-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NkgXhPRv9/lKkXooHB/R5KPeKSTUEduvlcJT0u72a2gxVhEFj4jLHS5LREJoZxLj MOhU1iM5MWJVAx3x9nCxcQ== /in/edgar/work/0000891618-00-005090/0000891618-00-005090.txt : 20001115 0000891618-00-005090.hdr.sgml : 20001115 ACCESSION NUMBER: 0000891618-00-005090 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVIRON CENTRAL INDEX KEY: 0000949173 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 770309686 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20815 FILM NUMBER: 766096 BUSINESS ADDRESS: STREET 1: 297 N BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 6509196500 MAIL ADDRESS: STREET 1: 297 NORTH BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 10-Q 1 f67161e10-q.txt FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2000 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-Q ------------------------ (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ . COMMISSION FILE NUMBER 0-20815 AVIRON (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0309686 (STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.) OR ORGANIZATION)
297 NORTH BERNARDO AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE) (650) 919-6500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) - -------------------------------------------------------------------------------- (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock $.001 par value 23,038,067 shares (Class) (Outstanding at November 6, 2000)
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 AVIRON TABLE OF CONTENTS
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES (UNAUDITED)..... 3 Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999................................ 3 Condensed Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2000 and 1999...................................................... 4 Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2000 and 1999...... 5 Notes to Condensed Consolidated Financial Statements........ 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................................... 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS........................................... 17 ITEM 2. CHANGES IN SECURITIES....................................... 17 ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 17 ITEM 5. OTHER INFORMATION........................................... 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 18 SIGNATURES........................................................... 19 EXHIBIT INDEX........................................................ 20
2 3 PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES (UNAUDITED) AVIRON CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ASSETS
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (UNAUDITED) (NOTE 1) Current Assets: Cash and cash equivalents................................. $ 59,010 $ 28,081 Short-term investments.................................... 62,079 24,235 Accounts receivable....................................... 3,978 3,241 Inventory................................................. 3,309 2,082 Prepaid expenses and other current assets................. 1,091 1,009 --------- --------- Total current assets................................... 129,467 58,648 Long-term investments....................................... 1,016 -- Property and equipment, net................................. 24,671 25,635 Deposits and other assets................................... 7,316 7,411 --------- --------- TOTAL ASSETS................................................ $ 162,470 $ 91,694 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable.......................................... $ 2,285 $ 3,038 Accrued compensation...................................... 2,349 1,739 Accrued clinical trial costs.............................. 1,326 846 Accrued interest.......................................... 2,875 1,438 Accrued expenses and other liabilities.................... 7,315 6,591 Current portion of capital lease obligations.............. 21 101 Current portion of long-term debt......................... 2,933 2,680 --------- --------- Total current liabilities.............................. 19,104 16,433 Deferred rent............................................... 2,012 2,214 Capital lease obligations, noncurrent....................... -- 9 Long-term debt, net of current portion...................... 110,424 112,657 Commitments and contingencies Stockholders' Equity (Deficit): Preferred stock, $0.001 par value; 5,000,000 shares authorized, issuable in series; none outstanding at September 30, 2000 and December 31, 1999............................. -- -- Common stock, $0.001 par value; 100,000,000 shares authorized as of September 30, 2000; 30,000,000 shares authorized as of December 31, 1999; 22,223,828 and 16,669,018 shares issued and outstanding at September 30, 2000 and December 31, 1999, respectively........................ 22 17 Additional paid-in capital................................ 282,350 143,822 Notes receivable from stockholders........................ (50) (83) Deferred compensation..................................... (25) (96) Accumulated deficit....................................... (251,367) (183,279) --------- --------- Total stockholders' equity (deficit)........................ 30,930 (39,619) --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $ 162,470 $ 91,694 ========= =========
See accompanying notes 3 4 AVIRON CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- REVENUES: Contract revenues and grants.................. $ 2,869 $ 1,363 $ 7,904 $ 19,838 -------- -------- -------- -------- OPERATING EXPENSES: Research and development...................... 18,966 19,593 54,036 47,960 Acquisition of in-process research and development................................ -- -- 10,904 -- General, administrative and marketing......... 3,387 3,602 9,324 9,435 -------- -------- -------- -------- TOTAL OPERATING EXPENSES........................ 22,353 23,195 74,264 57,395 -------- -------- -------- -------- LOSS FROM OPERATIONS............................ (19,484) (21,832) (66,360) (37,557) -------- -------- -------- -------- OTHER INCOME/(EXPENSE): Interest income............................... 1,981 804 4,351 3,077 Interest expense.............................. (2,033) (1,590) (6,177) (4,777) -------- -------- -------- -------- TOTAL OTHER INCOME (EXPENSE), net............. (52) (786) (1,826) (1,700) -------- -------- -------- -------- NET LOSS........................................ $(19,536) $(22,618) $(68,186) $(39,257) ======== ======== ======== ======== Basic and diluted net loss per share............ $ (0.90) $ (1.43) $ (3.42) $ (2.49) ======== ======== ======== ======== Shares used in computing basic and diluted net loss per share................................ 21,625 15,814 19,920 15,755 ======== ======== ======== ========
See accompanying notes 4 5 AVIRON CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 2000 1999 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................................................... $ (68,186) $(39,257) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation and amortization............................. 4,335 3,423 Amortization of convertible debt offering costs........... 423 429 Amortization of deferred compensation..................... 71 105 Issuance of warrant for acquisition of in-process research and development........................................ 10,904 -- Changes in assets and liabilities: Accounts receivable....................................... (737) (3,936) Inventory................................................. (1,227) (2,029) Prepaid expenses and other current assets................. 19 431 Deposits and other assets................................. 73 (1,610) Accounts payable.......................................... (753) 1,028 Accrued expenses and other liabilities.................... 3,563 4,649 Deferred rent............................................. (202) 842 --------- -------- Net cash used in operating activities....................... (51,717) (35,925) --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments.................................. (408,853) (40,282) Maturities of investments................................. 370,089 65,649 Loan to officer........................................... (500) -- Expenditures for property and equipment................... (3,371) (10,664) --------- -------- Net cash (used in) provided by investing activities......... (42,635) 14,703 --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations........... (89) (277) Principal payments on long-term debt...................... (1,980) -- Notes to shareholders collected........................... 33 -- Repurchase of common stock................................ (4) -- Proceeds from issuance of common stock, net............... 127,321 1,064 --------- -------- Net cash provided by financing activities................... 125,281 787 --------- -------- Net increase (decrease) in cash and cash equivalents........ 30,929 (20,435) CASH AND CASH EQUIVALENTS, at beginning of period........... 28,081 28,164 --------- -------- CASH AND CASH EQUIVALENTS, at end of period................. $ 59,010 $ 7,729 ========= ======== Supplemental schedule of non-cash financing activities: Issuance of warrant for legal settlement.................. 313 -- Supplemental disclosures of cash flow information: Cash paid for interest.................................... 4,243 2,919
See accompanying notes 5 6 AVIRON NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated financial statements include the accounts of Aviron and its wholly owned subsidiary, Aviron UK Limited. All significant inter-company accounts and transactions have been eliminated. The financial information as of September 30, 2000 and for the three-month and nine-month periods ended September 30, 2000 and 1999 is unaudited, but includes all adjustments (consisting only of normal recurring adjustments), which Aviron considers necessary for a fair presentation of the financial position at such date and the operating results and cash flows for those periods. The balance sheet data at December 31, 1999 is derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 1999. The results of our operations for any interim period are not necessarily indicative of the results of our operations for a full fiscal year. Revenue Recognition Research payments under collaborative arrangements and grants are recognized as revenue based on research expenses incurred. Non-refundable license fees are recognized as revenue when all obligations related to the fees have been met. Milestone payments under collaborative arrangements are recognized as revenue upon achievement of the milestone events, which represent the culmination of the earnings process because we have no future performance obligations related to the payment. Milestone payments are triggered either by the results of our research efforts or by events external to Aviron, such as regulatory approval to market a product or the achievement of specified sales levels by a marketing partner. Contract revenue for services provided by our animal research facility is recognized when services are provided pursuant to the contract. Amounts received in advance are recorded as deferred revenue until the related revenue is recognized. In December 1999, the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, or SAB 101, which includes the SEC staff's view on accounting for non-refundable up-front fees received in connection with collaboration agreements. We have determined that, pursuant to the guidance in SAB 101, a change in accounting will be necessary for the $15.0 million up-front license fee received from Wyeth Lederle Vaccines, or Wyeth, a business unit of American Home Products Corporation, or AHP, which was recognized as revenue in the first quarter of 1999. We will make this change in our accounting in the fourth quarter of 2000, which will result in a charge to operations for the cumulative effect of the change as of January 1, 2000. This amount will be recorded as deferred revenue and recognized as revenue ratably over 2000 and future periods. We have not yet determined the precise period over which the revenue will be recognized. Prior financial statements will not be restated. Comprehensive Income (Loss) Comprehensive income (loss) is not presented separately as it approximates the net loss presented in the statement of operations for the three-month and nine-month periods ended September 30, 2000 and 1999. 6 7 AVIRON NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) Net Loss Per Share We calculate net loss per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share, or SFAS 128. SFAS 128 requires the presentation of basic earnings (loss) per share and diluted earnings per share, if more dilutive, for all periods presented. Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share has not been presented separately as, given our net loss position, the result would be anti-dilutive. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS 133, which is required to be adopted for the year ending December 31, 2001. We do not anticipate that the adoption of SFAS 133 will have a significant effect on the results of our operations or our financial position. 2. FINANCING TRANSACTIONS DURING 2000 On January 11, 2000, we received a commitment for up to $48.0 million in equity financing from Acqua Wellington North America Equities Fund, Ltd., or Acqua Wellington, in amounts of up to $4.0 million per month, at our discretion, through January 2001. On June 9, 2000, Acqua Wellington increased its equity financing commitment to $8.0 million per month and increased its total commitment from $48.0 million to $84.0 million through February 2001. The commitment is reduced by the monthly allocation whether we draw on the commitment or not. These funds are available at our discretion at a small discount to the market price of our common stock with the market price to be determined based on the volume weighted average market price for the 18 trading days ending two business days prior to sale. The following table summarizes Acqua Wellington financing transactions completed during 2000.
# OF PRICE AGGREGATE DATE SOLD SHARES PER SHARE PROCEEDS --------- --------- --------- ------------- Transactions during nine-months ended September 30, 2000: March 6, 2000 253,935 $31.50 $ 8.0 million* April 13, 2000 144,185 27.74 4.0 million May 12, 2000 348,983 22.92 8.0 million* June 12, 2000 339,955 23.53 8.0 million July 11, 2000 270,013 29.63 8.0 million August 8, 2000 262,200 30.51 8.0 million September 6, 2000 244,272 32.75 8.0 million --------- ------------- Total 1,863,543 52.0 million --------- ------------- Subsequent Financing Transactions: October 3, 2000 173,142 46.20 8.0 million October 31, 2000 153,448 52.13 8.0 million
- --------------- * Includes an additional $4.0 million of financing outside of the commitment. As of September 30, 2000, $40.0 million of these funds were available, with $24.0 million available after the two financings in October 2000, under the Acqua Wellington commitment. 7 8 AVIRON NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) On February 3, 2000, we sold 309,995 shares of common stock to Ridgeway Investment, Ltd., or Ridgeway, for total proceeds of $6.0 million, or $19.36 per share. This share price was based on the volume weighted average market price for the 18 trading days ending on February 1, 2000. On February 3, 2000, we sold 103,322 shares of common stock to AHP for total proceeds of $2.0 million at the same share price and terms as those for the Ridgeway investment described above. On March 6, 2000, we sold 121,212 shares of common stock to AHP for total proceeds of $2.0 million, or $16.50 per share, which were sold pursuant to a December 30, 1999 agreement with AHP. On April 10, 2000, we sold 2,200,000 shares of our common stock in a follow-on public offering at a price of $22.50 per share. Concurrent with this public offering, AHP purchased 686,160 shares of common stock at $21.38 per share, the price equal to the net proceeds per share to the company in the public offering. Our aggregate net proceeds from both the public offering and the AHP transaction, after expenses and underwriters' discounts and commissions, were approximately $60.7 million. On October 12, 2000, we sold 450,000 shares of common stock in a private transaction to Biotech Invest, S.A., an affiliate of Biotech Target, S.A., at a price of $48.00 per share for aggregate proceeds of $21.6 million. 3. WARRANTS In February 2000, we amended our licensing agreement for cold-adapted influenza virus vaccine technology with the University of Michigan to accelerate the issuance of a warrant to the university. As a result of this amendment, we granted the university a warrant to purchase 340,000 shares of our common stock at an exercise price of $10.00 per share that expires on February 16, 2007. The warrant was valued using the Black-Scholes option valuation model and, as the related technology is under development, we recorded a one-time (non-cash) charge of approximately $10.9 million in the first quarter of 2000. Upon the date of the first commercial sale of FluMist, if 1.25 percent of the common stock then outstanding exceeds 340,000 shares, we will issue an additional warrant on the same terms, allowing the university to purchase a number of shares equal to the difference between 340,000 shares and 1.25 percent of the common stock outstanding. To the extent such additional warrants are issued, the related fair value will be recorded as an asset and amortized to cost of sales over the expected life of the FluMist product. On May 8, 2000, we entered into a settlement agreement with ARCH Development Corporation, or ARCH, pursuant to which we transferred to ARCH one-half of our ownership interest in Series A preferred shares of NeuroVir Therapeutics, Inc., or NeuroVir, transferred one-half of our ownership interest in a warrant to acquire shares of common stock of NeuroVir at a price of $1.25 Canadian per share that expires on the earlier of May 31, 2003 or the closing of an initial offering of NeuroVir, paid cash of $312,500 and issued a warrant to purchase 14,077 shares of our common stock at an exercise price of $23.00 per share that expires on June 23, 2005. The value of the warrant of our common stock at the date of issuance was determined to be $312,500 using the Black-Scholes option valuation model. The total cost of the settlement was valued at $625,000, which was recognized as an expense in the quarter ended December 31, 1999 since the settlement was judged to be probable and estimable at that time. On October 11, 2000, we granted Evans Vaccines Limited, a division of PowderJect Pharmaceuticals Plc, or Evans Vaccines, warrants to purchase a total of 63,162 shares of our common stock at an exercise price of $47.50 per share. These warrants, which expire annually at the rate of 10,527 shares per year on October 10, 2001 through 2006, will be valued at approximately $1.2 million. This grant was made as part of the restructuring of our contract manufacturing agreement with Evans Vaccines (see note 7). On October 13, 2000, as part of the purchase price of an internet domain name "flu.com", we issued a warrant for the purchase of 9,398 shares of common stock at an exercise price of $53.00 per share that expires 8 9 AVIRON NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) on October 13, 2005. The value of the warrant at the date of issuance was determined to be $350,000 using the Black-Scholes option valuation model (see note 6). 4. STOCK OPTIONS To motivate our employees and align their interests with stockholders, on February 9, 2000, we granted options for the purchase of a total of 1,264,900 shares of common stock at an exercise price of $24.00, the closing price of our common stock on February 8, 2000. Approximately 27 percent of the options become exercisable upon the acceptance by the U.S. Food and Drug Administration, or FDA, of our Biologics License Application, or BLA, submission for FluMist and another 40 percent become exercisable when FluMist is approved for marketing in the United States. These options will become exercisable in February 2005 unless these events related to FluMist occur earlier. The final 33 percent of these options will become exercisable when FluMist is approved for marketing in the United States, but only if this event occurs in 2001. If FDA approval for FluMist is not obtained by December 31, 2001, these options will be cancelled. If the final 33 percent of these options become exercisable, we will incur compensation expense in the period in which they become exercisable in an amount equal to the difference between the exercise price of the options and the then current fair market value of our common stock. Through September 30, 2000, we have granted options for the purchase of an additional 214,350 shares of common stock at prices ranging from $24.25 to $40.56 with all of the same vesting provisions. 