<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AVIRON
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 2836 77-0306986
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
------------------------
297 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 919-6500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
J. LEIGHTON READ, M.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AVIRON
297 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 919-6500
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN C. MENDELSON, ESQ. ALAN K. AUSTIN, ESQ.
ROBERT J. BRIGHAM, ESQ. ELIZABETH R. FLINT, ESQ.
Cooley Godward Castro Huddleson & Tatum ELIZABETH M. KURR, ESQ.
Five Palo Alto Square Wilson, Sonsini, Goodrich & Rosati
3000 El Camino Real 650 Page Mill Road
Palo Alto, California 94306 Palo Alto, California 94304
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value................... 3,450,000 $13.00 $44,850,000 $15,466
</TABLE>
(1) Includes 450,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AVIRON
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING
IN FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ------------------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover Pages
3. Summary Information; Risk Factors; and Ratio of
Earnings to Fixed Charges........................ Inside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Outside Front Cover Page; Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........ Prospectus Summary; Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel............ Legal Matters; Experts
11. Information with Respect to the Registrant........ Outside Front and Inside Front Cover Pages; Prospectus
Summary; Risk Factors; Dividend Policy; Capitalization;
Selected Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions;
Principal Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities...................................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 5, 1996
[LOGO]
3,000,000 SHARES
COMMON STOCK
All of the 3,000,000 shares of Common Stock offered hereby are being issued
and sold by Aviron (the "Company"). Prior to this offering there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price of the Common Stock will be between
$11.00 and $13.00 per share. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price.
Concurrent with this offering, the Company intends to sell 333,333 shares of
its Common Stock to Sang-A Pharm. Co., Ltd. ("Sang-A") in a private placement at
the initial public offering price (the "Sang-A Shares"), with the number of
shares to be sold to Sang-A subject to adjustment under certain conditions. See
"Business -- Collaborative Agreements" and "Underwriting."
----------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
<S> <C> <C> <C>
Per Share.......................................... $ $ $
Total (2).......................................... $ $ $
</TABLE>
(1) Before deducting expenses payable by the Company estimated at $600,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 450,000 shares of Common Stock, solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
----------------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part and certain other conditions. It is expected that delivery of
such shares will be made through the offices of Robertson, Stephens & Company
LLC ("Robertson, Stephens & Company"), San Francisco, California on or about
, 1996.
ROBERTSON, STEPHENS & COMPANY
BEAR, STEARNS & CO. INC.
HAMBRECHT & QUIST
The date of this Prospectus is , 1996
<PAGE>
AVIRON USES BOTH ITS RATIONAL VACCINE DESIGN TECHNOLOGY AND
CLASSICAL METHODS OF LIVE VACCINE DISCOVERY
RATIONAL VACCINE DESIGN TECHNOLOGY
[Virus particle containing genetic
information; three segments are highlighted
to correspond with methods of modifying the
virus' genetic information.]
DELETE VIRULENCE ADD GENETIC INFORMATION
PROTEINS Insert genes to enhance
Remove genes for viral components the virus'
thought to be important in disease stimulation of the
mechanism immune system
[Virus particle containing genetic [Virus particle
information; one segment of genetic containing genetic
information being removed.] information; one
segment of genetic
information being
added.]
DOWN-REGULATE
REPLICATION
Alter genetic information used
by the virus in controlling its replication
["Tree" structure comprised of 15 dots
symbolizing virus replication; second
structure comprised of 3 dots symbolizing
virus' reduced ability to replicate.]
VACCINE CANDIDATES
SPECIES SELECTION FOREIGN CELL ADAPTION TO PHYSICAL
Strains originate from PASSAGE CONDITIONS
non-human species Human virus mutates as it Human virus mutates as it
is propagated in cells is propagated in cells
from non-human species under unusual conditions,
e.g., cold temperature
[Graphic of a chicken and [Graphic of cells (3) [Petri dishes (2), each
a cow.] sequentially connected by with a corresponding
arrows.] graphic representation of
a thermometer. One
thermometer shows a higher
temperature than the
other.]
CLASSICAL METHODS
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
"Aviron" is a trademark of the Company. Certain other trademarks of the
Company and other companies are used in this Prospectus.
<PAGE>
AVIRON'S PROPOSED NASAL SPRAY
VACCINE FOR INFLUENZA
Genes from Genes from cold
naturally-occurring adapted master
influenza viruses as influenza virus strain
selected by public
health authorities
[Silhouette of human [Virus particle with box [Virus particle with box
head with lines coming around 2 of 8 segments around 6 of 8 segments
from nasal area leading of genetic information. of genetic information.]
to virus particle to the ------------------------
right.] Dashed lines connecting
to second virus particle
with box around 6 of 8
segments.]
[Virus particle
containing 8 segments of
genetic information; six
segments of the same
color, two segments of
different colors.]
AVIRON'S INFLUENZA VACCINE
COMBINES GENES FROM
NATURALLY OCCURRING VIRUSES
WITH GENES FROM THE COLD
ADAPTED MASTER STRAIN
[Photograph of a human hand holding a device
which is used to administer a vaccine in an
aerosol spray (to the upper respitory
tract-not shown). A spray effect is shown
which serves as the backdrop for an image of
a virus particle to the upper right.]
THE POTENTIAL IMPACT OF INFLUENZA IN THE COMMUNITY
[Photo of five young [Photo of one child from [Photo of woman from
children playing with previous picture in bed previous picture now in
blocks in a pre-school at home with mother at an office setting with 5
setting. Lines bedside. Child is ill, other adults. Lines
symbolically show how a and is shown with symbolically show how the
virus spreads from one thermometer in mouth, virus might spread to
child to the next.] mother touching forehead, others in the room.]
tissues and medication
bottle by bedside. Mother
is on the telephone.
Lines symbolically show
virus spreading from
child to mother.]
AGE GROUP: Children 1-18
ESTIMATED INFLUENZA ATTACK RATE: 37 per 100
BURDEN OF ILLNESS: illness, doctor visits, middle ear
infections, school absenteeism,
parents' lost work
ESTIMATED UNITED STATES POPULATION: 69 million
AVIRON PRODUCT STATUS: Phase I/II studies conducted
<PAGE>
THE COMPANY'S COLD ADAPTED NASAL SPRAY VACCINE IS AN INVESTIGATIONAL BIOLOGIC
AND HAS NOT BEEN APPROVED FOR SALE IN ANY COUNTRY. THE COMPANY DOES NOT
ANTICIPATE APPLYING FOR REGULATORY APPROVAL TO MARKET THIS PROPOSED VACCINE FOR
SEVERAL YEARS, IF EVER, AND WILL BE REQUIRED TO SUCCESSFULLY COMPLETE CLINICAL
TRIALS TO DEMONSTRATE ITS SAFETY AND EFFICACY PRIOR TO FILING FOR REGULATORY
APPROVAL. SEE "RISK FACTORS."
IMMUNE RESPONSE TO INFLUENZA VACCINES
[Silhouette of human head and torso [Silhouette of human head and torso
within which is visible the within which is visible the
circulatory system (red). The figure circulatory system (red) and the
is receiving an injection in the upper respiratory tract (blue). The
upper arm by syringe. The injected figure is receiving an aerosol spray
vaccine forms a small pool of liquid directed into the nasal passages and
at the site of injection.] upper respiratory tract by nasal
spray administration.]
INJECTABLE INACTIVATED NASAL SPRAY
VACCINE VACCINE
- Strongly stimulates - Stimulates mucosal
circulating antibodies immunity in
respiratory tract
- Stimulates cell-mediated
immunity
- Stimulates circulating
antibodies
[Photo of man from previous picture [The elderly woman from the previous
(presumably infected with the virus) picture is shown ill in bed in a
visiting with his elderly mother in hospital setting. Some medical
her home. He is kneeling beside a equipment is visible to the left; a
chair in which she is sitting and he healthcare worker or nurse is at her
is presenting her with a gift. A bedside. She appears awake and
line symbolically shows the virus alert.]
being passed between them.]
Adults 19-65 Elderly over 65
10-22 per 100 10 per 100
illness, doctor visits, lost illness, doctor visits,
work hospitalization, death
159 million 32 million
Phase II studies conducted Clinical trials planned for
co-administration with
injectable inactivated vaccine
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus does not constitute an offer to sell, or the solicitation of an
offer to buy, any securities other than the registered securities to which it
relates or an offer to, or solicitation of, any person in any jurisdiction in
which such offer or solicitation would be unlawful or to any person to whom it
is unlawful. Neither the delivery of this Prospectus nor any offer or sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in the distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 7
Use Of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 26
Management................................................................ 51
Certain Transactions...................................................... 58
Principal Stockholders.................................................... 60
Description Of Capital Stock.............................................. 63
Shares Eligible For Future Sale........................................... 66
Underwriting.............................................................. 68
Legal Matters............................................................. 69
Experts................................................................... 69
Additional Information.................................................... 69
</TABLE>
3
<PAGE>
SUMMARY
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND THE
FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Aviron is a biopharmaceutical company whose strategy is to focus on
prevention of disease. The Company's goal is to become a leader in the
discovery, development, manufacture and marketing of live virus vaccines which
are sufficiently cost effective to justify their use in immunization programs
targeting the general population. Live virus vaccines, such as those for
smallpox, polio, measles, mumps and rubella, have had a long record of success
in preventing, and in some cases eliminating, disease. The Company currently is
analyzing data from Phase I and Phase II clinical trials in children and adults
of its live cold adapted intranasal vaccine for influenza. The Company has
recently in-licensed a live intranasal vaccine for Parainfluenza Virus Type 3
("PIV-3") which has been tested by others in Phase I/II clinical trials. The
Company also is developing a subunit vaccine for Epstein-Barr Virus ("EBV"). In
addition, Aviron is using its proprietary "Rational Vaccine Design" technology
to discover new live virus vaccines. Rational Vaccine Design involves the
deletion or modification of virulence proteins, changes to the virus' genetic
control signals to slow down its replication, or addition of information to
enhance the virus' stimulation of the immune system. The Company is applying
this technology to develop candidates for the prevention of influenza in elderly
persons and diseases caused by Cytomegalovirus ("CMV"), Herpes Simplex
Virus-Type 2 ("HSV-2") and Respiratory Syncytial Virus ("RSV").
Aviron's age-specific influenza programs address three distinct population
groups: children, adults and the elderly. Influenza affects 20 to 50 million
Americans each year resulting in approximately 20,000 deaths annually, primarily
in the elderly, despite the availability of an injectable inactivated vaccine
that has been reported to be 60% to 80% effective. The United States Food and
Drug Administration (the "FDA") estimates that approximately 75 million doses of
influenza vaccine were manufactured for use in the United States in 1995.
Experts suggest that, although over half of Americans at high risk for
complications from influenza receive the annual influenza vaccine, relatively
few of the 70 million children under the age of 18 are vaccinated.
To address the need for more convenient influenza prophylaxis, the Company
has in-licensed the rights to a cold adapted influenza vaccine from the
University of Michigan and the National Institute of Allergy and Infectious
Disease ("NIAID"), a division of the National Institutes of Health (the "NIH").
Formulations of this vaccine were tested in over 7,000 persons prior to Aviron's
acquisition of the vaccine, and subsequently have been studied in clinical
trials conducted by the Company involving over 700 children and adults. The cold
adapted influenza vaccine elicits an immune response similar to that of the
natural infection by stimulating mucosal immunity in the nose, cellular
components of the immune system and circulating antibodies. Aviron intends to
develop the cold adapted influenza vaccine for widespread annual use in children
and adults, and for co-administration with the inactivated vaccine for improved
protection in the elderly. In addition, Aviron is developing a genetically
engineered influenza vaccine that is intended to be a better immune stimulus in
the elderly than either the cold adapted vaccine or the inactivated vaccine
alone, and therefore more suitable for use as a single-dose vaccine in this
population.
Aviron also is conducting research and development on additional vaccine
targets, including:
PARAINFLUENZA VIRUS TYPE 3. PIV-3 is a common respiratory virus of
childhood which causes croup, cough, fever and pneumonia. Over 80% of
children have been infected by age four, many having experienced several
cases of PIV-3 infection. The Company has in-licensed the rights to a bovine
PIV-3 ("bPIV-3") vaccine from the NIH which has been tested in over 100
infants and adults. Aviron intends to develop the bPIV-3 vaccine for use in
preventing childhood PIV-3 illness.
4
<PAGE>
EPSTEIN-BARR VIRUS. EBV infects most people at some point in their
lifetime. Half or more of the approximately 10% of students who first become
infected with the virus in high school and college develop infectious
mononucleosis. EBV also has been shown to be a contributing factor in the
development of certain types of cancer and lymphoma. The Company is
conducting preclinical evaluation of a subunit EBV vaccine candidate in
conjunction with SmithKline Beecham Biologicals S.A. ("SmithKline Beecham").
CYTOMEGALOVIRUS. Most people also become infected with CMV at some time
in their lives, but the resulting disease is typically serious only for
those with impaired immune systems or for babies of women infected in the
first trimester of pregnancy. The Company is developing and evaluating its
engineered vaccine candidates in preclinical models to create a prophylactic
vaccine.
HERPES SIMPLEX VIRUS-TYPE 2. Genital herpes is an incurable disease
characterized by recurrent, often painful genital sores, with over 700,000
new cases estimated in the United States each year. The Company currently is
developing and evaluating vaccine candidates in preclinical models to create
a prophylactic vaccine.
RESPIRATORY SYNCYTIAL VIRUS. RSV is the major cause of lower
respiratory tract illness in the very young, responsible for over 90,000
hospitalizations and more than 4,000 deaths per year in the United States.
Aviron is using its proprietary technology to create candidate vaccines to
prevent RSV disease.
Aviron intends to enter into selected collaborative agreements to gain
access to complementary technologies, capabilities and financial support for its
programs. In addition to acquiring rights from third parties to augment its
Rational Vaccine Design technology and the cold adapted influenza vaccine
technology, the Company has entered into a collaborative agreement with
SmithKline Beecham covering worldwide rights to its EBV vaccine, and a
collaboration with Sang-A involving certain marketing and manufacturing rights
to its products in Korea.
The Company was incorporated in California in April 1992, and intends to
reincorporate in Delaware in June 1996. The Company's executive offices are
located at 297 North Bernardo Avenue, Mountain View, California 94043, and its
telephone number is (415) 919-6500.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the 3,000,000 shares
Company............................
Common Stock Outstanding After the 12,285,990 shares (1)
Offering...........................
Use of Proceeds..................... For research and development, including
preclinical testing and clinical trials;
capital expenditures; and working capital
and general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market AVIR
Symbol.............................
</TABLE>
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM THREE MONTHS ENDED
APRIL 15, 1992 YEAR ENDED DECEMBER 31, MARCH 31,
(INCEPTION) TO ------------------------------------ ------------------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.......................... $ -- $ -- $ -- $ 1,707 $ -- $ 188
Operating expenses:
Research and development.............. 320 2,073 4,216 10,220 3,088 3,044
General and administrative............ 470 1,874 2,493 3,252 701 1,063
----- ----------- ----------- ---------- ----------- -----------
Total operating expenses............ 790 3,947 6,709 13,472 3,789 4,107
----- ----------- ----------- ---------- ----------- -----------
Loss from operations.................... (790) (3,947) (6,709) (11,765) (3,789) (3,919)
Interest income, net of interest
expense................................ 37 175 207 362 32 183
----- ----------- ----------- ---------- ----------- -----------
Net loss................................ $ (753) $ (3,772) $ (6,502) $ (11,403) $ (3,757) $ (3,736)
----- ----------- ----------- ---------- ----------- -----------
----- ----------- ----------- ---------- ----------- -----------
Pro forma net loss per share (2)........ $ (0.56) $ (0.73) $ (1.24) $ (0.41) $ (0.41)
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
Shares used in computing pro forma net
loss per share (2)..................... 6,696 8,948 9,183 9,062 9,223
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(3)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................................... $ 14,494 $ 51,374
Working capital..................................................................... 12,804 49,684
Total assets........................................................................ 17,275 54,155
Accumulated deficit................................................................. (26,192) (26,192)
Total stockholders' equity.......................................................... 14,167 51,047
</TABLE>
- ------------------------
(1) Includes the estimated 333,333 shares intended to be sold to Sang-A in a
private placement concurrent with this offering. Excludes (i) 643,480 shares
of Common Stock issuable upon exercise of options outstanding as of June 1,
1996, at a weighted average exercise price of approximately $1.22 per share,
(ii) an aggregate of 1,556,520 shares reserved for future grants or
purchases pursuant to the Company's 1996 Equity Incentive Plan, Employee
Stock Purchase Plan and Non-Employee Director Stock Option Plan, (iii)
118,395 shares issuable upon exercise of warrants outstanding as of June 1,
1996 at a weighted average exercise price of $6.65 per share, and (iv)
warrants to purchase 29,750 shares which become exercisable at the close of
the offering at 125% of the initial public offering price.
(2) See Note 1 of Notes to Financial Statements for an explanation of the method
used to determine the number of shares used to compute pro forma per share
amounts.
(3) As adjusted to give effect to the sale of 3,000,000 shares of Common Stock
at an assumed initial public offering price of $12.00 per share and the
estimated 333,333 shares intended to be sold to Sang-A in a private
placement concurrent with this offering and the application of the net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS REFLECTS A
ONE-FOR-FIVE REVERSE SPLIT OF THE COMPANY'S COMMON STOCK EFFECTED IN MAY 1996
AND ASSUMES (I) REINCORPORATION OF THE COMPANY IN DELAWARE PRIOR TO THE
OFFERING, (II) THE CONVERSION OF ALL OUTSTANDING SHARES OF ITS PREFERRED STOCK
INTO SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING AT A RATE OF ONE
SHARE OF COMMON STOCK FOR FIVE SHARES OF PREFERRED STOCK, AND (III) NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
6
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
The following risk factors should be considered carefully in evaluating the
Company and its business before purchasing shares of the Common Stock offered
hereby.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining required regulatory approvals for the commercial sale of
any of its products under development, the Company must demonstrate through
preclinical testing and clinical trials that each product is safe and effective
for use in each target indication. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in later
clinical trials and large-scale testing. Companies in the pharmaceutical,
biopharmaceutical and biotechnology industries have suffered significant
setbacks in various stages of clinical trials, even in advanced clinical trials
after promising results had been obtained in earlier trials. The Company's
vaccines are intended for use primarily in healthy individuals. To obtain
regulatory approval, the Company must demonstrate safety and efficacy in healthy
people which likely will require a lengthier process and involve a larger number
of trials and patients than would be customary for clinical trials of
therapeutics for disease management. There can be no assurance that the
Company's clinical trials will demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals or will result in marketable products.
The Company recently completed a Phase II challenge study of its cold adapted
influenza vaccine in adults. Preliminary analysis of the results indicated a
very low level of illness in both the placebo and treated groups, and the
Company believes that this study is unlikely to show statistically significant
efficacy in preventing influenza. Regardless of the results of this study, the
Company intends to discuss with the FDA its plans to proceed directly to Phase
III clinical trials in adults and does not intend to conduct other challenge
studies. If the Company's cold adapted influenza vaccine is not shown to be safe
and effective in Aviron's clinical trials, the resulting delays in developing
this and other vaccine candidates and conducting related preclinical testing and
clinical trials, as well as the need for additional financing, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's cold adapted influenza vaccine is based on technology licensed
from the NIH and the University of Michigan. Wyeth-Ayerst Laboratories
("Wyeth-Ayerst"), a division of American Home Products Corporation, licensed
certain rights to the vaccine in 1989 and was developing it for sale in
collaboration with the NIH until relinquishing its rights in 1993. In addition,
Kaketsuken, a Japanese research foundation ("Kaketsuken"), licensed certain
rights to the vaccine in 1993 and was developing it for sale in Japan until
relinquishing such rights in 1996. Formulations of the vaccine have been the
subject of a number of clinical trials performed by Wyeth-Ayerst, the NIAID of
the NIH and Kaketsuken. The Company has reviewed the data from these trials and
believes that it can submit such data in partial support of its application for
regulatory approval from the FDA. The Company did not participate in these
trials and cannot be confident in the accuracy of the data collected. Although a
large proportion of this data was positive, a number of trials included results
that were not. Very few of the trials involved a trivalent vaccine delivered
through nasal spray. The Company will need to perform additional trials of its
vaccine candidate to support its application to the FDA. There can be no
assurance that the data from these third-party trials is accurate, that the
Company will be able to obtain favorable results from its own trials, or that
the Company can complete these trials on a timely basis, or at all. See
"Business -- Influenza Clinical Trials."
The rate of completion of the Company's clinical trials may be delayed by
many factors. For example, delays may be encountered in enrolling a sufficient
number of patients fitting the appropriate trial profile, preparing the modified
vaccine strain for certain influenza seasons or in manufacturing clinical trial
materials. The Company's late-stage clinical trials of its cold adapted
influenza vaccine must be conducted during the influenza season and must be
commenced early enough in the approximately five-month season so that subjects
may be vaccinated well in advance of a challenge by the wild-type virus.
Additionally, there is a risk that there will not be enough natural influenza in
the community in a given influenza season to achieve statistically significant
results
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from clinical trials. As a result, if the Company is unable to commence its
clinical trials on a timely basis it will be required to wait until the next
influenza season, which will not occur for another year in that country. There
can be no assurance that delays in, or termination of, clinical trials will not
occur. Any delays in, or termination of, the Company's clinical trial efforts
would have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that Aviron will be permitted by regulatory
authorities to undertake additional clinical trials for its cold adapted
influenza vaccine or initiate clinical trials for its other programs or, if any
such trials are conducted, that any of the Company's product candidates will
prove to be safe and effective or will receive regulatory approvals. See
"Business -- Vaccine Products Under Development."
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
Aviron commenced its operations in April 1992 and until recently was a
development stage company. All of the Company's product candidates are in the
research or development stage. With the exception of two in-licensed product
candidates, none of the Company's proposed products has yet been approved for
clinical trials. To date, the Company has had no revenue from product sales and
all of its resources have been dedicated to the development of vaccines. There
can be no assurance that product revenues will be realized on a timely basis, if
ever.
The development of safe and effective vaccines for the prevention of viral
diseases such as influenza, herpes simplex and other target diseases is highly
uncertain and subject to numerous risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Potential products may be found ineffective or cause harmful side
effects during preclinical testing or clinical trials, fail to receive necessary
regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. Aviron has not yet
requested or received the regulatory approvals that are required to market its
products. Aviron does not expect that any of its proposed products will be ready
for commercialization for the next several years, if at all. To achieve
profitability, the Company, alone or with others, must successfully identify,
develop, test, manufacture and market its products. There can be no assurance
that Aviron will succeed in the development and marketing of any product. Any
potential product will require significant additional investment, development,
preclinical testing and clinical trials prior to potential regulatory approval
and commercialization.
The Company's cold adapted influenza vaccine involves a complex development
process. If the Company were to successfully develop an influenza vaccine, its
composition would require annual modification. Influenza viruses have a high
mutation rate and the surface antigens of influenza viruses that induce
protective immunity are variable from year to year. Each spring, the FDA and the
United States Centers for Disease Control and Prevention (the "CDC") select
circulating influenza strains that will be included in the following season's
influenza vaccines. As a result, manufacturers of vaccines must modify their
influenza vaccines each year to include the selected strains in a form that
meets FDA guidelines within an approximately six-month period in order to make
it available before the influenza season. On one occasion in the past, the
Company experienced difficulty in preparing modified vaccine strains in time to
conduct clinical trials during the influenza season. Even if the Company is able
to develop an influenza vaccine for a particular year, it must also establish a
dependable process by which the vaccine may be modified and manufactured on a
timely basis to include additional strains each year. If the Company were unable
to develop an influenza vaccine for a particular year that meets FDA guidelines
and establish a manufacturing process for the vaccine, its business, financial
condition and results of operations would be materially adversely affected. No
assurance can be given that delays in preparing vaccines for use in clinical
trials or commercial sales will not be encountered. In addition, there can be no
assurance that the Company's development efforts will be successful, that
required regulatory approvals, including those with respect to Investigational
New Drug ("IND") applications, will be obtained or that any products, if
introduced, will be successfully marketed. See "Business -- Vaccine Products
Under Development."
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NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue
and to accelerate in the foreseeable future. The development of the Company's
technology and proposed products will require a commitment of substantial funds
to conduct the costly and time-consuming research, preclinical testing and
clinical trials necessary to develop and optimize such technology and proposed
products, to establish manufacturing and marketing capabilities and to bring any
such products to market. The Company's future capital requirements will depend
upon many factors, including continued scientific progress in the research and
development of the Company's technology and vaccine programs, the size and
complexity of these programs, the ability of the Company to establish and
maintain collaborative arrangements, progress with preclinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the cost involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims or trade secrets, and product commercialization activities.
The Company anticipates that the proceeds of this offering, together with
the interest thereon, and existing capital resources, revenues from existing
collaborations, cash equivalents and short-term investments will enable it to
maintain its current and planned operations at least through 1997. The Company
is actively seeking additional collaborative agreements with corporate partners
and may seek additional funding through public or private equity or debt
financing. There can be no assurance that any additional collaborative
agreements will be entered into or that additional financing will be available
on acceptable terms, if at all. If additional funds are raised by issuing equity
securities, further dilution to stockholders may result. If adequate funds are
not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research or development programs or to obtain funds
through collaborative arrangements with others that may require the Company to
relinquish rights to certain of its technologies, product candidates or products
that the Company would otherwise seek to develop or commercialize itself. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS
The Company currently does not have the facilities to manufacture products
for large-scale clinical trials or in commercial quantities and has no
experience in commercial-scale manufacturing. To manufacture its products for
large-scale clinical trials or on a commercial scale, the Company will have to
build or gain access to a large-scale manufacturing facility which will require
a significant amount of funds. The Company currently is evaluating the costs and
benefits of developing internal manufacturing capabilities or contracting with
third-party manufacturers. The production of the Company's cold adapted
influenza vaccine is subject to the availability of a large number of
pathogen-free hen eggs, for which there are currently a limited number of
suppliers. Contamination or disruption of this source of supply would adversely
affect the ability to manufacture the Company's cold adapted influenza vaccine.
In addition, to make the vaccine available for clinical trials or commercial
sales before the influenza season, the Company must successfully modify the
vaccine within a six-month period to include selected strains for a particular
year in time for manufacturing and distribution. The Company currently is
considering whether to construct manufacturing facilities capable of producing
both pilot-scale and commercial quantities of its potential vaccine products and
is presently building a pilot manufacturing facility. This scale-up process will
require the Company to develop advanced manufacturing techniques and rigorous
process controls. Furthermore, the Company will be required to register its
facility with the FDA and with the California Department of Health Services and
will be subject to state and federal inspections confirming the Company's
compliance with current Good Manufacturing Practices ("cGMP") regulations
established by the FDA. No assurance can be given as to the ability of the
Company to produce commercial quantities of its potential products in compliance
with applicable regulations or at an acceptable cost, if at all.
