development, clinical development, process development, manufacturing scale-up and general manufacturing related services in India. In July 2011, the Company and Cadila amended the master services agreement to extend the term by one year for which services can be provided by Cadila under this agreement. Under the revised terms, if, by March 31, 2013, the amount of services provided by Cadila is less than $7.5 million, the Company will pay Cadila the portion of the shortfall amount that is less than or equal to $2.0 million and 50% of the portion of the shortfall amount that exceeds $2.0 million. When calculating the shortfall, the amount of services provided by Cadila includes amounts that have been paid under all project plans, the amounts that will be paid under ongoing executed project plans and amounts for services that had been offered to Cadila, that Cadila was capable of performing, but exercised its right not to accept such project. The term of the master services agreement is five years, but may be terminated by either party if there is a material breach that is not cured within 30 days of notice or, at any time after three years, provided that 90 days prior notice is given to the other party. As of December 31, 2011, the Company’s remaining obligation to Cadila under the master services agreement is $7.3 million.

Contingencies

License Agreement with Wyeth Holdings Corporation

The Company entered into a license agreement in 2007 with Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (“Wyeth”). The license is a non-exclusive, worldwide license to a family of patent applications covering VLP technology for use in human vaccines in certain fields. The agreement provides for an upfront payment, annual license fees, milestone payments and royalties on any product sales. If each milestone is achieved for any particular vaccine candidate, the Company would be obligated to pay an aggregate of $14 million to Wyeth for each product developed and commercialized under the agreement. Annual license maintenance fees under the agreement total $0.2 million per annum. The royalty to be paid by the Company under the agreement, if a product is approved by the FDA for commercialization, will be based on single digit percentage of net sales. Payments under the agreement to Wyeth as of December 31, 2011 aggregated $5.1 million. The agreement will remain effective as long as at least one claim of the licensed patent rights cover the manufacture, sale or use of any product unless terminated sooner at the Company’s option or by Wyeth for an uncured breach by the Company.

Employment Agreements

The Company has entered into employment agreements with certain of its executive officers and key employees. The employment agreements have one year terms that automatically renew annually and provide for base salaries and other incentives. The agreements include a provision whereby if the Company terminates the employment of such an employee other than for cause, including pursuant to a change of control under its severance plan, or the employee leaves the Company for good reason, such employee shall be entitled to receive payment of existing salary and benefits for a period that ranges from 12 to 24 months.