5. RELATED PARTY TRANSACTION In January 2000, we made a non-interest bearing loan to C. Boyd Clarke, our President and Chief Executive Officer, in the amount of $500,000. The loan, which is secured by real property, is repayable in equal annual installments over a five-year period. 6. DOMAIN NAME On September 28, 2000, we entered into an agreement for the acquisition of the internet domain name "flu.com" for a total cost of $700,000, which was comprised of $350,000 in cash and a warrant to be issued for the purchase of common stock valued at $350,000 (see note 3). The total cost of this acquisition has been recorded as an asset and will be amortized over a period of three years. 7. SUBSEQUENT EVENTS During October 2000, Celltech Group Plc sold its vaccines business, which included our existing FluMist contract manufacturing agreement, to Evans Vaccines. Also in October 2000, we restructured our contract manufacturing agreement with Evans Vaccines. Under the new agreement, which expires in June 2006, responsibility for bulk manufacture of FluMist in the Speke, United Kingdom, or UK, facility transfers to Aviron and Evans Vaccines' employees working on FluMist became our employees. We also entered into sub-leases of the FluMist manufacturing areas on the existing site. As consideration for the acquisition of technology and manufacturing know-how, we made an initial payment of $15.0 million and will make additional annual payments of $3.85 million over five years. As further consideration for the amendment to the contract manufacturing agreement, we agreed to continue our commitment to pay $19.0 million, which will be paid in the future based on net sales of FluMist. Evans Vaccines also received warrants to purchase 63,162 shares of Aviron common stock at an exercise price of $47.50 per share (see note 3). These elements of consideration will be recorded as assets and amortized over the 6-year term of the agreement with Evans Vaccines. 9 10 AVIRON NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED) In addition, we agreed to make payments during the term of the agreement of $150,000 per year for the use of the Aviron unit in the Evans Vaccines manufacturing plant, payments up to an aggregate total of $3.0 million for attaining specific milestones, and payments for other support services based on the costs of these services incurred. Rent and other support services will be expensed as the costs are incurred and milestones will be expensed as they become due. On October 11, 2000, we agreed to acquire a 25-year lease from Celltech Group Plc on approximately eight acres of land in Speke, UK. We intend to utilize an existing 45,000 square foot structure on the property to build a new FluMist manufacturing facility. Under the terms of the Celltech agreement, we will pay Celltech L1.5 million (British Pounds Sterling) and will assume the obligations for the remaining 24 years of the 25-year land lease. The minimum annual lease payments are L333,000 (British Pounds Sterling) per year during the term of the lease. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains, in addition to historical information, forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in our Annual Report on Form 10-K, as amended, in the section entitled "Business Risks." OVERVIEW We are a biopharmaceutical company focused on the prevention of disease through innovative vaccine technology. We are currently focusing our product development and commercialization efforts on our lead product candidate, FluMist, an investigational intranasal influenza vaccine. Our goal is to become a leader in the discovery, development, manufacture and marketing of innovative vaccines, which are safe, effective and economical enough to merit their use in immunization programs targeting the general population. Our vaccine development programs are based both on techniques for producing weakened live virus vaccines and on our proprietary genetic engineering technologies. Live virus vaccines, including those for smallpox, polio, measles, mumps, rubella and chicken pox, have had a long record of preventing disease. FluMist According to the Centers for Disease Control and Prevention, or CDC, epidemics of influenza occur during the winter months nearly every year. In the United States, influenza epidemics are responsible for approximately 20,000 deaths and cause illness in 10 to 20 percent of the population each year. Influenza viruses also can cause global epidemics of disease during which rates of illness and death from influenza-related complications can increase dramatically. Influenza viruses cause disease in all age groups. Rates of infection are highest among children and young children are at increased risk for hospitalization. Rates of serious illness and death are highest among persons over age 64 and persons of any age who have medical conditions that place them at high risk for complications from influenza. FluMist is designed to prevent influenza by inducing an immune response similar to that resulting from natural infection. With FluMist, the immune response is induced in the nose and throat (the point of contact for airborne infections such as influenza) as well as in the bloodstream. FluMist has been shown to provide a high protection rate against influenza in Phase 3 clinical trials in children and healthy adults. In addition, reductions in days of illness, antibiotic use, health resource use and missed work because of illness were observed in a trial conducted in healthy working adults. We are developing and intend to commercialize FluMist primarily in collaboration with our partner Wyeth Lederle Vaccines, or Wyeth, a business unit of the pharmaceutical division of American Home Products Corporation, or AHP. FluMist BLA Submission On October 31, 2000, we submitted our Biologics License Application, or BLA, for FluMist to the U.S. Food and Drug Administration, or FDA. We are seeking U.S. licensure of FluMist to prevent influenza in children and adults. Clinical Trial Study In October 2000, Kaiser Permanente initiated a clinical trial of FluMist. Enrollment of approximately 9,600 participants ages one to 17 years during the 2000-2001 flu season is expected. The study will evaluate a variety of endpoints to compare the rates of different medically attended events in the group receiving FluMist versus the group receiving placebo. Liquid FluMist The current formulation of FluMist requires freezer storage throughout distribution. Because many international markets do not have distribution channels well suited to the sale of frozen vaccines, Wyeth 11 12 initiated a randomized, single-blind Phase 2 clinical trial of more than 1,300 children in March 2000 in the southern hemisphere for a second generation refrigerator stable, or liquid, formulation of FluMist. This trial is intended to demonstrate clinical equivalence between frozen and liquid FluMist. During the fourth quarter, Wyeth also initiated three Phase 3 clinical trials with liquid FluMist: - A Pan-Asian efficacy trial expected to enroll 3,000 participants from 12 to 36 months of age. The primary endpoint is protection against culture-confirmed influenza. - A Pan-European pediatric day care efficacy trial expected to enroll 1,500 children in day care from 6 to 36 months of age. The primary endpoint is protection against culture-confirmed influenza. - A safety and immunogenicity study in 450 participants from 6 to 17 years of age taking place in Europe. The primary endpoint is immunogenicity by age. Operations On September 29, 2000, we announced that we qualified for a $2.7 million Challenge Grant from the National Institute of Allergy and Infectious Diseases of the National Institutes of Health to develop a vaccine to protect against possible pandemic influenza viruses. On October 11, 2000, we agreed to acquire the remaining 24 years of a 25-year lease from Celltech Group plc of approximately eight acres of land in Speke, UK. We intend to utilize an existing 45,000 square foot structure on the property to build a new FluMist manufacturing facility. During October 2000, Celltech Group Plc sold its vaccines business, which included our existing FluMist contract manufacturing agreement, to Evans Vaccines. Also in October 2000, we restructured our contract manufacturing agreement with Evans Vaccines. Under the new agreement, which expires in June 2006, responsibility for bulk manufacture of FluMist in the Speke, UK facility is transferred to Aviron. Evans Vaccines' employees working on FluMist became our employees and we entered into sub-leases for the FluMist manufacturing areas on the existing site. As consideration for the acquisition of technology and manufacturing know-how, we made an initial payment of $15.0 million and will make additional annual payments of $3.85 million over five years. As further consideration for the amendment to the contract manufacturing agreement, we agreed to continue our commitment to pay $19.0 million, which will be paid in the future based on net sales of FluMist. In addition, we agreed to make payments during the term of the agreement of $150,000 per year for the use of the Aviron unit in the Evans Vaccines manufacturing plant, payments up to an aggregate total of $3.0 million for attaining specific milestones, and payments for other support services based on the costs of these services incurred. Under the terms of the Celltech agreement, we will pay L1.5 million (British Pounds Sterling) and will assume the obligations for the remaining 24 years of the 25-year lease. Other Products in Development We also have a number of other vaccines in various stages of development: - A vaccine to prevent Epstein-Barr virus, or EBV, the leading cause of infectious mononucleosis. On October 25, 2000, we announced the initiation of a Phase 2 clinical trial with this vaccine, which is being developed, under our license with SmithKline Beecham Biologicals, or SBB. The initiation of this trial will trigger a $1.5 million payment from SBB to Aviron. Pursuant to our agreement with ARCH Development Corporation, or ARCH, we will pay 25 percent of each milestone received from SBB for the EBV product to ARCH. - A vaccine to prevent cytomegalovirus, or CMV, the leading infectious cause of birth defects in the United States. A clinical trial for this vaccine began during the second quarter of 2000. - A parainfluenza virus type 3, or PIV-3, vaccine to prevent a common cause of croup, a respiratory infection in children, for which we have completed a Phase 2 clinical trial. 12 13 We are using our proprietary technologies to develop new vaccine candidates, including vaccines for herpes simplex virus type 2, or HSV, the virus responsible for genital herpes, and respiratory syncytial virus, or RSV, a virus responsible for severe lower respiratory infection in infants and young children. Personnel Announcements In the third quarter of 2000, we made the following appointments: David M. Wonnacott, Ph.D. to the position of Vice President, Regulatory Affairs; Charles F. Katzer to the position of Vice President, Manufacturing; and Harry B. Greenberg, M.D. to the position of Senior Vice President, Research and Development and Chief Scientific Officer. On August 30, 2000, we announced the election of R. Gordon Douglas, Jr., M.D. to our board of directors. Cumulative Losses Since our inception in April 1992, we have devoted nearly all of our resources to our research and development programs. To date, we have not generated any revenues from the sale of products and do not expect to generate any revenues from the sale of products until 2001 at the earliest. We have incurred cumulative net losses of approximately $251.4 million as of September 30, 2000, and expect to incur substantial operating losses over at least the next several years. Business Risks Our business is subject to significant risks, including but not limited to manufacturing uncertainties; the risks inherent in our research and development efforts, including preclinical testing and clinical trials; uncertainties associated both with obtaining and enforcing our patents and with the patent rights of others; the lengthy, expensive and uncertain process of seeking regulatory approvals; uncertainties regarding government reforms and product pricing and reimbursement levels; technological change and competition; and dependence on third parties. Even if product candidates appear promising at early stages of development, they may not reach the market for numerous reasons. Such reasons include the possibilities that the products will not be found to be safe or effective during clinical trials, will fail to receive necessary regulatory approvals, will be difficult to manufacture on a commercial scale, will be uneconomical to market or will be precluded from commercialization by proprietary rights of third parties. See also section entitled "Business Risks" in our Annual Report on Form 10-K, as amended. This Form 10-Q contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. When used herein, the words "expects," "anticipates," "estimates," "intends," "plans" and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from the results discussed in the forward-looking statements. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Revenues We earned $2.9 million in revenue for the three months ended September 30, 2000, compared to $1.4 million for the three months ended September 30, 1999. In the third quarters of 2000 and 1999, revenues were comprised principally of expense reimbursements from Wyeth for clinical and commercialization expenses related to the clinical development of FluMist, and payable under the terms of our FluMist collaboration agreement. Operating Expenses Research and development expenses decreased to $19.0 million for the three months ended September 30, 2000, from $19.6 million for the three months ended September 30, 1999. The decrease was due primarily to one-time development expenses totaling $2.0 million incurred in 1999, which did not recur in 13 14 2000, and were partially offset by an increase in development activities, documentation, validation and other commercial scale-up expenses associated with FluMist. We expect our expenses to increase in the future as development and manufacturing activities expand in preparation for potential commercialization of FluMist. General, administrative and marketing expenses decreased to $3.4 million in the three months ended September 30, 2000 from $3.6 million for the three months ended September 30, 1999 due to a decrease in infrastructure and support activities. These expenses are expected to increase in the future in support of the potential commercialization of FluMist. Net Interest Income (Expense) Net interest expense decreased to $52,000 in the three months ended September 30, 2000, as compared to $786,000 for the three months ended September 30, 1999. The decrease in net interest expense reflects the increase in interest expense in connection with debt financing in December 1999, which is more than offset by the increase in interest income due to higher average balances of cash, cash equivalents, and investments resulting from the financing transactions in December 1999 and during the nine months ended September 30, 2000. NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 Revenues We earned $7.9 million in revenue for the nine months ended September 30, 2000, compared to $19.8 million for the nine months ended September 30, 1999. The 2000 revenues were comprised primarily of amounts earned from Wyeth under the FluMist collaboration agreement combined with other revenues from other contracts and research grants. The 1999 revenues were comprised primarily of amounts earned from Wyeth under the FluMist collaboration agreement, which included a non-refundable initial payment in the amount of $15.0 million and $4.8 million in payments related to the clinical development of FluMist, combined with revenues from other contracts and research grants. See discussion under Recent Accounting Pronouncement below. Operating Expenses Research and development expenses increased to $54.0 million for the nine months ended September 30, 2000, from $48.0 million for the nine months ended September 30, 1999. The increase was due primarily to an increase in development activities, documentation, validation and other commercial scale-up expenses associated with FluMist. These increases were partially offset by reductions in spending on clinical trials. We expect our expenses to increase in the future as development and manufacturing activities expand in preparation for potential commercialization of FluMist. In addition, we recognized a one-time, non-cash charge for the acquisition of in-process research and development in the amount of $10.9 million in the first quarter of 2000 due to the amendment of our agreement with the University of Michigan to accelerate the issuance of a warrant. The warrant was granted to the university in connection with our license for the cold-adapted influenza technology, which is the basis for FluMist. General, administrative and marketing expenses fell to $9.3 million in the nine months ended September 30, 2000, compared to $9.4 million for the nine months ended September 30, 1999, due to a decrease in infrastructure and support activities. These expenses are expected to increase in the future in support of the potential commercialization of FluMist. Net Interest Income (Expense) Net interest expense increased to $1.8 million in the nine months ended September 30, 2000, as compared to $1.7 million for the nine months ended September 30, 1999. The increase in net interest expense reflects the increase in interest expense in connection with debt financing in December 1999, which is partially offset by the increase in interest income due to higher yields on average balances of cash, cash equivalents, and investments during the nine months ended September 30, 2000, as compared with the same period in 1999. 14 15 Recent Accounting Pronouncement In December 1999, the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, or SAB 101, which includes the SEC staff's view on accounting for non-refundable up-front fees received in connection with collaboration agreements. We have determined that, pursuant to the guidance in SAB 101, a change in accounting will be necessary for the $15.0 million up-front license fee received from Wyeth, which was recognized as revenue in the first quarter of 1999. We will make this change in our accounting in the fourth quarter of 2000, which will result in a charge to operations for the cumulative effect of the change as of January 1, 2000. This amount will be recorded as deferred revenue and recognized as revenue ratably over 2000 and future periods. We have not yet determined the precise period over which we will recognize the revenue. Prior financial statements will not be restated. LIQUIDITY AND CAPITAL RESOURCES We had cash, cash equivalents and marketable securities, at September 30, 2000, of approximately $122.1 million. In order to preserve principal and maintain liquidity, our funds are invested in United States Treasury and agency obligations, highly rated corporate obligations and other liquid investments. We have financed our operations since inception primarily through sales of equity, convertible debt securities, and other debt financing. Through December 31, 1999, we raised approximately $263.0 million from such activities, net of offering expenses. During the nine months ended September 30, 2000, we raised approximately $127.3 million through the sale of common stock, bringing the total raised through financing activities since inception to approximately $390.3 million. On January 11, 2000, we received a commitment for up to $48.0 million in equity financing from Acqua Wellington in amounts of up to $4.0 million per month, at our discretion, through January 2001. On June 9, 2000, Acqua Wellington increased this commitment to $8.0 million per month and increased its total commitment from $48.0 million to $84.0 million through February 2001. The commitment is reduced by the monthly allocation whether we draw on the commitment or not. As of September 30, 2000, $40.0 million of these funds were available, with $24.0 million available after the two financings in October 2000, under the Acqua Wellington commitment. In October 2000, we generated $37.6 million of equity financing in three transactions for sale of common stock. Also in October 2000, we made an initial payment of $15.0 million to Evans Vaccines as part of the consideration for the acquisition of technology and manufacturing know-how. Our future revenues will depend largely on the success of our collaboration arrangements, contracts and research grants. With respect to our collaboration agreement with Wyeth, our rights to receive milestone payments are all "event driven." These payments are earned only upon our successful completion of specific activities. We cannot be certain as to when, and if, these milestone payments will be realized. Under the agreement, the earliest of the milestone payments in the amount of $15.5 million is due upon acceptance by the FDA of the filing of our BLA, which is not expected to occur until sixty days after the date of submission. The BLA was submitted to the FDA on October 31, 2000. A further milestone payment of $20.0 million is due upon obtaining FDA marketing approval for FluMist. The timing of receipt of this payment will depend on the progress of the regulatory review of the BLA. Additional milestone payments related to the submission and approval of FluMist for marketing in international markets, for expansions in labeling claims, and for the liquid formulation are dependent upon future governmental approvals or recommendations by medical advisory bodies and will not be received until these activities are successfully completed. We expect expenditures for research and development and general, administrative and marketing expenses to continue to increase during the remainder of 2000 and beyond as we develop our products and prepare for the potential commercial launch of FluMist. For the first nine months of 2000, $51.7 million of cash was used in operations as compared with $35.9 million in the first nine months of 1999. The increase in cash used in operating activities was primarily due to an increase in the net loss of $28.9 million, offset by a $10.9 million non-cash charge related to the issuance of a warrant to the University of Michigan for the acquisition of in-process research and development. 