The Company is alternatively considering the use of contract manufacturers
for the commercial production of its potential products. The Company currently
relies on Evans Medical Limited, a subsidiary of Medeva plc ("Evans"), for the
manufacture of its influenza vaccine for clinical trials. The Company is aware
of only a limited number of manufacturers which it believes have the ability and
capacity to manufacture its potential products, including the cold adapted
influenza vaccine, in a timely manner. There can be no assurance that the
Company would be able to contract with any of these manufacturers for the
manufacture of its products on acceptable
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terms, if at all. If the Company enters into an agreement with a third-party
manufacturer, it will be required to relinquish control of the manufacturing
process, which might adversely affect the Company's results of operations.
Furthermore, a third-party manufacturer also will be required to manufacture the
Company's products in compliance with state and federal regulations. Failure of
any such third-party manufacturer to comply with state and federal regulations
and to deliver the required quantities on a timely basis and at commercially
reasonable prices would materially adversely affect the Company's business,
financial condition and results of operations. No assurance can be given that
the Company, alone or with a third party, will be able to make the transition to
commercial-scale production of its potential products successfully, if at all,
or that if successful, the Company will be able to maintain such production. See
"Business -- Manufacturing" and "-- Government Regulation."
UNCERTAINTY OF FUTURE PROFITABILITY; ACCUMULATED DEFICIT
The Company has experienced significant and increasing operating losses
since its inception in April 1992. As of March 31, 1996, the Company had an
accumulated deficit of approximately $26.2 million. Aviron has not received any
product revenue to date and does not expect to generate revenues from the sale
of products for several years, if at all. The Company expects to incur
significant and increasing operating losses over at least the next several years
as the Company's research and development efforts and preclinical testing and
clinical trial activities expand. The Company's ability to achieve profitability
depends in part upon its ability, alone or with others, to complete development
of its proposed products, to obtain required regulatory approvals and to
successfully manufacture and market such products. To the extent that the
Company is unable to obtain third-party funding for expenses, the Company
expects that its increased expenses will result in increased losses from
operations. There can be no assurance that Aviron will obtain required
regulatory approvals or successfully identify, develop, test, manufacture and
market any product candidates, or that the Company will ever achieve product
revenues or profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS; DEPENDENCE ON TRADE
SECRETS
The Company's success will depend in part on its ability to maintain its
technology licenses, maintain trade secrets, obtain patents and operate without
infringing the proprietary rights of others, both in the United States and in
other countries. Since patent applications in the United States are maintained
in secrecy until patents issue and since publication of discoveries in the
scientific or patent literature often lag behind actual discoveries, the Company
cannot be certain that it was the first to make the inventions covered by each
of its pending patent applications or that it was the first to file patent
applications for such inventions. The patent positions of biotechnology and
pharmaceutical companies can be highly uncertain and involve complex legal and
factual questions, and therefore the breadth of claims allowed in biotechnology
and pharmaceutical patents, or their enforceability, cannot be predicted. There
can be no assurance that any of the Company's patents or patent applications
will issue or, if issued, will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide proprietary protection or
competitive advantages to the Company.
The commercial success of Aviron also will depend, in part, upon the
Company's not infringing patents issued to others. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions have
filed patent applications or received patents in the areas of the Company's
programs. Some of these applications or patents may limit or preclude the
Company's applications, or conflict in certain respects with claims made under
the Company's applications.
On May 22, 1996, the Company received notice from Chiron Corporation
("Chiron") that Chiron intends to file a lawsuit against Aviron, unless a prompt
negotiated settlement can be reached, alleging that certain of Aviron's patent
applications relating to its EBV program are based on Chiron proprietary
information which was improperly conveyed to Aviron by a former Chiron employee.
Aviron believes that Chiron's allegations are without merit and, if a complaint
is filed, intends to vigorously defend itself against any such action. Aviron
does not utilize the alleged proprietary information in any of its programs. The
Company has received terms of a proposed settlement from Chiron and is in
discussions with Chiron regarding a possible settlement of the dispute. No
assurance can be given that litigation will not ensue, which could be costly and
time-consuming.
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The Company is aware of pending patent applications that have been filed by
others that may pertain to certain aspects of the Company's programs or its
issued or pending patent applications. If patents have been or are issued to
others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to these patents or to develop or obtain alternative technology. No
assurance can be given that patents have not been issued, or will not be issued,
to third parties that contain preclusive or conflicting claims with respect to
the cold adapted influenza vaccine or any of the Company's other programs. The
Company's breach of an existing license or failure to obtain a license to
technology required to commercialize its products may have a material adverse
effect on the Company's business, financial condition and results of operations.
Litigation, which could result in substantial costs to the Company, may also be
necessary to enforce any patents issued to the Company or to determine the scope
and validity of third-party proprietary rights. If competitors of the Company
prepare and file patent applications in the United States that claim technology
also claimed by the Company, the Company may have to participate in interference
proceedings declared by the United States Patent and Trademark Office to
determine priority of invention, which could result in substantial cost to the
Company, even if the eventual outcome is favorable to the Company. An adverse
outcome could subject the Company to significant liabilities to third parties
and require the Company to license disputed rights from third parties or to
cease using such technology.
The Company has no issued patents on the technology related to its cold
adapted influenza vaccine. The Company's rights to this technology are based on
a license of materials and know-how from the University of Michigan, which owns
the master strains from which the vaccine is derived, and on a license of
know-how and clinical trial data from the NIH. There can be no assurance that a
third party will not reproduce the Company's cold adapted influenza vaccine or
that a third party will not develop another live-virus influenza vaccine which
might be comparable to Aviron's in terms of safety and effectiveness.
The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Certain of the Company's licensors also rely on trade secrets to
protect technology which has been licensed to Aviron, and as a result, the
Company is dependent on the efforts of such licensors to protect such trade
secrets. For example, the University of Michigan relies, in part, on trade
secrets to protect the master strains of the cold adapted influenza virus used
by the Company. Aviron protects its proprietary technology and processes, in
part, by confidentiality agreements with its employees, consultants,
collaborators and certain contractors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets or those of its licensors
will not otherwise become known or be independently discovered by competitors.
To the extent that Aviron or its consultants or research collaborators use
intellectual property owned by others in their work for the Company, disputes
may also arise as to the rights in related or resulting know-how and inventions.
See "Business -- Patents and Proprietary Rights."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVALS
The production and marketing of the Company's products and its ongoing
research and development activities are subject to extensive regulation by
numerous government authorities in the United States and other countries. Prior
to marketing in the United States, any product developed by the Company must
undergo rigorous preclinical testing and clinical trials and an extensive
regulatory approval process implemented by the FDA under the Food, Drug and
Cosmetic Act. Satisfaction of such regulatory requirements, which includes
demonstrating that the product is both safe and effective, typically takes
several years or more depending upon the type, complexity and novelty of the
product and requires the expenditure of substantial resources. This process may
be more demanding for vaccines intended for use in healthy people compared to
therapeutics used for treatment of people with diseases. Preclinical studies
must be conducted in compliance with the FDA's Good Laboratory Practice ("GLP")
regulations. Clinical testing must meet requirements for Institutional Review
Board ("IRB") oversight and informed consent, as well as FDA prior review,
oversight and good clinical practice requirements. The Company has limited
experience in conducting and managing the clinical trials necessary to obtain
regulatory approval. Furthermore, the Company or the FDA may suspend clinical
trials at any time if it believes that the subjects participating in such trials
are being exposed to unacceptable health risks.
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Before receiving FDA approval to market a product, the Company will have to
demonstrate that the product is safe and effective and represents an improved
form of health management compared to existing approaches. Data obtained from
preclinical testing and clinical trials are susceptible to varying
interpretations which could delay, limit or prevent regulatory approvals. In
addition, delays or rejections may be encountered based upon additional
government regulation from future legislation or administrative action or
changes in FDA policy during the period of product development, clinical trials
and FDA regulatory review. Similar delays may also be encountered in foreign
countries. There can be no assurance that even after such time and expenditures,
regulatory approval will be obtained for any products developed by the Company.
If regulatory approval of a product is granted, such approval will be limited to
those specific segments of the population for which the product is effective, as
demonstrated through clinical trials. Furthermore, approval may entail ongoing
requirements for post-marketing studies. Even if such regulatory approval is
obtained, a marketed product, its manufacturer and its manufacturing facilities
are subject to continual review and periodic inspections. The regulatory
standards for manufacturing are currently being applied stringently by the FDA.
Discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or manufacturer, including
costly recalls or even withdrawal of the product from the market. There can be
no assurance that any product developed by the Company alone or in conjunction
with others will prove to be safe and efficacious in clinical trials and will
meet all of the applicable regulatory requirements needed to receive marketing
approval.
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied for
at a national level, although within the European Union (the "EU"), procedures
are available to companies wishing to market a product in more than one EU
member state. If the regulatory authorities are satisfied that adequate evidence
of safety, quality and efficacy has been presented, a marketing authorization
will be granted. This foreign regulatory approval process includes all of the
risks associated with FDA approval set forth above. See "Business -- Government
Regulation."
INTENSE COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
The Company operates in a rapidly evolving field. Any product developed by
the Company would compete with existing and new drugs and vaccines being created
by pharmaceutical, biopharmaceutical and biotechnology companies. If the Company
were able to successfully develop its vaccines, it would be competing with
larger companies that have already introduced vaccines and have significantly
greater marketing, manufacturing, financial and managerial resources. For
example, with respect to its cold adapted influenza vaccine, the Company will be
competing against larger companies such as Pasteur Merieux Connaught,
Wyeth-Ayerst, Parke-Davis Group, a subsidiary of Warner-Lambert Company
("Parke-Davis") and Evans. Each of these companies sell the injectable
inactivated influenza vaccine in the United States, have significantly greater
financial resources than Aviron and have established marketing and distribution
channels for such products. The Company is also aware of several companies that
are marketing or are in late-stage development of products to prevent CMV or HSV
disease, including Glaxo Wellcome plc ("Glaxo"), SmithKline Beecham and Chiron
Biocine Corporation. In addition, the Company is aware of the use in Russia of a
cold adapted influenza vaccine, research programs by some of the competitors
listed above, among others, to develop more effective influenza vaccines and a
cold adapted PIV-3 vaccine developed with NIH support which may be licensed to a
large vaccine company.
New developments are expected to continue in both the pharmaceutical and
biotechnology industries and in academia. Other companies may succeed in
developing products that are safer, more effective or less costly than any that
may be developed by the Company. Such companies may also be more effective than
the Company in the production and marketing of their products. Furthermore,
rapid technological development by competitors may result in the Company's
products becoming obsolete before the Company is able to recover its research,
development or commercialization expenses incurred in connection with any such
product. Many potential competitors have substantially greater financial,
technical and marketing resources than the Company. Some of these companies also
have considerable experience in preclinical testing, clinical trials and other
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regulatory approval procedures. Moreover, certain academic institutions,
government agencies and other research organizations are conducting research in
areas in which the Company is working. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more active in seeking patent protection and licensing arrangements to collect
royalties for the use of technology that they have developed. These institutions
may also market competitive commercial products on their own or through joint
ventures.
Aviron believes that competition in the markets it is addressing will
continue to be intense. The vaccine industry is characterized by intense price
competition, and the Company anticipates that it will face this and other forms
of competition. There can be no assurance that pharmaceutical, biopharmaceutical
and biotechnology companies will not develop more effective products than those
of the Company or will not market and sell their products more effectively than
the Company, which would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Competition."
DEPENDENCE ON COLLABORATIVE AGREEMENTS
The Company's strategy for the development, clinical trials, manufacturing
and commercialization of certain of its products includes maintaining and
entering into various collaborations with corporate partners, licensors,
licensees and others. There can be no assurance that the Company will be able to
maintain existing collaborative agreements, negotiate collaborative arrangements
in the future on acceptable terms, if at all, or that any such collaborative
arrangements will be successful. To the extent that the Company is not able to
maintain or establish such arrangements, the Company would be required to
undertake product development and commercialization activities at its own
expense, which would increase the Company's capital requirements or require the
Company to limit the scope of its development and commercialization activities.
In addition, the Company may encounter significant delays in introducing its
products into certain markets or find that the development, manufacture or sale
of its products in such markets is adversely affected by the absence of such
collaborative agreements.
The Company cannot control the amount and timing of resources which its
collaborative partners devote to the Company's programs or potential products,
which may vary because of factors unrelated to the potential products. If any of
the Company's collaborative partners breach or terminate their agreements with
the Company or otherwise fail to conduct their collaborative activities in a
timely manner, the preclinical or clinical development or commercialization of
product candidates or research programs will be delayed, and the Company would
be required to devote additional resources to product development and
commercialization, or terminate certain development programs. These
relationships generally may be terminated at the discretion of the Company's
collaborative partners, in some cases with only limited notice to the Company.
The termination of collaborative arrangements could have a material adverse
effect on the Company's business, financial condition and results of operations.
There also can be no assurance that disputes will not arise in the future with
respect to the ownership of rights to any technology developed with third
parties. These and other possible disagreements between collaborators and the
Company could lead to delays in the collaborative research, development or
commercialization of certain product candidates, or could result in litigation
or arbitration, which would be time consuming and expensive, and would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In addition, Aviron's collaborative partners may develop, either alone or
with others, products that compete with the development and marketing of the
Company's products. Competing products of the Company's collaborative partners
may result in their withdrawal of support with respect to all or a portion of
the Company's technology, which would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Collaborative Agreements."
UNCERTAINTY OF MARKET ACCEPTANCE
Even if the requisite regulatory approvals are obtained for the Company's
potential products, uncertainty exists as to whether such products will be
accepted in United States or foreign markets. The Company believes, for example,
that widespread use of the Company's proposed vaccines in the United States is
unlikely without
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positive recommendations from the Advisory Committee on Immunization Practices
(the "ACIP") of the CDC, the American Academy of Pediatrics or the American
College of Physicians. There can be no assurance that such authorities will
recommend the use of the Company's proposed products. The lack of such
recommendations would have a material adverse effect on the Company's business,
financial condition and results of operations.
A number of additional factors may affect the rate and overall market
acceptance of Aviron's cold adapted influenza vaccine and any other products
which may be developed by the Company, including the rate of adoption of
Aviron's vaccines by health care practitioners, the rate of vaccine acceptance
by the target population, the timing of market entry relative to competitive
products, the availability of alternative technologies, the price of the
Company's products relative to alternative technologies, the availability of
third-party reimbursement and the extent of marketing efforts by the Company,
collaborative partners and third-party distributors or agents retained by the
Company. Side effects or unfavorable publicity concerning Aviron's products or
any product incorporating live virus vaccines could have an adverse effect on
the Company's ability to obtain physician, patient or third-party payor
acceptance and efforts to sell the Company's products. The Company's current
formulation of the cold adapted influenza vaccine for clinical trials requires
frozen storage, which may adversely affect market acceptance in certain foreign
countries where adequate refrigeration is not commonly available. There can be
no assurance that physicians, patients or third-party payors will accept new
live virus vaccine products or any of the Company's products as readily as other
types of vaccines, or at all. See "Business -- Vaccine Products Under
Development."
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
The Company currently has no sales, marketing or distribution capability. To
market any products, Aviron must either obtain the assistance of a third party
with a suitable distribution system, develop a direct sales and marketing staff
of its own or combine the efforts of a third party with its own efforts. Other
than SmithKline Beecham and Sang-A, the Company to date has no agreements for
marketing or distributing its potential products.
The success and commercialization of the Company's products is dependent in
part upon the ability of the Company to maintain and enter into additional
collaborative agreements with corporate partners for the development, testing
and marketing of certain of its vaccines and upon the ability of these third
parties to perform their responsibilities. Although Aviron believes that parties
to any such arrangements would have an economic motivation to succeed in
performing their contractual responsibilities, the amount and timing of
resources devoted to these activities will not be within the control of the
Company. There can be no assurance that any such agreements or arrangements will
be available on terms acceptable to the Company, if at all, that such third
parties would perform their obligations as expected, or that any revenue would
be derived from such arrangements. If Aviron is not able to enter into such
agreements or arrangements, it could encounter delays in introducing its
products into the market or be forced to limit the scope of its
commercialization activities. If the Company were to market products directly,
significant additional expenditures, management resources and time would be
required to develop a sales and marketing staff within the Company. In addition,
the Company would also be competing with other companies that currently have
experienced and well-funded marketing and sales operations. There can be no
assurance that the Company will be able to establish its own sales and marketing
force or that any such force, if established, would be successful. See "Business
- -- Marketing and Sales" and "-- Collaborative Agreements."
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of pharmaceutical, biopharmaceutical and
biotechnology companies have historically been highly volatile. The market has
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. In addition,
factors such as fluctuations in the Company's operating results, future sales of
Common Stock, announcements of technological innovations or new therapeutic
products by the Company or its competitors, announcements of collaborators,
clinical trial results, government regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs developed by the
Company or others, comments made by securities analysts and general
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market conditions can have an adverse effect on the market price of the Common
Stock. In particular, the realization of any of the risks described in these
"Risk Factors" could have a significant and adverse impact on such market price.
RISK OF PRODUCT LIABILITY; UNCERTAINTY OF AVAILABILITY OF INSURANCE
The Company's business exposes it to potential product liability risks that
are inherent in the testing, manufacturing and marketing of vaccines. The
Company has obtained clinical trial liability insurance for its clinical trials,
but there can be no assurance that it will be able to maintain adequate
insurance for its clinical trials. The Company also intends to seek product
liability insurance in the future for products approved for marketing, if any.
However, no assurance can be given that the Company will be able to acquire or
maintain insurance or that insurance can be acquired or maintained at a
reasonable cost or in sufficient amounts to protect the Company. There can be no
assurance that insurance coverage and the resources of the Company would be
sufficient to satisfy any liability resulting from product liability claims. A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on its business, financial
condition and results of operations. The Company intends to seek inclusion of
certain of its products in the United States National Vaccine Injury
Compensation Program, a no-fault compensation program for claims against vaccine
manufacturers, which administers a trust funded by excise taxes on sales of
certain recommended childhood vaccines. There can be no assurance that this
government program will continue or that the Company's proposed vaccines will be
included in the program.
UNCERTAINTY RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
Political, economic and regulatory influences are subjecting the health care
industry in the United States to fundamental change. Recent initiatives to
reduce the federal deficit and to reform health care delivery are increasing
cost-containment efforts. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company or its
collaborative partners to limit or eliminate spending on development projects.
Legislative debate is expected to continue in the future, and market forces are
expected to demand reduced costs. Aviron cannot predict what impact the adoption
of any federal or state health care reform measures or future private sector
reforms may have on its business.
In both domestic and foreign markets, sales of the Company's proposed
vaccines will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payors are increasingly challenging the price and
cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
There can be no assurance that the Company's proposed products will be
considered cost effective or that adequate third-party reimbursement will be
available to enable Aviron to maintain price levels sufficient to realize an
appropriate return on its investment in product development. Legislation and
regulations affecting the pricing of pharmaceuticals may change before the
Company's proposed products are approved for marketing. Adoption of such
legislation could further limit reimbursement for medical products. If adequate
coverage and reimbursement levels are not provided by the government and
third-party payors for the Company's products, the market acceptance of these
products would be adversely affected, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of its scientific
and management staff. In addition, the Company relies on consultants and
advisors, including its scientific advisors, to assist the Company in
formulating its research and development strategy. Attracting and retaining
qualified personnel, consultants and advisors will be critical to the Company's
success. To pursue its product development and marketing plans,
15
<PAGE>
the Company will be required to hire additional qualified scientific personnel
to perform research and development, as well as personnel with expertise in
conducting clinical trials, government regulation, manufacturing and marketing
and sales. Expansion in product development and marketing is also expected to
require the addition of management personnel and the development of additional
expertise by existing management personnel. The Company faces competition for
qualified individuals from numerous pharmaceutical, biopharmaceutical and
biotechnology companies, universities and other research institutions. There can
be no assurance that the Company will be able to attract and retain such
individuals.
In addition, a portion of the Company's research and development is
conducted under sponsored research programs with several universities and
research institutions. The Company depends on the availability of a principal
investigator for each such program, and the Company cannot assure that these
individuals or their research staffs will be available to conduct research and
development for Aviron. The Company's academic collaborators are not employees
of the Company. As a result, the Company has limited control over their
activities and can expect that only limited amounts of their time will be
dedicated to Company activities. The Company's academic collaborators may have
relationships with other commercial entities, some of which could compete with
the Company. See "Business -- Scientific Advisory Board" and "Management."
RISKS ASSOCIATED WITH HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals, various radioactive substances and viruses.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, the
Company could be held liable for any damages that result and any such liability
could exceed the resources of the Company. The Company may incur substantial
costs to comply with environmental regulations if the Company develops
manufacturing capacity.
DILUTION
The assumed initial public offering price is substantially higher than the
pro forma net tangible book value per share of the Company's Common Stock.
Investors purchasing shares of Common Stock in this offering and the Sang-A
Shares will therefore incur immediate, substantial dilution of approximately
$7.82 per share. In addition, investors purchasing shares of Common Stock in
this offering will incur additional dilution to the extent outstanding options
and warrants are exercised. See "Dilution."
NO PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that a regular trading market will
develop and continue after this offering or that the market price of the Common
Stock will not decline below the initial public offering price. The initial
public offering price will be determined through negotiations between the
Company and the Representatives of the Underwriters and may not be indicative of
the market price of the Common Stock following this offering. Among the factors
considered in such negotiations will be prevailing market conditions, certain
financial information of the Company, market valuations of other companies that
the Company and the Representatives of the Underwriters believe to be comparable
to the Company, estimates of the business potential of the Company, the present
state of the Company's development and other factors deemed relevant. See
"Underwriting."
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial amount of Common Stock in the public market following
this offering could adversely affect the market price for the Company's Common
Stock. Upon completion of this offering and the sale of the Sang-A Shares, the
Company will have 12,285,990 shares of Common Stock outstanding. In addition to
the 3,000,000 shares of Common Stock offered hereby, approximately 149,329
shares will be available for sale in the public market upon the effective date
of the Registration Statement pursuant to subsection (k) of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"). Approximately 37,395
shares of Common
16
<PAGE>
Stock will be available for sale in the public market pursuant to Rule 144 or
Rule 701 under the Act beginning 90 days after the date of this Prospectus,
subject in certain cases to volume and manner of sale restrictions. In addition,
283,160 shares subject to vested options will be available for sale 90 days
after the date of this Prospectus pursuant to Rule 701. Beginning 180 days from
the date of this Prospectus, 5,311,881 shares of outstanding and 33,726 shares
subject to additional vested options will be available for sale, subject in
certain cases to volume limitations, upon the expiration of agreements not to
sell such outstanding shares or shares subject to such options. Robertson,
Stephens & Company may, in its sole discretion and at any time without notice,
release all or any portion of the shares subject to lock-up agreements.
Additional shares held by existing shareholders will become eligible for sale
from time to time in the future. After this offering, the holders of
approximately 7,833,659 shares of Common Stock and warrants to purchase
approximately 148,145 shares of Common Stock will be entitled to certain demand
and piggyback registration rights with respect to registration of such shares
under the Act. If such holders, by exercising their demand or piggyback
registration rights, cause a large number of securities to be registered and
sold in the public market, such sales could have an adverse effect on the market
price for the Company's Common Stock. If the Company were to include in a
Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on the Company's ability to raise needed capital. See "Shares Eligible
for Future Sale" and "Underwriting."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the Company's
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. While the Company has no present intention to
issue shares of Preferred Stock, such issuance, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 could have the effect of delaying or preventing a
change of control of the Company. The Company's Certificate of Incorporation
provides for staggered terms for the members of the Board of Directors. The
staggered Board of Directors and certain other provisions of the Company's
Certificate of Incorporation and Bylaws may have the effect of delaying or
preventing changes in control or management of the Company, which could
adversely affect the market price of the Company's Common Stock. See
"Description of Capital Stock -- Delaware Anti-Takeover Law and Certain Charter
Provisions."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
offered hereby are estimated to be $32.9 million ($37.9 million if the
Underwriters' over-allotment option is exercised in full) after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company. In addition, the net proceeds to the Company from the sale of
the Sang-A Shares are estimated to be $4.0 million.
The Company anticipates using approximately $24.0 million of the net
proceeds from this offering and from the sale of the Sang-A Shares for product
research and development, including preclinical testing and clinical trials and
approximately $8.0 million for capital expenditures. The balance of the net
proceeds will be used for working capital and general corporate purposes. The
amounts and timing of the expenditures for these purposes may vary significantly
depending on numerous factors, such as the status of the Company's research and
development efforts, the regulatory approval process, technological advances,
determinations as to commercial potential, the terms of collaborative agreements
entered into by the Company, the status of competitive products and the
possibility of the Company's construction of a commercial-scale manufacturing
facility for its potential products. In addition, the Company's research and
development expenditures will vary as projects are added, extended or terminated
and as a result of variations in funding from existing or future collaborative
agreements. The Company may also use a portion of such net proceeds to acquire
or invest in businesses, products and technologies that are complementary to
those of the Company, although no such acquisitions are planned or being
negotiated as of the date of this Prospectus, and no portion of the net proceeds
has been allocated for any specific acquisition.
The Company believes that its available cash, cash equivalents and
short-term investments, together with the net proceeds of this offering and from
the sale of the Sang-A Shares, and the interest thereon, will be sufficient to
meet its capital requirements at least through 1997. Pending application of the
net proceeds as described above, the Company intends to invest the net proceeds
in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock
since inception and does not intend to pay any cash dividends in the foreseeable
future. Future cash dividends, if any, will be determined by the Board of
Directors.
18
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996, (i) the pro forma
capitalization of the Company, giving effect to the conversion of all
outstanding shares of Preferred Stock of the Company into Common Stock, and (ii)
the pro forma capitalization as adjusted to reflect the receipt of the estimated
net proceeds from the sale of 3,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $12.00 per share,
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company, and the estimated proceeds from the
sale of the Sang-A Shares:
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
PRO FORMA AS ADJUSTED
----------- -----------
(in thousands)
<S> <C> <C>
Capital lease obligations, noncurrent.................. $ 545 $ 545
----------- -----------
Stockholders' equity:
Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; none issued and outstanding............. -- --
Common Stock, $0.001 par value; 30,000,000 shares
authorized; 8,874,456 shares issued and outstanding
pro forma, and 12,207,789 shares issued and
outstanding as adjusted (1)......................... 9 12
Additional paid-in capital........................... 41,598 78,475
Notes receivable from stockholders................... (310) (310)
Deferred compensation................................ (938) (938)
Accumulated deficit.................................. (26,192) (26,192)
----------- -----------
Total stockholders' equity..................... 14,167 51,047
----------- -----------
Total capitalization......................... $ 14,712 $ 51,592
----------- -----------
----------- -----------
</TABLE>
- -------------------
(1) Excludes (i) 78,201 shares of Common Stock issued subsequent to March 31,
1996 upon exercise of stock options, (ii) 643,480 shares of Common Stock
issuable upon exercise of options outstanding as of June 1, 1996 at a
weighted average exercise price of approximately $1.22 per share, (iii) an
aggregate of 1,556,520 shares reserved for future grants or purchases
pursuant to the Company's 1996 Equity Incentive Plan, Employee Stock
Purchase Plan and Non-Employee Director Stock Option Plan, (iv) 118,395
shares issuable upon exercise of warrants outstanding as of June 1, 1996 at
a weighted average exercise price of $6.65 per share, and (v) warrants to
purchase 29,750 shares which become exercisable at the close of the offering
at 125% of the initial public offering price.