15 16 Cash expended for capital additions were approximately $3.4 million and $10.7 million for the first nine months of 2000 and 1999, respectively. Capital expenditures decreased in 2000 primarily due to a decrease in the level of expenditures for leasehold improvements and equipment at our facilities in Speke, UK; Philadelphia, Pennsylvania; and Santa Clara, California. Capital expenditures are expected to increase during the remainder of 2000 and beyond, primarily in connection with building additions at our Pennsylvania and UK facilities and equipment additions at all facilities. Principal payments in the amount of $2.0 million were made during the first nine months of 2000 on debt incurred in December 1999. Such payments will continue over the life of the debt and will increase slightly in the future as greater portions of the payments are allocated to principal reduction. We anticipate that our existing cash, cash equivalents and short-term investments, and proceeds from existing collaborations and recent financings will enable us to maintain our current and planned operations through 2001. Our future cash requirements will depend on numerous factors, including the ability to successfully complete activities necessary to earn milestones under our collaborative agreements and the timing of receipt of these milestones; the time and costs involved in obtaining regulatory approvals; the ability to successfully launch FluMist in the United States; continued scientific progress in the research and development of our technology and vaccine programs; the size and complexity of these programs; our ability to establish and maintain collaborative arrangements; progress with preclinical testing and clinical trials; the cost involved in preparing, filing, prosecuting, maintaining and enforcing patent claims; the cost of constructing additional manufacturing facilities; and product commercialization activities, which may require us to seek additional funding. Additionally, due to the seasonal nature of FluMist, cash will not be generated from product sales until late in each year. A significant amount of working capital will be required each year to provide for the payment of expenditures associated with the manufacturing of inventory and other operating and capital needs in advance of any product sales. There can be no assurance that, should we require outside funding through additional debt or equity financings, such funds would be available on favorable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or obtain funds through collaborative agreements with others that may require us to relinquish rights to our technologies, product candidates or products we would otherwise seek to develop or commercialize ourselves, which could harm our business, financial condition and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk, including changes to interest rates and foreign currency exchange rates. Interest Rates -- Our investments and interest income are sensitive to changes in the general level of interest rates, primarily U.S. interest rates. In this regard, changes in U.S. interest rates primarily affect the interest earned on our cash equivalents and investments. To mitigate the impact of fluctuations in U.S. interest rates, we place our cash in investments that meet the high credit standards specified in our investment policy, and generally hold such securities to maturity. The policy also limits the amount of credit exposure to any one issue, issuer, or type of investment and does not permit derivative financial instruments in our investment portfolio. As a result, we do not expect any material loss with respect to our investment portfolio. Foreign Currency Exchange Rates -- We pay for the costs of manufacturing and development activities, equipment, and facilities modifications at our U.K. manufacturing facility in British Pounds Sterling. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the U.K. We are exposed to changes in exchange rates in the United Kingdom. When the U.S. dollar strengthens against the British Pound Sterling, the U.S. dollar value of British Pound Sterling-based expenses decreases; when the U.S. dollar weakens, the U.S. dollar value of British Pound Sterling-based expenses increases. Accordingly, changes in exchange rates, and in particular a weakening of the U.S. dollar, may adversely affect our financial position as expressed in U.S. dollars. We currently do not hedge our obligations in British Pounds Sterling. Cash, Cash Equivalents and Investments -- At September 30, 2000, we had cash and cash equivalents of $122.1 million, with a weighted average interest rate of 6.69 percent per year, and short-term investments with a basis of $61.7 million and a fair value of $62.1 million, with a weighted average interest rate of 6.75 percent. We also had long-term investments with a basis and a fair market value of $1.0 million with a weighted average interest rate of 7.21 percent per year. 16 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 30, 1999, the European Patent Office held oral proceedings in an Opposition filed by American Cyanamid against Aviron's granted European Patent No. 0490972 relating to methods and compositions of recombinant negative-strand RNA viruses. At the oral proceedings, the Opposition Division of the European Patent Office informed us of its intent to issue a written opinion which upholds claims limited to recombinant influenza and denies claims generically encompassing negative-strand RNA viruses. This decision will not affect our FluMist cold-adapted influenza product. We intend to appeal the decision insofar as it relates to the denied claims; the appeal will request the Technical Board of Appeals to reverse the decision with respect to the denial of the claims encompassing recombinant negative-strand RNA viruses. There can be no assurance that we will be successful in obtaining claims as originally granted as a result of the appeal. If we do not succeed in the appeal of the claims, which encompass negative-strand RNA viruses, in particular non-segmented RNA viruses, it could negatively impact our ability to exclude others from commercializing an RSV or PIV vaccine based on genetically engineered candidates in Europe. On July 8, 1999, a lawsuit entitled Joany Chou v. The University of Chicago, ARCH Development Corp., Bernard Roizman and Aviron Company, was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, or Court, by an individual formerly associated with the University of Chicago. On September 30, 1999, this individual filed an amended complaint against the same defendants. This amended complaint appeared to assert claims of inventor ship relating to the United States Patent Nos. 5,328,688; 5,795,713, 5,922,328, their foreign counterparts, and potentially other patents and applications; unjust enrichment; fraud; conversion; breach of fiduciary duty; breach of contract and breach of implied contract. The amended complaint seeks, among other things, money damages, an order correcting the inventorship and ownership of the patents referenced above, disgorgement, a constructive trust, possible injunctive and equitable relief, punitive damages, attorneys' fees, costs, and interest. All of the claims appear to relate to patent and patent applications for HSV, and none appear to relate to our cold-adapted influenza product or technology or any other pipeline products in research or development. On February 18, 2000, the Court granted our motion to dismiss, thereby dismissing all pending claims made by the plaintiff against Aviron. On April 19, 2000, the plaintiff appealed the Court's ruling. We cannot be sure that we will prevail in the defense of this lawsuit in the event that the plaintiff is successful in reinstating her claims or in bringing in new claims against Aviron. ITEM 2. CHANGES IN SECURITIES On October 13, 2000, as part of the purchase price of an internet domain name, we issued a warrant for the purchase of 9,398 shares of common stock to The Proctor and Gamble Company at an exercise price of $53.00 per share that expires on October 13, 2005. If the holder of such warrant is unable to sell or otherwise dispose of the warrant shares pursuant to Rule 144 of the Securities Act of 1933, as amended, then we are obligated to register such warrant shares upon request. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 17 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
ITEM DESCRIPTION ---- ----------- 4.18 Warrant for Common Stock, issued to The Procter and Gamble Company. ++10.31 Amended and Restated Production Agreement, dated as of August 1, 2000, by and between Aviron and Packaging Coordinators, Inc.(1) 10.32 First Amendment to Facility Reservation Agreement, dated as of August 1, 2000, by and between Aviron and Packaging Coordinators, Inc. 27.1 Financial Data Schedule.
(b) Reports on Form 8-K None - --------------- ++ Confidential treatment has been requested for portions of this exhibit. (1) Appendix 5 of this exhibit is incorporated by reference to Exhibit 10.17 to Aviron's Registration Statement on Form S-3, File No. 333-41649, filed December 5, 1997, as amended. 18 19 AVIRON SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. AVIRON Date: November 14, 2000 By: /s/ C. BOYD CLARKE ------------------------------------ C. Boyd Clarke President and Chief Executive Officer Date: November 14, 2000 By: /s/ FRED KURLAND ------------------------------------ Fred Kurland Senior Vice President and Chief Financial Officer 19 20 EXHIBIT INDEX
NO. OF EXHIBIT DESCRIPTION - ------- ----------- 4.18 Warrant for Common Stock, issued to The Procter and Gamble Company. ++10.31 Amended and Restated Production Agreement, dated as of August 1, 2000, by and between Aviron and Packaging Coordinators, Inc.(1) 10.32 First Amendment to Facility Reservation Agreement, dated as of August 1, 2000, by and between Aviron and Packaging Coordinators, Inc. 27.1 Financial Data Schedule.
- --------------- ++ Confidential treatment has been requested for portions of this exhibit. (1) Appendix 5 of this exhibit is incorporated by reference to Exhibit 10.17 to Aviron's Registration Statement on Form S-3, File No. 333-41649, filed December 5, 1997, as amended. EX-4.18 2 f67161ex4-18.txt EXHIBIT 4.18 1 EXHIBIT 4.18 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. AVIRON WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK No. CSW- 4 9,398 Shares FOR VALUE RECEIVED, AVIRON, a Delaware corporation (the "Company"), with its principal office at 297 North Bernardo Avenue, Mountain View, CA 94043, hereby certifies that The Procter & Gamble Company, or its assigns (the "Holder"), is entitled, subject to the provisions of this Warrant, to purchase from the Company, at any time after the Eligibility Date (as defined below) and prior to the Expiration Date (as defined below), nine thousand three hundred ninety-eight (9,398) fully paid and nonassessable shares of Common Stock of the Company, at an exercise price per share equal to fifty-three dollars ($53.00) (the "Exercise Price"). The term "Common Stock" shall mean the aforementioned Common Stock of the Company, together with any other equity securities that may be issued by the Company in addition thereto or in substitution therefor as provided herein. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock are subject to adjustment from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares." SECTION 1. EXERCISE OF WARRANT. Subject to Section 11 below, this Warrant shall be immediately exercisable in whole, but not in part, upon the earlier of: (i) the date of receipt by the Company of written acceptance by the United States Food and Drug Administration of the Company's filing of its Biologics License Application for its product, FluMist(TM), or (ii) ten (10) days prior to the Expiration Date (the "Eligibility Date"). This Warrant may be exercised in whole, but not in part, by presentation and surrender to the Company at its principal office at the address set forth in the initial paragraph hereof (or at such other address as the Company may hereafter notify the Holder in writing) with the Purchase Form annexed hereto duly executed and accompanied by proper payment of the Exercise Price in lawful money of the United States of America in the form of a check, subject to collection, for the number of Warrant Shares specified 2 in the Purchase Form. Partial exercise of this Warrant shall not be permitted. Upon receipt by the Company of this Warrant and such Purchase Form, together with proper payment of the Exercise Price, at such office, the Holder shall be deemed to be the holder of record of the Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. SECTION 2. NET ISSUE EXERCISE. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula: X = Y (A - B) --------- A Where X = the number of shares of Common Stock to be issued to the Holder Y = the number of shares of Common Stock purchasable under the Warrant (at the date of such calculation) A = the fair market value as determined by the closing sales price on the date of exercise of one share of the Company's Common Stock as quoted on NASDAQ B = Exercise Price (as adjusted to the date of such calculation) SECTION 3. RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant all shares of its Common Stock or other shares of capital stock of the Company from time to time issuable upon exercise of this Warrant. All such shares shall be duly authorized and, when issued upon such exercise in accordance with the terms of this Warrant, shall be validly issued, fully paid and nonassessable. SECTION 4. FRACTIONAL INTEREST. The Company will not issue a fractional share of Common Stock upon exercise of this Warrant. Instead, the Company will deliver its check for the current fair market value of the fractional share, as determined in good faith by the Board of Directors of the Company. SECTION 5. ASSIGNMENT OR LOSS OF WARRANT. (a) Except as provided in Section 9, the Holder of this Warrant shall be entitled, without obtaining the consent of the Company, to assign its interest in this Warrant in whole to any person or persons. Subject to the provisions of Section 9, upon surrender of this Warrant to the Company or at the office of its stock transfer agent or warrant agent, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the 2. 3 Company shall, without charge, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees named in such instrument of assignment, and this Warrant shall promptly be canceled. (b) Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnification satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. SECTION 6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent or to receive notice as a shareholder of the Company on any matters or with respect to any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the Warrant Shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised in accordance with its terms. SECTION 7. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number and kind of securities purchasable upon the exercise of the Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) RECLASSIFICATION OF OUTSTANDING SECURITIES. In case of any reclassification, change or conversion of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), the Company shall execute a new Warrant (in form and substance reasonably satisfactory to the Holder of this Warrant) providing that the Holder of this Warrant shall have the right to exercise such new Warrant and upon such exercise to receive, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification or change by a holder of one share of Common Stock. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) SUBDIVISIONS OR COMBINATION OF SHARES. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the Exercise Price and the number of Warrant Shares issuable upon exercise hereof shall be proportionately adjusted. (c) STOCK DIVIDENDS. If the Company at any time while this Warrant is outstanding and unexpired shall pay a dividend payable in shares of Common Stock (except any distribution specifically provided for in the foregoing subsections (a) and (b)), then the Exercise Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price 3. 4 in effect immediately prior to such date of determination by a fraction (a) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution and the number of Warrant Shares subject to this Warrant shall be proportionately adjusted. (d) NOTICE OF RECORD DATE. In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed merger or consolidation of the Company with or into any other corporation, or any proposed sale, lease or conveyance of all or substantially all of the assets of the Company, or any proposed liquidation, dissolution or winding up of the Company, the Company shall mail to the Holder of this Warrant, at least ten days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (e) NO ADJUSTMENT UPON EXERCISE OF WARRANTS. No adjustments shall be made under any Section herein in connection with the issuance of Warrant Shares upon exercise of the Warrants. SECTION 8. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of Section 7, the Company shall deliver an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be signed by the chairman, president or chief financial officer of the Company. SECTION 9. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant may not be exercised and neither this Warrant nor any of the Warrant Shares, nor any interest in either, may be sold, assigned, pledged, hypothecated, encumbered or in any other manner transferred or disposed of, in whole or in part, except in compliance with applicable United States federal and state securities or Blue Sky laws and the terms and conditions hereof. Each Warrant shall bear a legend in substantially the same form as the legend set forth on the first page of this Warrant. Each certificate for Warrant Shares issued upon exercise of this Warrant, unless at the time of exercise such Warrant Shares are acquired pursuant to a registration statement that has been declared effective under the Act, shall bear a legend substantially in the following form: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE 4. 5 APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. Any certificate for any Warrant Shares issued at any time in exchange or substitution for any certificate for any Warrant Shares bearing such legend (except a new certificate for any Warrant Shares issued after the acquisition of such Warrant Shares pursuant to a registration statement that has been declared effective under the Act) shall also bear such legend unless, in the opinion of counsel for the Company, the Warrant Shares represented thereby need no longer be subject to the restriction contained herein. The provisions of this Section 9 shall be binding upon all subsequent Holders of certificates for Warrant Shares bearing the above legend and all subsequent Holders of this Warrant, if any. In addition in connection with the issuance of this Warrant, the Holder specifically represents to the Company by acceptance of this Warrant as follows: (a) The Holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof in violation of the Act. (b) The Holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder's investment intent as expressed herein. (c) The Holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. (d) The Holder is aware of the provisions of Rule 144 promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, if applicable, including, among other things, the availability of certain public information about the Company, the resale occurring not less than one year after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein. (e) The Holder further understands that in the event all of the requirements of Rule 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the staff of the Securities and Exchange Commission (the "SEC") has expressed 5. 6 its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. SECTION 10. REGISTRATION RIGHTS. If, after this Warrant has been exercised in full, the Holder is unable to sell or otherwise dispose of all the Warrant Shares delivered upon such exercise without restriction pursuant to Rule 144, then with respect to such Warrant Shares, the Holder shall be entitled to registration rights as provided in this Section 10. (a) REGISTRATION REQUIREMENTS. (i) Except as provided in paragraph (iv) below, if the Company shall receive a written request from the Holder that the Company file a registration statement under the Act covering the registration of those Warrant Shares which Holder cannot sell or otherwise dispose pursuant to Rule 144, then the Company shall use its best efforts to prepare and file a registration statement on Form S-3 with the SEC under the Act within 30 days of the receipt of such written request, to register such Warrant Shares by the Holder (the "Registration Statement") and to use its best efforts to cause the Registration Statement to be declared effective as soon as practicable. In the event that at any time the filing of such Registration Statement is undertaken or is required to be undertaken the Company fails to qualify for use of Form S-3 (or other available form for similar type securities registration) for purposes of registering for resale the Warrant Shares, the Company shall cause a registration statement on Form S-1 (or other available form for similar type securities registration) to be filed as soon as practicable after its receipt of the request specified in this Section 10(a)(i). The Holder agrees to furnish promptly to the Company in writing all information reasonably required by the Company to file such Registration Statement. The Company shall only be obligated to effect one (1) registration pursuant to this Section 10. (ii) The Company shall pay all Registration Expenses (as defined below) in connection with any registration, qualification or compliance hereunder, and Holder shall pay all Selling Expenses (as defined below). "Registration Expenses" shall mean all expenses, except for Selling Expenses, incurred by the Company in complying with the registration provisions herein described, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel and independent public accountants for the Company, blue sky fees, transfer agent fees and expenses and the expense of any special audits incident to or required by any such registration. "Selling Expenses" shall mean selling commissions, underwriting fees and stock transfer taxes applicable to the Warrant Shares. (iii) In the case of the registration effected by the Company pursuant to these registration provisions, the Company will use its best efforts to: (1) keep such registration effective until the earliest of (A) the first anniversary of the effective date of the Registration Statement, (B) such date as all of the Warrant Shares have been resold or (C) such time as all of the Warrant Shares held by Holder can be sold without restriction pursuant to Rule 144 under the Act; (2) prepare and file with the SEC such amendments and supplements to the Registration 6. 7 Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by the Registration Statement; (3) furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as Holder from time to time may reasonably request in order to facilitate the public sale or other disposition of all or any of the Warrant Shares held by Holder; (4) cause all Warrant Shares registered as described herein to be listed on each securities exchange and quoted on each quotation service on which similar securities issued by the Company are then listed or quoted; (5) provide a transfer agent and registrar for all Warrant Shares registered pursuant to the Registration Statement and a CUSIP number for all such Warrant Shares; (6) otherwise use its best efforts promptly to comply with all applicable rules and regulations of the SEC; and (7) file the documents required of the Company and otherwise use its best efforts promptly to obtain, if applicable, and maintain requisite blue sky clearance in (A) all jurisdictions in which any of the Warrant Shares are originally sold and (B) all other states specified in writing by Holder, provided as to clause (B), however, that the Company shall not be required to qualify to do business or consent to service of process in any state in which it is not now so qualified or has not so consented. The Company shall use its best efforts to qualify for use of Form S-3 or other similar form then available under the Act to register the resale of the Warrant Shares and to maintain such qualification during the periods described in paragraph (i). (iv) The Company may delay the filing of the Registration Statement for up to forty-five (45) days by giving written notice to Holder if the Board of Directors of the Company shall have determined in good faith that the Company may be required to disclose any material corporate development which disclosure may have a material effect on the Company. (v) Following the effectiveness of the Registration Statement, the Company may, at any time, but not more than once in any six-month period, suspend the effectiveness of such Registration Statement for up to 30 days, as appropriate (a "Suspension Period"), by giving notice to Holder, if the Company shall have determined that the Company may be required to disclose any material corporate development which disclosure may have a material effect on the Company. The Company agrees to use commercially reasonable efforts to minimize the length of any such suspension. The duration of any Suspension Period shall be added to the period of time that the Company agrees to keep the Registration Statement effective. Holder agrees that, upon receipt of any notice from the Company of a Suspension Period, Holder shall forthwith discontinue disposition of Warrant Shares covered by such Registration Statement or prospectus until Holder (i) is advised in writing by the Company that the use of the applicable prospectus may be resumed, (ii) has received copies of a supplemental or amended prospectus, if applicable, and (iii) has received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference in such prospectus. (vi) The Company will, as expeditiously as possible, notify Holder (1) of the effective date of the Registration Statement and the date when any post-effective amendment to the Registration Statement becomes effective; (2) of any stop order or notification from the SEC or any other jurisdiction as to the suspension of the effectiveness of the Registration Statement; and (3) of the end of any suspension hereunder. 7. 8 (vii) With a view to making available to Holder the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit Holder to sell the Warrant Shares to the public without registration or pursuant to registration, the Company covenants and agrees to: (1) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) the second anniversary of the date hereof or (B) such date as all of the Warrant Shares shall have been resold; (2) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act and maintain registration of its Common Stock under Section 12 of the Exchange Act until the earlier of (A) the second anniversary of the date hereof or (B) such date as all of the Warrant Shares shall have been resold; and (3) furnish to Holder upon request, as long as Holder owns any Warrant Shares, (A) a written statement by the Company that it has complied with the reporting requirements of the Exchange Act, (B) a copy of the most recent annual or quarterly report of the Company, and (C) such other information as may be reasonably requested in order to avail Holder of any rule or regulation of the SEC that permits the selling of any such Warrant Shares without registration. (b) INDEMNIFICATION AND CONTRIBUTION. (i) The Company agrees to indemnify Holder and hold Holder harmless from and against any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) to which Holder may become subject (under the Act, Exchange Act, state securities laws or otherwise) insofar as such losses, claims, damages or liabilities (or actions proceedings or settlements in respect thereof) arise out of, or are based upon, (1) any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, on the effective date thereof or any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (2) the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or (3) any failure by the Company (or its agents) to fulfill any undertaking included in the Registration Statement, and the Company will, as incurred, reimburse Holder for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, loss, damage, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon (1) an untrue statement (or omission) made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of Holder specifically for use in preparation of the Registration Statement, or (2) any untrue statement (or omission) in any Prospectus that is corrected in any subsequent Prospectus that was delivered to Holder by the Company prior to the pertinent sale or sales by Holder. The Company will reimburse Holder for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this section and the possibility that such payments might later be held to be improper, provided, that (1) to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them and (2) such persons shall provide to the Company, upon request, reasonable assurances of their ability to effect any refund, when and if due. (ii) Holder agrees to indemnify and hold harmless the Company from and against any losses, claims, damages or liabilities (or actions or proceedings in respect 8. 9 thereof) to which the Company may become subject (under the Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (1) an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of Holder specifically for use in preparation of the Registration Statement, provided, however, that Holder shall not be liable in any such case for any untrue statement included in any Prospectus which statement has been corrected, in writing, by Holder and delivered to the Company before the sale from which such loss occurred and the Company has had the opportunity to amend or supplement the prospectus prior to such sale, or (2) any untrue statement in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Holder prior to the pertinent sale or sales by Holder, provided, further, however, that the liability of Holder hereunder shall be limited to the proceeds received by Holder from the sale of the Warrant Shares covered by such Registration Statement; and provided, further, however, that the obligations of Holder hereunder shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of Holder. Holder will reimburse the Company for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim up to the limits set forth herein notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this section and the possibility that such payments might later be held to be improper, provided, that (i) to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them and (ii) such persons shall provide to Holder, upon request, reasonable assurances of their ability to effect any refund, when and if due. (iii) Promptly after receipt by any indemnified person of a notice of a claim or the commencement of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 10(b), such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person and the indemnifying person shall have been notified thereof, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall wish, to assume and undertake the defense thereof, with counsel reasonably satisfactory to the indemnified person. After notice from the indemnifying person to such indemnified person of the indemnifying person's election to assume and undertake the defense thereof, the indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate in the reasonable judgment of the indemnified person for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person. (iv) If the indemnification provided for in this Section 10(b) is unavailable to or insufficient to hold harmless an indemnified party under paragraph (i) or (ii) above in respect of any losses, claims, damages or liabilities (or actions proceedings or settlements in respect thereof) referred to therein, then the indemnifying party shall contribute to the amount paid or payable by such indemnified party as result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the 9. 10 relative fault of the Company on the one hand and the Holder on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or Holder on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and Holder agree that it would not be just and equitable if contribution pursuant to this paragraph (iv) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this paragraph (iv). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above in this paragraph (iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph (d), Holder shall not be required to contribute any amount in excess of the amount by which the amount received by Holder (net of Selling Expenses) from the sale of the Warrant Shares to which such loss relates exceeds the amount of any damages which Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (v) The obligations of the Company and Holder under this Section 10(b) shall be in addition to any liability which the Company and Holder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company or Holder within the meaning of the Act. SECTION 11. EXPIRATION DATE. This Warrant shall expire and shall be wholly void and have no effect after 5:00 p.m. (San Francisco time) on the date (the "Expiration Date") which is the earlier of (a) the fifth anniversary of the date hereof, or (b) the closing date of a merger or consolidation of the Company with or into any other entity, including a reverse triangular merger involving the Company (other than a merger or consolidation in which the Holders of the voting power of the Company immediately prior to such consolidation or merger hold a majority of the surviving or resulting entity immediately following such consolidation or merger), provided that, if the last day on which this Warrant may be exercised, or on which it may be exercised at a particular Exercise Price, is a Sunday or a legal holiday or a day on which banking institutions doing business in the city of San Francisco are authorized by law to close, this Warrant may be exercised prior to 5:00 p.m. (San Francisco time) on the next succeeding full business day with the same force and effect and at the same Exercise Price as if exercised on such last day specified herein. SECTION 12. GOVERNING LAW. This Warrant is delivered in the State of California and shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of that State. 10. 11 SECTION 13. MODIFICATION AND WAIVER. Neither this Warrant nor any term hereof may be amended, waived, discharged or terminated other than by an instrument in writing signed by the Company and by the Holder hereof. SECTION 14. NOTICES. Any notice, request or other document required or permitted to be given or delivered to the Holder hereof or the Company shall be delivered or shall be sent by certified mail, postage prepaid, to each such Holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant. SECTION 15. DESCRIPTIVE HEADINGS. The description headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. SECTION 16. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter herein and supersedes all prior and contemporaneous agreements, representation and undertakings of the parties. IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed by its duly authorized officer and to be dated as of October 13, 2000. AVIRON By: /s/ C. Boyd Clarke --------------------- C. Boyd Clarke President and Chief Executive Officer 11. 12 SUBSCRIPTION FORM THE UNDERSIGNED, holder of this Warrant, (1) hereby irrevocably elects to exercise the right of purchase represented by this Warrant for, and to purchase thereunder, ________________ full Warrant Shares of the Common Stock of Aviron provided for therein, (2) makes payment in full of the purchase price of such Warrant Shares, in the amount of $_____________, and (3) requests that certificates for such Warrant Shares be issued in the name of: ---------------------------------------------------------------- (Please print name and address) ---------------------------------------------------------------- (Please insert social security or other identifying number) Dated:_______________________________________________ Signature:____________________________________________________ By:___________________________________________________________ 13 ASSIGNMENT FORM Dated _________, 20__ FOR VALUE RECEIVED, _____________________________________ hereby sells, assigns and transfers unto ________________________________________________ (the "Assignee"),____________________________________________________________________ (please type or print in block letters) ________________________________________________________________________________ (insert address) its right to purchase up to ________ shares of Common Stock of AVIRON represented by this Warrant and does hereby irrevocably constitute and appoint ____________________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises. Signature__________________________________ EX-10.31 3 f67161ex10-31.txt EXHIBIT 10.31 1 CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. EXHIBIT 10.31 AMENDED AND RESTATED PRODUCTION AGREEMENT BETWEEN PACKAGING COORDINATORS, INC. AND AVIRON This Amended and Restated Production Agreement (the "AGREEMENT") made effective as of August 1, 2000 (the "EFFECTIVE DATE") by and between Packaging Coordinators, Inc., a Pennsylvania corporation with offices at 3001 Red Lion Road, Philadelphia, Pennsylvania 19114 (hereinafter called "PCI"); and Aviron, a Delaware corporation with offices at 297 N. Bernardo Avenue, Mountain View, California 94043 (hereinafter called "AVIRON"). PCI and Aviron may be referred to herein as a "PARTY" or, collectively, as "PARTIES." WITNESSETH WHEREAS, PCI specializes in packaging for the pharmaceutical industries and has certain technical and commercial information and know-how relating to, among other things, performing assembly functions and packaging of pharmaceutical products. WHEREAS, Aviron is a corporation that develops, conducts stability trials, registers, and intends to market pharmaceutical products, and is the owner of certain proprietary technical and commercial information and know-how relating to, among other things, the formulation and development of such products. WHEREAS, Aviron desires to engage PCI to provide certain services to Aviron in connection with the manufacture of certain of Aviron's products; and WHEREAS, the Parties previously entered into an Agreement made effective as of October 31, 1997 providing for such manufacture (the "ORIGINAL PRODUCTION AGREEMENT"); WHEREAS, the parties desire to reallocate the responsibilities for such manufacture between them and to amend and restate the Original Production Agreement in its entirety; NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein and intending to be legally bound hereby, the Parties agree as follows: 2 1. DEFINITIONS. The following terms as used in this Agreement shall have the meanings set forth in this Article unless otherwise specifically provided herein: 1.1 "AFFILIATE(s)" shall mean any corporation, firm, partnership or other entity which controls, is controlled by or is under common control with a Party. For purposes of this definition, control shall mean the ownership of at least fifty (50%) percent of the voting share capital of such entity or any other comparable equity or ownership interest. 1.2 "AGENCY" shall mean any governmental regulatory authority involved in regulating any aspect of the development, Manufacture, Storage and sale of the Product. 