19
<PAGE>
DILUTION
The pro forma net tangible book value of the Company, as of March 31, 1996,
was $14,167,000 or $1.60 per share of Common Stock. Pro forma net tangible book
value per share is determined by dividing the pro forma net tangible book value
(pro forma tangible assets less total liabilities) of the Company by the number
of shares of Common Stock outstanding at that date, including shares of Common
Stock to be issued upon conversion of the Preferred Stock immediately prior to
the consummation of this offering. After giving effect to the receipt of the net
proceeds from the sale of the 3,000,000 shares of Common Stock offered by the
Company at an assumed initial public offering price of $12.00 per share and the
estimated proceeds from the sale of the Sang-A Shares, the pro forma net
tangible book value of the Company as of March 31, 1996 would have been
$51,047,000 or $4.18 per share. This represents an immediate increase in such
pro forma net tangible book value of $2.58 per share to existing stockholders
and an immediate dilution of $7.82 per share to new public investors and Sang-A.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.................. $ 12.00
Pro forma net tangible book value before offering.... $ 1.60
Increase attributable to new investors............... 2.58
---------
Pro forma net tangible book value after offering....... 4.18
---------
Dilution to new investors.............................. $ 7.82
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1996,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering and purchasing the Sang-A Shares at an assumed initial public offering
price of $12.00 per share and before deducting underwriting discounts and
estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 8,874,456 72.7% $ 41,454,000 50.9% $ 4.67
New investors............................... 3,333,333 27.3 40,000,000 49.1 12.00
------------ ----- ------------- -----
Total................................... 12,207,789 100.0% $ 81,454,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
The foregoing table excludes (i) 78,201 shares of Common Stock issued
subsequent to March 31, 1996 upon exercise of stock options, (ii) 643,480 shares
of Common Stock issuable upon exercise of options outstanding as of June 1,
1996, at a weighted average exercise price of approximately $1.22 per share,
(iii) an aggregate of 1,556,520 shares reserved for future grants or purchases
pursuant to the Company's 1996 Equity Incentive Plan, Employee Stock Purchase
Plan and Non-Employee Director Stock Option Plan, (iv) 118,395 shares issuable
upon exercise of warrants outstanding as of June 1, 1996 at a weighted average
exercise price of $6.65 per share, and (v) warrants to purchase 29,750 shares
which become exercisable at the close of the offering at 125% of the initial
public offering price.
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto included elsewhere in
this Prospectus. The statement of operations data for the years ended December
31, 1993, 1994 and 1995, and the balance sheet data at December 31, 1994 and
1995, are derived from the financial statements of the Company included
elsewhere in this Prospectus which have been audited by Ernst & Young LLP,
independent auditors, whose report is included elsewhere in this Prospectus. The
statement of operations data from inception (April 15, 1992) through December
31, 1992 and the balance sheet data as of December 31, 1992 and 1993, are
derived from audited financial statements not included herein. Financial data as
of March 31, 1996 and for the three-month periods ended March 31, 1995 and 1996,
is derived from unaudited financial statements included elsewhere herein, and,
in the opinion of management, includes all normal recurring adjustments that the
Company considers necessary for a fair presentation of its results of
operations. The results of operations for the interim periods are not
necessarily indicative of results to be expected for any future period. The
Company has not declared or paid cash dividends on its Common Stock since
inception and does not intend to pay any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM THREE MONTHS ENDED
APRIL 15, 1992 YEAR ENDED DECEMBER 31, MARCH 31,
(DATE OF INCEPTION) ------------------------------------ ------------------------
TO DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ----------- ----------- ---------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenue........................ $ -- $ -- $ -- $ 1,707 $ -- $ 188
Operating expenses:
Research and development........... 320 2,073 4,216 10,220 3,088 3,044
General and administrative......... 470 1,874 2,493 3,252 701 1,063
----- ----------- ----------- ---------- ----------- -----------
Total operating expenses......... 790 3,947 6,709 13,472 3,789 4,107
----- ----------- ----------- ---------- ----------- -----------
Loss from operations................. (790) (3,947) (6,709) (11,765) (3,789) (3,919)
----- ----------- ----------- ---------- ----------- -----------
Interest income, net of interest
expense............................. 37 175 207 362 32 183
----- ----------- ----------- ---------- ----------- -----------
Net loss............................. $ (753) $ (3,772) $ (6,502) $ (11,403) $ (3,757) $ (3,736)
----- ----------- ----------- ---------- ----------- -----------
----- ----------- ----------- ---------- ----------- -----------
Pro forma net loss per share (1)..... $ (0.56) $ (0.73) $ (1.24) $ (0.41) $ (0.41)
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
Shares used in computing pro forma
net loss per share (1).............. 6,696 8,948 9,183 9,062 9,223
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ ----------
1992 1993 1994 1995 1996
------------ ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.......... $ 1,492 $ 12,410 $ 6,449 $ 17,819 $ 14,494
Working capital............................................ 1,355 12,155 5,877 16,775 12,804
Total assets............................................... 1,901 13,206 7,789 19,878 17,275
Capital lease obligations, noncurrent...................... -- -- (750) (618) (545)
Deferred compensation (2).................................. -- -- -- 180 938
Accumulated deficit........................................ (753) (4,525) (11,060) (22,444) (26,192)
Total stockholders' equity................................. 1,722 12,893 6,362 17,537 14,167
</TABLE>
- --------------
(1) See Note 1 of Notes to Financial Statements for an explanation of the method
used to determine the number of shares used to compute pro forma per share
amounts.
(2) In May 1996, the Company recorded approximately $463,000 of deferred
compensation related to grants of employee stock options. See Note 7 of
Notes to Financial Statements.
21
<PAGE>
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 forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus.
OVERVIEW
Since its inception in April 1992, Aviron has devoted substantially all of
its resources to its research and development programs. To date, Aviron has not
generated any revenues from the sale of products and does not expect to generate
any such revenues for at least several years, if at all. Aviron has incurred
cumulative net losses of approximately $26.2 million as of March 31, 1996, and
it expects to incur increasing operating losses for a number of years.
Aviron has financed its operations through proceeds from private placements
of Preferred Stock, revenue from its collaborative agreements, including
reimbursement of certain of Aviron's research and development expenses,
equipment lease financing and investment income earned on cash balances and
short-term investments.
The Company expects its research and development expenditures to increase
substantially over the next several years as the Company expands its research
and development efforts and preclinical testing and clinical trials with respect
to certain of its programs. In addition, general and administrative expenses are
expected to continue to increase as the Company expands its operations and
incurs the additional expenses associated with operating as a public company.
In October 1995, the Company signed an agreement with SmithKline Beecham
defining a collaboration on the Company's EBV vaccine technology (the "SB
Agreement"). Under the terms of the SB Agreement, the Company granted SmithKline
Beecham an exclusive license to produce, use and sell non-live EBV vaccines
incorporating the Company's technology for prophylactic and therapeutic uses on
a worldwide basis, except in South and North Korea (together, "Korea"). The
Company has retained the right to co-distribute a monovalent formulation of the
vaccine in certain markets in the United States and to have SmithKline Beecham
supply such vaccine. SmithKline Beecham has agreed to fund research and
development at the Company related to the EBV vaccine, in specified minimum
amounts, during the first two years of the SB Agreement. SmithKline Beecham made
an initial upfront payment to the Company and agreed to make additional payments
upon the achievement of certain product development milestones. The Company is
entitled to royalties from SmithKline Beecham based on net sales of the vaccine.
No assurance can be given, however, that the Company will receive any additional
payments from SmithKline Beecham or that SmithKline Beecham will not terminate
its agreement with the Company. See "Business -- Collaborative Agreements."
In May 1995, the Company entered into a Development and License Agreement
with Sang-A. The Company granted to Sang-A exclusive clinical development,
manufacturing and marketing rights in Korea for specified products developed by
Aviron, including vaccines for influenza (cold adapted and recombinant), EBV,
CMV, HSV-2 and RSV. However, the Company is under no obligation to develop any
product. Sang-A also will make payments to the Company upon the Company's
meeting certain regulatory milestones for each product in Korea and will pay a
royalty to the Company on net sales of such products in Korea. No assurance can
be given, however, that the Company will receive any payments from Sang-A or
that Sang-A will not terminate its agreement with the Company. See "Business --
Collaborative Agreements."
The Company currently is evaluating the costs and benefits of developing
internal manufacturing capabilities or contracting with third-party
manufacturers. The Company presently is funding the construction of its pilot
manufacturing facility through a capital lease line of credit, however, if the
Company decides to establish its own commercial-scale manufacturing facility, it
would require a significant amount of funds. See "Business -- Manufacturing."
22
<PAGE>
The Company's business is subject to significant risks, including but not
limited to the risks inherent in its research and development efforts, including
preclinical testing and clinical trials, uncertainties associated both with
obtaining and enforcing its 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, manufacturing uncertainties and
dependence on third parties. Even if the Company's product candidates appear
promising at an early stage of development, they may not reach the market for
numerous reasons. Such reasons include the possibilities that the products will
be found unsafe or ineffective during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to manufacture on a large
scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
REVENUES
Total revenue for the three months ended March 31, 1996 was $188,000, and no
revenue was earned for the three months ended March 31, 1995. Revenue in the
three months ended March 31, 1996 resulted primarily from the Company's license
and development agreement with SmithKline Beecham. See "Business --
Collaborative Agreements -- SmithKline Beecham Biologicals S.A."
OPERATING EXPENSES
Research and development expenses were $3.0 million for the three months
ended March 31, 1996 and $3.1 million for the three months ended March 31, 1995.
Included in research and development expenses for the three months ended March
31, 1995 is a one-time charge of $1.6 million relating to Aviron's agreement
with the University of Michigan (see Note 2 of Notes to Financial Statements).
Without the one-time charge, research and development expenses increased 103%
between the three months ended March 31, 1996 and 1995. These increases were
primarily due to increases in research and development staffing, licensing fees,
expenses associated with clinical trials of the Company's cold adapted influenza
vaccine and preclinical testing associated with other programs.
General and administrative expenses increased 52% to $1.1 million in the
three months ended March 31, 1996 from $701,000 in the three months ended March
31, 1995. These increases were incurred to support the Company's expanded
research and development efforts and facilities, patent and legal expenses, and
corporate development activities.
NET INTEREST INCOME
The Company's net interest income increased to $183,000 in the three months
ended March 31, 1996, from $32,000 in the three months ended March 31, 1995. The
increase reflects the effect of the Comany's higher average cash and cash
equivalents and short-term investment balances.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUES
Total revenue for 1995 was $1.7 million, and no revenue was earned in the
year ended December 31, 1994. Revenue in the year ended December 31, 1995
resulted primarily from the Company's license and development agreement with
SmithKline Beecham. See "Business -- Collaborative Agreements -- SmithKline
Beecham Biologicals S.A."
OPERATING EXPENSES
Research and development expenses increased 142% to $10.2 million in the
year ended December 31, 1995 from $4.2 million in the year ended December 31,
1994. These increases were primarily due to increases in research and
development staffing, licensing fees (including the one-time charge relating to
Aviron's agreement with the University of Michigan discussed above), and
expenses associated primarily with clinical trials of its cold adapted influenza
vaccine and preclinical testing associated with the herpes simplex virus
program. General and administrative expenses increased 30% to $3.3 million in
the year ended December 31, 1995 from
23
<PAGE>
$2.5 million in the year ended December 31, 1994. These increases were incurred
to support the Company's expanded research and development efforts and
facilities, patent and legal expenses, and corporate development activities.
NET INTEREST INCOME
The Company's net interest income increased 75% to $362,000 in the year
ended December 31, 1995, from $207,000 in the year ended December 31, 1994. The
increase in 1995 reflects the effect of the Company's higher average cash and
cash equivalents and short-term investment balances, offset by increased
interest expense related to capital lease obligations.
YEARS ENDED DECEMBER 31, 1994 AND 1993
OPERATING EXPENSES
Research and development expenses increased 103% to $4.2 million in the year
ended December 31, 1994, from $2.1 million in the year ended December 31, 1993.
These increases were primarily due to increases in research and development
staffing and preclinical testing. General and administrative expenses increased
33% from $2.5 million in the year ended December 31, 1994, from $1.9 million in
the year ended December 31, 1993. These increases were incurred to support the
Company's expanded research and development efforts and facilities and patent
and legal expenses.
NET INTEREST INCOME
The Company's net interest income increased 18% to $207,000 in the year
ended December 31, 1994, from $175,000 in the year ended December 31, 1993. The
increase reflected the effect of the Company's higher average cash and cash
equivalents and short-term investment balances, offset by interest expense
related to capital lease obligations in 1994.
NET OPERATING LOSS CARRYFORWARD
As of December 31, 1995, the Company had a federal net operating loss
carryforward of approximately $20.0 million available to offset future taxable
income, if any. The net operating loss carryforward will expire at various dates
beginning from 2007 through 2010, if not utilized. Utilization of the net
operating losses and credits may be subject to substantial annual limitation due
to the "change in ownership" provisions of the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation may result in the expiration of
net operating losses and credits before utilization. See Note 8 of Notes to
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Aviron had cash, cash equivalents and short-term investments at March 31,
1996 of approximately $14.5 million. In order to preserve principal and maintain
liquidity, the Company's funds are invested in United States Treasury
obligations, highly-rated corporate obligations and other short-term
investments.
The Company has financed its operations since inception primarily through
private placements of Preferred Stock. Through March 31, 1996, the Company had
raised approximately $38.4 million from such sales net of offering expenses.
Cash used in operations was $3.4 million, $6.1 million, $8.9 million and $3.0
million in 1993, 1994, 1995 and the first quarter of 1996, respectively. Cash
expended for capital additions and to repay lease financing arrangements
amounted to approximately $593,000, $472,000, $622,000 and $659,000 in 1993,
1994 and 1995 and the first quarter of 1996, respectively. The Company expects
expenditures for capital additions will increase in 1996 as a result of the
construction of a pilot manufacturing facility. The Company expects expenditures
for research and development, clinical trials and general administrative
expenditures will continue to increase in 1996 as the Company develops its
products and expands its clinical trials.
The Company anticipates that the proceeds of this offering, together with
the interest thereon and existing capital resources, revenues from existing
collaborations, cash equivalents and short-term investments, will enable it to
maintain its current and planned operations at least through 1997. The Company's
future cash requirements will depend on numerous factors, including continued
scientific progress in the research and development of the Company's technology
and vaccine programs, the size and complexity of these programs, the ability of
the Company to establish and maintain collaborative arrangements, progress with
preclinical
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<PAGE>
testing and clinical trials, the time and costs involved in obtaining regulatory
approvals, the cost involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims, and product commercialization activities. The Company
is seeking additional collaborative agreements with corporate partners and may
seek access to the public or private equity markets. There can be no assurance,
however, that any such agreements will be entered into or that they will reduce
the Company's funding requirements or that additional funding will be available.
The Company expects that additional equity or debt financings will be required
to fund its operations. There can be no assurance that such funds will be
available on favorable terms, if at all. If adequate funds are not available,
the Company may be required to delay, reduce the scope of, or eliminate one or
more of its research or development programs or to obtain funds through
collaborative agreements with others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would otherwise seek to develop or commercialize itself, which would
materially adversely affect the Company's business, financial condition and
results of operations.
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<PAGE>
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
Aviron is a biopharmaceutical company whose strategy is to focus on
prevention of disease. The Company's goal is to become a leader in the
discovery, development, manufacture and marketing of live virus vaccines which
are sufficiently cost effective to justify their use in immunization programs
targeting the general population. Live virus vaccines, such as those for
smallpox, polio, measles, mumps and rubella, have had a long record of success
in preventing, and in some cases eliminating, disease. The Company currently is
analyzing data from Phase I and Phase II clinical trials in children and adults
of its live cold adapted intranasal vaccine for influenza. The Company has
recently in-licensed a live intranasal vaccine for Parainfluenza Virus Type 3
("PIV-3") which has been tested by others in Phase I/II clinical trials. The
Company also is developing a vaccine for Epstein-Barr virus ("EBV"). In
addition, Aviron is using its proprietary "Rational Vaccine Design" technology
to discover new live virus vaccines. Rational Vaccine Design involves the
deletion or modification of virulence proteins, changes to the virus' genetic
control signals to slow down its replication, or addition of information to
enhance the virus' stimulation of the immune system. The Company is applying
this technology to develop candidates for the prevention of influenza in elderly
persons and diseases caused by Cytomegalovirus ("CMV"), Herpes Simplex
Virus-Type 2 ("HSV-2") and Respiratory Syncytial Virus ("RSV").
BACKGROUND
PREVENTION TECHNOLOGY IN THE ERA OF MANAGED CARE AND COST CONTAINMENT
Market-based changes already underway in the United States health care
system are dramatically altering prospects for technologies which can be used to
manage disease or lower the cost of health care for patients in managed health
plans. Medical cost-containment efforts and the reorganization of United States
health care delivery into managed care systems are changing the basis of
competition for producers of health care products. Health maintenance
organization enrollment was approximately 54 million in the United States in
1995 and is growing rapidly. Decision makers in the United States, such as HMO
medical directors, clinical practice committees, and government health
authorities, are increasingly evaluating whether preventive technologies are
more cost effective than treating disease once it is present. For example,
vaccinations are widely used by managed care organizations and in government
programs. In determining whether to use an FDA-approved vaccine, decision makers
consider whether it has been recommended by the Advisory Committee on
Immunization Practices (the "ACIP") of the CDC and whether it is cost effective.
Health care cost containment efforts are also evident in many of the
developed economies outside the United States. These efforts include physician
budgets in Germany and general practice schemes in the United Kingdom, where
doctors are given responsibility for the cost of their patients' overall care.
THE IMMUNE SYSTEM AND VACCINES
Infections occur when a pathogenic microorganism, such as a virus or
bacterium, invades body tissues and begins to replicate. The human immune system
responds with a battery of resources to contain and eliminate this threat. The
process begins when specialized cells recognize that molecules on the surface of
invading pathogens are foreign (antigens). Immune responses to contain and
eliminate the threat include:
- ANTIBODIES: Antigens stimulate the immune system to produce specific
molecules (antibodies) which bind to and neutralize the virus or
bacterium.
- CELL-MEDIATED RESPONSE: An effective immune response typically also leads
to the multiplication of specific types of white blood cells (a
cell-mediated response) which have the ability to inactivate the pathogen
or to destroy infected cells, thereby limiting replication of the virus or
bacterium.
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- MUCOSAL IMMUNITY: In addition to circulating antibodies and the
cell-mediated response, antibodies are produced in the mucous membranes,
such as those which line the nose and throat. Mucosal immunity is
important in protecting against pathogens which cause disease in the
respiratory, gastrointestinal and genitourinary systems, or which enter
the body through these portals.
Vaccines are designed to stimulate a person's immune system through one or
more of the above mechanisms to induce memory of specific antigens prior to the
invasion of a pathogen. This memory primes the immune system so that it can
inactivate the specific pathogen if encountered again. This may be achieved
through one of several techniques, including introduction of a live attenuated
(weakened) virus or bacterium, administration of an antigen fragment (a
subunit), or administration of an inactivated (killed) virus.
HISTORY OF VACCINES
The first successful vaccine against an infectious disease was created by
Edward Jenner who, in 1796, demonstrated that introduction of infected material
from a diseased cow could be used to protect humans from the deadly smallpox
virus. Smallpox vaccination programs based on this live virus vaccine were
gradually adopted by industrialized countries, and a concerted global effort by
public health authorities in this century succeeded in eradicating smallpox from
the human population in the 1970s.
Vaccines against two life-threatening bacterial diseases, diphtheria and
tetanus, came into use early in this century. These vaccines consist of
bacterial toxins which have been chemically inactivated. These are often
administered in combination with an inactivated pertussis bacterium vaccine to
prevent whooping cough. This combination is known as the "DTP" vaccine. Just
prior to World War II, a live attenuated virus vaccine was developed against
yellow fever, used primarily in protecting military personnel and those
traveling to areas where this disease is endemic. In the years after the war
following several widespread polio epidemics, Jonas Salk created the first
successful polio vaccine by growing the wild-type virus and inactivating it
before injection. Salk's vaccine was introduced into widespread use in the early
1950s, but was supplanted in the United States and many other countries by the
orally administered live attenuated polio virus vaccine developed by Albert
Sabin and first introduced in 1961. In the 1960s and 1970s, live attenuated
virus vaccines against measles, mumps and rubella (German measles) were
successfully developed and recommended by the ACIP to be included in childhood
immunization programs.
After a period of almost two decades during which no new vaccines came into
widespread use, a genetically engineered subunit vaccine for hepatitis B was
introduced in the mid-1980s and is now part of the ACIP-recommended childhood
immunization program. In 1990, a vaccine for bacterial meningitis was also added
to this program. Two inactivated vaccines against the hepatitis A virus were
approved in the United States in 1995 and 1996. In 1995, the ACIP also
recommended that children be vaccinated against chicken pox using a live virus
vaccine recently approved by the FDA.
Current challenges for vaccine innovation include providing effective
protection against the major infectious diseases for which no vaccines are
currently available and improving on current vaccines to achieve higher efficacy
or greater ease of administration.
TYPES OF VACCINES
LIVE VIRUS VACCINES
Live virus vaccines expose the immune system to an attenuated form of the
virus which is sufficiently infectious to stimulate a lasting immune response to
the natural (or wild-type) virus. All of the live virus vaccines in use today
are strains derived from natural infections of humans. Attenuation of live
viruses, including polio, yellow fever, measles, mumps and rubella, and chicken
pox vaccines was accomplished by "passaging," or propagating, the virus
repeatedly in non-human cells. As a result of this process, viruses may acquire
mutations that decrease the ability of the virus to cause disease in humans.
After an arbitrary number of passages, the mutated strain is tested for
attenuation in animal models, if available, or directly in human subjects.
Following assessment of safety and immunogenicity (stimulation of an immune
response) in a limited number of human subjects, larger-scale trials are used to
demonstrate efficacy in preventing naturally acquired infections.
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Live virus vaccines mimic the natural disease-causing infection and
therefore may activate the same protective mechanisms of the human immune system
as the disease itself. This process results in a balanced immune response
activating all parts of the immune system including systemic and local
antibodies as well as cell-mediated immunity. As a result, live viruses are
often considered to be more effective than other types of vaccines in providing
immunity to natural variations in the wild-type viruses which cause disease. For
example, the live polio vaccine is believed to be more effective in eliminating
wild-type polio virus than inactivated polio vaccines. The basis of these
advantages is that live vaccines typically present all of the surface and
internal antigens associated with the natural pathogen. Live virus vaccines may
also be easier to administer through their natural route of infection,
intranasally or orally, as in the case of the oral polio vaccine.
However, an attenuated live vaccine could cause disease resembling natural
infection, as might occur in people with an immune system impaired by a
congenital disease, HIV infection or drug treatment for cancer or organ
transplantation. To date, the live virus vaccines in widespread use rarely have
been associated with significant adverse events. For example, the 19 million
doses of live attenuated polio vaccine administered annually in the United
States are thought to be responsible for only eight to 10 cases of clinical
polio per year. To further reduce the number of these cases, the ACIP is
recommending that the inactivated polio vaccine be given for the initial infant
dose, now that wild-type polio has been virtually eradicated in the United
States.
Live virus strains can change as they replicate in human hosts, and it is
possible that a vaccine virus could revert to the wild-type characteristics.
This reversion potential is a small but recognized problem for some of the
current live vaccines, including polio. Finally, there are two theoretical
concerns regarding live attenuated viruses. First, an attenuated vaccine virus
may exchange genetic information with wild-type strains after immunization, with
the resulting strain being more dangerous than either alone. Second, the DNA of
a live virus vaccine could integrate into the genome of the host and cause
cancer or other problems in the future.
INACTIVATED AND SUBUNIT VIRUS VACCINES
Inactivated virus vaccines are produced by killing a virus using chemicals.
Some vaccines, such as the hepatitis A vaccine, are based on the whole,
inactivated virus. Other vaccines are the result of various degrees of
purification to concentrate certain surface glycoproteins (subunits) most
responsible for producing immunity. A different approach is used to make the
current hepatitis B vaccine, the first successful recombinant subunit vaccine.
For this vaccine, the tools of molecular biology were applied to clone and
express the dominant hepatitis surface glycoprotein in a yeast production
system. Inactivated and subunit vaccines offer the advantage of little or no
risk of infection from the vaccine itself, assuming the virus has been
adequately inactivated. Good manufacturing techniques also minimize the
possibility of contamination with other viruses or fragments of DNA which could
integrate into the recipient's genes.
The principle disadvantage of inactivated and subunit vaccines for many
viruses has been a lack of success in creating protective immunity. A successful
subunit vaccine requires knowledge of which specific antigens are responsible
for providing protection. Subunit and inactivated vaccines may produce
reasonable levels of circulating antibodies, but are less able to stimulate
antibodies in the mucosal sites of viral entry, such as the lining of the
respiratory, gastrointestinal or genitourinary tracts. To improve stimulation of
the cellular components of the immune system, adjuvants (non-specific immune
stimulants) are typically added to inactivated or subunit vaccines. Only alum
(an aluminum salt preparation) is approved for use as an adjuvant in the United
States. Several new adjuvants are in clinical testing and show promise for
boosting the immune response to subunit antigens. The mechanism by which
adjuvants work is still poorly understood, so each vaccine-adjuvant combination
must be evaluated in a trial and error process in animal models and clinical
trials. Finally, certain inactivated vaccines in clinical trials left recipients
more vulnerable to disease after vaccination, due to an unbalanced immune
response. For example, in trials of experimental inactivated vaccines against
RSV and measles, some children were shown to experience more severe, atypical
disease when they later acquired the natural viral infection following
vaccination.
EMERGING VACCINE TECHNOLOGIES
Several companies and academic scientists have reported that direct
injection of DNA encoding viral antigens can be used to stimulate an immune
response. Although at an early stage, this approach shows promise.
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However, it is not clear whether the sustained expression of viral antigens
obtainable by this approach is advantageous in eliciting a better immune
response. In addition, it is possible that the administered DNA may integrate
into the genes of the recipient and cause potential unwanted effects.