1.3 "AVIRON AREA" shall mean the area reserved for [ * ] Production pursuant to, and more fully described in, the Facility Reservation Agreement. 1.4 "AVIRON FACILITY" shall mean the portion of the PCI Facility that is subject to the Facility Reservation Agreement and which is dedicated to [ * ] Production, or such other facility as may be mutually agreed in writing by the Parties. 1.5 "AVIRON PRODUCTION EQUIPMENT" shall mean any [ * ] equipment purchased by Aviron for use by PCI pursuant to this Agreement, including any such equipment set forth in Appendix 1 attached hereto, which may be amended from time to time. 1.6 "CGMP" shall mean all the laws, regulations and standards relating to [ * ] Production, including but not limited to, the United States Food And Drug Administration (FDA) current Good Manufacturing Practices, as set forth in the Code Of Federal Regulations (CFR), and the EEC Good Manufacturing Guidelines, Volume IV as such Regulations and Guidelines may be revised from time to time, and any other applicable laws, guidelines and regulations. If there should be a conflict between the FDA and EEC standards, the more stringent of the two shall apply. Aviron shall be responsible to advise PCI of cGMP and other Agency requirements which shall apply to [ * ] Production conducted hereunder. 1.7 "DELIVERY DATE" shall mean the date on which Product is delivered to the carrier for shipment from PCI to Aviron pursuant to Section 7.2. 1.8 "FACILITY RESERVATION AGREEMENT" shall mean that certain agreement dated October 31, 1997, as amended, relating to the buildout and use of the Aviron Facility, a copy of which is attached hereto as Appendix 5. 1.9 "FDA" shall mean the United States Food and Drug Administration and any successor agency having substantially the same function. 1.10 "MATERIALS" shall mean all components utilized in [ * ] Production except for the [ * ] Product. 1.11 "MICHIGAN" shall mean the Regents of the University of Michigan, a constitutional corporation of the State of Michigan with offices located at Wolverine Tower, Room 2071, 3003 South State Street, Ann Arbor, Michigan, 48109-1280, USA. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 2 3 1.12 "MICHIGAN AGREEMENT" shall mean a certain Materials Transfer and Intellectual Property Agreement between Aviron and Michigan dated 24 February 1995. 1.13 "PACKAGING SPECIFICATIONS" shall mean the procedures, Standard Operating Procedures, components specifications, test results, requirements, quality standards data and other documentation with respect to Materials, [ * ] Production, Product Production Equipment and Storage, including, without limitation, those appended hereto as Appendix 3, as the same may be amended from time to time, which shall not include requirements relating to [ *] Production. 1.14 "PCI FACILITY" shall mean PCI's facility at [ * ], or such other facility as may be mutually agreed in writing by the Parties. 1.15 "PCI PRODUCTION EQUIPMENT" shall mean all of the [ * ] by PCI as set forth in Appendix 2, which may be amended from time to time. 1.16 "[ * ] PRODUCT" shall mean the product that is the result of [ * ] Production. 1.17 "[ * ] PRODUCTION" shall mean the blending and aseptic filling of Vaccine in a Syringe. 1.18 "[ * ] PRODUCT SPECIFICATIONS" shall mean the procedures, Standard Operating Procedures, test results, requirements, quality standards data and other documentation developed by Aviron with respect to [ * ] Product, including without limitation those appended hereto as Appendix 4, as the same may be amended from time to time. 1.19 "PRODUCT" shall mean the product which is the result of [ * ] Production. 1.20 "PROPRIETARY INFORMATION" shall have the meaning set forth in Article 12. 1.21 "[ * ] AREA" shall mean the area at the Aviron Facility reserved for [ * ] Production as designated by Aviron in consultation with PCI. 1.22 "[ * ] PRODUCTION" shall mean assembly, labeling and packaging of [ * ] Product and Storage, in accordance with the Packaging Specifications. 1.23 "STORE" or "STORAGE" shall mean the storage of [ * ], as set forth in the Packaging Specifications. 1.24 "STORED MATERIALS" shall mean all Materials, Syringes and other supplies to be used by Aviron in connection with [ * ] Production (other than [ * ] and vaccine). 1.25 "SYRINGE" shall mean the unfilled sprayer and stopper, as set forth in the Packaging Specifications. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 3 4 1.26 "VACCINE" shall mean the bulk cold-adapted influenza vaccine, as set forth in the Packaging Specifications. 2. REPLACEMENT OF ORIGINAL PRODUCTION AGREEMENT. By entering into this Agreement, the Parties hereby amend and restate the Original Production Agreement in its entirety. Except for rights and obligations accrued as of the Effective Date, all rights and obligations arising thereunder are hereby terminated as of the Effective Date. 3. PRODUCTION EQUIPMENT 3.1 Installation and Qualification. Each Party will, at its sole expense, provide, install in the [ * ] Area, validate and qualify its respective Production Equipment in compliance with cGMP. Aviron will perform process validation on the packaging line and PCI will assist Aviron in the validation process with its operators and engineers. 3.2 Maintenance. PCI agrees to maintain and operate the Aviron and PCI Production Equipment used for [ * ] Production, in all material respects, in accordance with (a) cGMPs, (b) applicable Agency requirements and (c) the Packaging Specifications. As to the Aviron Production Equipment, PCI shall be responsible for routine maintenance in accordance with the equipment manufacturers' guidelines, cGMPs and other applicable laws and regulations, and for other repairs required as a result of the negligence or intentional misconduct of PCI or its employees. Aviron shall bear all other expenses incurred for the maintenance (other than routine maintenance), repair and/or replacement, as needed of the Aviron Production Equipment. PCI shall be responsible for assuring that the PCI Production Equipment is Year 2000 compliant as may be necessary. Aviron shall be responsible for all expenses and maintenance (including routine maintenance) for any other equipment, used in [ * ] Production, including, without limitation, the freezer, but not including, in any case, the building equipment required to be maintained by PCI pursuant to the Facility Reservation Agreement. For the purpose of this Agreement, routine maintenance shall mean preventive maintenance and calibration, as set forth in the Packaging Specifications. 3.3 Ownership. Aviron shall at all times hold all right, title and interest in the Aviron Production Equipment. PCI shall not, at any time during the term of this Agreement, encumber the Aviron Production Equipment. PCI shall at all times hold all right, title and interest in the PCI Production Equipment. Aviron shall not, at any time during the term of this Agreement, encumber the PCI Production Equipment. Upon the other Party's request, each Party shall provide evidence to the other Party's reasonable satisfaction indicating that Party's Production Equipment is insured and that such insurance covers the other Party (as an additional insured) for any loss or damage to the other Party, or its property or employees, except where such loss or damage is a result of the negligence or intentional misconduct of the other Party or its employees. 4. COORDINATION; SUPERVISION WITHIN THE [ * ] AREA 4.1 Aviron Technical Representative. Aviron shall have the right to have one or more representatives in the [ * ] Area during [ * ] Production to (a) review [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 4 5 Production Equipment and [ * ] Production, (b) review any relevant records in connection with such [ * ] Production and assess its compliance with cGMP and quality assurance standards set forth in the Packaging Specifications and (c) discuss any related issues with PCI's management. Aviron's technical representatives, when in the [ * ] Area, shall comply with PCI's rules and regulations. Aviron shall indemnify and hold PCI and its Affiliates harmless from all liability, including claims by Aviron's technical representatives for workers' compensation, resulting from the presence of Aviron's technical representatives at the Aviron Facility except for claims resulting from the negligent or willful misconduct on the part of PCI and its employees or breach by PCI of its obligations hereunder or under the Facility Reservation Agreement. 4.2 Responsibilities. Aviron's technical representative, if present, shall not have responsibility for the supervision of PCI's personnel conducting [ * ] Production. However, if at any time Aviron's technical representatives feel that PCI is operating in a manner inconsistent with this Agreement, he/she is to notify PCI immediately to cease operations until such condition is remedied. PCI will immediately cease operations and will not recommence [ * ] Production operations without Aviron's approval. PCI shall use its best efforts to remedy any such condition and Aviron shall authorize PCI to resume [ * ] Production upon reasonable satisfaction that such condition has been remedied. Nothing herein shall amend or alter the status of PCI as an independent contractor. 4.3 Coordination of [ * ] Production. Aviron and PCI shall mutually agree in writing upon and arrange for each of the following activities and any additional activities that are necessary or useful to permit Aviron to undertake [ * ] Production at the Aviron Facility or to permit the Parties to coordinate [ * ] Production with [ * ] Production: (a) Provision for the delivery of materials and equipment for [ * ] Production; (b) Transfer of [ * ] Product at designated times from Aviron to PCI in a manner that ensures Storage in compliance with the Packaging Specifications at all times; (c) Delivery of Product pursuant to Section 7.2 in a manner that ensures Storage in accordance with the Packaging Specifications; (d) Communication as to other issues arising from Aviron's conduct of [ * ] Production, PCI's conduct of [ * ] Production, other activities of PCI at the Aviron Facility pursuant to the Facility Reservation Agreement, or coordination of [ * ] Production; and (e) Designation of a representative of each party to coordinate and facilitate the activities of (a) to (d). [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 5 6 5. FORECAST, PURCHASE AND SUPPLY OF PRODUCT 5.1 [ * ] Production. During the term of this Agreement, PCI shall perform [ * ] Production of such quantities of Product as may be set forth on orders placed by Aviron under this Agreement. All [ * ] Production and deliveries of Product hereunder shall be governed by the terms of this Agreement which shall supersede any inconsistent provisions in any order delivered by Aviron to PCI. 5.2 Forecasts. On or before September 30 and June 15 of each year during the term of this Agreement, Aviron will provide PCI with a written eighteen (18) month rolling forecast, to be updated in six (6) month intervals, of the quantity of Product which Aviron expects to require from PCI during each of the next eighteen (18) months. The first six months of the first such rolling forecast shall be binding upon Aviron, subject to the provisions of Section 5.6 below. Aviron's first forecast shall include (a) the required Delivery Date for the binding portion of the forecast and (b) the quantity of Product to be delivered. 5.3 Orders. According to the forecast, Aviron will provide PCI with one or more orders at six-month intervals. Each such order will set forth (a) the quantity of Product ordered for delivery during the six months after the date on which the order is deemed to be received, (b) the requested Delivery Date for such order, (c) the quantity of Product to be delivered to Aviron as a quality control sample and (d) the quantity of Product to be delivered on the Delivery Date in each form of packaging. Such order shall be delivered no later than ninety (90) days prior to the earliest requested Delivery Date. 5.4 Confirmation; Orders Greater than Forecast. Within fifteen (15) days of receipt of any order, PCI shall confirm in writing such order and the Delivery Date therefor. PCI shall use reasonable commercial efforts to supply the quantity of Product ordered, regardless of the quantity forecast by Aviron, subject to the capacity limitations of the Aviron and PCI Production Equipment and to the ability of Aviron to supply [ * ] Product to PCI pursuant to Section 6.2. In the event that PCI is unable to fill any order, PCI shall so notify Aviron in its written confirmation. 5.5 Amendment of Orders. PCI will use best efforts to accommodate a request to amend an order to increase or decrease the quantity of Product to be delivered. 5.6 Cancellations. Aviron may cancel any order by providing PCI written notice at any time prior to the confirmed Delivery Date. In the event that Aviron cancels any order for Product, Aviron shall pay PCI at the rates set forth in Section 13.1 for all Product packaged under such cancelled order prior to the date of cancellation, whether or not such Product has been or will be delivered, shall also reimburse PCI for non-cancellable direct costs reasonably incurred by PCI in connection with performance of such order up to the time of receipt of such notice, including, without limitation, any Materials purchased or obtained by PCI not earlier than ten (10) weeks prior to the confirmed Delivery Date, based upon Aviron's binding forecast (as set forth in Section 5.2 above). [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 6 7 5.7 Supply Commitments. Subject to the limitations set forth in Section 5.4, PCI represents and warrants that it has the ability to, and hereby covenants that it will, supply the quantity of Product ordered by Aviron. 5.8 Limited Warranty. PCI WARRANTS THAT PRODUCT DELIVERED HEREUNDER WILL (a) BE PACKAGED BY PCI IN ACCORDANCE WITH cGMP AND OTHER APPLICABLE FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, INCLUDING BUT NOT LIMITED TO FDA REGULATIONS, (b) BE PACKAGED IN ACCORDANCE WITH THE PACKAGING SPECIFICATIONS AND (c) CONFORM AS OF THE DELIVERY DATE TO THE APPLICABLE PACKAGING SPECIFICATIONS, AS THEN IN EFFECT, SUBJECT TO NONCONFORMITIES IN [ * ] PRODUCT EXISTING AT THE TIME OF DELIVERY TO PCI. EXCEPT AS SET FORTH HEREIN, PCI MAKES NO WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PRODUCTS, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. 6. SUPPLY AND PROCESSING OF [ * ] PRODUCT, SYRINGES AND MATERIALS 6.1 License; Inventions. (a) Aviron hereby grants to PCI, during the term of this Agreement, a non-exclusive, non-transferable, royalty-free license during the term of this Agreement to use the data, information and technology provided by Aviron related to the Vaccine and the [ * ] Product for the limited purpose of assisting PCI in carrying out its obligations set forth in this Agreement. (b) PCI agrees that any and all ideas, improvements, inventions and works of authorship conceived, written or first reduced to practice whether by PCI's employees alone or in conjunction with Aviron, if any, that are related to the Vaccine or [ * ] Production (the "AVIRON INVENTIONS") shall be the sole and exclusive property of Aviron and PCI hereby assigns to Aviron all right, title and interest in and to any and all such Aviron Inventions. (c) Aviron agrees that any and all ideas, improvements, inventions and works of authorship conceived, written or first reduced to practice in the performance of this Agreement that are related to [ * ] Production (the "PCI Inventions") shall be the sole and exclusive property of PCI and Aviron assigns all right, title and interest in and to any and all such PCI Inventions. PCI hereby grants to Aviron a non-exclusive, worldwide, royalty-free license to use and practice such PCI Inventions for the manufacture, by or for Aviron of any of Aviron's products. Such license shall survive the termination or expiration of this Agreement. 6.2 Supply of [ * ] Product. Aviron shall, at Aviron's expense, on a timely basis, deliver or cause to be delivered to the [ * ] Area or made available at the Aviron Facility, sufficient quantities of [ * ] Product meeting the [ * ] Product Specifications such that PCI can fill orders for the Product submitted pursuant to Section 5.3. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 7 8 6.3 Risk of Loss of [ * ] Product. PCI shall bear all risk of loss for [ * ] Product delivered or made available to PCI under Section 6.2 and for Stored Materials, which loss results from PCI's failure to comply with the Packaging Specifications or from the negligence or intentional misconduct of PCI or its employees. Notwithstanding the foregoing, PCI shall not bear the risk of loss for normal manufacturing losses, up to [ * ] of all [ * ] Product and/or Stored Materials delivered or made available to PCI by Aviron. If, for any purpose under this Agreement, PCI is required to obtain Vaccine or Syringes from Aviron at PCI's expense, Aviron's charges to PCI for such Vaccine or Syringes will be equal to Aviron's direct costs to deliver such Vaccine or Syringes to PCI. 6.4 Supply of Materials and Inventories. PCI shall purchase all Materials, including but not limited to those set forth in the Packaging Specifications, required to complete the [ * ] Production of the Product. PCI shall provide Aviron with an inventory of all Stored Materials and Product on a regular schedule, and shall develop computer systems to enable Aviron to track and monitor inventories, all as required by Aviron. Detailed inventory transaction reports will be provided to Aviron by PCI on a schedule to be agreed upon by the parties. In the event Aviron desires to obtain the Materials (other than the cartons, inserts or lids) from sources other than PCI, it shall have the right to do so, at its own expense, provided Aviron notifies PCI at least ninety (90) days in advance. In the event Aviron is able to obtain cartons, inserts or lids (in accordance with the Packaging Specifications) at a cost less than the prices then in effect from PCI, Aviron shall notify PCI and PCI shall have an opportunity to agree to match such lower prices. In the event PCI does not agree to such lower prices, Aviron shall be permitted to obtain such Materials from sources other than PCI, provided Aviron notifies PCI at least ninety (90) days in advance. In the event Aviron purchases such Materials itself, the price for Product shall be adjusted as set forth in Section 13. 6.5 Labels and [ * ] Production. (a) Thirty (30) days prior to the intended date of commencement of commercial production, Aviron shall provide PCI with: (i) any particular Packaging Specifications it may have with respect to labels and packaging materials and (ii) camera-ready artwork for reproduction on the labels, package inserts and packaging materials. Such information shall include, but need not be limited to, the quality, weight and color of the packaging materials and labels, the type and colors of ink to be used in printing the labels or packaging materials and any special requirements for the labels or packaging for the Product to be delivered to specific countries. The method to assign lot numbers will be set forth in the Packaging Specifications. (b) PCI shall reproduce the artwork on the labels, packages inserts and packaging materials and imprint the appropriate lot number on each individual unit and each carton of Product in accordance with the designated lot numbers. PCI shall conduct all [ * ] Production in accordance with the Packaging Specifications. (c) In the event that Aviron desires to change any label, packaging insert or packaging Material for all or any portion of the Product, Aviron shall supply PCI with new camera-ready artwork and work with PCI to promptly coordinate the use of such [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 8 9 new artwork into [ * ] Production process. In such event, Aviron shall purchase from PCI, at a price equal to PCI's cost, all Materials in PCI's inventory made obsolete by such changes. 6.6 [ * ] Production of Product. (a) PCI shall conduct [ * ] Production in accordance with the Packaging Specifications and applicable federal, state and local laws and regulations including, without limitation, cGMP. PCI shall notify Aviron of any difficulty in meeting Packaging Specifications or any deviation therefrom immediately upon discovery of such difficulty. PCI shall not conduct [ * ] Production nor Store Stored Materials or Product at any other location other than the Aviron Facility without the prior written approval of Aviron, and shall keep all Product within the [ * ] Area. Before, during and after [ * ] Production of each batch of Product, PCI shall monitor the [ * ] Production and Storage environments (other than the freezers) and keep such records as all of the foregoing are required by the Packaging Specifications and cGMP. Each Party shall promptly notify the other of any new instructions or specifications required by the FDA or the United States Federal Food, Drug and Cosmetic Act, and of other applicable rules and regulations, and shall confer with each other with respect to the best means to comply with such requirements and shall [ * ] of implementing such changes on an [ * ]. (b) The Parties agree that it is their intention to identify ways in which to enhance efficiencies in the [ * ] Production and so reduce production costs ("COST REDUCTION MEASURES"). In the event PCI expends amounts in undertaking Cost Reduction Measures, including, for example, the purchasing of additional production equipment and provided such costs are agreed upon in advance by the parties in writing, Aviron shall reimburse PCI for such amounts. Any additional equipment paid for by Aviron under this Section 6.6(b) shall be deemed Aviron Production Equipment. 6.7 Product Specifications; Testing. (a) Certain of the Packaging Specifications and the [ * ] Product Specifications are appended to this Agreement as Appendix 3 and Appendix 4, respectively. The Parties acknowledge that the Packaging Specifications set forth in Appendix 3 may need to be refined and modified as the Parties gain experience with [ * ] Production, testing and use of Product. Accordingly, the Parties agree to negotiate in good faith to modify Appendix 3 from time to time as the Parties' experience with [ * ] Production, testing and use of Product warrant; and PCI further agrees that it will facilitate changes to Appendix 3 that are necessary or appropriate in light of FDA or other regulatory requirements. The Parties agree to allocate on an equitable basis any special costs of developing and implementing revised procedures. Aviron, at its discretion but after consultation with PCI, may modify Appendix 4 and Aviron will bear all costs of developing and implementing such revised procedures. (b) Product supplied hereunder will conform to the Packaging Specifications, and such conformance will be verified in accordance with the testing standards and procedures specified therein. PCI will forward a sample of each batch of Product to Aviron for testing and will supply Aviron with a certificate of analysis ("CERTIFICATE OF ANALYSIS") confirming that such Product produced meets the Packaging Specifications. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 9 10 6.8 FDA and Regulatory Support. (a) PCI agrees to provide Aviron with letters of access to any files and documents required by the FDA or regarding [ * ] Production. Aviron shall have sole responsibility for obtaining from any Agency all permits and/or licenses necessary or required for the sale, marketing or commercialization of Product. Aviron shall be responsible for all other filings necessary for approval and import of Product into countries outside the United States. PCI further agrees to use reasonable commercial efforts to assist Aviron in obtaining any government or Agency approval that may be required for the marketing of Product in any country. Aviron shall provide PCI with written notice of any additional regulatory requirements of countries other than the United States that relate to [ * ] Production. PCI shall use its reasonable commercial efforts to comply with such additional requirements and shall provide Aviron with prompt written notice of whether it is able to do so. PCI will provide Aviron copies of all supporting documentation in PCI's possession required for FDA licensing of the Product. Aviron will hold the FDA and any other Agency license(s) for the Product. (b) Upon request, PCI shall allow access to the Aviron Facility and inspection of the [ * ] Area by FDA or other Agency officials. In the event that the [ * ] Area is audited or inspected by an Agency, PCI will notify Aviron immediately by telephone and will provide Aviron with prompt written notice of such audit. Aviron will have, at its option, the opportunity to observe the audit for inspection, and to jointly cooperate with PCI in any response. PCI will also promptly provide Aviron with copies of any correspondence or reports relating to such audit or inspection. 6.9 cGMP Compliance and QA Audits. Within ten days of Aviron's written request, PCI shall supply Aviron with copies of PCI's manufacturing records, including its batch records, for the purposes of assuring product quality and compliance with the Packaging Specifications. Any found discrepancies, other than discrepancies resulting from directions received from Aviron or its representatives, will be reported to PCI and PCI will within thirty (30) days correct said discrepancies to Aviron's reasonable satisfaction. Failure to do so will give Aviron the right to terminate this Agreement pursuant to Section 10.5. Aviron's failure to exercise its right to audit the PCI Facility will not represent a waiver of any future exercise of this right or of any other rights under this Agreement, nor does it represent acceptance of any conditions past or present that might exist or result from such conditions at the PCI Facility. Aviron acknowledges that all copies of PCI's manufacturing records shall be subject to the confidentiality provisions of Article 12. 6.10 Compliance with Laws. PCI shall comply with all applicable present and future orders, regulations, requirements and laws of any and all applicable, federal, state, and local authorities and Agencies, including without limitation all laws and regulations of applicable to the transportation, storage, use, handling and disposal of hazardous materials. PCI represents and warrants to Aviron that it has and will maintain during the term of this Agreement all government permits, including without limitation health, safety and environmental permits, necessary for the conduct of the actions and procedures that it undertakes pursuant to this Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 10 11 6.11 Documentation. PCI shall keep, for a period of [ * ], complete, accurate and authentic accounts, notes, data and records of the work performed under this Agreement, including those pertaining to the methods and Aviron Facility used for [ * ] Production, testing, and distribution of Product in accordance with the Packaging Specifications, cGMP, Michigan Agreement and other applicable laws and regulations. 6.12 Rework. PCI shall not rework any batch of Product without Aviron's prior written consent, which consent shall not be unreasonably withheld. 6.13 Samples. PCI shall retain quantities of samples of Product in accordance with cGMP. Within ten (10) days following Aviron's written request, PCI shall provide Aviron, at Aviron's expense, with up to one-half the original amount of the retained samples. 6.14 Storage and Handling. PCI shall Store and handle Stored Materials and Product as required by the Packaging Specifications. 6.15 Corrective Action. In the event any Agency shall request or order, or if Aviron shall determine to undertake, any corrective action with respect to Products supplied hereunder, including any Product recall, customer notice, restriction, change, corrective action or market action, and the cause or basis for such corrective action results from the material breach by PCI of Section 5.8, then PCI shall replace and reship only the lot(s) of Products which are subject to such corrective action. PCI shall pay all costs incurred in replacing such Product, including the [ * ] Product, Materials and shipping costs, subject to the limitations set forth in Section 9.2. Any costs resulting from corrective actions for any other cause, including but not limited to the Packaging Specifications or product tampering after the Products have been shipped from PCI's Facility, shall be the sole responsibility of Aviron. Aviron shall promptly notify PCI in writing upon the occurrence of any such corrective action (or, to the extent practicable, not less than ten days prior thereto). 7. DELIVERY AND ACCEPTANCE OF FINISHED PRODUCT 7.1 Quality Control Sample of Product. Prior to the delivery of any batch of Product, PCI shall provide Aviron with (a) a quality control sample of such batch for the purpose of confirming that such batch meets the Packaging Specifications, (b) a copy of the batch records for such batch, together with written confirmation that such batch records have been reviewed and approved by PCI's quality assurance unit and (c) a Certificate of Analysis. The quality control sample shall consist of the number of individual Product units specified in the Packaging Specifications. No delivery of Product shall be deemed to have been made until Aviron accepts or is deemed to have accepted the quality-control sample and associated documentation in accordance with the Packaging Specifications and Section 7.3. 7.2 Delivery of Product. All deliveries shall be shipped [ * ], unless otherwise agreed upon by PCI and Aviron in a particular order. [ * ] shall be responsible for [ * ] and [ * ] and shall [ * ] of [ * ] of the Product [ * ] of [ * ] to [ * ]. 7.3 Acceptance and Rejection of Product. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 11 12 (a) Aviron may reject any quality control sample or batch delivery which does not conform with the Packaging Specifications or with applicable documentation or other requirements. Any such notice of rejection shall be in writing and shall indicate the reasons for such rejection. (b) In order to reject or put on hold delivery of Product based on testing of a quality control sample, Aviron must give written notice to PCI of Aviron's rejection of any delivery within (i) [ * ], or (ii) [ * ] after receipt of the applicable quality control sample, whichever is later (the "Acceptance Period"). If no such notice of rejection/hold is received during such time period, Aviron shall be deemed to have accepted such quality control sample upon the expiration of the Acceptance Period, and PCI shall be authorized to make delivery of the Product. (c) After notice of rejection/hold is given, Aviron shall cooperate with PCI in determining whether rejection is necessary or justified and, in situations in which the type of damage so warrants, provide PCI with the allegedly non-conforming Product for PCI evaluation. PCI will evaluate the cause for such non-compliance. PCI shall notify Aviron as promptly as reasonably possible whether it accepts Aviron's basis for any rejection. If PCI disagrees with Aviron's determination that certain Product does not meet the Packaging Specifications, [ * ]. Whether or not PCI accepts Aviron's basis for rejection, promptly on receipt of a notice of rejection/hold of Product, PCI shall use reasonable commercial efforts at Aviron's request to replace such rejected Product. [ * ] shall bear the expenses of such replacement. If [ * ], Aviron guarantees to purchase that Product and any replacement Product which PCI has delivered to Aviron at the price set forth in Section 13.1. [ * ]. 7.4 Destruction of Product. Neither Party may destroy any Product alleged not to meet Packaging Specifications until [ * ]. Thereafter, upon Aviron's written request, PCI shall return to Aviron or promptly destroy any rejected Product. The Party determined [ * ] shall bear all costs for such return or destruction. In the event PCI destroys such Product, PCI shall provide Aviron with certification of such destruction. 7.5 Replacement Product. In the event that PCI bears responsibility for the failure of Product, promptly following the rejection of any Product, Aviron shall deliver sufficient quantities of [ * ] Product to the Aviron Facility in order for PCI to comply with Section 7.37.3(c) provided that the production and delivery of such additional [ * ] Product is reasonably feasible, and can reasonably result in the delivery of completed final Product by PCI in sufficient time for market distribution . All direct costs incurred by Aviron in connection with acquiring, producing and delivering such quantities of [ * ] Product shall be the sole responsibility of PCI, subject to the limitations set forth in Section 9.2. In accordance with the terms of Sections 6.6 and 6.7, PCI shall Manufacture enough Product to deliver to Aviron the amount of Product originally ordered for the rejected delivery and shall do so as promptly as technically feasible. 8. REPRESENTATIONS AND WARRANTIES 8.1 Existence and Power. Each Party hereby represents and warrants to the other Party that such Party (a) is duly organized, validly existing and in good standing under [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 12 13 the laws of the state in which it is organized, (b) has the power and authority and the legal right to own and operate its property and assets, and to carry on its business as it is now being conducted, and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not materially adversely affect such party's ability to perform its obligations under the Agreement. 8.2 Authorization and Enforcement of Obligations. Each Party hereby represents and warrants to the other Party that such Party (a) has the power and authority and the legal right to enter into the Agreement and to perform its obligations hereunder and thereunder and (b) has taken all necessary action on its part to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder. The Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation, enforceable against such Party in accordance with its terms. 8.3 No Consents. Each Party hereby represents and warrants to the other Party that all necessary consents, approvals and authorizations of all Agencies and other persons required to be obtained by such Party in connection with the Agreement have been obtained. 8.4 No Conflict. Each Party hereby represents and warrants to the other Party that the execution and delivery of the Agreement and the performance of such party's obligations hereunder and thereunder (a) does not conflict with or violate any requirement of applicable laws or regulations or any material contractual obligation of such Party and (b) does not materially conflict with, or constitute a material default or require any consent under, any material contractual obligation of such Party. 8.5 Non-Debarment. PCI represents and warrants that PCI is not and does not, to the best of its knowledge, use in any capacity the services of any person barred by an applicable Agency (including, but not limited to, the FDA) from providing such services. PCI covenants it will not in the performance of its obligations hereunder use in any capacity the services of any person that it knows is barred by an applicable Agency and will immediately disclose in writing to Aviron promptly, before it becomes aware of any person who is performing services hereunder is so barred or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of PCI's knowledge, threatened, relating to the debarment of PCI or any person performing services hereunder by any applicable Agency. 9. INDEMNIFICATION 9.1 Indemnity. (a) Except to the extent that claims, suits, losses, damages, costs, fees or expenses arise or result from any negligent or wrongful act or omission of PCI or PCI's breach of Section 5.8, Article 8, or Article 16, Aviron agrees to indemnify, hold harmless and defend PCI and PCI's directors, officers, employees and agents, and the directors, officers, employees and agents of any PCI parent, subsidiary or related company (the "PCI Indemnitees") from and against any and all claims, suits, losses, damages, costs, fees and expenses resulting from or arising out of Primary Production, the development, creation, sale, [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 13 14 distribution, possession or use of Product by any person, or asserted by or on behalf of [ * ] against the PCI Indemnitees, including without limiting the generality of the foregoing any damages, losses or liabilities whatsoever with respect to death or injury to person or damage to property. (b) To the extent that such claims, suits, losses, damages, costs, fees or expenses arise or result from any negligent or wrongful act or omission of PCI or the breach by PCI of Section 5.8, Article 8 or Article 16, PCI agrees to indemnify, hold harmless and defend Aviron and Aviron's directors, officers, employees and agents, and the directors, officers, employees and agents of any Aviron parent, subsidiary or related company (the "AVIRON INDEMNITEES") from and against any and all claims, suits, losses, damages, costs, fees and expenses resulting from or arising out of [ * ], including without limiting the generality of the foregoing any damages, losses or liabilities whatsoever with respect to death or injury to person or damage to property. 9.2 Limitation of Liability. (a) Notwithstanding anything to the contrary in this Agreement, PCI's liability (individually or in the aggregate) under this Agreement or in any manner arising out of this Agreement or its [ * ] Production, Storage, use or handling of the Product shall be limited as set forth in this Section 9.2(a) and Section 9.2(b). PCI's liability shall not exceed the lesser of (i) the sum of all [ * ] Production Agreement for Product [ * ] during, the twelve (12) months immediately preceding the event which resulted in such liability; and [ * ]. (b) IN NO EVENT SHALL EITHER AVIRON OR PCI BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS, DAMAGE, COSTS OR EXPENSES OF ANY NATURE WHATSOEVER, INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS. 9.3 Notice and Payment. (a) Promptly after acquiring knowledge of any damage, loss, deficiency, liability, encumbrances, penalty, cost, expense, action, suit, investigation, proceeding, assessment, audit, judgment, or claim against which Aviron or PCI must indemnify the other pursuant to Section 9.1 (the "INDEMNIFYING PARTY"), the Indemnified Party shall give to the Indemnifying Party written notice thereof, specifying the nature of the claim for indemnity (the "CLAIM NOTICE"); provided, however, that the delay or failure to give a Claim Notice shall not be a bar to indemnification hereunder, except and to the extent that the indemnifying Party is materially prejudiced by the delay or failure to give such Claim Notice. (b) With respect to any claim, action, suit, investigation, proceedings, demand, assessment or audit brought by a Third Party ("THIRD PARTY MATTER"), the Indemnifying Party shall have the right, at its own expense, to contest and defend against or attempt to settle or compromise (subject to the limitations set forth below), such Third Party Matter and any damages, losses, deficiencies, liabilities, encumbrances, penalties, costs, expenses and assessments ("DAMAGES") resulting therefrom. If the Indemnifying Party so elects, such defense shall be instituted promptly and the Indemnifying Party shall receive from the [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 14 15 Indemnified Party all necessary and reasonable cooperation in said defense. If the Indemnifying Party is successful in respect of any counterclaim asserted by it in defending a Third Party Matter, any sums recovered shall first be applied to reimburse the Indemnifying Party for its reasonable out-of-pocket expenses in connection therewith, and any sums in excess of such amount shall be paid to the Indemnified Party. (c) In the event that an Indemnifying Party, after written notice from the Indemnified Party, elects not to defend the same or fails to so notify the Indemnified Party within thirty (30) days of the giving of the Claim Notice, the Indemnifying Party shall be deemed to have elected not to defend and if the Indemnified Party elects to contest and defend against such claim, it shall have the right to do so with counsel of its own choosing, at the cost and expense of the Indemnifying Party. (d) Neither the Indemnified Party nor the Indemnifying Party shall have the right to settle, compromise or make payment with respect to any claim, demand, or litigation without the written consent of the other party, except that the Indemnified Party shall have the right to settle, compromise or make payment with respect to any claim, demand, or litigation against it without such consent if it has given a Claim Notice to the Indemnifying Party, and (i) the Indemnifying Party has elected, or shall be deemed to have elected, not to defend the same or (ii) the Indemnifying Party fails to promptly attempt to settle or compromise the claim. 