Another new technology for vaccination is based on genetic engineering to
modify one virus so that it carries antigens which may stimulate an immune
response to protect against other pathogens. For example, pox virus vector
strains, related to the virus used successfully to eradicate smallpox, have
shown usefulness in protecting dogs and cats against rabies. Other pox virus
vectors are being evaluated in experimental models of human malaria and in a
hybrid regimen combining doses of a modified live virus with a subunit HIV
vaccine to protect high-risk individuals.
AVIRON'S TECHNOLOGY
Aviron's vaccine programs are based on both classical live virus vaccine
attenuation techniques and the Company's proprietary genetic engineering
technology.
COLD ADAPTED INFLUENZA TECHNOLOGY
The Company is applying its expertise in the molecular biology of influenza
to develop a live virus vaccine discovered using classical cold-adaption
techniques. This cold adapted influenza vaccine technology was first developed
by Dr. H.F. Maassab at the University of Michigan in 1967. Dr. Maassab created
attenuated influenza strains by propagating the virus in progressively colder
conditions until these strains had lost the ability to grow well at human body
temperature. The Company has obtained exclusive rights to this cold adapted
influenza vaccine technology.
The cold adapted influenza vaccine technology includes the master strains
for influenza A and B, as well as techniques useful for updating the vaccine
each year according to recommendations of the CDC and the FDA. Updated strains
are made by mating the master strains with recent strains to obtain viruses with
the attenuated properties of the cold adapted master strain and the antigenic
properties of the current wild-type strain. This process is called genetic
reassortment. After cultured cells are infected with two different strains of
virus, the eight RNA genes of influenza mix at random in the cells and it is
possible to select the two genes for the antigens of the expected epidemic
strain and the six remaining genes from the cold adapted master donor strain.
The Company has received the technology for updating the cold adapted master
strains from the University of Michigan and has extended this approach by the
introduction of Aviron's proprietary techniques, including those of reverse
genetics, which may facilitate the annual process of creating a reassorted
vaccine.
RATIONAL VACCINE DESIGN
Since the Company's founding, its core vaccine discovery strategy has been
to apply genetic engineering techniques to create live attenuated virus vaccine
candidates for targets where traditional discovery techniques have been
inadequate. The Company believes that this "Rational Vaccine Design" approach is
more flexible and systematic than traditional methods of live vaccine discovery
and is a platform that can be applied to many viral targets and, potentially, to
the creation of viruses used in gene therapy and the treatment of cancer.
Furthermore, Aviron believes that a particular advantage of Rational Vaccine
Design is that engineered viruses can be designed so that they are less likely
to revert to wild-type characteristics than classically derived vaccines. Three
ways of implementing this approach are:
- DELETING OR MODIFYING SPECIFIC VIRAL GENES WHICH ENCODE VIRULENCE
PROTEINS. Virulence proteins are viral components thought to be
particularly important in the mechanism of disease, but which are not
required for the virus to replicate and stimulate a strong immune
response. An example of this strategy is the Company's program to create a
live attenuated vaccine against the HSV-2 virus which causes genital
herpes. One of the Company's founders, Dr. Bernard Roizman, discovered a
particular protein important in the ability of HSV-2 to grow in nerve
cells. Since nerve ganglia are the reservoir from which HSV-2 reseeds
itself to cause painful skin lesions, deletion of the gene encoding this
protein is the basis of the Company's Rational Vaccine Design program for
development of a vaccine for this target.
- ALTERING THE GENETIC INFORMATION USED BY THE VIRUS IN CONTROLLING ITS
REPLICATION. An example of this strategy is work by Company scientists to
create live attenuated vaccine candidates for influenza. Until recently,
it
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was impossible to genetically engineer vaccine strains of influenza
because influenza genes are composed of negative-strand RNA rather than
DNA or positive-strand RNA. Dr. Peter Palese, one of the Company's
founders, discovered how to create recombinant negative-strand RNA viruses
using reverse genetics. Company scientists have employed this reverse
genetics technology to engineer mutations into a gene used by the
influenza virus to make copies of itself. The resulting strains are
attenuated in animal models and at least one strain has been identified as
a potential candidate for clinical trials.
- ADDING ANTIGENIC INFORMATION DISPLAYED BY THE VACCINE VIRUS. An example of
this strategy is the Company's approach to the creation of a live
attenuated CMV vaccine, which begins with a vaccine candidate thought to
be over-attenuated and thus insufficiently immunogenic. Aviron recently
discovered genes for certain antigen structures present in wild-type CMV
viruses. These genes are being engineered into an over-attenuated vaccine
candidate to create a potentially more immunogenic vaccine. The Company
believes this technique of adding antigen structures may enable the
Company to create combination vaccines expressing antigens of more than
one virus in a single vaccine strain.
BUSINESS STRATEGY
Aviron's objective is to become a leader in the discovery, development,
manufacture and marketing of live virus vaccines which are sufficiently cost
effective to justify their use in immunization programs targeting the general
population. The Company's strategy is to:
ADDRESS INFECTIOUS DISEASES WHICH MERIT WIDESPREAD IMMUNIZATION
PROGRAMS. The concept of universal immunization is well established for certain
infectious diseases where safe and effective vaccines are already available,
including immunization against pathogens such as polio, measles, mumps, rubella
and hepatitis B. For each of its potential products, the Company's objective is
to produce vaccine strains which are sufficiently safe and cost effective to
obtain official recommendations for universal use in childhood vaccine regimens
or, in the case of influenza, annual use in the general population.
APPLY RATIONAL VACCINE DESIGN TECHNOLOGY TO A RANGE OF VIRAL
TARGETS. Aviron believes that its proprietary genetic engineering technologies
may be used to create live attenuated vaccines for a wide range of viral
targets, such as viruses related to influenza and herpes viruses.
SELECT PROGRAMS AND MARKET VACCINES BASED ON PHARMACOECONOMIC DATA. Public
health agencies and managed care systems are increasingly concerned with the
economic impact of potential new mandates for vaccines. In setting its internal
product development priorities, the Company considers the costs of implementing
widespread vaccine programs based on its products in relation to potential cost
savings to the government and managed health care systems and intends to perform
rigorous cost-effectiveness analyses on its products.
IN-LICENSE PROMISING VACCINE TECHNOLOGY. Aviron evaluates in-licensing
opportunities and intends to add programs which complement the Company's core
technologies and capabilities. For example, the Company obtained exclusive
rights to the cold adapted influenza vaccine technology from the University of
Michigan and the NIH, and to the PIV-3 vaccine from the NIH.
ESTABLISH COLLABORATIVE ARRANGEMENTS TO ENHANCE PRODUCT DEVELOPMENT
EFFORTS. Aviron intends to enter into collaborative arrangements to gain access
to specific technologies and skills which may accelerate product development and
provide additional financial resources to support its research and development
and commercialization efforts, particularly outside of the United States. The
Company has entered into collaborative arrangements with SmithKline Beecham for
development of an EBV vaccine and with Sang-A for certain rights to the
Company's products in Korea.
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VACCINE PRODUCTS UNDER DEVELOPMENT
The following table summarizes Aviron's most advanced potential products
under research and development. This table is qualified in its entirety by
reference to the more detailed descriptions appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
COMMERCIAL
PROGRAM VACCINE TYPE STATUS (1) RIGHTS (2)
---------------------------- ---------------------------------------- ------------------ --------------
<S> <C> <C> <C>
Influenza
Adults Cold adapted live virus Phase II Conducted Aviron
Children Cold adapted live virus Phase I/II Aviron
Conducted
Elderly Cold adapted live virus Clinical Trials Aviron
(co-administered with inactivated Planned
vaccine)
Genetically engineered live virus Preclinical Aviron
Parainfluenza Virus Type 3 Bovine live virus IND Planned Aviron
Epstein-Barr Virus Recombinant subunit glycoprotein Preclinical SmithKline
Beecham/
Aviron (3)
Cytomegalovirus Genetically engineered live virus Preclinical Aviron
Herpes Simplex Virus-Type 2 Genetically engineered live virus Preclinical Aviron
Respiratory Syncytial Virus Genetically engineered live virus Research Aviron
----------------
(1) "Phase II Conducted" means Aviron is evaluating data from multi-center, double-blind,
placebo-controlled clinical trials for safety, immunogenicity and efficacy and the Company intends to
proceed directly to Phase III clinical trials.
"Phase I/II Conducted" means Aviron is evaluating data from multi-center, double-blind,
placebo-controlled clinical trials for safety and immunogenicity in a limited patient population and
the Company intends to proceed directly to Phase III clinical trials.
"Clinical Trials Planned" indicates that no clinical trials have been conducted by Aviron to date.
Aviron intends to discuss with the FDA its plans to proceed directly to Phase III clinical trials.
"Preclinical" includes assessment of specific vaccine candidates for growth properties in cell culture
and for attenuation and immunogenicity in animal models.
"IND Planned" indicates that no clinical trials have been conducted by Aviron to date. The Company is
evaluating the timing and level of commitment for Aviron-sponsored clinical trials.
"Research" includes identification of vaccine candidates and approaches to create new candidate
strains. See "Government Regulation."
(2) Commercial rights for Korea for most listed programs are licensed to Sang-A. See "-- Collaborative
Agreements."
(3) Worldwide rights licensed to SmithKline Beecham; Aviron retains certain United States co-promotion
rights.
</TABLE>
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INFLUENZA
Every year in mid- to late-winter, influenza spreads across the globe,
infecting an average of approximately 10% to 20% of the United States
population. In the United States, 20 to 50 million cases of influenza occur
annually. Influenza cases are associated with symptoms lasting for at least
three to five days, an average of approximately three days of lost work or
missed school, and approximately 20,000 deaths each year. Field studies indicate
the attack rate ranges from a low of 10% in persons over age 65 to a high of 37%
in children aged one to 18. Children are also a major factor in spreading
influenza to other population segments, including those at high risk of
contracting the disease. At the peak of a typical epidemic, reportedly 9% to 22%
of all physician office visits are for flu-like symptoms. Over 90% of
influenza-related deaths occur in people over age 65, but children under age
five and women in the third trimester of pregnancy are also at higher risk for
serious complications. Several times this century, influenza has appeared as a
much more serious pandemic. These major pandemics occur when the influenza virus
undergoes "antigenic shift" in which one influenza subtype is replaced by a
different strain for which the population has not developed antibodies and,
therefore, for which it is extremely susceptible to infection.
The variability of certain components of the influenza virus requires that
the influenza vaccine be modified annually. The CDC and the World Health
Organization (the "WHO") maintain a global network which generates data required
to select strains for the coming influenza season's vaccine and monitor the
occurrence of especially severe epidemics. Based on these data, the FDA and the
CDC discuss circulating influenza strains which are candidates for inclusion in
the following season's influenza vaccine. A similar process is undertaken in
Europe by the WHO and various national authorities. Currently available
inactivated influenza vaccines contain three strains of influenza virus (two
strains of influenza A and one strain of influenza B) and are therefore called
trivalent vaccines. Typically one or sometimes two of the strains in these
trivalent vaccines are recommended for updating annually. Current vaccines have
been variously reported to be 60% to 80% effective in preventing illness,
pneumonia, hospitalization and death due to complications from influenza.
The ACIP has identified the principal target groups for the current
influenza vaccine as those at increased risk for influenza-related
complications: persons age 65 or older, residents of chronic-care facilities,
adults and children with chronic disorders of the pulmonary or cardiovascular
system, adults and children who have required regular medical follow-up or
hospitalization during the preceding year because of chronic metabolic diseases
or immunosuppression, and children and teenagers receiving long-term aspirin
therapy and therefore at risk of developing Reye's syndrome. The next level of
priority for vaccination identified by the ACIP includes certain groups, such as
health care personnel and household members (including children), that may
transmit influenza to high-risk persons. Furthermore, the ACIP recommends that
physicians administer influenza vaccine to any person who wishes to reduce the
chance of becoming ill with influenza.
The FDA estimates that over 75 million influenza vaccine doses were
manfactured for use in the United States in 1995. According to the CDC, over
half of the 34 million Americans over age 65 received the annual influenza
vaccine for the 1993 influenza season, up from less than approximately 25% a few
years ago. The Company believes that a lower percentage of high-risk individuals
under age 65 were vaccinated in 1994, and that the majority of influenza doses
used in the United States are being administered to healthy adults under age 65,
many of whom participate in voluntary work place immunization programs. Experts
suggest that very few of the 70 million children under age 18 receive the annual
influenza vaccine.
In addition to the currently available vaccines, two oral drugs are
currently approved for use in the prevention and treatment of influenza A:
amantadine, which has been on the market for many years, and rimantidine, a
closely related compound which produces fewer side effects. Both agents have
been shown to be effective in reducing the severity of influenza A disease and
the number of days of disability, but are not effective against influenza B.
Both are also recommended for daily use during the influenza season by certain
high-risk persons for whom the influenza vaccine is contraindicated. However,
there is a concern that widespread prophylactic use could lead to emergence of
drug-resistant strains.
AVIRON'S COLD ADAPTED INFLUENZA VACCINE. The Company's most advanced
program is based on the live cold adapted influenza vaccine technology licensed
from the University of Michigan and on a Cooperative Research and Development
Agreement ("CRADA") with the NIH. The cold adapted influenza vaccine is
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currently undergoing extensive clinical trials by Aviron with a network of
NIH-sponsored investigators. Prior to Company-initiated trials, at least 65
clinical trials of the cold adapted influenza vaccine technology have been
performed since 1977, involving more than 15,000 volunteers, of whom over 7,000
received the cold adapted influenza vaccine. See "-- Influenza Clinical Trials."
The Company intends to develop the cold adapted influenza vaccine for
widespread annual use in children and adults, and for co-administration with the
inactivated vaccine for improved protection in the elderly. The quality of the
immune response induced by cold adapted influenza vaccine differs from that
induced by inactivated influenza vaccines. The cold adapted influenza vaccine
elicits an immune response to multiple viral proteins mimicking the natural
immunobiology of influenza, whereas the response to the classical inactivated
vaccine is directed primarily to one component of the virus. Because the cold
adapted influenza vaccine is delivered as a nasal spray, the Company believes it
would provide the first practical way to immunize children on an annual basis.
Children are an important target because, while the elderly experience the
greatest mortality from the annual influenza epidemic, much of the morbidity and
illness occurs in young children. Children are also thought to be important in
the spread of influenza in the population. In addition to its proposed use in
physician's offices, Aviron believes that the nasal spray delivery of this
vaccine will enable it to be administered by adults without special medical
training, so that it will be practical to consider delivery via pharmacies,
schools, day care centers, and possibly in the home.
Aviron also is targeting healthy adults, many of whom are being offered
influenza prophylaxis by their employer and who may prefer Aviron's intranasal
administration to injection. The Company believes that many adults who regularly
receive the inactivated influenza vaccine will select the intranasal vaccine if
given the choice, and that people who have avoided "flu shots" in the past will
receive a vaccination if the intranasal alternative is available. In addition,
the Company is developing its vaccine for co-administration by nasal spray with
the inactivated influenza vaccine injection for the elderly. While efficacy in
the elderly has not been conclusively demonstrated, nursing home studies suggest
that simultaneous administration of the intranasal cold adapted influenza
vaccine with an injection of the inactivated vaccine offers added protection
compared to administration of the inactivated vaccine alone. Aviron intends to
seek recommendations from the ACIP and the American Academy of Pediatrics for
use of the cold adapted influenza vaccine in the appropriate population.
The Company has completed enrollment of 259 adults and 356 children in
multicenter Phase I/II clinical trials designed to show that Aviron's trivalent
formulation and nasal spray delivery system are generally safe, well tolerated
and immunogenic. These studies were followed by a Phase II challenge study in 92
adults. Data from these studies are under analysis. Additional large-scale
clinical trials are planned for the influenza seasons of 1996 through 1998. In
addition, the Company intends to discuss with the FDA its plans for Phase III
clinical trials to demonstrate efficacy of the co-administration with the
inactivated influenza vaccine in the elderly. No assurances can be given that
the Company will commence clinical trials as planned, or that if commenced, such
trials can be successfully completed on a timely basis, if at all. See "--
Clinical Trials."
AVIRON'S NEXT-GENERATION GENETICALLY ENGINEERED INFLUENZA VACCINE. The
Company is using its proprietary reverse genetics technology to engineer future
generations of influenza vaccines which are designed to the needs of various age
groups in the population. The Company's first priority is to develop strains
which offer improved protection in the elderly compared to the currently
available inactivated vaccines. Since most elderly persons have had experience
with several influenza infections in their lifetime, pre-existing antibodies may
prevent the cold adapted virus from multiplying sufficiently to be used as an
alternative to the currently available vaccines in the elderly. To address this
problem, Aviron scientists have created new strains of influenza vaccine
candidates which have been evaluated and shown to be attenuated in ferrets, an
animal model for influenza. Vaccinated animals were protected from subsequent
challenge with a virulent strain of influenza. Some of the Company's genetically
engineered strains have been found to better replicate in the upper respiratory
tract of these animals than the cold adapted influenza vaccine, while retaining
the property of restricted growth in the lower respiratory tract. Work with the
cold adapted influenza vaccine has shown that these features are associated with
desirable characteristics of attenuation in humans. However, animal model
results are not necessarily predictive of results in humans. The Company
believes that these strains may be more
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immunogenic than the cold adapted vaccine and, therefore, more suitable for use
as a single-dose vaccine for the elderly. No assurance can be given that the
Company will be able to commence or successfully complete clinical trials on a
timely basis, if at all.
PARAINFLUENZA VIRUS TYPE 3
PIV-3 is a common respiratory virus of childhood which causes croup, cough,
fever and pneumonia. Every year, primarily during the spring and summer months,
PIV-3 infects infants, children and adults. In the United States, at least 60%
of children are infected by the time they reach two years of age, and 80% by
four years of age. These cases are associated with symptoms lasting from three
to eight days and approximately 17,000 hospitalizations per year. Children are
also a major factor in introducing PIV-3 infection into the family setting.
PIV-3 frequently reoccurs and children typically experience two to three
infections of decreasing severity. Unlike influenza, PIV-3 undergoes only a very
minor degree of variation in the surface proteins from year to year; therefore,
a PIV-3 vaccine will not require annual updates.
Both serum and nasal antibodies directed to PIV-3 surface proteins play a
role in protection against PIV-3 disease. It is thought that protection of the
lower respiratory tract from PIV-3 replication and disease requires high serum
antibody levels, whereas resistance to infection and protection against disease
in the upper respiratory tract requires mucosal antibodies in the nose. There is
currently no available vaccine to protect against PIV-3 infection, and no drug
for treatment of PIV-3 disease.
AVIRON'S LIVE PARAINFLUENZA VIRUS TYPE 3 VACCINE. The Company's live PIV-3
vaccine program utilizes bovine PIV-3 ("bPIV-3") vaccine technology licensed
from the NIH. Use of bPIV-3 as a vaccine to protect humans against human PIV-3
strains is based on the successful strategy first used by Jenner for smallpox
vaccination, in which an animal virus is used to protect humans from the
analogous human virus. It is thought that the attenuation of bPIV-3 in primates
is due to mutations sustained throughout its genome during its long evolutionary
adaptation to the bovine host.
Prior to the Company's in-licensing of the bPIV-3 vaccine, it had been
tested in Phase I/II clinical trials in adults, children and infants. In all age
groups, the bPIV-3 vaccine appeared satisfactorily attenuated, safe and
genetically stable. Eighty-five percent of seronegative children (six to 60
months of age) were infected by the tested dose, and 61% of bPIV-3 recipients
developed a level of antibody to PIV-3 previously associated with protection
from disease. The vaccine strain infected 92% of infants younger than six months
of age, even in the presence of maternally-derived PIV-3 antibodies. Infection
with the bPIV-3 vaccine stimulated an immune response to PIV-3 in 42% of these
young infants. The Company is evaluating the timing and level of commitment for
Aviron-sponsored Phase II clinical trials of bPIV-3 using the existing bPIV-3
vaccine supply produced and tested for the NIAID. There can be no assurance that
this vaccine supply will be suitable for clinical trials or that these or any
additional clinical trials will be commenced or, if commenced, will be
successful, or that the Company will develop successfully and receive FDA
approval of its bPIV-3 vaccine.
EPSTEIN-BARR VIRUS
Epstein-Barr virus, a herpes virus that causes infectious mononucleosis,
infects most people at some point in their lifetime. Infection at a young age
may cause mild symptoms, but the debilitating syndrome of infectious
mononucleosis is most common where infection first occurs in adolescence or
young adulthood via exchange of saliva. Sore throat and swollen neck glands are
followed by a period of fatigue and lethargy which can last for weeks or even
months. Approximately 10% of high school and college students become infected
with EBV each year in the United States, of which half or more may develop
infectious mononucleosis. The disease usually runs its course without
significant medical intervention; however, the long duration of infectious
mononucleosis can be a serious problem for high school and college students and
workers. Enlargement of the liver and spleen are also common, so doctors
typically prohibit participation in athletic activities to prevent serious
injuries. EBV is one of the viruses implicated as a contributing cause of cancer
in humans, including Hodgkin's disease, post-transplant and other lymphomas,
nasopharyngeal carcinoma (the most common head and neck cancer in large regions
of Asia) and Burkitt's lymphoma (a significant disease in Africa).
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The Company is developing a subunit vaccine for EBV based on the single
surface antigen responsible for most of the neutralizing antibodies stimulated
by EBV infection. Quantities of this antigen have been expressed, purified and
evaluated in a rabbit model, where preliminary results indicate that the antigen
is immunogenic when combined with an adjuvant. In 1995, the Company entered into
a collaboration with SmithKline Beecham, whereby SmithKline Beecham will fund
the development of Aviron's EBV vaccine in exchange for certain marketing
rights. See "-- Collaborative Agreements."
CYTOMEGALOVIRUS
Most people become infected with CMV, another member of the herpes virus
family, at some time in their life, and in the United States 40% to 60% of
infections occur in childhood. These infections are typically asymptomatic or
result in mild illness with sore throat, headache, fatigue and swollen glands.
CMV also can cause an infectious mononucleosis syndrome clinically
indistinguishable from that associated with EBV infection. More serious CMV
disease is also often associated with a weakened immune system, as is often
found in AIDS, cancer and transplant patients, which may be due to reactivation
of CMV acquired early in life or a primary infection. In addition, if a woman is
first exposed to this virus early in pregnancy, the resulting infection can
cause serious fetal abnormalities. Approximately 40,000 infants in the United
States are infected each year, resulting in varying levels of brain damage or
deafness in over 10% of these infants. Congenital CMV syndrome results in
significant expenditures for neonatal intensive care.
No vaccine currently is available for CMV. Antibodies from persons with high
levels of immunity are available in the form of hyperimmune globulins for
certain high-risk patients, but use of these products can be costly and of
limited efficacy. The Company believes that widespread vaccination of children
with a safe effective CMV vaccine is justified for the same reason that children
in the United States are vaccinated against rubella: to protect unborn children
from birth defects by reducing the risk that mothers are exposed to infected
children.
A live attenuated CMV vaccine candidate, known as the Towne strain, has been
tested by third parties in several hundred people. This strain was reported to
be well tolerated, but did not provide sufficient protection in pregnant mothers
of children in day care who were at risk for congenital CMV, or in transplant
recipients at risk of acquiring CMV from the donor organs. Aviron scientists
have discovered differences between the genome of the Towne strain and that of
wild-type CMV. Based on this knowledge, the Company has used its Rational
Vaccine Design approach to create new recombinant CMV vaccine candidates in an
attempt to strike the appropriate balance between attenuation and protection.
Some of these vaccine candidates have been made and tested by Aviron in a
specialized animal model. The Company expects to select a vaccine candidate to
prevent CMV infection for testing in clinical trials. However, no assurance can
be given that the Company will be successful in identifying a CMV vaccine
candidate.
HERPES SIMPLEX VIRUS-TYPE 2
It is estimated that HSV-2, the cause of genital herpes, infects one out of
five persons in the United States. Only one-third of those infected experience
symptoms, but a significant portion of new infections are caused by transmission
from asymptomatic individuals. Genital herpes is a non-lethal but incurable
disease that invades the body once and settles in for a lifetime, often
manifesting its presence several times a year with painful sores in the genital
area. It is estimated that there are over 700,000 new cases of genital herpes
per year in the United States, and that the disease is responsible for over
500,000 physician visits per year.
Genital herpes also can be acquired by newborn babies as they pass through
the birth canal of infected mothers. Neonatal herpes simplex infection can
result in serious damage to the brain and many other organs. Even with therapy,
over 20% of the 1,500 infants infected each year in the United States die, and
many of the survivors are seriously impaired. In addition, efforts to prevent
neonatal herpes contribute significantly to the cost of the disease. Thousands
of women in the United States with a history of genital herpes are advised to
undergo a Cesarean section when prenatal cultures or examinations suggest a
recurrence near the time of delivery. HSV-2 infection can also lead to serious
and fatal complications in adults with impaired immune systems due to AIDS or
drug therapy for organ transplants.
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The most widely used drug therapy for HSV-2 disease is acyclovir (Zovirax),
which has been shown to reduce the severity and duration of herpetic lesions,
although most patients treated still experience symptoms for several days. When
taken several times a day as a prophylaxis for HSV-2, acyclovir also has been
shown to reduce the frequency of recurrences. Several additional therapeutics
are available or are in the late stages of clinical trials, and several
prophylactic vaccines are in clinical trials; however, no vaccine currently is
available to prevent genital herpes. At least two companies are in Phase III
clinical trials of subunit vaccines for the primary prevention of genital
herpes.
Aviron is using its Rational Vaccine Design approach to create an injectable
live attenuated vaccine to be used in uninfected children and young adults to
prevent genital herpes. Two of the Company's founders, Dr. Bernard Roizman and
Dr. Richard Whitley, in collaboration with Pasteur Merieux Serums et Vaccins,
developed a prototype live herpes vaccine based on an oral herpes virus (HSV-1)
backbone. After extensive preclinical testing, the virus was tested in humans;
however, the immune response following vaccination was deemed insufficient. This
insufficiency was attributed to the use of the HSV-1 backbone from which too
many important genes had been deleted, thus rendering the virus over-attenuated.
Aviron has licensed this technology, along with patents covering strategies for
more specific deletions, from ARCH Development Corporation. Aviron has used this
technology to create live vaccine candidates using an HSV-2 backbone, which it
currently is evaluating in preclinical models. Several candidates have shown
attenuation in various rodent models, as well as efficacy in protecting guinea
pigs and primates from challenge with a lethal dose of wild-type HSV-2. The
Company intends to use the results of animal studies to select these or other
strains under development for evaluation in clinical trials. There can be no
assurance, however, that the Company will commence or successfully complete
clinical trials on a timely basis, if at all.
Aviron is currently in discussions with a third party to license certain of
Aviron's patent rights covering or related to the use of HSV for cancer and gene
therapy (excluding vaccines).
RESPIRATORY SYNCYTIAL VIRUS
RSV is the major cause of lower respiratory tract illness in the very young,
responsible for over 90,000 hospitalizations and more than 4,000 deaths a year
in the United States. Infection is manifested as cough and fever and, in some
cases, pneumonia. While RSV infection can occur at any time of year, epidemics
generally occur in the winter. Most cases are in children under age four, with
the peak of severe illness under six months of age, particularly in infants with
pre-existing heart and lung disease. No vaccine for RSV currently is available,
although certain third parties are testing a cold adapted live attenuated RSV
vaccine in infants. Available drug therapy is reserved for the most serious
cases as it has significant side effects. Aviron is developing a genetically
engineered live attenuated virus vaccine for RSV using its proprietary reverse
genetics technology. Aviron's objective is to use this technology to create a
number of live virus vaccine candidates which can be tested in animal models
before selecting a candidate for testing in humans. However, no assurance can be
given that the Company will be successful in identifying a vaccine candidate.
INFLUENZA CLINICAL TRIALS
CLINICAL TRIALS CONDUCTED BY OTHERS
The Company's most advanced vaccine product is based on the cold adapted
influenza vaccine technology licensed from the University of Michigan and the
NIH. The Company has obtained from the NIH and the University of Michigan
exclusive rights to trial results and data from the work at the Vaccine
Treatment Evaluation Units (the "VTEUs") and Wyeth-Ayerst. Aviron has reviewed
the data from over 65 previous clinical trials of influenza vaccine viruses
derived from the University of Michigan master strains. These studies, performed
since 1976, involved more than 15,000 volunteers, of whom over 7,000 received
the cold adapted influenza vaccine. Most of these trials were conducted by
academic investigators to explore the biology of the vaccines and were not
designed to support an application to the FDA for approval to market a product.
Each of the 15 vaccine strains that were tested were derived from the master
strains and typically corresponded to the contemporaneous inactivated influenza
vaccine for the year of testing.
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Those who received the cold adapted vaccine ranged in age from two months to
over 80 years. More than 50 of these trials studied strains of influenza A
vaccine, involving more than 13,000 volunteers, and 15 of the trials studied
strains of influenza B vaccines, involving approximately 2,200 volunteers. In
the aggregate, these clinical trials involved over 2,000 children. Nearly all of
these trials used monovalent (one strain) or bivalent (two strains)
formulations, containing only one or two of the three strains usually found in
the current trivalent inactivated vaccine. These trials used either placebo or
an inactivated virus vaccine as controls. In these clinical trials, trivalent
formulations were administered to about 350 adults and 200 children. The cold
adapted influenza vaccine was given in most of these clinical trials as nose
drops, although in some instances it was given as a nasal spray.
The effectiveness of the cold adapted influenza vaccine in preventing
influenza infection in adults and children has been evaluated in seven adult and
three pediatric challenge studies. Six of these adult challenge studies were
placebo-controlled and involved 254 seronegative (relatively low levels of prior
antibodies to the influenza strains used in the study) adults who were
challenged within six months of vaccination. A challenge study is a clinical
trial in which, typically, 20 to 30 adult volunteers are given wild-type
influenza by nose drops, one to two months following immunization with the
experimental or control vaccine preparation. Compared to placebo rates, the cold
adapted influenza strains resulted in significant reduction (66% to 100%) in
systemic illness compared to the placebo group and a reduction (17% to 100%) in
infection as measured by evidence of challenge virus replication, or virus
shedding, in the nose of the recipient. Two of these six studies included a
comparison group of subjects treated with the inactivated virus vaccines. While
these studies did not have a sufficient number of patients to detect a
statistical difference between the cold adapted and inactivated vaccines, the
cold adapted vaccine protection rates were equal or better than those seen for
the inactivated vaccine in each of the five studies. In one study where adults
were challenged seven months after immunization, less protection was seen as
measured by infection or any illness for both inactivated and cold adapted
vaccines. However, protection rates against systemic illness, such as fever,
were 79% to 100% for the cold adapted vaccine and 67% to 84% for the inactivated
vaccine.
Children are challenged in such studies using the cold adapted influenza
vaccine as the challenge virus rather than virulent wild-type virus. The
endpoint measured in children is protection from infection, defined as vaccine
virus growth in the nose after challenge. Of the three placebo-controlled
studies in 86 children, prior immunization with the cold adapted influenza
vaccine was associated with a significant reduction (52% to 100%) in the percent
of children infected with the challenge virus compared to placebo. In the only
children's study that included a comparison to inactivated vaccine, the cold
adapted vaccine resulted in a 52% reduction in virus shedding, whereas the
inactivated vaccine reduced shedding by 6% compared to the placebo.
Cold adapted influenza vaccines also have been tested in field trials where
children and adults were vaccinated before the influenza season, and are then
followed during the next six months in order to assess protection against
influenza disease. The largest study was conducted over four consecutive
influenza seasons. Approximately 1,500 children and adults from ages three to 65
were randomly assigned to each arm of this double-blind, placebo-controlled
study. This study design only allowed comparison of the inactivated and cold
adapted influenza A components. Both vaccines were considered to be
well-tolerated, with slightly increased redness and tenderness at the injection
site in those receiving the inactivated vaccine and slightly increased sore
throat or runny nose, lethargy and aches in those receiving the vaccine nose
drops. This study showed that both cold adapted and inactivated influenza
vaccines were well tolerated and reduced infection and morbidity due to
influenza A. The relative efficacy of the two vaccines differed from one
epidemic year to another and according to which measurement was used to assess
efficacy. As measured by rises in circulating antibodies during the influenza
season (seroconversion), the inactivated vaccine appeared more effective.
However, it is not clear how well this correlates with actual protection, as the
cold adapted and inactivated vaccines both protected recipients from
culture-positive disease at rates which did not differ by an amount which was
statistically significant.
CLINICAL TRIALS BY AVIRON
The Company intends to conduct additional clinical trials to demonstrate
safety and efficacy of its cold adapted influenza vaccine. While the Company
believes that it can use the previous data to support its regulatory filings,
the Company's use of the previous trial data to establish safety and efficacy of
its proposed
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vaccine is limited because very few of the clinical trials involved a trivalent
vaccine delivered through a nasal spray. The additional studies will relate to
the safety of the formulation as well as the safety of its delivery by
intranasal spray. Aviron enrolled a total of 615 patients in Phase I/II clinical
trials and 92 patients in a Phase II challenge study in five VTEUs as part of
the Company's CRADA with the NIH.
The first study, conducted at three university research laboratories, was a
safety and immunogenicity study involving 259 healthy adults. Patients were
randomly assigned to receive either Aviron's trivalent cold adapted influenza
vaccine by nasal spray or nose drops, or placebo by nasal spray or nose drops.
No serious adverse events were seen in any subjects. In a preliminary analysis
based on approximately 80% of the patients enrolled, there were no statistically
significant differences in the occurrence of fever, sore throat, runny nose,
cough, headache or any other potential reaction assessed in the study between
the vaccine or placebo or between the different types of administration. The
Company is in the process of assessing additional safety and immunogenicity data
from this study.
Two hundred thirty-eight children between the ages of 18 months and five
years were enrolled at four VTEUs and 118 children were enrolled at the Center
for Vaccine Development in Santiago, Chile, in a Phase I/ II safety,
immunogenicity and dose-escalation study. The study design and endpoints were
similar to the adult study, except that the initial phases used a dose lower
than that given to adults. No serious adverse events were seen in any subjects
in any of the three phases of the dose escalation. Based on a statistical
analysis of safety data by an NIH-appointed data monitoring and safety committee
following each of the escalating dose phases of the children's study, the
Company received notification from the committee that it had no objection to the
Company proceeding with a larger-scale Phase III pivotal trial in children at
the highest dose tested. The Company intends to initiate such a large-scale
field trial in the second half of the year. However, the FDA must review data
from its completed Phase I/II trials before the Company can enroll subjects in
the pivotal trial. The Company intends to enroll approximately 900 children who
will be vaccinated with either the cold adapted influenza vaccine or a placebo
and observed for evidence of illness or infection during the 1996-1997 influenza
season and, if required, revaccinated and observed during the 1997-1998
influenza season.
Aviron's trivalent intranasal spray formulation of the cold adapted
influenza vaccine also has been tested in a Phase II challenge study at two
VTEUs involving ninety-two healthy young adults. Subjects were randomized to
receive either the trivalent cold adapted intranasal vaccine, the trivalent
inactivated vaccine injection or a placebo. There were no serious adverse events
attributed to the study vaccine seen in any subjects. The Company is in the
process of analyzing safety and efficacy data from this study. Preliminary
analysis of clinical illness and viral shedding following exposure to the
challenge virus indicates that a lower than expected percentage of subjects in
the placebo group experienced influenza-like illness than had been seen in
previous challenge studies. The Company believes that this may have been due to
a problem with the challenge virus used to produce influenza in the subjects or
to a problem with selection of subjects based on their prior exposure to
influenza. Therefore, the Company believes that the challenge study is unlikely
to show statistically significant efficacy on the primary endpoint of preventing
laboratory-confirmed influenza. Regardless of the results of this study, the
Company intends to discuss with the FDA its plans to proceed directly to Phase
III clinical trials in adults and does not intend to conduct other challenge
studies.
Additional trials in children, adults and the elderly will be required to
assess the safety and efficacy of the Company's cold adapted influenza vaccine.
There can be no assurance that these or any additional trials will be successful
or that the Company will successfully develop and receive FDA approval of its
cold adapted influenza vaccine.
ADDITIONAL RESEARCH PROGRAMS
LIVE VIRUSES AS VECTORS
Aviron believes that its virus engineering technology may be used to create
strains which carry "foreign" genes and are able to deliver genetic or antigenic
information to specific tissues in the host. For example, it is possible to
engineer antigens from other viruses into influenza, as has already been
demonstrated for small antigenic regions from agents such as HIV and malaria.
RSV and PIV-3 are two other important causes of childhood infections which may
be targeted by using the influenza virus as a vector to deliver antigens.
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Members of the herpes virus family may also serve as vectors to deliver
antigens to make vaccines which protect against other viruses. Due to the
natural properties of this virus, it may be useful to delivery genetic
information to the central nervous system. Aviron is considering entering into a
collaboration to develop the Company's proprietary technology for the use of
herpes simplex virus as a vector in gene therapy. There can be no assurance that
the Company will be able to enter into a collaboration or that the Company,
alone or with others, will be successful in developing this technology.
MODIFIED HERPES SIMPLEX VIRUSES TO TREAT BRAIN CANCER
The Company's proprietary technology to modify herpes simplex viruses has
been evaluated by others in animal models for the treatment of brain cancer.
Malignant glioma is the most lethal of the common tumors originating in the
brain. In spite of surgical therapy, radiotherapy and chemotherapy, five-year
survival rates of approximately 5% are seen. Many new therapies have been
investigated, including radiation, hyperthermia, phototherapy, immunotherapy,
novel drug delivery for chemotherapy and gene therapy. Two of Aviron's founders,
Dr. Richard Whitley and Dr. Bernard Roizman, modified the herpes simplex virus
using genetic engineering and have tested this virus in an animal model of
malignant glioma. Preliminary results show that tumor size was reduced by the
modified viruses, resulting in a survival benefit for the treated animals.
However, no assurance can be given that the Company will be successful in
developing this technology.
MANUFACTURING
All of the vaccine material being used in the Company's current clinical
trials is being supplied by Evans Medical Limited, a subsidiary of Medeva plc
("Evans"). Evans is one of the four companies licensed by the FDA to produce
influenza vaccine for sale in the United States. Evans has also agreed to supply
clinical vaccine material for the 1996-1997 influenza season. The Company
currently does not have facilities to manufacture products for large-scale
clinical trials or in commercial quantities and has no experience in
commercial-scale manufacturing. To manufacture its products for large-scale
clinical trials or on a commercial scale, the Company will have to build or gain
access to a large-scale manufacturing facility which will require a significant
amount of funds. The production of the Company's cold adapted influenza vaccine
is subject to the availability of a large number of pathogen-free hen eggs, for
which there are currently a limited number of suppliers. Contamination or
disruption of this source of supply would adversely affect the ability to
manufacture the Company's cold adapted influenza vaccine. In addition, to make
the vaccine available for clinical trials or commercial sales before the
influenza season, the Company must successfully modify the vaccine within a
six-month period to include selected strains for a particular year.
The Company currently is considering whether to construct manufacturing
facilities capable of producing both pilot-scale and commercial quantities of
its potential vaccine products and is presently building a pilot manufacturing
facility for its potential vaccine products other than cold-adapted influenza.
This scale-up process will require the Company to develop advanced manufacturing
techniques and rigorous process controls. Furthermore, the Company will be
required to register its facility with the FDA and with the California
Department of Health Services and will be subject to state and federal
inspections confirming the Company's compliance with cGMP regulations
established by the FDA. However, no assurance can be given as to the ability of
the Company to produce commercial quantities of its potential products in
compliance with applicable regulations or at an acceptable cost, or at all.
The Company is alternatively considering the use of contract manufacturers
for the commercial production of its potential products. The Company is aware of
only a limited number of manufacturers which it believes have the ability and
capacity to manufacture its potential products, including the cold adapted
influenza vaccine, in a timely manner. There can be no assurance that the
Company would be able to contract with any of these companies for the
manufacture of its products on acceptable terms, if at all. If the Company
enters into an agreement with a third-party manufacturer, it will be required to
relinquish control of the manufacturing process, which might adversely affect
the Company's results of operations. Furthermore, a third-party manufacturer
also will be required to manufacture the Company's products in compliance with
state and federal regulations. Failure of any such third-party manufacturer to
comply with state and federal regulations and to deliver the required quantities
on a timely basis and at commercially reasonable prices would materially
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adversely affect the Company's business, financial condition and results of
operations. No assurance can be given that the Company, alone or with a third
party, will be able to make the transition to commercial-scale production of its
potential products successfully, if at all, or that if successful, the Company
will be able to maintain such production.
In November 1995, the Company and Evans entered into a manufacturing and
development agreement (the "Evans Agreement"). Under the terms of the Evans
Agreement, Evans is performing the development of a manufacturing process for
production of a cold adapted influenza vaccine and will produce such vaccine in
sufficient quantities to enable the Company to conduct its planned field trials
and large-scale clinical trials of the vaccine, subject to certain limitations.
In addition, in the event that the Company seeks to offer manufacturing rights
to a third party, Evans has a right of first negotiation to supply a portion of
the Company's commercial requirements for the vaccine in certain European
markets. The Company also granted Evans a right of first negotiation with
respect to distribution rights for the vaccine in Europe. After December 31,
1996, either party may terminate the Evans Agreement upon six months notice to
the other party.
MARKETING AND SALES
The current purchasers of vaccines are principally physicians, large HMOs
and state and federal government agencies. However, the United States health
care system is undergoing significant changes and the relative proportion that
each group will represent in the future will depend on factors such as
legislative changes and the economy. The Company intends to sell its products
directly to HMOs and state and federal health care agencies, and to other buyers
through partners with strong capabilities in local markets. Outside the United
States, the Company plans to sell its potential products through collaborative
agreements with strategic partners. Aviron intends to use rigorous
cost-effectiveness analysis as a guide for its pricing strategy and in support
of its marketing plans.
The Company currently has no marketing, sales or distribution capabilities.
To market any products, Aviron must either obtain the assistance of a third
party with a suitable distribution system, develop a direct sales and marketing
staff of its own or combine the efforts of a third party with its own efforts.
Other than SmithKline Beecham and Sang-A, the Company to date has no agreements
for marketing or distributing its potential products.
The success and commercialization of the Company's products is dependent in
part upon the ability of the Company to maintain and enter into additional
collaborative agreements with corporate partners for the development, testing
and marketing of certain of its vaccines and upon the ability of these third
parties to perform their responsibilities. Although Aviron believes that parties
to any such arrangements would have an economic motivation to succeed in
performing their contractual responsibilities, the amount and timing of
resources devoted to these activities will not be within the control of the
Company. There can be no assurance that any such agreements or arrangements
would be available on terms acceptable to the Company, if at all, that such
third parties would perform their obligations as expected, or that any revenue
would be derived from such arrangements. If Aviron is not able to enter into
such agreements or arrangements, it could encounter delays in introducing its
potential products into the market or be forced to limit the scope of its
commercialization activities. If the Company were to market products directly,
significant additional expenditures, management resources and time would be
required to develop a marketing and sales staff within the Company. In addition,
the Company would also be competing with other companies that currently have
experienced and well-funded marketing and sales operations. There can be no
assurance that the Company will be able to establish its own marketing and sales
force or that any such force, if established, would be successful.
COLLABORATIVE AGREEMENTS
The Company's strategy for the development, clinical trials, manufacturing
and commercialization of certain of its products includes maintaining and
entering into various collaborations with corporate partners, licensors,
licensees and others. There can be no assurance that the Company will be able to
maintain existing
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collaborative agreements, negotiate collaborative arrangements in the future on
acceptable terms, if at all, or that any such collaborative arrangements will be
successful. To date the Company has entered into the following collaborative
agreements.
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES -- PARAINFLUENZA VIRUS
TYPE 3
In May 1996, the Company obtained exclusive rights from the NIAID of the NIH
to certain biological materials and clinical trial data for its PIV-3 program.
The NIH granted to the Company exclusive rights in specific strains of bovine
parainfluenza virus (the "Licensed Materials") to develop, test, manufacture,
use and sell products for vaccination against human parainfluenza virus and
other human and animal diseases ("Licensed Products"). In addition, the Company
obtained from the NIAID the right to reference an existing IND and certain data
relating to the Licensed Materials. The NIH retained certain rights to the
Licensed Materials on behalf of the United States Government to conduct research
and to grant research licenses to third parties under certain circumstances. In
return for the rights granted by NIH, the Company will make payments to NIH on
the achievement of specified milestones and will make certain royalty payments
to NIH. Unless otherwise terminated, the Agreement will terminate on cessation
of commercial sales of Licensed Products by the Company or its sublicensee. The
Company has the unilateral right to terminate the Agreement in any country upon
providing 60 days notice to NIH.
SMITHKLINE BEECHAM BIOLOGICALS S.A.
In October 1995, the Company signed an agreement with SmithKline Beecham
defining a collaboration on the Company's EBV vaccine technology (the "SB
Agreement"). Under the terms of the SB Agreement, the Company granted SmithKline
Beecham an exclusive license to produce, use and sell non-live EBV vaccines
incorporating the Company's technology for prophylactic and therapeutic uses on
a worldwide basis, except in South and North Korea (together, "Korea"). The
Company has retained the right to co-distribute a monovalent formulation of the
vaccine in certain markets in the United States and to have SmithKline Beecham
supply such vaccine. In addition, SmithKline Beecham obtained a right of first
refusal to an exclusive, worldwide (except Korea) license under any intellectual
property rights relating to any live EBV vaccine technology developed or
controlled by the Company during the term of the SB Agreement.
SmithKline Beecham has agreed to fund research and development at the
Company related to the EBV vaccine, in specified minimum amounts, during the
first two years of the SB Agreement. SmithKline Beecham made an initial upfront
payment to the Company and agreed to make additional payments upon the
achievement of certain product development milestones. The Company is entitled
to royalties from SmithKline Beecham based on net sales of the vaccine. Unless
otherwise terminated, the SmithKline Beecham Agreement will expire upon the
expiration or invalidation of the last remaining patent covered by the SB
Agreement or 10 years from the date of first commercial sale of the vaccine,
whichever is later. The SB Agreement may be terminated by SmithKline Beecham
with respect to any country at any time.
SANG-A PHARM. CO., LTD.
In May 1995, the Company entered into a Development and License Agreement
with Sang-A. The Company granted to Sang-A exclusive clinical development,
manufacturing and marketing rights in Korea for specified products developed by
Aviron, including vaccines for influenza (cold adapted and recombinant), EBV,
CMV, HSV-2 and RSV. However, the Company is under no obligation to develop any
product. Sang-A also will make payments to the Company upon the Company's
meeting certain regulatory milestones for each product in Korea and will pay a
royalty to the Company on net sales of such products in Korea.
Sang-A also is obligated to establish a manufacturing facility with at least
enough capacity to meet demand for all Korean product requirements for each
product that reaches commercialization, if any. In the event that Sang-A's
manufacturing capabilities satisfy certain objective criteria and subject to an
obligation to cooperate with the Company's future corporate partners for any
given products, Sang-A has a right of first refusal to
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manufacture a portion of the total requirements of the Company, its affiliates
and sublicensees for the specified products, with the exception of the EBV
vaccine, in specified countries, including the United States, provided that it
can do so at a competitive price, quality and timeline.
The term of this agreement extends, on a product-by-product basis, until 10
years from the date of first commercial sale of each product in Korea. At the
conclusion of the term, Sang-A has an option to extend the agreement on a
product-by-product basis, for the longer of an additional 10 years or the
expiration of the patents covering such product. During any such extension,
Sang-A will have either no royalty obligation to the Company or a reduced
royalty obligation, depending on the product. Aviron may terminate the Agreement
on a product-by-product basis for material breach by Sang-A of certain
provisions of the Agreement, and may terminate the agreement in its entirety for
material breach of certain other provisions.
In return for the rights granted to Sang-A, Sang-A made an equity investment
in the Company in May 1995 of approximately $4.0 million. Sang-A subsequently
made an additional equity investment of approximately $1.6 million in the
Company's private placement of Series C Preferred Stock and currently owns
4,265,480 shares of the Company's Series C Preferred Stock, convertible into
853,096 shares of the Company's Common Stock, representing approximately 9% of
the Company's Common Stock (on an as-converted basis) outstanding prior to this
offering. In addition, Sang-A has agreed to purchase, if so requested by Aviron,
10% of any subsequent offerings by the Company of new securities at the same
price offered to other purchasers in any such offering. This purchase obligation
expires following the closing of the first firmly underwritten public offering
of the Company's Common Stock. Concurrent with this offering, Aviron intends to
sell to Sang-A in a private placement, at the initial public offering price, a
number of shares of Common Stock equal to 10% of the aggregate number of shares
sold in the offering and in the private placement, provided however, that the
total number of shares to be purchased by Sang-A will not exceed $5,000,000
divided by the initial public offering price.
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES -- COLD ADAPTED INFLUENZA
VACCINE
Following a competitive application process, the Company entered into a
CRADA in March 1995 with the National Institute of Allergy and Infectious
Diseases of the NIH to conduct clinical trials of the Company's cold adapted
influenza vaccine. Wyeth-Ayerst licensed certain rights to the vaccine from the
NIH in 1989 and was developing it for sale in collaboration with the NIH until
relinquishing its rights in 1993. Aviron has obtained from the NIH and the
University of Michigan exclusive rights to trial results and data from the work
at the VTEUs and Wyeth-Ayerst. The NIH has agreed to support the trials by
enrolling subjects in its network of VTEUs. In addition, the Company acquired
exclusive commercial rights to data generated from all previous clinical trials
conducted by the NIH and Wyeth-Ayerst using the vaccine. The term of the CRADA
will not exceed five years without a written amendment by the parties. Either
party may terminate the CRADA for material breach.
UNIVERSITY OF MICHIGAN
In February 1995, the Company entered into a materials transfer and
intellectual property agreement (the "Michigan Agreement") with the University
of Michigan. Pursuant to the Michigan Agreement, the University of Michigan
granted the Company exclusive rights to certain intellectual property and
technology relating to a cold adapted influenza vaccine and proprietary donor
strains of influenza viruses useful in the production of products for
vaccination against influenza and potentially for gene therapy and other uses
(the "Master Strains"). Specifically, the Company obtained the exclusive right
to develop, manufacture, use, market and sell products incorporating any such
intellectual property or utilizing the Master Strains in all countries of the
world except Japan. Aviron is in the process of acquiring the Japanese rights
from the University of Michigan for no additional consideration. In
consideration for the rights granted to the Company, the Company (i) made an
initial cash payment to the University of Michigan; (ii) agreed to pay a royalty
to the University of Michigan on net sales of products subject to the license;
(iii) entered into a sponsored research agreement with the University of
Michigan for a period of at least two years; and (iv) issued to the University
of Michigan 1,323,734 shares of Series B Preferred Stock, convertible into
264,746 shares of the Company's Common Stock, representing approximately 3% of
the Company's Common Stock (on an as-converted basis) outstanding prior to this
offering.
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In addition, in the event that Aviron receives approval to commercially market a
product based on the University of Michigan technology, the Company has agreed
to issue a warrant to the University of Michigan to purchase shares of the
Company's Common Stock, for a number of shares to be based on 1.25% of the
Common Stock outstanding on the date of the first commercial sale of the product
incorporating the University of Michigan technology. See "Description of Capital
Stock -- Warrants."
Pursuant to the Michigan Agreement, the Company is required to grant to the
University of Michigan an irrevocable, royalty-free license for research
purposes, or for transfer to a subsequent licensee should the Michigan Agreement
be terminated, to (i) all improvements developed by the Company, its affiliates
or sublicensees, whether or not patentable, relating to delivery mechanisms and
processes for administration and manufacturing of products, as well as
packaging, storage and preservation processes for the Master Strains, and (ii)
all new technical information acquired by the Company, its affiliates or
sublicensees relating to the Master Strains and products.
The term of the Michigan Agreement is until the later of the last to expire
of the the University of Michigan patents licensed to the Company or 20 years
from the date of first commercial sale of a product incorporating the Michigan
technology. The Company has the further right to terminate for any reason upon
12 months notice to the University of Michigan.
THE MOUNT SINAI SCHOOL OF MEDICINE
In February 1993, the Company entered into a technology transfer agreement
with The Mount Sinai School of Medicine of the City University of New York
("Mount Sinai"). Under this agreement, Mount Sinai assigned to the Company all
of its rights, title and interest in and to certain patents and patent
applications, as well as all associated know-how and other technical
information, relating to recombinant negative strand RNA virus expression
systems and vaccines, attenuated influenza viruses and certain other technology.
Mount Sinai also granted the Company (i) an option to acquire any improvements
to the inventions disclosed in the assigned patents and patent applications
thereafter developed by Mount Sinai and (ii) a right of first negotiation for a
license or assignment to certain additional related technology. In consideration
for the rights granted to the Company, the Company issued to Mount Sinai 35,000
shares of the Company's Common Stock. The Company also issued to Mount Sinai
three warrants to purchase up to a total of 225,000 shares of the Company's
Series A Preferred Stock, each exercisable for a term of five years commencing
upon the occurrence of certain milestone events which accelerate upon the
effectiveness of this offering. Warrants to purchase 45,000 of the shares of
Series A Preferred Stock (convertible into 9,000 shares of Common Stock) are
exercisable at a purchase price of $4.50 per share of Common Stock. Warrants to
purchase 148,750 shares of Series A Preferred Stock (convertible into 29,750
shares of Common Stock), will become exercisable at the effective date of this
offering at a price per share of Common Stock of 125% of the initial public
offering price of the Company's Common Stock. The warrant to purchase the
remaining 31,250 shares of Series A Preferred Stock will be cancelled on the
effective date of this offering. See "Capital Stock -- Warrants."