9.4 PCI Insurance. Throughout the term of this Agreement and for five (5) years thereafter, PCI shall maintain the following minimum insurance coverage with insurance carriers reasonably acceptable to Aviron: (a) Comprehensive General Liability in the amount of at least five million dollars ($5,000,000) combined single limit, including contractual coverage for bodily injury and property damage, which shall name Aviron as an additional insured and may not be canceled by PCI or its insurer without ten (10) days prior written notice to Aviron; and (b) Worker's Compensation Insurance for PCI's employees to the full extent required by applicable state law. 9.5 Aviron Insurance. Aviron shall purchase and maintain, during the term of this Agreement and for a period of five (5) years thereafter, at its own cost, liability insurance coverage in an amount of at least five million dollars ($5,000,000) and worker's compensation insurance coverage for Aviron's employees in amounts required pursuant to applicable state laws, from an insurer reasonably acceptable to PCI to cover liabilities which may arise under this Agreement, which insurance shall name PCI as an additional insured and may not be canceled by Aviron or its insurer without ten (10) days prior written notice to PCI. 10. TERM AND TERMINATION 10.1 This Amended and Restated Agreement shall be effective as of the Effective Date and, unless earlier terminated as provided herein, shall continue through December 31, 2004. The term of this Agreement may be extended by Aviron upon [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 15 16 six (6) months prior written notice to PCI, for up to two (2) additional periods of three (3) years each, provided that prior to the exercise of the first extension, Aviron shall (a) have ordered PCI to perform [ * ] Production at a rate which would result in production of at least [ * ] Syringe units of Product on an annualized basis (including any quantities subject to a binding forecast), and (b) then be in compliance, in all material respects, with the terms of this Agreement and the Facility Reservation Agreement; and prior to the exercise of the second extension, Aviron shall (a) have ordered PCI to perform [ * ] Production at a rate which would result in production of least [ * ] Syringe units of Product on an annualized basis (including any quantities subject to a binding forecast), and (b) then be in compliance, in all material respects, with the terms of this Agreement and the Facility Reservation Agreement. 10.2 Aviron may terminate this Agreement at any time upon twelve (12) months prior written notice to PCI; provided, however that in the event that Aviron terminates because it desires to undertake [ * ] at Aviron's own facility, Aviron shall provide PCI with twenty-four (24) months prior written notice of termination of this Agreement. 10.3 Any time following September 30, 2002, PCI may deliver to Aviron written notice of PCI's intention to terminate this Agreement and not to renew, such termination to be effective thirty-six (36) months following receipt of such notice. 10.4 Either Party shall have the right to immediately terminate this Agreement if the other Party files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver or trustee, or makes an assignment for the benefit of creditors, or suffers or permits the entry of an order adjudicating it to be bankrupt or insolvent, provided that such bankruptcy is not discharged within thirty (30) days. 10.5 If either Party materially breaches any of the provisions of this Agreement and such breach is not cured within thirty (30) days after the giving of written notice, the Party claiming the breach shall have the right to terminate this Agreement. 10.6 Either Party may terminate this Agreement upon ninety (90) days written notice and without penalty in the event of failure to obtain FDA approval for the Product in the United States or any license, permit or certificate required by any governmental or regulatory agency is not approved and/or issued by any applicable Agency, provided that such other party may no longer appeal such decision, reapply or otherwise pursue such permit, license or certificate. 10.7 In the event of expiration or termination of this Agreement, (i) Aviron shall pay for all completed Product whether or not Aviron takes delivery of such Product, (ii) Aviron shall bear no responsibility for the payment of any [ * ] not completed prior to termination of this Agreement, (iii) PCI shall promptly, at Aviron's request and expense, destroy or return to a location to be specified by Aviron, any remaining inventory of Materials and Product to Aviron, unless such termination shall have been as a result of termination or a breach of this Agreement by PCI, in which case such [ * ] Product and Materials shall be returned or destroyed at PCI's expense, and Aviron shall reimburse PCI for the cost of all Materials so returned; (iv) each Party shall promptly return all Proprietary Information (as [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 16 17 described in Article 12) to the Disclosing Party; and (v) Aviron shall remove the Aviron Production Equipment from the Aviron Area in accordance with the Facility Production Agreement. If Aviron fails to remove the Aviron Production Equipment and make such repairs, PCI may do so, and Aviron shall, within ten days after receipt of evidence thereof, reimburse PCI in full for all reasonable expenses incurred by PCI in connection with such removal and restoration. 10.8 Termination of this Agreement shall not affect any rights or claims of either Party that accrued prior to the date of such termination. The rights and obligations of each of the Parties under the provisions of Sections 6.8, 6.9, 6.11, 6.13, 6.15, 10.7, 10.8, 10.9, 13.1(c), 13.5, and Articles 9, 11 and 12 shall survive the termination or expiration of this Agreement for any reason. 10.9 Upon termination of this Agreement, the Facility Reservation Agreement shall terminate, and the consequences of such termination shall be as set forth in Section 10 of that Agreement. 11. DISPUTE RESOLUTION. Any controversy, claim, or dispute (the "DISPUTE") between the Parties arising out of or relating to this Agreement, or the breach thereof, shall be submitted to the chief executive officer of PCI and the Chief Executive Officer of Aviron for twenty (20) days for resolution. If the Dispute has not been resolved in such period, the Dispute shall be resolved through arbitration before three (3) arbitrators. Such arbitration shall take place in Philadelphia and shall proceed in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("COMMERCIAL RULES") and the laws of Pennsylvania without regard to the provisions thereof concerning conflict of laws. Within thirty (30) calendar days of either Party making a demand for arbitration, Aviron and PCI shall each select one (1) arbitrator. A third arbitrator shall be selected by the arbitrators selected by the Parties within ninety (90) days of the demand for arbitration. In the event that either Party shall fail to appoint its arbitrator, or the two arbitrators selected by the Parties fail to appoint the third arbitrator, in either case within the prescribed time period, then either Party may apply to the American Arbitration Association for the appointment of such arbitrator. The determination of a majority of the panel of arbitrators shall be the decision of the arbitrators and shall be binding regardless of whether one of the Parties fails or refuses to participate in the arbitration; said determination shall be enforceable by any court of competent jurisdiction. Each Party shall [ * ] for the arbitrator it selects with the cost of the third arbitrator being divided equally between the Parties. All other costs related to the arbitration shall be borne by the Party incurring such costs, unless otherwise agreed to by the Parties. 12. CONFIDENTIALITY 12.1 Definition. As used in this Agreement, the term Proprietary Information shall mean any information, either enabling or disabling, including the terms of this Agreement, any batch record, any order or other commercial relationship between the Parties, know-how, trade secrets, research, data, process, technique, algorithm, program, design, drawing, formula, experimental design or test data relating to any research project, work in process, future development, scientific, manufacturing, marketing, business plan, financial or personnel matter relating to the disclosing Party (the "DISCLOSING PARTY"), its present or future [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 17 18 products, sales, suppliers, customers, employees, investors or business, whether in oral, written, graphic or electronic form and whether received from the Disclosing Party or a third party. The term Proprietary Information shall include, without limitation, (a) any cost information related to the manufacture of Product, and (b) the Packaging Specifications for Product, each of which has previously been disclosed to PCI. 12.2 Obligation. During the term of this Agreement and for a period of [ * ] thereafter, the receiving Party (the "RECEIVING PARTY") shall maintain in confidence all Proprietary Information, as defined in Section 12.1 above, and shall not use, disclose or grant use of such Proprietary Information except as expressly authorized by this Agreement. The Receiving Party may disclose Proprietary Information, as authorized hereunder, only to those employees, agents or consultants of the Receiving Party reasonably requiring access. The Receiving Party shall use the standard of care which is practical to ensure that such employees do not disclose or make any unauthorized use of Proprietary Information. The Receiving Party shall promptly notify the Disclosing Party upon discovery of any unauthorized use of disclosure of Proprietary Information. 12.3 Exclusions. The term Proprietary Information shall not be deemed to include information which the Receiving Party can demonstrate by competent written proof (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available, (b) is known by the Receiving Party at the time of receiving such information as evidenced by its records, (c) is hereafter furnished to the Receiving Party by a third party, as a matter of right and without restriction on disclosure, or (d) is the subject of a written permission to disclose provided by the Disclosing Party. Further, the obligations of confidentiality under this Article 12 shall not apply to the extent that the Receiving Party is required to disclose Proprietary Information in support of applying for, obtaining or maintaining a product approval or other filings with, by an order or regulation of, an Agency or in the course of litigation or other legal or administrative proceedings, provided that in all cases the Receiving Party shall to the extent permitted give the other Party prompt notice of the pending disclosure and shall cooperate in such other party's attempts, at such other party's sole expense, to seek an order maintaining the confidentiality of the Proprietary Information. 13. FEES & PAYMENT TERMS 13.1 Product Pricing. (a) The definitive piece price per unit of Product (e.g., each Syringe containing Product) shall be comprised of the following components: (i) [ * ] (ii) [ * ]. In the event Aviron itself purchases any Materials, the Materials Unit Cost attributable to such Materials shall be deducted from the price per unit charged by PCI. The Parties agree that where the number of units manufactured in a twelve (12) month period is less than [ * ], the [ * ] shall be at a rate mutually agreed upon by the Parties at such time. [ * ]. (b) The Parties agree and acknowledge that the [ * ] and the [ * ] shall remain in effect with respect to all Product ordered and shipped prior to [ * ]. After such date such cost factors are subject to annual upward or downward adjustment in accordance with the Product Price Index for Pharmaceutical preparations, S.I.C. Code Number 2834. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 18 19 (c) The price for Product shall be invoiced to Aviron within [ * ] after completion of the [ * ] of such Product, net [ * ]. In the event Aviron rejects Product pursuant to Section 7.3, any such amount paid by Aviron for such rejected Product shall be credited to Aviron's account immediately. 13.2 All amounts due hereunder shall be paid to PCI in U.S. dollars by check or wire transfer per PCI's instructions. Failure by Aviron to make a payment when due shall be deemed to be a material breach for purposes of Section 10.5. 13.3 PCI shall keep accurate records in sufficient detail to permit the determination of all invoices and fees payable, credits due, and units of Product packaged hereunder and, within ten (10) days following a request by Aviron shall permit either Aviron or its agents, to examine during ordinary business hours such records for the purpose of verifying the correctness of any such invoices, fees, credits and units. 13.4 [ * ] will pay [ * ] the cost for [ * ] employees and support during the validation phase of [ * ] (other than for validation of PCI Production Equipment) at the agreed rate of [ * ] per hour. Costs associated with validation of the PCI Production Equipment will be the responsibility of [ * ]. On-going employee training related to [ * ] will be at [ * ] expense. 13.5 As an inducement to, and in consideration for, PCI entering into this Amended and Restated Production Agreement, Aviron shall pay to PCI not later than [ * ] an amendment fee of [ * ]. This amendment fee shall be non-refundable and shall not be applied against any other obligations Aviron may have to PCI and shall not be subject to any offset for obligations that PCI may have to Aviron. 13.6 Guaranteed, Non-Refundable Minimum Payments. (a) Notwithstanding the foregoing, Aviron shall pay to PCI a non-refundable guaranteed minimum payment for the 2001 Production Season (as defined below) of [ * ] equal installments of [ * ] each on or before each of [ * ]. (b) Notwithstanding the foregoing, Aviron shall pay to PCI a non-refundable guaranteed minimum payment for the 2002 Production Season of [ * ] equal installments of [ * ] each on or before each of [ * ]. (c) Notwithstanding the foregoing, Aviron shall pay to PCI a non-refundable guaranteed minimum payment for the 2003 Production Season of [ * ] equal installments of [ * ] each on or before each of [ * ]. (d) Notwithstanding the foregoing, Aviron shall pay to PCI a non-refundable guaranteed minimum payment for the 2004 Production Season of [ * ] equal installments of [ * ] each on or before each of [ * ]. (e) Each Production Season's non-refundable guaranteed minimum payment shall be credited against actual charges incurred by Aviron pursuant to this [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 19 20 Agreement for [ * ] Production performed by PCI in connection with such Production Season only. If no [ * ] Production is performed by PCI for such Production Season, then PCI shall be entitled to retain all of such Production Season's non-refundable guaranteed minimum payment as consideration for PCI's commitment to have its facility, equipment and personnel available to produce such [ * ] Production. If packaging for less than [ * ] Syringe units is ordered by Aviron for a Production Season, the credit against charges described above shall be pro-rated for that Production Season. (f) Except as expressly set forth herein, nothing in this Section 13.6 shall increase, decrease or otherwise modify the pricing and payment terms set forth in Sections 13.1 through 13.5 (and the applicable appendix or appendices to this Agreement). (g) For the purposes of this Section 13.6, "Production Season" shall mean the period of time during each calendar year in which [ * ] Production can be performed by PCI in time for distribution of Product prior to and during such calendar year's United States domestic flu season, which period of time the parties anticipate will commence on April 1 and extend through November 1 of each calendar year. 14. GENERAL 14.1 Interpretation. The construction, validity, and performance of this Agreement shall be governed in all respects by the laws of Pennsylvania, exclusive of its conflict-of-law provisions. This Agreement was negotiated by sophisticated parties at arms' length and neither party shall be construed as the drafting party against which the Agreement could be construed. 14.2 Force Majeure. Failure or omission by either Party hereto in the performance of any obligation of this Agreement (other than obligations to pay amounts due hereunder) shall not be deemed a breach of this Agreement and shall not create any liability if the same shall arise from any cause or causes beyond the reasonable control of such Party, including, but not limited to, (other than the failure or refusal of the FDA to approve the Product for sale), fire, storm, flood, earthquake, accident, acts of the public enemy, war, rebellion, insurrection, riot, and invasion. In the event of Force Majeure, the Party affected shall promptly notify the other Party, and shall use reasonable commercial efforts to eliminate, cure or overcome such event and to resume performance of its obligation hereunder. Notwithstanding the foregoing, should any event of Force Majeure as defined above prevent the Parties from performing the Agreement for a period exceeding three (3) months, the non-affected Party shall have the right to terminate this Agreement without further notice. It is expressly agreed by the Parties that strikes, lockouts and other labor problems shall not be deemed incidences of Force Majeure. 14.3 Notices. Any notice or consent required to be given by either Party shall be given in writing addressed to the Party for whom it is intended at the address set forth in the preamble to this Agreement, or such other address as such Party may designate in writing, and sent by overnight courier or certified mail, return receipt requested, or confirmed facsimile. Such facsimile to be sent to (215) 281-9190 in the case of PCI and (650) 919-6612 in the case of Aviron. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 20 21 14.4 Waiver. The failure on the part of any Party to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights nor operate to bar the exercise or enforcement thereof at any time or times thereafter. 14.5 Assignability. Neither Party may assign this Agreement or any rights granted hereunder in whole or in part (other than a transaction involving or between PCI and Cardinal Health, Inc. or other subsidiaries or divisions of Cardinal Health, Inc., provided such assignee is an Affiliate of Cardinal Health, Inc.) without the prior written consent of the other Party, except either Party may assign this Agreement in whole or in part to one of its Affiliates or to the successor(s) to or assignee(s) of all or substantially all of the part of its business to which this Agreement relates. The Parties agree that any change of ownership or control of either Aviron or PCI shall not affect the Parties' rights and obligations under this Agreement. 14.6 Entire Agreement. This Agreement and the Schedules, Exhibits and Appendices hereto, constitute the entire agreement between the Parties concerning the subject matter hereof and supersede all prior agreements or understandings whether written or oral between the Parties with respect to the subject matter hereof. 14.7 Titles. The headings appearing at the beginning of the numbered Articles hereof have been inserted for convenience only and do not constitute any part of this Agreement. 14.8 Publicity and Press Releases. Except to the extent necessary under applicable laws, each Party agrees that no press releases or other publicity relating to the existence or substance of the matters contained herein will be made without the other Party's prior written approval; provided, however, that any press release containing information released in a prior release approved of by the Parties shall require no additional consent. 14.9 Relationship of the Parties. Notwithstanding any provision hereof, for all purposes of this Agreement each Party shall be and act as an independent contractor and not as partner, joint venture, or agent of the other and shall not bind nor attempt to bind the other to any contract. 14.10 Modifications. No changes or modifications or waivers are to be made to this Agreement unless evidenced in writing and signed for and on behalf of both Parties. 14.11 Severability. In the event that any provision of this Agreement shall be determined to be illegal or unenforceable, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 15. NON-SOLICITATION OF EMPLOYEES 15.1 Aviron agrees that, during the term of this Agreement and for a period of three (3) years thereafter, Aviron will not, directly or indirectly, solicit for employment or hire any employee of PCI (other than those employees listed on Appendix 7). [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 21 22 15.2 PCI agrees that, during the term of this Agreement and for a period of three (3) years thereafter, PCI will not, directly or indirectly, solicit for employment or hire any employee of Aviron. 16. MICHIGAN LICENSE. PCI accepts: (a) It may use the Vaccine only in [ * ] Production; and (b) Except as set forth in this Agreement, PCI shall not provide any Vaccine, [ * ] Product or Product, or derivatives thereof to any third party, unless instructed to do so by an authorized officer of Aviron. PCI shall limit access to the [ * ] Product supplied by Aviron to those employees reasonably requiring such access for [ * ], which employees are governed by PCI's customary confidentiality obligations. 16.2 Aviron shall: (a) use every reasonable effort to honor and observe its obligations under the Michigan Agreement and shall not act or fail to act in any way which might jeopardize or cause to be terminated the Michigan Agreement; and, (b) promptly notify PCI of any amendment to the Michigan Agreement that affects PCI's performance under this Agreement; and, (c) make every reasonable effort to notify PCI in writing of the expiration or termination of the Michigan Agreement at least six weeks prior to either event. 16.3 PCI will use every reasonable effort to conduct [ * ] and to Store Materials, Stored Materials and Product in accordance with all applicable government laws and regulations. 16.4 Aviron, on Michigan's behalf, may request from PCI at reasonable times and in reasonable quantities Product at a cost equal to PCI's cost for production of Product as it may desire, provided that PCI shall be under no obligation under this sub-clause or otherwise to produce extra batches of Product solely or substantially to meet Michigan's requirements. Any requirements of Michigan shall be supplied from Product being produced for Aviron with Aviron being solely responsible for apportioning such part thereof to Michigan as Aviron sees fit. Aviron shall promptly pay to PCI the difference between the cost of Product supplied to Michigan hereunder and the price of Product as set forth in Section 13.1. 16.5 PCI acknowledges Michigan's warranty disclaimer and limitation of liability contained in the Michigan Agreement but makes no assessment or admission of its validity or reasonableness. Notwithstanding such, PCI will not make any statements, representations or warranties inconsistent with such warranty disclaimer or limitation of liability other than in pursuance or prosecution of its own rights and remedies. 16.6 PCI will indemnify Michigan, its fellows, officers, employees and agents for and against any and all claims, damages, losses and expenses of any nature resulting [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 22 23 from, but not limited to, death, personal injury, illness or property damage, arising directly and solely as a result of; (a) any [ * ] Production, use or other disposition by PCI of the Vaccine, [ * ] Product or Product; (b) the use by PCI, its agents or employees of Vaccine, [ * ] Product, or Product made or used by PCI; (c) the use, handling, storage or disposal of Vaccine, any derivatives, [ * ] Product, or Product by PCI; or (d) the unauthorized and negligent use by PCI of any know-how, or technical data sub-licensed to Aviron from Michigan (and of which know-how and technical data Aviron has expressly notified PCI as being sub-licensed to Aviron by Michigan) or developed by PCI pursuant to [ * ] Production, where but only where such claims, damages, losses and expenses are a direct consequence of the negligence of PCI, its agents or employees. 16.7 PCI shall not use the name of Michigan in publicity or advertising concerning the Product, [ * ] Product or the Vaccine without the prior written consent of Michigan, such consent not to be unreasonably or arbitrarily withheld nor delayed. Reports in scientific literature and presentations of joint research and development work are not considered publicity for the purpose of this clause. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 23 24 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective duly authorized officers or representatives as of the date first above written. PACKAGING COORDINATORS, INC. AVIRON By: /s/ Paul Alvater By: /s/ Edward J. Arcuri -------------------------------------- --------------------------------- Name: Paul Alvater Name: Edward J. Arcuri ------------------------------------ ------------------------------- Title: President, PCI Contract Services Title: Sr. Vice President Operations ----------------------------------- ------------------------------ [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 24 25 APPENDIX 1 Aviron Production Equipment See attached [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 25 26 APPENDIX 1 AVIRON PRODUCTION EQUIPMENT
SERIAL # DESCRIPTION -------- ----------- [ * ] [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 26 27 APPENDIX 2 PCI Production Equipment
Function Manufacturer -------- ------------ [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 27 28 APPENDIX 3 Packaging Specifications See attached [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 28 29 PACKAGING SPECIFICATIONS PCI PACKAGING DOCUMENT INDEX [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 29 30 APPENDIX 4 [ * ] Product Specifications See attached [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 30 31 [ * ] PRODUCT SPECIFICATIONS AVIRON SOP INDEX
NUMBER NAME ------ ---- [ * ] [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 31 32 [ * ] PRODUCT SPECIFICATION AVIRON SPECIFICATION INDEX
PART NUMBER NAME ----------- ---- [ * ] [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 32 33 APPENDIX 5 Facility Reservation Agreement Facility Reservation Agreement, dated October 31, 1997, between Aviron and Packaging Coordinators, Inc. See Exhibit 10.17 to Aviron's Registration Statement on Form S-3 (No. 333-41649) filed on December 5, 1997. First Amendment to Facility Reservation Agreement, dated August 1, 2000, by and between Aviron and Packaging Coordinators, Inc. See Exhibit 10.32 to this Form 10-Q. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 33 34 APPENDIX 6 See attached [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 34 35 Appendix 6-A Aviron FluMist Pricing [ * ] All Prices Shown are per Syringe
TARGET PRICE REDUCTION POTENTIAL 20MM SYRINGES INCREASE POTENTIAL ------------------- ------------- -------------------- [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] [ * ] [ * ] [ * ] [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Notes: 1) Reduction/increase potential for raw materials show effect of individual items changing. 2) All prices shown are per syringe when packaged [ * ] 3) [ * ] 4) Assembly reflects [ * ] 5) Assembly/labor prices valid through [ * ] If Aviron orders PCI to perform [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 35 36 Appendix 6-b Aviron FluMist Pricing [ * ] All Prices Shown are per Syringe
TARGET PRICE REDUCTION POTENTIAL 20MM SYRINGES INCREASE POTENTIAL ------------------- ------------- -------------------- [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] [ * ] [ * ] [ * ] [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] Subtract [ * ] for [ * ] Add [ * ] for each each [ * ] decrease [ * ] increase in in material cost material cost [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Notes: 1) Reduction/increase potential for raw materials show effect of individual items changing. 2) All prices shown are per syringe when packaged [ * ] 3) [ * ] 4) Assembly reflects [ * ] 5) Assembly/labor prices valid through [ * ] If Aviron orders PCI to perform [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 36 37 Appendix 6-c Future New Equipment Pricing Aviron FluMist [ * ] All Prices Shown are per Syringe
EXISTING EQUIPMENT NEW EQUIPMENT -------------------------------------------- -------------------------------------------- AVIRON MULTIVAC LINE AVIRON MULTIVAC LINE AVIRON MULTIVAC LINE AVIRON MULTIVAC LINE #1 #1 #1 #1 TARGET PRICE 20MM TARGET PRICE 20MM TARGET PRICE 20MM TARGET PRICE 20MM SYRINGES SYRINGES SYRINGES SYRINGES -------------------------------------------- -------------------------------------------- PACKAGING LINE SPEED PACKAGING LINE SPEED PACKAGING LINE SPEED PACKAGING LINE SPEED OF 200 OF SYRINGES OF 350 SYRINGES OF 400 SYRINGES OF 450 SYRINGES PER MIN PER MIN PER MIN PER MIN - ----------------- -------------------- -------------------- -------------------- -------------------- [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
Notes: 1) Raw material cost reductions/increase potential shown on Appendix 6-A applies to this schedule. 2) All prices shown are per syringe when packaged [ * ] 3) [ * ] 4) Assembly/labor prices valid thru [ * ] If Aviron orders PCI to perform [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 37 38 APPENDIX 7 Employees Production Staff: [ * ] QA Personnel: [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 38 EX-10.32 4 f67161ex10-32.txt EXHIBIT 10.32 1 EXHIBIT 10.32 Execution Copy FIRST AMENDMENT TO FACILITY RESERVATION AGREEMENT THIS FIRST AMENDMENT TO FACILITY RESERVATION AGREEMENT is made by and between PACKAGING COORDINATORS, INC., a Pennsylvania corporation ("PCI") and AVIRON, a Delaware corporation, to be effective and binding on the parties as of August 1, 2000 (the "EFFECTIVE DATE"). RECITALS A. PCI and Aviron are parties to that certain Facility Reservation Agreement dated effective October 31, 1997 (the "ORIGINAL AGREEMENT"). Capitalized terms defined in the Original Agreement shall have the same meanings when used herein. B. The parties now desire to amend the Original Agreement, as more particularly set forth below. NOW, THEREFORE, the parties hereby agree that the Original Agreement shall be amended as follows: 1. Aviron Area. As of the Effective Date of this Amendment, the Aviron Area (as that term is defined in Section 1.1 of the Original Agreement) shall be expanded to include the "Expansion Area" that is described on Attachment 1 hereto, which comprises: (i) an additional 4,416 square feet of interior space within the Building, and (ii) an additional 2,520 square feet of exterior footprint space, as well as the second floor space as described, for the external build-out as described in Attachment 1. PCI shall deliver possession of the Expansion Area to Aviron as of October 16, 2000. All improvements to be made to the Expansion Area shall be constructed at Aviron's expense and made in accordance with the provisions of Paragraph 7 below; provided, however, that any costs to relocate existing PCI fixtures and/or equipment located within the Expansion Area (i.e., emergency generators, alcohol or waste storage equipment, etc.) shall be paid by PCI. 2. Base Monthly Fee. Effective as of the date construction or improvements to the Expansion Area is commenced, the "BASE MONTHLY FEE" (as that term is defined in Paragraph 1.1 of the Original Agreement) shall mean $123,162 per month. 3. Production Agreement. The term "Production Agreement," as defined in Paragraph 1.1 of the Original Agreement shall mean and refer to the Production Agreement as originally defined, and all amendments, extensions and restatements thereof made from time to time by the parties, including, without limitation, the Amended and Restated Production Agreement dated effective as of August 1, 2000 being entered into contemporaneously herewith. 2 4. Repair and Maintenance. Paragraph 5.1 of the Original Agreement is hereby deleted in its entirety and replaced by the following: 4.1 Repair and Maintenance. (a) PCI shall, at all times during the term of this Agreement and at its sole cost and expense, maintain in good order, condition and repair the Building and every part thereof including without limiting the generality of the foregoing, foundation, roof (structure and membrane), load-bearing and exterior walls, building systems, fire alarm/fire suppression system, pest control, perimeter security, windows, doors, skylights, all structural elements of the Building, and all plumbing, electrical, wiring conduits, connectors and fixtures, the chillers and related piping up to the point where the main supply lines enter the mechanical room in the Aviron Area (the "Mechanical Room") and the return lines to the chillers, and the generator and emergency power supply system for the Aviron Area; provided, however, that PCI shall not be responsible for maintaining the items to be maintained by Aviron pursuant to subsection (b) below. (b) Aviron shall, at all times during the term of this Agreement and at its sole cost and expense, maintain the warehouse freezer (including the compressors) and all aspects of the Aviron Area other than electrical lines and chilled water lines and returns within the Aviron Area but outside the Mechanical Room. 5. Term. Paragraph 2.2 of the Original Agreement is hereby deleted in its entirety and replaced by the following: Subject to Paragraph 2.4 below, the term of this Agreement shall begin on the Effective Date and, unless extended as set forth below or earlier terminated as set forth in this Agreement or Section 10.9 of the Production Agreement, shall end on December 31, 2004 (the "Agreement Expiration Date"). The term of this Agreement may be extended by Aviron upon six (6) months prior written notice to PCI, for up to two (2) additional periods of three (3) years each, provided that prior to the exercise of the first extension, Aviron shall (a) have ordered PCI to perform Secondary Production (as defined in the Production Agreement) at a rate which would result in production of at least 10 million Syringe (as defined in the Production Agreement) units of Product (as defined in the Production Agreement) on an annualized basis (including any quantities subject to a binding forecast), (b) have exercised the first extension of the term of the Production Agreement (as contemplated in Section 10.1 of the Production Agreement), and (c) then be in compliance, in all material respects, with the terms of -2- 3 this Agreement and the Production Agreement; and prior to the exercise of the second extension, Aviron shall (a) have ordered PCI to perform Secondary Production at a rate which would result in production of at least 20 million Syringe units of Product on an annualized basis (including any quantities subject to a binding forecast), (b) have exercised the second extension of the term of the Production Agreement (as contemplated in Section 10.1 of the Production Agreement), and (c) then be in compliance, in all material respects, with the terms of this Agreement and the Production Agreement. 6. Separate Entrance. The last sentence of Paragraph 2.7 is hereby deleted in its entirety and replaced by the following: In the event either Party desires, at its option, to initiate a proposal to modify the Building to add a separate entrance to the Aviron Area, such modification: (i) will be subject to the prior written approval of the other party; (ii) shall be performed in compliance with all applicable laws and regulations, including the Americans with Disabilities Act; (iii) shall not interfere with Aviron's use of the Aviron Area and PCI's use of its facility; and (iv) shall be at the expense of the Party initiating the proposal. 7. Additional Construction. Aviron will construct, at its own expense, any desired improvements to the Expansion Area, subject to review and approval by PCI of all plans and changes thereto, and such construction shall be conducted without interference with PCI's use of its facility. Such construction will be in accordance with all applicable laws and the improvements will, when completed, be in compliance with the Americans with Disabilities Act. All of such improvements shall be deemed to be included in the Aviron Improvements, unless otherwise mutually agreed by the Parties. 8. Permitted Use. The second sentence of Paragraph 4.1 of the Original Agreement shall be deleted in its entirety. 9. Furniture and Computers. The Parties acknowledge that PCI has made available to Aviron in the Aviron Area certain computer equipment and office furniture and fixtures, as described on Attachment 2 attached hereto and incorporated herein (the "PCI FF&E"). During the term of this Agreement, Aviron shall be permitted to use the PCI FF&E in the ordinary course of its operations, and PCI shall be responsible for the routine maintenance and upkeep of the PCI FF&E until such time as, individually, the items included in the PCI FF&E are no longer usable by Aviron for the purpose intended. At such time, the items, individually, shall be returned to PCI, and PCI shall have no obligation to replace such item(s). Aviron shall be responsible, at its own expense, for any replacement items of furniture, fixtures and computer equipment used by Aviron in the Aviron Area. -3- 4 10. Buy Back Amounts. (a) Paragraph 10.5(a)(i)(D) of the Original Agreement is hereby deleted in its entirety and replaced by the following: (D) In the event this Agreement shall terminate at any time during calendar year 2003 or 2004, the Buy-Back Amount shall be six hundred thousand dollars ($600,000). (b) Paragraph 10.5(a)(i)(E) of the Original Agreement is hereby deleted in its entirety. 11. Notices. Notices to Aviron should be sent to the following address: Aviron 297 North Bernardo Mountain View, California 94043 Attention: Vice President, Operations 12. Other Changes. The Original Agreement is and shall remain in full force and effect in accordance with its terms, except as specifically amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers or representatives as of the date first above written. -4- 5 PACKAGING COORDINATORS, INC. By: /s/ Paul Alvater ------------------------------------- Name: Paul Alvater ----------------------------------- Title: President, PCI Contract Services ---------------------------------- AVIRON By: /s/ Edward J. Arcuri ------------------------------------- Name: Edward J. Arcuri ----------------------------------- Title: Sr. Vice President, Operations ---------------------------------- -5- 6 ATTACHMENT 1 EXPANSION AREA [Map] 7 ATTACHMENT 2 COMPUTER EQUIPMENT, OFFICE FURNITURE AND FIXTURES INCLUDED IN PARAGRAPH 9 PACKAGING COORDINATOR INVENTORY
COMPUTER SUPPLIES QUANTITY - -------------------------------------------------- Computer Monitors 3 - -------------------------------------------------- Computer Hard Drives 3 - -------------------------------------------------- Computer Keyboards 3 - -------------------------------------------------- Computer Mouse 3 - -------------------------------------------------- Computer Desk 1 - -------------------------------------------------- Computer Laptop 3 - -------------------------------------------------- Computer Scanner 1 - -------------------------------------------------- Laser Jet Printer 3 - -------------------------------------------------- DESKS/OFFICE SUPPLIES QUANTITY - -------------------------------------------------- BioFit Black Swivel Chair 4 - -------------------------------------------------- Bookshelves 6 - -------------------------------------------------- CABINETS QUANTITY - -------------------------------------------------- Conference Room Cabinet 3 - -------------------------------------------------- Metal Cabinet with Wheels 1 - -------------------------------------------------- Metal Drawer Cabinet (Conf. Rm.) 1 - -------------------------------------------------- PLASTIC CABINETS QUANTITY - -------------------------------------------------- Small 2 - -------------------------------------------------- Large 1 - -------------------------------------------------- Conference Room Swivel Chairs 7 - -------------------------------------------------- Conference Room Wood Table 1 - -------------------------------------------------- Copier 1 - -------------------------------------------------- Cradenza 1 - -------------------------------------------------- Cradenza with Bookcase 3 - -------------------------------------------------- Document Shredder 1 - -------------------------------------------------- Fax Machine 1 - -------------------------------------------------- Gray Workstation Desks 4 - -------------------------------------------------- Gray Computer Desk 2 - -------------------------------------------------- Red Stationary Chairs 5 - -------------------------------------------------- Red Desk Swivel Chair 3 - -------------------------------------------------- Red Office/Swivel Chair 4 - -------------------------------------------------- Rolm Telephone 6 - -------------------------------------------------- Wood Desk 3 - -------------------------------------------------- Wood File Cabinet with 2 Drawers 2 - --------------------------------------------------
EX-27.1 5 f67161ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 59,010 63,095 3,978 0 3,309 129,467 38,734 14,063 162,470 19,104 113,378 0 0 22 30,907 162,470 0 7,904 0 0 74,264 0 6,177 68,186 0 68,186 0 0 0 68,186 (3.42) (3.42)
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