ARCH DEVELOPMENT CORPORATION
In July 1992, the Company entered into a license agreement with ARCH
Development Corporation ("ARCH"), an Illinois not-for-profit corporation
associated with the University of Chicago, pursuant to which the Company
obtained an exclusive, worldwide commercialization license, with the right to
sublicense, to certain patent rights and related intellectual property and
materials pertaining to the herpes simplex viruses, EBV and various recombinant
methods and materials. In return for the rights granted to the Company under
this agreement, the Company will make payments to ARCH upon the achievement of
certain milestones in the development of products covered by the license and
will pay royalties to ARCH on net sales of such products. ARCH also granted the
Company certain rights to improvements and additional related technology. The
term of this agreement extends until the expiration of the last-to-expire patent
rights covered under the license. In connection with this agreement, ARCH
purchased 40,000 shares of the Company's Common Stock. Subsequent to this
agreement, affiliates of ARCH made equity investments in Aviron, purchasing
700,000, 300,000 and 113,999 shares of the Company's Series A, B and C Preferred
Stock, respectively, convertible into a total of
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222,799 shares of the Company's Common Stock. ARCH and its affiliates together
own shares representing approximately 2.5% of the Company's Common Stock (on an
as-converted basis) outstanding prior to this offering.
PATENTS AND PROPRIETARY RIGHTS
Aviron believes that patent and trade secret protection is important to its
business and that its future will depend in part on its ability to maintain its
technology licenses, maintain trade secret protection, obtain patents and
operate without infringing the proprietary rights of others. The Company owns or
has licensed rights to United States and foreign patents and patent applications
covering aspects of technology relating to herpes viruses, including EBV, CMV,
and HSV-2 and negative strand RNA viruses, such as influenza and RSV
technologies.
The Company has no issued patents on the technology related to its cold
adapted influenza vaccine. The Company's rights to this technology are based on
a license of materials and know-how from the University of Michigan, which owns
the master strains from which the vaccine is derived, and on a license of
know-how and clinical trial data from the NIH. There can be no assurance, that a
third party will not reproduce the Company's cold adapted influenza vaccine or
that a third party will not develop another live-virus influenza vaccine which
might be comparable to Aviron's in terms of safety and efficacy.
The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Certain of the Company's licensors also rely on trade secrets to
protect technology which has been licensed to Aviron, and as a result, the
Company is dependent on the efforts of these licensors to protect such trade
secrets. For example, the University of Michigan relies in part on trade secrets
to protect the master strains of the cold adapted influenza virus used by the
Company and the NIH relies in part on trade secrets to protect the master
strains of the bPIV-3 virus. Aviron protects its proprietary technology and
processes, in part, by confidentiality agreements with its employees,
consultants, collaborators and certain contractors. There can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets or those of its
licensors will not otherwise become known or be independently discovered by
competitors. To the extent that Aviron or its consultants or research
collaborators use intellectual property owned by others in their work for the
Company, disputes may also arise as to the rights in related or resulting
know-how and inventions.
The Company's success also will depend in part on its ability to obtain
patents, both in the United States and in other countries. Since patent
applications in the United States are maintained in secrecy until patents issue
and since publication of discoveries in the scientific or patent literature
often lag behind actual discoveries, the Company cannot be certain that it was
the first to make the inventions covered by each of its pending patent
applications or that it was the first to file patent applications for such
inventions. The patent positions of biotechnology and pharmaceutical companies
can be highly uncertain and involve complex legal and factual questions, and
therefore the breadth of claims allowed in biotechnology and pharmaceutical
patents or their enforceability cannot be predicted. Although Aviron has
acquired or licensed rights to over a dozen patent applications pending in the
United States, and seven issued United States patents, there can be no assurance
that any of the Company's patents or patent applications will issue, or if
issued, will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide proprietary protection or competitive advantages
to the Company.
The commercial success of Aviron additionally will depend, in part, upon the
Company's not infringing patents issued to others. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions have
filed patent applications or received patents in the areas of the Company's
programs. Some of these applications or patents may limit or preclude the
Company's applications, or conflict in certain respects with claims made under
the Company's applications.
The Company is aware of pending patent applications that have been filed by
others that may pertain to certain aspects of the Company's programs, including
a genetically engineered influenza vaccine, the Company's herpes virus program
or other of its issued or pending patent applications. If patents are issued to
others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, the Company
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may be required to obtain licenses to these patents or to develop or obtain
alternative technology. The Company's breach of an existing license or failure
to obtain a license to technology required to commercialize its products may
have a material adverse effect on the Company's business, financial condition
and results of operations. Litigation, which could result in substantial costs
to the Company, may also be necessary to enforce any patents issued to the
Company or to determine the scope and validity of third-party proprietary
rights. If competitors of the Company prepare and file patent applications in
the United States that claim technology also claimed by the Company, the Company
may have to participate in interference proceedings declared by the United
States Patent and Trademark Office to determine priority of invention, which
could result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. An adverse outcome could subject the Company to
significant liabilities to third parties and require the Company to license
disputed rights from third parties or to cease using such technology.
On May 22, 1996, the Company received notice from Chiron that Chiron intends
to file a lawsuit against Aviron, unless a prompt negotiated settlement can be
reached, alleging that certain of Aviron's patent applications relating to its
EBV program are based on Chiron proprietary information which was improperly
conveyed to Aviron by a former Chiron employee. Aviron believes that Chiron's
allegations are without merit and, if a complaint is filed, intends to
vigorously defend itself against any such action. Aviron does not utilize the
alleged proprietary information in any of its programs. The Company has received
terms of a proposed settlement from Chiron and is in discussions with Chiron
regarding a possible settlement of the dispute. No assurance can be given that
litigation will not ensue, which could be costly and time-consuming.
GOVERNMENT REGULATION
Regulation by government authorities in the United States and other
countries will be a significant factor in the manufacturing and marketing of any
products that may be developed by the Company. All of the Company's products
will require regulatory approval by government agencies prior to
commercialization. The Company's vaccine products are subject to rigorous
preclinical testing and clinical trial and other approval procedures by the FDA
and similar health authorities in foreign countries. Various federal statutes
and regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of such products.
The Company believes that its vaccine products will be classified by the FDA
as "biologic products," as opposed to "drug products." The steps ordinarily
required before a drug or biological product may be marketed in the United
States include (a) preclinical testing and clinical trials; (b) the submission
to the FDA of an IND, which must become effective before clinical trials may
commence; (c) adequate and well-controlled clinical trials to establish the
safety and efficacy of the drug; (d) the submission to the FDA of a Product
License Application ("PLA") together with an Establishment License Application
("ELA"); and (e) FDA approval of the application, including approval of all
product labeling and, in some instances, advertising.
Preclinical testing includes laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. Preclinical safety tests must be conducted
by laboratories that comply with FDA regulations regarding Good Laboratory
Practice. The results of the preclinical tests are submitted to the FDA as part
of an IND and are reviewed by the FDA before the commencement of clinical
trials. Unless the FDA objects to an IND, the IND will become effective 30 days
following its receipt by the FDA. There can be no assurance that submission of
an IND will result in FDA authorization to commence clinical trials or that the
lack of an objection means that the FDA will ultimately approve an application
for marketing approval.
Clinical trials involve the administration of the investigational product to
humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practices under
protocols submitted to the FDA as part of the IND. In addition, each clinical
trial must be approved and conducted under the auspice of an Institutional
Review Board and with patient informed consent. The Institutional Review Board
will consider, among other things, ethical factors, the safety of human subjects
and the possible liability of the institution conducting the clinical trial.
Phase I clinical trials are generally performed in healthy human subjects.
The goal of the Phase I clinical trials is to establish initial data about
safety and tolerance of the vaccine in humans. Also, the data regarding the
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immune response to a vaccine may be obtained. In Phase II clinical trials,
evidence is sought about the desired therapeutic efficacy of a drug or antibody,
or the immune response to a vaccine, in limited studies with small numbers of
carefully selected subjects. Efforts are made to evaluate the effects of various
dosages and to establish an optimal dosage level and dosage schedule. Additional
safety data are also gathered from these studies. The Phase III clinical trial
program consists of expanded, large-scale, multicenter studies of persons who
are susceptible to the disease. The goal of these studies is to obtain
definitive statistical evidence of the efficacy and safety of the proposed
product and dosage regimen.
All data obtained from this comprehensive development program are submitted
as a PLA to the FDA and the corresponding agencies in other countries for review
and approval. FDA approval of the PLA and the associated ELA is required before
marketing may begin in the United States. The FDA will present to the Vaccine
and Related Biological Products Advisory Committee documentation on most of
Aviron's products for review and recommendation before PLA approval. Although
the FDA's policy is to review priority applications within 180 days of their
filing, in practice longer times may be required. The FDA frequently requests
that additional information be submitted requiring significant additional review
time. All proposed products of the Company will be subject to demanding and
time-consuming PLA or similar approval procedures in the countries where the
Company intends to market its products. These regulations define not only the
form and content of the development of safety and efficacy data regarding the
proposed product, but also impose specific requirements regarding manufacture of
the product, quality assurance, packaging, storage, documentation and record
keeping, labelling and advertising, and marketing procedures. Effective
commercialization also requires inclusion of the Company's products in national,
state, provincial, or institutional formularies or cost reimbursement systems.
FDA approval of the Company's products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. The process
of obtaining approvals from the FDA can be costly, time consuming and subject to
unanticipated delays. The FDA may refuse to approve an application if it
believes that applicable regulatory criteria are not satisfied. The FDA may also
require additional testing for safety and efficacy of the drug. Moreover, if
regulatory approval of a drug product is granted, the approval will be limited
to specific indications. There can be no assurance that approvals of the
Company's proposed products, processes or facilities will be granted on a timely
basis, if at all. Any failure to obtain or delay in obtaining such approvals
would have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, even if regulatory approval is
granted, such approval may include significant limitations on indicated uses for
which a product could be marketed.
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Nuclear Regulatory
Commission, the Resource Conservation and Recovery Act and other present and
potential future federal, state or local regulations. The Company's research and
development involves the controlled use of hazardous materials and chemicals.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, there can be no assurance that accidental contamination or
injury from these materials will not occur. In the event of such an accident,
the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities may be necessary in foreign countries prior to
the commencement of marketing of the product in such countries. The approval
procedure varies among countries, can involve additional testing, and the time
required may differ from that required for FDA approval. Although there is now a
centralized European Union approval mechanism in place, each European country
may nonetheless impose its own procedures and requirements, many of which are
time consuming and expensive. Thus, there can be substantial delays in obtaining
required approvals from both the FDA and foreign regulatory authorities after
the relevant applications are filed. The Company expects to rely on corporate
partners and licensees, along with Company expertise, to obtain governmental
approval in foreign countries of drug formulations utilizing its candidates.
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The Company believes that the approval process for vaccines may be longer
than for other therapeutic products. In addition, regulatory scrutiny may be
particularly intense for products, such as Aviron's cold-attenuated influenza
vaccine, which are designed to be given to otherwise healthy children.
COMPETITION
The Company operates in a rapidly evolving field. Any product developed by
the Company would compete with existing and new drugs and vaccines being created
by pharmaceutical, biopharmaceutical and biotechnology companies. If the Company
were able to successfully develop its vaccines, it would be competing with
larger companies that have already introduced vaccines and have significantly
greater marketing, manufacturing, financial and managerial resources. For
example, with respect to its cold adapted influenza vaccine, the Company will be
competing against larger companies such as Pasteur Merieux Connaught,
Wyeth-Ayerst, Parke-Davis and Evans. Each of these companies sells the
inactivated injectable influenza vaccine in the United States, has significantly
greater financial resources than Aviron and has established marketing and
distribution channels for such products. The Company is also aware of several
companies that are marketing or are in late-stage development of products to
prevent HSV disease, including Glaxo, SmithKline Beecham and Chiron Biocine
Corporation. In addition, the Company is also aware of the use in Russia of a
cold adapted influenza vaccine, research programs by some of the competitors
listed above, among others, to develop more effective influenza vaccines and a
cold adapted PIV-3 vaccine developed with NIH support which may be licensed to a
large vaccine company.
New developments are expected to continue in both the pharmaceutical and
biotechnology industries and in academia. Other companies may succeed in
developing products that are safer, more effective or less costly than any that
may be developed by the Company. Such companies may also be more effective than
the Company in the production and marketing of their products. Furthermore,
rapid technological development by competitors may result in the Company's
products becoming obsolete before the Company is able to recover its research,
development or commercialization expenses incurred in connection with any such
product. Many potential competitors have substantially greater financial,
technical and marketing resources than the Company. Some of these companies also
have considerable experience in preclinical testing, clinical trials and other
regulatory approval procedures. Moreover, certain academic institutions,
government agencies and other research organizations are conducting research in
areas in which the Company is working. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more active in seeking patent protection and licensing arrangements to collect
royalties for the use of technology that they have developed. These institutions
may also market competitive commercial products on their own or through joint
ventures.
Aviron believes that competition in the markets it is addressing will
continue to be intense. The vaccine industry is characterized by intense price
competition, and the Company anticipates that it will face this and other forms
of competition. There can be no assurance that pharmaceutical, biopharmaceutical
and biotechnology companies will not develop more effective products than those
of the Company or will not market and sell their products more effectively than
the Company, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
PHARMACEUTICAL PRICING AND REIMBURSEMENT
Political, economic and regulatory influences are subjecting the health care
industry in the United States to fundamental change. Recent initiatives to
reduce the federal deficit and to reform health care delivery are increasing
cost-containment efforts. The Company anticipates that Congress, state
legislatures and the private sector will continue to review and assess
alternative benefits, controls on health care spending through limitations on
the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause the Company or its
collaborative partners to limit or eliminate spending on development projects.
Legislative debate is expected to
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continue in the future, and market forces are expected to demand reduced costs.
Aviron cannot predict what impact the adoption of any federal or state health
care reform measures or future private sector reforms may have on its business.
In both domestic and foreign markets, sales of the Company's proposed
vaccines will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, other third-party payors are increasingly challenging the price and
cost effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
There can be no assurance that the Company's proposed products will be
considered cost effective or that adequate third-party reimbursement will be
available to enable Aviron to maintain price levels sufficient to realize an
appropriate return on its investment in product development. Legislation and
regulations affecting the pricing of pharmaceuticals may change before the
Company's proposed products are approved for marketing. Adoption of such
legislation could further limit reimbursement for medical products. If adequate
coverage and reimbursement levels are not provided by the government and
third-party payors for the Company's products, the market acceptance of these
products would be adversely affected, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
Several of the Company's proposed vaccines are intended for use in children.
Widespread use of these proposed vaccines is unlikely without recommendations
for their use in childhood immunization programs from authorities such as the
ACIP, the American Academy of Pediatrics and the American College of Physicians.
The ACIP has a role in making recommendations which affect the market for most,
if not all, of the products Aviron intends to make. The CDC develops
epidemiologic data in support of the need for new vaccines and monitors vaccine
usage and changes in disease incidence. In addition, CDC staff frequently act as
key advisors to the FDA in their review process. There can be no assurance that
such authorities will recommend the use of the Company's proposed products,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.
EMPLOYEES
As of June 1, 1996, the Company had 70 full-time employees. Thirty-eight of
the Company's employees were in research and development 16 were in regulatory
affairs, quality assurance and quality control, and 16 were in administration.
No Company employee is represented by a labor union, and the Company has not
experienced any work stoppages. The Company considers its employee relations to
be good.
FACILITIES
Aviron occupies approximately 52,800 square feet of office and laboratory
space in Mountain View, California. The Company has leased this facility through
October 2005 and has two options to extend the lease for successive five-year
terms. The Company currently subleases approximately 15,000 square feet of space
to three subtenants. The subleases run through June 1996 and may be extended at
Aviron's discretion. The Company believes that this facility is adequate to meet
its needs for the foreseeable future.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings. However, on
May 22, 1996, the Company received notice from Chiron that Chiron intends to
file a lawsuit against Aviron, unless a prompt negotiated settlement can be
reached, alleging that certain of Aviron's patent applications relating to its
EBV program are based on Chiron proprietary information which was improperly
conveyed to Aviron by a former Chiron employee. Aviron believes that Chiron's
allegations are without merit and, if a complaint is filed, intends to
vigorously defend itself against any such action. Aviron does not utilize the
alleged proprietary information in any of its programs. The Company has received
terms of a possible settlement from Chiron and is in discussions with Chiron
regarding a proposed settlement of the dispute. No assurance can be given that
litigation will not ensue, which could be costly and time-consuming.
48
<PAGE>
SCIENTIFIC ADVISORY BOARD
Aviron's scientific advisors are consultants who devote six to 20 days per
year to the Company. Some meet frequently with Company employees to discuss
specific projects and others participate primarily via the Company's two annual
meetings of the Scientific Advisory Board.
ANN ARVIN, M.D., Professor of Pediatrics, Microbiology and Immunology at the
Stanford University School of Medicine, has been a member of the Company's
Scientific Advisory Board since 1992. Dr. Arvin has conducted research on the
epidemiology of maternal-to-infant transmission of HSV-2 and she directs one of
the leading laboratories in the study of the interaction of the human immune
system with the varicella zoster (chicken pox) virus in natural and vaccine
infections.
HARRY GREENBERG, M.D., Professor of Medicine, Microbiology and Immunology
and Chief of the Division of Gastroenterology and Associate Chairman for
Academic Affairs, Department of Medicine at the Stanford University School of
Medicine, has been a member of the Company's Scientific Advisory Board since
1992. Dr. Greenberg's research deals with the immunology and pathogenesis of the
principal viruses which cause infectious diarrhea and hepatitis.
ELLIOT KIEFF, M.D., PH.D., Albee Professor of Medicine, Microbiology and
Molecular Genetics and Chairman of the Virology Program at Harvard University,
and Director of Infectious Disease at the Brigham and Women's Hospital, has been
a member of the Company's Scientific Advisory Board since 1992. Dr. Kieff's
laboratory conducts research on the molecular mechanisms of how EBV is a
contributory cause of cancer in humans.
JOSHUA LEDERBERG, PH.D., the Raymond and Beverly Sackler Foundation Scholar
and former President of The Rockefeller University, has been a member of the
Company's Scientific Advisory Board since 1992. He received the Nobel Prize in
Physiology or Medicine for his discovery of genetic recombination in bacteria.
His laboratory at the Rockefeller University studies molecular genetics and he
is active in formulation of national policy concerning emerging infections.
HUNEIN F. MAASSAB, PH.D., Chairman of the Department of Epidemiology, School
of Public Health, at the University of Michigan, has been a member of the
Company's Scientific Advisory Board since 1995. He is the inventor of the cold
adapted influenza vaccine licensed to the Company by the University of Michigan
and has published numerous papers on this subject. His laboratory is studying
the molecular basis of influenza virus attenuation and is involved in
development of new vaccines for other respiratory viruses.
EDWARD MOCARSKI, JR., PH.D., Professor and Chairman of the Department of
Microbiology and Immunology at the Stanford University School of Medicine, has
been a member of the Company's Scientific Advisory Board since 1992. His
laboratory engineered the first recombinant CMV providing the first
demonstration of this virus as a vector and is one of the leading groups
conducting research on CMV gene regulation.
PETER PALESE, PH.D., a founder of the Company and member of the Scientific
Advisory Board since 1992, is Professor and Chairman of the Department of
Microbiology at The Mount Sinai School of Medicine of the City University of New
York. His laboratory developed the first successful strategy for making
genetically engineered influenza viruses. This invention is the subject of a
United States patent issued in 1992 covering the genetic engineering of negative
strand RNA viruses rights to which patent have been acquired by the Company. Dr.
Palese's research group has been responsible for developing a genetic map for
influenza virus, elucidating the function of viral proteins, and the creation of
recombinant influenza strains which demonstrate the use of this virus as a
vector.
GERALD V. QUINNAN, JR., M.D., Professor of Preventive Medicine, Medicine and
Microbiology, Department of Preventive Medicine and Biometrics at the Uniformed
Services University of the Health Sciences in Bethesda, Maryland, has been a
member of the Company's Scientific Advisory Board since 1995. Dr. Quinnan was
employed by the FDA from 1977 until 1993. From 1980 to 1988, he was Director of
the Virology Division, subsequently serving as Deputy Director and Acting
Director, of the Center for Biologics Evaluation and Research. Dr. Quinnan's
research concerns aspects of HIV immunology related to vaccine development.
BERNARD ROIZMAN, SC.D., a founder and director of the Company and member of
the Scientific Advisory Board since 1992, is the Joseph Regenstein Distinguished
Service Professor of the Departments of Molecular
49
<PAGE>
Genetics and Cell Biology and of Biochemistry and Molecular Biology at The
University of Chicago. His laboratory is a leading center of research on
neurovirulence of the herpes simplex viruses, created the first example of a
large DNA virus which had been genetically engineered and provided the first
demonstration of herpes simplex virus as a vector. Dr. Roizman is a member of
the United States National Academy of Sciences. The Company's HSV-2 vaccine
program is based on his patented technology, licensed to Aviron.
JOHN SKEHEL, PH.D., FRS, Director of the National Institute of Medical
Research of the Medical Research Council and the WHO Influenza Surveillance
Center in Mill Hill near London, has been a member of the Company's Scientific
Advisory Board since 1992. His laboratory has contributed new knowledge on the
structure of the influenza virus as well as the molecular epidemiology of this
virus.
RICHARD WHITLEY, M.D., a founder of the Company and member of the Scientific
Advisory Board since 1992, is Professor of Pediatrics, Microbiology, and
Medicine and Vice Chairman of the Department of Pediatrics at the University of
Alabama School of Medicine in Birmingham. He has conducted pharmacologic and
clinical studies on many antiviral drugs and his laboratory is a leading center
of research on the mechanism by which herpes simplex virus causes disease, and
he is studying the use of modified herpes viruses to treat brain cancer. Dr.
Whitley is former Chairman of the NIH Data Monitoring and Safety Committee for
AIDS Therapy and a member of the Committee on Infectious Disease of the American
Academy of Pediatrics (The Redbook Committee).
MAX WILHELM, PH.D., is a consultant to the biotechnology industry and has
been a member of the Company's Scientific Advisory Board since 1993. He has
retired from a 35-year career at Ciba-Geigy where he was most recently a member
of the Pharmaceuticals Division Committee overseeing worldwide research and
development operations. He was involved in the formation of The Biocine Company,
a joint venture vaccine company between Ciba-Geigy and Chiron, serving as one of
its original directors, and is currently Chairman of the Board of Directors of
Genelabs Technologies, Inc.
50
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of June 1, 1996 is
set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------- --- -----------------------------------
<S> <C> <C>
J. Leighton Read, M.D............ 45 Chairman, Chief Executive Officer
and Chief Financial Officer
Martin L. Bryant, M.D., Ph.D..... 47 Vice President, Research
Victor Jegede, Ph.D.............. 51 Vice President, Technical Affairs
Vera Kallmeyer, M.D., Ph.D....... 37 Vice President, Corporate
Development
Paul M. Mendelman, M.D........... 48 Vice President, Clinical Research
Eric J. Patzer, Ph.D............. 47 Vice President, Development
Reid W. Dennis (1)(2)............ 70 Director
Paul H. Klingenstein (1)(2)...... 40 Director
Jane E. Shaw, Ph.D............... 57 Director
L. James Strand, M.D. (1)(2)..... 54 Director
Bernard Roizman, Sc.D............ 67 Director
Alan C. Mendelson................ 48 Secretary
</TABLE>
- -------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
J. LEIGHTON READ, M.D., a founder of the Company, has been Chairman, Chief
Executive Officer and Chief Financial Officer of the Company since 1992. In
1989, he co-founded Affymax N.V. with Dr. Alejandro Zaffaroni, serving initially
as its Executive Vice President and Chief Operating Officer and later, from 1990
to 1991, as President of the Pharma Division and as a Managing Director of the
parent company. From 1991 to 1993, Dr. Read was a principal with Interhealth
Limited, an investment partnership. Prior to 1989, Dr. Read held appointments at
the Harvard Medical School and School of Public Health, where his research dealt
with techniques for assessing the cost effectiveness of pharmaceutical products.
He has served on the boards of a number of private biotechnology companies and
is currently on the board of a private biotechnology company. Dr. Read holds a
B.S. in Biology and Psychology from Rice University and an M.D. from the
University of Texas Health Science Center at San Antonio.
MARTIN L. BRYANT, M.D., PH.D., has been Vice President, Research of the
Company since 1995. Dr. Bryant also currently is Consulting Associate Professor
of Pediatrics, Microbiology and Immunology at the Stanford University School of
Medicine and Adjunct Associate Professor of Molecular Microbiology at the
Washington University School of Medicine. From 1991 to 1995, he was Director,
Infectious Disease Research for G. D. Searle & Co./Monsanto, a pharmaceutical
company. From 1990 to 1991, he was an Instructor in Pediatric Infectious
Diseases at the Washington University School of Medicine. Dr. Bryant holds a
B.A. in Chemistry from Duke University, an M.A. in Chemistry from San Diego
State University, and an M.D. and a Ph.D. from the University of Southern
California.
VICTOR JEGEDE, PH.D., has been Vice President, Technical Affairs of the
Company since 1995. From 1992 to 1994, Dr. Jegede was Vice President, Regulatory
Affairs and Quality for Creative BioMolecules, Inc., a biopharmaceuticals
company, and from 1989 to 1992, he was Director, Regulatory Affairs and Quality
for WelGen Manufacturing Partnership (BW Manufacturing, Inc.), a division of
Burroughs Welcome Manufacturing, Inc., a pharmaceutical manufacturer. Dr. Jegede
holds a B.S. and an M.S. in Biology, and a Ph.D. in Bacteriology from Boston
College.
51
<PAGE>
VERA KALLMEYER, M.D., PH.D., has been Vice President, Corporate Development
of the Company since 1994. From 1993 to 1994, Dr. Kallmeyer was Vice President,
Healthcare Banking/Biotech at Flemings, a London-based merchant bank. From 1990
to 1993, she was an Associate in Investment Banking at Wasserstein Perella and
Company. In 1994, she co-founded Pacific Futures, an investment advisory
business located in Hong Kong, for which she currently serves as Senior Advisor.
Dr. Kallmeyer holds an M.D. and a Ph.D. in Pediatric Cardiology from
Ludwig-Alexander University in Erlangen, Germany, and an M.B.A. from Stanford
University. She has also studied at the Harvard Medical School and the Royal
Postgraduate Medical School in London.
PAUL M. MENDELMAN, M.D., has been Vice President, Clinical Research of the
Company since May 1996. Prior to joining the Company, Dr. Mendelman was
Director, Clinical Research, Infectious Diseases for Merck Research
Laboratories, a pharmaceutical company, since September 1991. From 1983 to 1991,
Dr. Mendelman was Clinical Instructor, Assistant Professor and then Associate
Professor of Pediatrics at the University of Washington. Dr. Mendelman holds a
B.S. and an M.D. from Ohio State University and is a fellow of the American
Academy of Pediatrics.
ERIC J. PATZER, PH.D., has been Vice President, Development of the Company
since 1996. Prior to joining the Company, Dr. Patzer had held various positions
with Genentech, Inc., a pharmaceutical company, since 1981, most recently as
Vice President, Development. Dr. Patzer holds a B.S. in Mechanical Engineering
from The Pennsylvania State University and a Ph.D. in Microbiology from the
University of Virginia.
REID W. DENNIS has been a director of the Company since 1992. Mr. Dennis has
been active in venture capital investments since 1952. He founded Institutional
Venture Partners ("IVP"), a venture capital firm, in 1980, and has acted as
general partner of IVP since that time. He is currently a director of Collagen
Corporation, as well as several private companies. Mr. Dennis holds a B.S. in
Electrical Engineering and an M.B.A. from Stanford University.
PAUL H. KLINGENSTEIN has been a director of the Company since 1993. Mr.
Klingenstein has been associated with Accel Partners, a venture capital firm,
since 1986, where he has been a General Partner since 1988. He is a director of
several private health care and biopharmaceutical companies. Mr. Klingenstein
holds an A.B. from Harvard University and an M.B.A. from Stanford University.
BERNARD ROIZMAN, SC.D., has been a director of the Company since 1992. Dr.
Roizman has been the Joseph Regenstein Distinguished Service Professor of
Virology at the University of Chicago since 1984. He holds B.A. and M.S. degrees
from Temple University and an Sc.D. from The Johns Hopkins University. Dr.
Roizman is also a member of the Company's Scientific Advisory Board.
JANE E. SHAW, PH.D., has been a Director of the Company since May 1996. Dr.
Shaw has been associated with The Stable Network, a biopharmaceutical consulting
company, since she founded it in 1995. From 1987 to 1994, Dr. Shaw was President
and Chief Operating Officer of ALZA Corporation, a pharmaceutical company, where
she began her career as a research scientist in 1970. Dr. Shaw is also a
director of Intel Corporation, McKesson Corporation and Boise Cascade
Corporation. Dr. Shaw holds a B.Sc. and a Ph.D. in physiology from Birmingham
University, England, and an honorary Doctorate of Science degree from the
Worcester Polytechnic Institute.
L. JAMES STRAND, M.D., has been a director of the Company since 1992. Dr.
Strand began consulting for IVP, a venture capital firm, in 1986, was named Life
Sciences Venture Partner of IVP in 1993 and a General Partner in 1994. From 1983
to 1993, Dr. Strand was President of Advanced Marketing Decisions, a biomedical
marketing and product development consulting company. Dr. Strand is a director
of Microcide Pharmaceuticals, Inc. and several privately-held health care and
biomedical companies. He holds B.S., M.A. and M.D. degrees from the University
of California at San Francisco and an M.B.A. from Santa Clara University and is
a fellow of the American College of Physicians.
ALAN C. MENDELSON has served as Secretary of the Company since 1992. He has
been a partner of Cooley Godward Castro Huddleson & Tatum, counsel to the
Company, since 1980 and served as Managing Partner of its Palo Alto office from
1990 to 1995. Mr. Mendelson also served as Secretary and Acting General Counsel
of Amgen Inc., a biopharmaceutical company, from 1990 to 1991, and served as
Acting General Counsel at
52
<PAGE>
Cadence Design Systems, Inc., an electronic design automation software company,
from 1995 to 1996. He is a director of Acuson Corporation, CoCensys, Inc.,
Elexsys International, Inc. and Isis Pharmaceuticals, Inc. Mr. Mendelson holds a
B.A. from the University of California at Berkeley, and a J.D. from the Harvard
Law School.
The Board of Directors has an Audit Committee which consists of Messrs.
Dennis, Klingenstein and Strand. The Audit Committee makes recommendations to
the Board regarding the selection of independent accountants, reviews the
results and scope of the audit and other services provided by the Company's
independent accountants, and reviews and evaluates the Company's control
functions. The Board of Directors has a Compensation Committee which consists of
Messrs. Dennis, Klingenstein and Strand. The Compensation Committee makes
recommendations to the Board concerning salaries and incentive compensation for
employees and consultants of the Company.
The Board of Directors presently consists of six members who hold office
until the annual meeting of stockholders and until a successor is duly elected
and qualified. Effective upon the Company's reincorporation into Delaware, the
Board of Directors will be divided into three classes of equal size. One class
of directors will be elected annually and its members will hold office for a
three year term or until their successors are duly elected and qualified, or
until their earlier removal or resignation. The number of directors will
initially be six and may be changed by a resolution of the Board of Directors.
Executive officers are elected by the Board of Directors. There are no family
relationships among any of the directors and executive officers of the Company.
DIRECTOR COMPENSATION
Directors currently receive no cash compensation from the Company for their
services as members of the Board of Directors. They are reimbursed for certain
expenses in connection with attendance at Board and Committee meetings.
All of Aviron's non-employee directors are entitled to receive
non-discretionary annual stock option grants under the Company's 1996
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). Each option
granted pursuant to the Directors' Plan has an exercise price equal to the fair
market value of the Common Stock on the date of grant, and is subject to
three-year vesting in equal annual installments. The Directors' Plan provides
for initial grants of options to purchase 15,000 shares for each non-employee
director who joins the Board following the offering, plus annual grants of
options to purchase 3,000 shares.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the fiscal year ended December 31, 1995 to its President and
Chief Executive Officer and four of the Company's other executive officers who
earned more than $100,000 during the year ended December 31, 1995 (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION COMPENSATION (1)
------------------------ ----------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY COMPENSATION
- -------------------------------------------------- -------- --------------
<S> <C> <C> <C>
J. Leighton Read, M.D. ........................... $210,000 $ -- $ 743
Chairman, Chief Executive Officer and Chief
Financial Officer
Francis R. Cano, Ph.D. (2) ....................... 222,500 -- 20,381
President and Chief Operating Officer
Martin L. Bryant, M.D., Ph.D. (3) ................ 153,333 121,351(4)(5) 940
Vice President, Research
Victor Jegede, Ph.D. (6) ......................... 156,667 94,195(4) 1,555
Vice President, Technical Affairs
Vera Kallmeyer, M.D., Ph.D. ...................... 148,167 -- 304
Vice President, Corporate Development
</TABLE>
53
<PAGE>
- -------------------
(1) Includes group term life insurance paid by the Company and reimbursement by
the Company of $18,120 paid by Dr. Cano as a premium payment on his split
dollar life insurance policy.
(2) Dr. Cano resigned as a director, officer and employee of the Company in
April 1996.
(3) Dr. Bryant began his employment with the Company on January 16, 1995.
(4) Includes reimbursement of moving, housing and other expenses incurred in
connection with relocating to California as follows: for Dr. Bryant, $45,308
in direct reimbursement, $16,000 in relocation assistance, $8,000 in monthly
housing assistance, and $25,953 in federal income tax gross-up; for Dr.
Jegede, $47,042 in direct reimbursement, $16,000 in relocation assistance,
$6,500 in monthly housing assistance, and $23,097 in federal income tax
gross-up.
(5) Includes $25,000 paid to Dr. Bryant in March 1995 as reimbursement for a
bonus forfeited upon Dr. Bryant's leaving his former employer.
(6) Dr. Jegede began his employment with the Company on January 9, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------
NUMBER OF % POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OF TOTAL ANNUAL RATES OF STOCK PRICE
UNDERLYING OPTIONS GRANTED EXERCISE APPRECIATION FOR OPTION TERM (3)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION --------------------------------------
NAME GRANTED FISCAL YEAR (1) SHARE (2) DATE 0% 5% 10%
- ----------------------------------- ------------ --------------- ----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Leighton Read, M.D.............. 60,000 19.4% $ 0.50 05/08/05 $ 690,000 $ 1,124,700 $ 1,787,100
20,000(4) 6.5 0.50 05/08/05 230,000 374,900 595,700
20,000(4) 6.5 1.25 12/12/05 215,000 350,450 556,850
Francis R. Cano, Ph.D. (5)......... 40,000 12.9 0.50 05/08/05 460,000 749,800 1,191,400
Martin L. Bryant, Ph.D............. 24,000 7.8 0.50 03/14/05 276,000 449,880 714,840
Victor Jegede, Ph.D................ 24,000 7.8 0.50 03/14/05 276,000 449,880 714,840
Vera Kallmeyer, M.D., Ph.D......... 4,000 1.3 0.50 05/08/05 46,000 74,980 119,140
5,000 1.6 0.50 05/08/05 57,500 93,725 148,925
15,000 4.9 0.50 05/08/05 172,500 281,175 446,775
20,000 6.5 1.25 12/12/05 215,000 350,450 556,850
</TABLE>
- -------------------
(1) Based on an aggregate of 309,000 options granted to employees and directors
of the Company in fiscal 1995, including the Named Executive Officers set
forth in the "Summary Compensation Table" above and directors set forth in
"Director Compensation" above.
(2) The exercise price is equal to 100% of the fair market value of the Common
Stock at the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at the time of grant (ten years). Stock price appreciation of five percent
and ten percent is assumed pursuant to rules promulgated by the Securities
and Exchange Commission and does not represent the Company's prediction of
its stock price performance. The potential realizable value of 0%
appreciation measures the value of the option at effectiveness based on the
assumed initial public offering price per share of $12.00 less the exercise
price. The potential realizable value at 5% and 10% appreciation is
calculated by assuming that the assumed initial public offering price
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price.
(4) Options granted outside of the 1996 Equity Incentive Plan.
(5) Dr. Cano resigned as a director, officer and employee of the Company in
April 1996.
54
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1995 AT DECEMBER 31, 1995
ACQUIRED ON VALUE -------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE (1)
- ------------------------------ ------------- --------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Leighton Read, M.D......... 60,000(2) $ 15,000 40,000 -- $ 445,000 $ --
Francis R. Cano, Ph.D......... -- -- 110,000 30,000 1,282,500 352,500
Martin L. Bryant, Ph.D........ -- -- -- 24,000 -- 276,000
Victor Jegede, Ph.D........... -- -- -- 24,000 -- 276,000
Vera Kallmeyer, M.D., Ph.D.... -- -- 14,780 49,220 169,970 551,030
</TABLE>
- -------------------
(1) Based on the assumed initial public offering price of $12.00 per share,
minus the exercise price, multiplied by the number of shares underlying the
option.
(2) As of June 1, 1996, 34,200 of the shares acquired upon exercise were subject
to repurchase by the Company.
EMPLOYMENT CONTRACTS
The Company's offer of employment to Martin L. Bryant, Ph.D., the Company's
Vice President, Research, in December 1994, provided for an initial annual
salary of $160,000 and payment of $25,000 as reimbursement for a bonus forfeited
by Dr. Bryant when he left his previous employer. The Company also agreed to pay
certain relocation expenses and to loan Dr. Bryant up to $50,000 in aggregate
principal amount, at 7.75% simple interest, to assist him in the purchase of a
home. Interest on this loan will be forgiven annually, and principal will be
forgiven annually at the rate of 20% per year as long as Dr. Bryant remains with
the Company.
The Company's offer of employment to Victor A. Jegede, Ph.D., the Company's
Vice President, Technical Affairs, in December 1994, provided for an initial
annual salary of $160,000. The Company also agreed to pay certain relocation
expenses and to loan Dr. Jegede up to $50,000 in aggregate principal amount, at
7.75% simple interest, to assist him in the purchase of a home. Interest on this
loan will be forgiven annually, and principal will be forgiven annually at the
rate of 20% per year as long as Dr. Jegede remains with the Company.
The Company's offer of employment to Eric J. Patzer, Ph.D., the Company's
Vice President, Development, in December 1995, provided for an initial annual
salary of $185,000 and a bonus payment of $25,000 upon signing of the agreement
and $25,000 after the completion of one year of service. The Company also agreed
to pay certain relocation expenses and to loan Dr. Patzer up to $100,000 in
aggregate principal amount, at 7.75% simple interest, to assist him in the
purchase of a home. Interest on this loan, when made, will be forgiven annually,
and principal will be forgiven annually at the rate of 20% per year as long as
Dr. Patzer remains with the Company.
The Company's offer of employment to Paul M. Mendelman, M.D., the Company's
Vice President, Clinical Research, in April 1996, provided for an initial annual
salary of $185,000 and a bonus payment of $25,000 upon Dr. Mendelman's
acceptance of the offer. The Company also agreed to reimburse Dr. Mendelman for
certain relocation expenses and to loan Dr. Mendelman up to $100,000 in
aggregate principal amount, at 7.75% simple interest, to assist him in the
purchase of a home. Interest on this loan, when made, will be forgiven annually
at the rate of 20% per year as long as Dr. Mendelman remains with the Company.
Francis R. Cano, Ph.D. resigned as Director, President and Chief Operating
Officer of the Company effective April 19, 1996. Pursuant to an agreement
between Dr. Cano and the Company, Dr. Cano will continue to be employed as a
consultant by the Company until April 18, 1997. In consideration for Dr. Cano's
consulting services, the Company will continue to pay Dr. Cano's salary and
benefits during the consulting period.
55
<PAGE>
STOCK OPTION PLANS
EQUITY INCENTIVE PLAN. In March 1996, the Board adopted the 1996 Equity
Incentive Plan (the "Incentive Plan") as an amendment and restatement of its
1992 Stock Option Plan and increased the number of shares reserved for issuance
under the Incentive Plan to 1,750,000 shares. The Incentive Plan provides for
grants of incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options, restricted stock purchase awards,
stock bonuses and stock appreciation rights to employees (including officers and
employee directors) and consultants of the Company. It is intended that the
Incentive Plan will be administered by the Compensation Committee, which
determines recipients and types of awards to be granted, including the exercise
price, number of shares subject to the award and the exercisability thereof.
The term of a stock option granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors, but, in the case of an incentive
stock option, cannot be less than 100% of the fair market value of the Common
Stock on the date of grant or, in the case of 10% stockholders, not less than
110% of the fair market value of the Common Stock on the date of grant. Options
granted under the Incentive Plan to new employees and consultants generally will
vest at the rate of of the shares subject to the option on the first annual
anniversary of the date of hire and 1/48th of such shares at the end of each
calendar month thereafter. No option may be transferred by the optionee other
than by will or the laws of descent or distribution or, in certain limited
instances, pursuant to a qualified domestic relations order. An optionee whose
relationship with the Company or any related corporation ceases for any reason
(other than by death or permanent and total disability) may exercise options in
the three-month period following such cessation (unless such options terminate
or expire sooner by their terms) or in such longer period as may be determined
by the Board of Directors.
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Incentive Plan. Furthermore, the Board of
Directors may offer to exchange new options for existing options, with the
shares subject to the existing options again becoming available for grant under
the Incentive Plan. In the event of a decline in the value of the Company's
Common Stock, the Board of Directors has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new lower priced
options.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule determined by the Board. The purchase price of such
awards will be at least 85% of the fair market value of the Common Stock on the
date of grant. Stock bonuses may be awarded in consideration for past services
without a purchase payment. Stock appreciation rights authorized for issuance
under the Incentive Plan may be tandem stock appreciation rights, concurrent
stock appreciation rights or independent stock appreciation rights.
Upon any merger or consolidation in which the Company is not the surviving
corporation, all outstanding awards under the Incentive Plan shall either be
assumed or substituted by the surviving entity. If the surviving entity
determines not to assume or substitute such awards, the time during which such
awards may be exercised shall be accelerated and the awards terminated if not
exercised prior to the merger or consolidation.
As of June 1, 1996, 643,480 options were outstanding under the Incentive
Plan, with 1,106,520 shares reserved for future grants or purchases. The
Incentive Plan will terminate in January 2006, unless terminated sooner by the
Board of Directors. See Note 7 of Notes to Financial Statements.
EMPLOYEE STOCK PURCHASE PLAN. In March 1996, the Board adopted the Employee
Stock Purchase Plan (the "Purchase Plan") covering an aggregate of 250,000
shares of Common Stock. The Purchase Plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Code. Under the
Purchase Plan, the Board of Directors may authorize participation by eligible
employees, including officers, in periodic offerings following the adoption of
the Purchase Plan. The offering period for any offering will be no more than 27
months.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, for at
least 20 hours per week and are employed by the Company, or an affiliate of the
Company designated by the Board, for at least five months per calendar year.
Employees who
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<PAGE>
participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board of
Directors. The price of Common Stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or on the specified purchase date.
Employees may end their participation in the offering at any time during the
offering period. Participation ends automatically on termination of employment
with the Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, in which the Company is not the surviving corporation,
the Board of Directors has discretion to provide that each right to purchase
Common Stock will be assumed or an equivalent right substituted by the successor
corporation, or the Board may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The Purchase Plan will terminate at
the Board's discretion. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock. See Note 7 of Notes to
Financial Statements.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. In March 1996, the Board
adopted the 1996 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") to provide for the automatic grant of options to purchase shares of
Common Stock to non-employee directors of the Company. The Directors' Plan is
administered by the Board of Directors, unless the Board delegates
administration to a committee comprised of members of the Board.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 200,000. Pursuant to the terms of
the Directors' Plan, each director of the Company not otherwise employed by the
Company and who is first elected as a non-employee director after the completion
of this offering automatically will be granted an option to purchase 15,000
shares of Common Stock upon such election. Finally, each director who continues
to serve as a non-employee director of the Company will be granted an additional
option to purchase 3,000 shares of Common Stock on December 31 of each year. All
such options vest one-third on the first anniversary of the date of grant and
one-third per year thereafter.
In the event of a merger, consolidation, reverse reorganization,
dissolution, sale of substantially all of the assets of the Company, or certain
changes in the beneficial ownership of the Company's securities representing at
least a 50% change of such ownership, then options outstanding under the
Directors' Plan will automatically become fully vested and will terminate if not
exercised prior to such event.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. The exercise price of
options under the Directors' Plan will equal the fair market value of the Common
Stock on the date of grant. The Directors' Plan will terminate in January 2006,
unless earlier terminated by the Board. See Note 7 of Notes to Financial
Statements.
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CERTAIN TRANSACTIONS
In June and July 1992, 14 investors purchased an aggregate of 5,000,000
shares of the Company's Series A Preferred Stock at a per share price of $0.50.
Institutional Venture Partners V and Institutional Venture Management V, each
affiliated with Institutional Venture Partners ("IVP"), purchased 2,955,000 and
45,000 shares, respectively, of Series A Preferred Stock. IVP is a 5%
stockholder of the Company, and Reid W. Dennis and L. James Strand, directors of
the Company, are each General Partners of IVP. J. Leighton Read, M.D., Chairman
of the Board of Directors, Chief Executive Officer and Chief Financial Officer
of the Company, and Bernard Roizman, a director of the Company, purchased
500,000 and 100,000 shares, respectively, of Series A Preferred Stock. Albert L.
Zesiger, a member of Zesiger Capital Group LLC, a 5% stockholder of the Company,
purchased 300,000 shares of Series A Preferred Stock. Peter Palese and Richard
Whitley, two of the founders of the Company, purchased 100,000 and 10,000
shares, respectively, of Series A Preferred Stock. The Series A Preferred Stock
purchased by the IVP affiliates and by Drs. Read, Roizman, Palese and Whitley
were purchased on the same terms and conditions as Series A Preferred Stock
purchased by other investors. The Series A Preferred Stock is convertible into
Common Stock of the Company at the rate of one share of Common Stock for each
five shares of Series A Preferred Stock owned.
In September 1993, 34 investors purchased an aggregate of 16,666,667 shares
of the Company's Series B Preferred Stock at a per share price of $0.90.
Institutional Venture Partners V and Institutional Venture Management V
purchased 1,361,667 and 27,767 shares, respectively, of Series B Preferred
Stock. In addition, Institutional Venture Partners V and Institutional Venture
Management V received 1,633,333 shares and 33,333 shares, respectively, of
Series B Preferred Stock upon conversion of promissory notes, bearing interest
at a 4% annualized rate and aggregating $1,500,000, which the Company issued to
these entities in connection with bridge loan financing in June 1993. Entities
affiliated with Accel Partners, a 5% stockholder of the Company, purchased
shares of Series B Preferred Stock as follows: Accel IV L.P., 2,811,111 shares
and Accel Japan L.P., 244,444 shares. Paul H. Klingenstein, a director of the
Company, is a General Partner of Accel Partners. Entities controlled by Zesiger
Capital Group LLC, an affiliate of Abingworth Bioventures SICAV, purchased
2,065,000 shares of Series B Preferred Stock. Abingworth Bioventures, a 5%
stockholder of the Company, purchased 2,777,778 shares of Series B Preferred
Stock. Entities affiliated with Brinson Partners, Inc., a 5% stockholder of the
Company, purchased shares of Series B Preferred Stock as follows: Brinson Trust
Company as trustee of the Brinson MAP Venture Capital Fund III, 311,598 shares,
and Brinson Venture Capital Fund III, 1,910,624 shares. Peter Palese also
purchased 55,556 shares of Series B Preferred Stock. The Series B Preferred
Stock purchased by the affiliates of 5% stockholders of the Company and by Dr.
Palese were purchased on the same terms and conditions as the Series B Preferred
Stock purchased by other investors. The Series B Preferred Stock is convertible
into Common Stock of the Company at the rate of one share of Common Stock for
each five shares of Series B Preferred Stock owned.
In September 1993, the Company issued warrants to purchase 400,000 shares of
its Series B Preferred Stock at an exercise price of $1.25 per share to entities
affiliated with IVP. The warrants expired unexercised in June 1995.
In May 1995, Sang-A Pharm. Co., Ltd., a 5% stockholder of the Company,
purchased 2,941,863 shares of Series C Preferred Stock at $1.35 per share. The
Series C Preferred Stock is convertible into Common Stock of the Company at the
rate of one share of Common Stock for each five shares of Series C Preferred
Stock owned.
From July through November 1995, 66 investors purchased an aggregate of
13,099,707 shares of the Company's Series C Preferred Stock at a per share price
of $1.35. Dr. Bernard Roizman purchased 20,000 shares of Series C Preferred
Stock. Institutional Venture Partners V and Institutional Venture Management V
purchased 653,332 and 13,335 shares, respectively, of Series C Preferred Stock.
Various entities affiliated with Accel Partners purchased shares of Series C
Preferred Stock as follows: Accel Investors '93 L.P., 41,112 shares; Accel IV
L.P., 930,000 shares; Accel Japan L.P., 88,890 shares; Accel Keiretsu L.P.,
20,000 shares; Ellmore C. Patterson Partners, 24,444 shares; and Prosper
Partners, 6,666 shares. Sang-A Pharm. Co., Ltd. purchased 1,187,295 shares of
Series C Preferred Stock. Orefund, whose investment in the Company is controlled
by Zesiger Capital Group LLC, purchased 1,481,400 shares of Series C Preferred
Stock. Abingworth Bioventures SICAV purchased 370,370 shares of Series C
Preferred Stock. Biotech Growth, a 5% stockholder of the
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Company, purchased 3,000,000 shares of Series C Preferred Stock. Entities
affiliated with Brinson Partners, Inc. purchased shares of Series C Preferred
Stock as follows: First National Bank of Chicago, as custodian to the Brinson
MAP Venture Capital Fund III, 36,872 shares, and First National Bank of Chicago,
as custodian to the Brinson Venture Capital Fund III, 226,091 shares. Sally
Whitley, wife of Richard Whitley purchased 10,000 shares of Series C Preferred
Stock. The Series C Preferred shares purchased by the 5% stockholders of the
Company and their affiliates and by Dr. Roizman and Mrs. Whitley were purchased
on the same terms and conditions as Series C Preferred shares purchased by other
investors. The Series C Preferred Stock is convertible into Common Stock of the
Company at the rate of one share of Common Stock for each five shares of Series
C Preferred Stock owned.
In March 1996, Sang-A Pharm Co., Ltd. purchased 136,326 shares of Series C
Preferred Stock, at a price of $1.35 per share. The Series C Preferred Stock is
convertible into Common Stock of the Company at the rate of one share of Common
Stock for each five shares of Series C Preferred Stock owned.
Vera Kallmeyer, Vice President, Corporate Development of the Company, is a
founder, senior advisor, and 15% shareholder of Pacific Futures (formerly
Pacific Century), a Hong Kong-based investment advisory business. Pacific
Futures received a sales commission on the sale of Series C Preferred Stock to
Sang-A, in an aggregate amount of $334,462 during 1995. Dr. Kallmeyer received
no portion of such sales commission, and is currently receiving no salary from
Pacific Futures.
Pursuant to certain offer letters to certain of its senior officers, the
Company made loans to these officers to facilitate home purchases and certain
other commitments. As of June 1, 1996, the amounts outstanding for principal and
interest on these loans was $40,388 to Martin L. Bryant and $40,388 to Victor A.
Jegede. See "Management -- Employment Contracts."
In January 1996, the Company extended loans to certain senior officers to
facilitate the early exercise of options to purchase shares of Common Stock,
including loans of $70,000 to Dr. Patzer; $65,000 to Dr. Bryant; $65,000 to Dr.
Jegede; $70,000 to Dr. Cano; and $40,000 to Dr. Kallmeyer. The loans bear simple
interest at a rate of 5.73% per year. Principal on each loan is due on the
earlier of 50 months from the date of the underlying option grant or the date of
employment termination.
See also "Management -- Employment Contracts."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 1, 1996 held by (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and Named Executive
Officer of the Company, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law. Except as otherwise noted below, the
address of each person listed below is c/o the Company, 297 North Bernardo
Avenue, Mountain View, California 94043.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
OWNED (1)
SHARES -------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ---------------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Institutional Venture Partners (2) ................ 1,344,553 15.02% 10.94%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Sang-A Pharm. Co., Ltd. (3) ................................................ 853,096 9.53% 9.66%
640-9 Deung Chon Dung
Kangseo-Ku
Seoul, South Korea
Entities affiliated with Accel Partners (4) ................................ 833,330 9.31% 6.78%
One Embarcadero Center, Suite 3820
San Francisco, CA 94111
Entities controlled by Zesiger Capital Group LLC (5) ....................... 769,280 8.59% 6.26%
320 Park Avenue
New York, NY 10022
Abingworth Bioventures SICAV ............................................... 629,629 7.03% 5.12%
26 St. James's Street
London SW1A 1HA England
Biotech Growth ............................................................. 600,000 6.70% 4.88%
Bellevue Asset Management
Grundstrasse 12
CH-6343 Rotkreuz
Switzerland
Entities affiliated with Brinson Partners, Inc. (6) ........................ 497,035 5.55% 4.05%
209 South LaSalle Street, Suite 114
Chicago, IL 60604-1295
J. Leighton Read, M.D. (7).................................................. 395,000 4.41% 3.22%
Martin L. Bryant, M.D., Ph.D. (8)........................................... 34,640 * *
Victor Jegede, Ph.D. (9).................................................... 34,640 * *
Vera Kallmeyer, M.D., Ph.D. (10)............................................ 45,673 * *
Eric J. Patzer, Ph.D. (11).................................................. 40,000 * *
Reid W. Dennis (2).......................................................... 1,344,553 15.02% 10.94%
Paul H. Klingenstein (4).................................................... 833,330 9.31% 6.78%
Bernard Roizman, Sc.D. (12)................................................. 175,200 1.96% 1.43%
Jane E. Shaw, Ph.D. (13).................................................... 4,000 * *
L. James Strand, M.D. (14).................................................. 1,354,553 15.12% 11.02%
All directors and executive officers as a group
(11 persons) (15)......................................................... 2,917,036 32.38% 23.63%
</TABLE>
- -------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
the Company's Common
Stock.
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(1) Calculated as if all outstanding shares of Preferred Stock have been
converted into Common Stock at a ratio of five shares of Preferred Stock for
one share of Common Stock. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Beneficial
ownership also includes shares of stock subject to options and warrants
currently exercisable or convertible, or exercisable or convertible within
60 days of the date of this table. Percentage of beneficial ownership is
based on 8,952,657 shares of Common Stock outstanding as of June 1, 1996,
and 12,285,990 shares of Common Stock outstanding after completion of this
offering and the concurrent sale of the Sang-A Shares.
(2) Includes 1,320,666 shares held by Institutional Venture Partners V and
23,887 shares held by Institutional Venture Management V, of which Mr.
Dennis, a Director of the Company is a general partner. Institutional
Venture Management V is the general partner of Institutional Venture
Partners V. Mr. Dennis disclaims beneficial ownership of the shares held by
Institutional Venture Partners V and Institutional Venture Management V,
except to the extent of his pecuniary interests therein.
(3) Percentage of shares beneficially owned after offering includes the
estimated 333,333 shares Sang-A intends to purchase concurrent with the
offering.
(4) Includes 697,500 shares held by Accel IV, L.P., 66,666 shares held by Accel
Japan, L.P., 30,833 shares held by Accel Investors '93, L.P., 18,332 shares
held by Ellmore C. Patterson Partners, 15,000 shares held by Accel Keiretsu,
L.P. and 4,999 shares held by Prosper Partners. Mr. Klingenstein, a Director
of the Company is a general partner of Accel Partners. Mr. Klingenstein
disclaims beneficial ownership of the shares held by Accel IV, L.P., Accel
Japan, L.P., Accel Investors '93, L.P., Ellmore C. Patterson Partners,
Prosper Partners and Accel Keiretsu, L.P., except to the extent of his
pecuniary interests therein.
(5) Includes 8,000 shares held by A. Carey Zesiger Revocable Trust, 22,000
shares held by Atwell & Co., 11,000 shares held by Batrus & Co., 11,000
shares held by Booth & Co., 11,000 shares held by Calmont & Co., 100,000
shares held by Comply & Co., 33,000 shares held by Daly & Co., 28,000 shares
held by Heil & Co., 17,000 shares held by J.C. Orr & Co., 90,000 shares held
by Kane & Co., 17,000 shares held by Domenic Mizio, 296,280 shares held by
Orefund, 28,000 shares held by Sigler & Co., 60,000 shares held by Albert L.
Zesiger, 7,000 shares held by Alexa L. Zesiger, 22,000 shares held by Barry
Ramsay Zesiger and 8,000 shares held by Nicola L. Zesiger. Zesiger Capital
Group LLC disclaims beneficial ownership of all such shares.
(6) Includes 427,342 shares held by Brinson Venture Capital Fund III, L.P. and
69,693 shares held by Brinson Trust Company as Trustee of The Brinson MAP
Venture Capital Fund III.
(7) Includes 40,000 shares Dr. Read acquired pursuant to the exercise of stock
options. Also includes an aggregate of 110,000 shares acquired pursuant to
an early exercise of stock options, of which an aggregate of 76,400 will be
subject to repurchase by the Company as of July 31, 1996. Also includes an
aggregate of 32,000 shares held by The Travis Read 1993 Trust and The Haley
Read 1993 Trust (the "Trusts") of which Robert Fitzwilson is the trustee.
Dr. Read disclaims beneficial ownership of the shares held by the Trusts.
(8) Includes 26,000 shares acquired pursuant to an early exercise of stock
options, of which 22,880 will be subject to repurchase by the Company as of
July 31, 1996. Also includes 8,640 shares Dr. Bryant has the right to
acquire pursuant to options exercisable as of July 31, 1996.
(9) Includes 26,000 shares acquired pursuant to an early exercise of stock
options, of which 22,880 will be subject to repurchase by the Company as of
July 31, 1996. Also includes 8,640 shares Dr. Jegede has the right to
acquire pursuant to options exercisable as of July 31, 1996.
(10) Includes 16,000 shares acquired pursuant to an early exercise of stock
options, of which 14,080 will be subject to repurchase by the Company as of
July 31, 1996. Also includes 29,673 shares Dr. Kallmeyer has the right to
acquire pursuant to options exercisable as of July 31, 1996.
(11) Includes 40,000 shares acquired pursuant to an early exercise of stock
options, all of which are subject to repurchase by the Company.
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(12) Includes 12,000 shares which are subject to repurchase by the Company and
1,200 shares Dr. Roizman has the right to acquire pursuant to options
exercisable as of July 31, 1996.
(13) Includes 4,000 shares Dr. Shaw has the right to acquire pursuant to options
exercisable as of July 31, 1996.
(14) Includes 1,320,666 shares held by Institutional Venture Partners V ("IVP
V"), of which Dr. Strand is a limited partner, and 23,887 shares held by
Insitutional Venture Management V, which is the general partner of IVP V,
and 5,000 shares Dr. Strand has the right to acquire pursuant to options
exercisable as of July 31, 1996. Dr. Strand disclaims beneficial ownership
of the shares held by IVP V and Institutional Venture Management V.
(15) Includes 2,177,883 shares held by entities affiliated with certain
directors of the Company as described in footnotes 2 and 3 above and 57,153
shares subject to options exercisable as of July 31, 1996.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws to be
effective upon completion of this offering is a summary and is qualified in its
entirety by the provisions of the Certificate of Incorporation and Bylaws, which
have been filed as exhibits to the Company's Registration Statement, of which
this Prospectus is a part.
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, par value $0.001 and
5,000,000 shares of Preferred Stock, par value $0.001.
COMMON STOCK
Upon completion of this offering, there will be 12,285,990 shares of Common
Stock outstanding (plus up to 38,888 shares that may be issued upon exercise of
outstanding warrants). The holders of Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders. The holders of Common Stock are not entitled to cumulative voting
rights with respect to the election of directors, and as a consequence, minority
stockholders will not be able to elect directors on the basis of their votes
alone.
Subject to preferences that may be applicable to any then outstanding shares
of Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefore. See "Dividend Policy." In the event of liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any then outstanding shares of Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding Preferred Stock of the
Company will be converted into Common Stock. The Board of Directors will have
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by the
stockholders. The issuance of Preferred Stock could adversely affect the voting
power of holders of Common Stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation may have the effect of
delaying, deferring or preventing a change in control of the Company, which
could have a depressive effect on the market price of the Company's Common
Stock. The Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
In February 1993, the Company entered into an agreement with The Mount Sinai
School of Medicine of the City University of New York ("Mount Sinai"), under
which Mount Sinai transferred to the Company rights to certain patents, patent
applications, and associated know-how and other technical information. Mount
Sinai also granted the Company (i) an option to acquire any improvements to the
inventions disclosed in the licensed patents and patent applications thereafter
developed by Mount Sinai and (ii) a right of first negotiation for a license or
assignment to certain related technology. In connection with these agreements,
the Company issued to Mount Sinai warrants (the "Mount Sinai Warrants") to
purchase, in the aggregate, 225,000 shares of the Company's Series A Preferred
Stock (45,000 shares of Common Stock upon conversion of the Series A Preferred
Stock). Each Mount Sinai Warrant is exercisable for a period of five years
commencing upon the occurrence of specified milestone events, which accelerate
upon the effectiveness of this offering. Warrants to purchase 45,000 of the
shares are exercisable at a purchase price of $0.90 per share (convertible into
9,000 shares of Common Stock) issuable upon exercise of the warrants. Warrants
to purchase 148,750 of the shares will become exercisable upon the effective
date of this offering, at a purchase price per share of Common Stock receivable
upon
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<PAGE>
conversion of the Series A Preferred Stock issuable upon exercise of the
warrants equal to 125% of the per share price of this offering. Warrants to
purchase the remaining 31,250 shares will be canceled on the effective date of
this offering. See "Business -- Collaborative Agreements -- The Mount Sinai
School of Medicine of the City University of New York."
In connection with an agreement entered into in February 1995 with the
University of Michigan ("Michigan"), under which Michigan transferred to the
Company certain intellectual property rights and technology (the "Michigan
Technology"), the Company agreed to issue to Michigan a warrant (the "Michigan
Warrant") to purchase shares of its Common Stock upon the first commercial sale
of a product incorporating the Michigan Technology, for a number of shares equal
to 1.25% of the total issued and outstanding shares of the Company's Common
Stock as of the date of such first commercial sale (excluding shares of the
Company's Common Stock issued by the Company in connection with its acquisition
of another company, in connection with any corporate partnering transaction,
issued in connection with other technology transfers not involving the Michigan
Technology, or unvested employee or director option shares), at a per share
exercise price equal to 125% of the price of this Offering. See "Business --
Collaborative Agreements -- University of Michigan."
In connection with a private placement of Series C Preferred Stock, the
Company issued to the placement agent a warrant to purchase 352,536 shares of
its Series C Preferred Stock at an exercise price of $1.62 per share
(convertible into 70,507 shares of Common Stock), exercisable at any time
through November 9, 2000.
REGISTRATION RIGHTS
The holders (or their permitted transferees) ("Holders") of approximately
7,833,634 shares of Common Stock and warrants to purchase approximately 148,145
shares of Common Stock are entitled to certain rights with respect to the
registration of such shares under the Securities Act. If the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders, the Holders are entitled
to notice of the registration and are entitled to include, at the Company's
expense, such shares therein. In addition, certain of the Holders may require
the Company at its expense on not more than two occasions to file a Registration
Statement under the Securities Act, with respect to their shares of Common
Stock, and the Company is required to use its best efforts to effect the
registration, subject to certain conditions and limitations. Further, the
Holders may require the Company at its expense to register their shares on Form
S-3 when such form becomes available to the Company, subject to certain
conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Upon completion of the Company's reincorporation in Delaware, the Company
will be subject to the provisions of Section 203 of the Delaware General
Corporation Law (the "Delaware Law"), an anti-takeover law. In general, the
statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
Upon completion of the Company's reincorporation in Delaware, the Company's
Certificate of Incorporation will provide that each director will serve for a
three-year term, with approximately one-third of the directors to be elected
annually. Candidates for director may be nominated only by the Board of
Directors or by a stockholder who gives written notice to the Company at least
20 days before the annual meeting. The Company may have the number of directors
as determined from time to time to pursuant to a resolution of the Board, which
currently consists of six members. Between stockholder meetings, the Board may
appoint new directors to fill vacancies or newly created directorships. The
Certificate will not provide for cumulative voting at stockholder meetings for
election of directors. As a result, stockholders controlling more than 50% of
the outstanding Common Stock can elect the entire Board of Directors, while
stockholders controlling 49% of the outstanding Common Stock may not be able to
elect any directors. A director may be removed from office only for cause by the
affirmative vote of a majority of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors.
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Upon completion of the Company's reincorporation in Delaware, the Company's
Certificate of Incorporation will require that any action required or permitted
to be taken by stockholders of the Company must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing. The Company's Certificate of Incorporation also provides that the
authorized number of directors may be changed only by resolution of the Board of
Directors. See "Management -- Directors and Executive Officers." Delaware Law
and these charter provisions may have the effect of deterring hostile takeovers
or delaying changes in control or management of the Company, which could have a
depressive effect on the market price of the Company's Common Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Upon completion of the Company's reincorporation in Delaware, the Company's
Certificate of Incorporation will contain certain provisions permitted under
Delaware Law relating to the liability of directors. These provisions eliminate
a director's personal liability for monetary damages resulting from a breach of
fiduciary duty, except in certain circumstances involving certain wrongful acts,
such as (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derives an improper personal benefit. These provisions do not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief, such as an injunction or rescission, in the event of a breach of
director's fiduciary duty. These provisions will not alter a directors liability
under federal securities laws. The Company's Certificate of Incorporation also
contains provisions indemnifying the directors and officers of the Company to
the fullest extent permitted by Delaware General Corporation Law. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is The First National
Bank of Boston.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the Common
Stock of the Company. Further sales of substantial amounts of Common Stock in
the open market may adversely affect the market price of the Common Stock
offered hereby.
Upon completion of this offering, based on the number of shares outstanding
as of June 1, 1996, the Company will have outstanding an aggregate of 12,285,990
shares of Common Stock assuming (i) the issuance by the Company of 3,000,000
shares of Common Stock offered hereby, (ii) the issuance of the 333,333 Sang-A
Shares, (iii) no issuance of 148,145 shares of Common Stock relating to
outstanding warrants to purchase Common Stock, (iv) no exercise of outstanding
options exercisable to purchase 643,480 shares of Common Stock, and (v) no
exercise of the Underwriters' over-allotment option to purchase 450,000 shares
of Common Stock. Of these shares, 3,000,000 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, except for shares held by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (whose sales would be subject to
certain limitations and restrictions described below) and the regulations
promulgated thereunder.
The remaining 8,952,657 shares held by officers, directors, employees,
consultants and other shareholders of the Company were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are "restricted" securities within the meaning of Rule 144 under the
Securities Act. Approximately 149,329 of these shares of Common Stock will be
eligible for sale in the public market upon the effective date of the
Registration Statement of which this Prospectus is a part (the "Effective Date")
in reliance on Rule 144(k) under the Securities Act. Beginning 90 days after the
Effective Date, an additional 37,395 of these shares will become eligible for
sale subject to the provisions of Rule 144 and Rule 701 of the Securities Act.
Beginning 180 days after the Effective Date, an additional 5,311,881 of these
shares will become eligible for sale subject to the provisions of Rule 144 or
Rule 701 upon the expiration of agreements not to sell such shares. In addition,
90 days after the Effective Date, 283,160 shares subject to vested options will
be available for sale, subject to compliance with Rule 701, and an additional
33,726 shares subject to additional vested options will be available for sale
upon the expiration of the Lock-Up Period described below.
Each officer, director and certain stockholders of the Company have agreed
with the representatives of the Underwriters for a period of 180 days after the
effective date of this Prospectus (the "Lock-Up Period"), subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of Common Stock,
any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock owned as
of the date of this Prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of Robertson, Stephens & Company.
However, Robertson, Stephens & Company may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements. In addition, the Company has agreed that during the Lock-Up
Period, the Company will not, without the prior written consent of Robertson,
Stephens & Company, subject to certain exceptions, issue, sell, contract to
sell, or otherwise dispose of, any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into, exercisable for or exchangeable for shares of Common Stock.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month period
commencing 90 days after the Effective Date, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
(approximately 122,860 shares outstanding immediately after this offering) or
(ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale, subject to the filing of a Form 144 with
respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least three years, would be entitled
to sell such shares under Rule 144(k) without regard to the
66
<PAGE>
requirements described above. To the extent that shares were acquired from an
affiliate of the Company, such stockholder's holding period for the purpose of
effecting a sale under Rule 144 commences on the date of transfer from the
affiliate.
Any employee, officer or director of or consultant to the Company who
purchased shares or was granted options to purchase shares pursuant to a written
compensatory plan or contract ("Rule 701 Shares") is entitled to rely on the
resale provisions of Rule 701. Rule 701 permits non-affiliates to sell their
Rule 701 Shares without having to comply with the public-information,
holding-period, volume-limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 Shares without having to comply with the
holding period restrictions of Rule 144, in each case commencing 90 days after
the Effective Date. However, all officers and directors and certain other
stockholders have agreed not to sell or otherwise dispose of Common Stock of the
Company during the Lock-Up Period without the prior written consent of
Robertson, Stephens & Company. See "Underwriting."
The Company intends to file a registration statement under the Securities
Act to register shares of Common Stock reserved for issuance under the Option
Plan, thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act. Such registration statement
will become effective immediately upon filing.
67
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives
Robertson, Stephens & Company LLC, Bear, Stearns & Co. Inc., and Hambrecht &
Quist LLC (the "Representatives"), have severally agreed, subject to the terms
and conditions of the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock set forth opposite their names below. The
Underwriters are committed to purchase and pay for all such shares, if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------- ----------
<S> <C>
Robertson, Stephens & Company LLC................................
Bear, Stearns & Co. Inc..........................................
Hambrecht & Quist LLC............................................
----------
Total........................................................ 3,000,000
----------
----------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $ per share, of which
$ may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the Representatives. No such reduction shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the same price per share as the Company
will receive for the 3,000,000 shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of the
3,000,000 shares offered hereby. If purchased, such additional shares will be
sold by the Underwriters on the same terms as those on which the 3,000,000
shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Each executive officer and director and certain other shareholders of the
Company have agreed with the Representatives for the Lock-Up Period not to offer
to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of Common Stock, any options or warrants
to purchase any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock owned as of the date of this Prospectus
or thereafter acquired directly by such holders or with respect to which they
have or hereinafter acquire the power of disposition, without the prior written
consent of Robertson, Stephens & Company LLC. However, Robertson, Stephens &
Company LLC may, in its sole discretion at any time or from time to time,
without notice, release all or any portion of the securities subject to the
lock-up agreements. Approximately 5,311,881 of such shares will be eligible for
immediate public sale following expiration of the Lock-Up Period, subject to the
provisions of Rule 144. In addition, the Company has agreed that during the
Lock-Up Period, it will not, without the prior written consent of Robertson,
Stephens & Company LLC, issue, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities convertible into, exercisable for or exchangeable
for shares of Common Stock other than the issuance of Common Stock upon the
exercise of outstanding options and under the existing employee stock purchase
plan and the Company's issuance of options under existing employee stock option
plans. See "Shares Eligible For Future Sale."
68
<PAGE>
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority in excess of 5% of the number of shares of
Common Stock offered hereby.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby was determined through negotiations among the Company and
the Representatives. Among the factors considered in such negotiations were
prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential of
the Company, the present state of the Company's development and other factors
deemed relevant.
In addition to the 3,000,000 shares of Common Stock to be sold by the
Company in this offering, concurrent with this offering the Company intends to
sell in a private placement a number of shares of Common Stock equal to 10% of
the aggregate number of shares sold in this offering and in the private
placement at the initial public offering price per share (333,333 shares
assuming a purchase price of $12.00 per share); provided however, that the total
number of shares to be purchased by Sang-A will not exceed $5,000,000 divided by
the initial public offering price. Such sale will be effected pursuant to a
separate agreement with Sang-A and not pursuant to the Underwriting Agreement.
An individual associated with Bear, Stearns & Co. Inc. beneficially owns
10,000 shares of the Company's Common Stock.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto,
California. GC&H Investments, an entity affiliated with Cooley Godward Castro
Huddleson & Tatum, beneficially owns 22,000 shares of the Company's Common
Stock. Certain legal matters will be passed upon for the Underwriters by Wilson
Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
The financial statements of Aviron as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report theron appearing elsewhere
herein and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
such Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549, the
New York Regional Office located at 7 World Trade Center, 13th Floor, New York,
New York 10048, and the Chicago Regional Office located at Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511, and copies of all
or any part thereof may be obtained from the Public Reference Branch of the
Commission upon the payment of certain fees prescribed by the Commission.
69
<PAGE>
AVIRON
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Audited Financial Statements
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statement of Stockholders' Equity......................................... F-5
Statements of Cash Flows.................................................. F-7
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Aviron
We have audited the accompanying balance sheets of Aviron as of December 31,
1994 and 1995, and the related statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aviron at December 31, 1994
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 26, 1996,
except as to the first paragraph of Note 1 and
Note 10, for which the date is May 30, 1996
F-2
<PAGE>
AVIRON
BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
MARCH 31, UNAUDITED
1996 PRO FORMA
----------- STOCKHOLDERS'
EQUITY AT
(UNAUDITED) MARCH 31,
1996
-----------
(NOTE 10)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 952 $ 11,532 $ 10,000
Short-term investments.................................. 5,497 6,287 4,494
Prepaid expenses and other current assets............... 105 679 873
--------- --------- -----------
Total current assets...................................... 6,554 18,498 15,367
Property and equipment, net............................... 1,216 1,275 1,816
Deposits and other assets................................. 19 105 92
--------- --------- -----------
Total assets............................................ $ 7,789 $ 19,878 $ 17,275
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 101 $ 312 $ 703
Accrued compensation.................................... 68 130 149
Accrued clinical trial costs............................ -- 545 470
Accrued expenses and other liabilities.................. 201 108 319
Deferred revenue........................................ -- 208 437
Current portion of capital lease obligations............ 307 420 485
--------- --------- -----------
Total current liabilities................................. 677 1,723 2,563
Capital lease obligations, noncurrent..................... 750 618 545
Commitments
Stockholders' equity:
Preferred Stock, no par value; 43,000,000 shares
authorized, issuable in series; 21,666,667, 39,031,971
and 39,168,297, convertible preferred shares issued and
outstanding at December 31, 1994 and 1995 and March 31,
1996 respectively, aggregate liquidation preference of
$40,347,481 and $40,531,520 at December 31, 1995 and
March 31, 1996, respectively (pro forma at March 31,
1996 -- $0.001 par value, 5,000,000 shares authorized,
none issued and outstanding)........................... 17,406 39,844 40,028 $ --
Common Stock, no par value; 53,000,000 shares
authorized; 695,414, 758,306 and 1,040,822 shares
issued and outstanding at December 31, 1994 and 1995,
and March 31, 1996 respectively (pro forma at March 31,
1996 -- $0.001 par value 30,000,000 shares authorized,
8,874,456 shares issued and outstanding)............... 16 317 1,579 9
Additional paid-in capital.............................. -- -- -- 41,598
Notes receivable from stockholders...................... -- -- (310) (310)
Deferred compensation................................... -- (180) (938) (938)
Accumulated deficit..................................... (11,060) (22,444) (26,192) (26,192)
--------- --------- -----------
Total stockholders' equity................................ 6,362 17,537 14,167 14,167
--------- --------- ----------- -----------
Total liabilities and stockholders' equity.............. $ 7,789 $ 19,878 $ 17,275 $ 17,275
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
AVIRON
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License revenue..................................... $ -- $ -- $ 1,500 $ -- $ --
Contract revenue.................................... -- -- 207 -- 188
---------- ---------- ---------- ---------- ----------
Total revenues........................................ -- -- 1,707 -- 188
Operating expenses:
Research and development............................ 2,073 4,216 10,220 3,088 3,044
General and administrative.......................... 1,874 2,493 3,252 701 1,063
---------- ---------- ---------- ---------- ----------
Total operating expenses.............................. 3,947 6,709 13,472 3,789 4,107
---------- ---------- ---------- ---------- ----------
Loss from operations.................................. (3,947) (6,709) (11,765) (3,789) (3,919)
Other income (expense):
Interest income..................................... 175 306 520 71 220
Interest expense.................................... -- (99) (158) (39) (37)
---------- ---------- ---------- ---------- ----------
Total other income, net............................... 175 207 362 32 183
---------- ---------- ---------- ---------- ----------
Net loss.............................................. $ (3,772) $ (6,502) $ (11,403) $ (3,757) $ (3,736)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Pro forma net loss per share.......................... $ (0.56) $ (0.73) $ (1.24) $ (0.41) $ (0.41)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Shares used in computing pro forma net loss per
share................................................ 6,696,454 8,948,240 9,182,642 9,061,525 9,223,033
</TABLE>
See accompanying notes.
F-4
<PAGE>
AVIRON
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------------- ---------------------- NOTES DEFERRED
SHARES AMOUNT SHARES AMOUNT RECEIVABLE COMPENSATION
--------- ----------- --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992......... 5,000,000 $ 2,471 648,000 $ 3 -- $ --
Issuance of Series B Convertible
Preferred Stock at $0.90 per share
for cash and conversion of notes
payable in September 1993, net of
issuance costs of $65.............. 16,666,667 14,935 -- -- -- --
Issuance of Common Stock at $0.25
per share in April 1993 for certain
technology and patent rights....... -- -- 35,000 9 -- --
Exercise of stock options at $0.25
per share for cash................. -- -- 2,550 1 -- --
Net loss............................ -- -- -- -- -- --
--------- ----------- --------- ----------- ----- -----
Balance at December 31, 1993.......... 21,666,667 17,406 685,550 13 -- --
Exercise of stock options at $0.25
to $0.50 per share for cash........ -- -- 9,864 3 -- --
Net unrealized loss on available-
for-sale investments............... -- -- -- -- -- --
Net loss............................ -- -- -- -- -- --
--------- ----------- --------- ----------- ----- -----
Balance at December 31, 1994.......... 21,666,667 17,406 695,414 16 -- --
Issuance of Series B Convertible
Preferred Stock at $1.20 per share
in February 1995 for certain
in-process technology.............. 1,323,734 1,588 -- -- -- --
Issuance of Series C Convertible
Preferred Stock at $1.35 per share
for cash in June through November
1995, net of issuance costs of
$807............................... 16,041,570 20,850 -- -- -- --
Exercise of stock options at $0.25
to $0.50 per share for cash........ -- -- 62,892 31 -- --
Deferred compensation related to the
grant of certain stock options..... -- -- -- 270 -- (270)
Amortization of deferred
compensation....................... -- -- -- -- -- 90
Change in net unrealized loss on
available-for-sale investments..... -- -- -- -- -- --
Net loss............................ -- -- -- -- -- --
--------- ----------- --------- ----------- ----- -----
Balance at December 31, 1995.......... 39,031,971 $ 39,844 758,306 $ 317 -- $ (180)
Issuance of Series C Convertible
Preferred Stock at $1.35 per share
for cash in March 1996
(unaudited)........................ 136,326 184 -- -- -- --
Exercise of stock options at $0.25
to $2.50 per share for cash
(unaudited)........................ -- -- 114,516 168 -- --
Exercise of stock options at $0.50
to $2.50 per share for notes
receivable (unaudited)............. -- -- 168,000 310 (310) --
Deferred compensation related to the
grant of certain stock options
(unaudited)........................ -- -- -- 784 -- (784)
Amortization of deferred
compensation (unaudited)........... -- -- -- -- -- 26
Change in net unrealized gain on
available-for-sale Investments
(unaudited)........................ -- -- -- -- -- --
Net loss (unaudited)................ -- -- -- -- -- --
--------- ----------- --------- ----------- ----- -----
Balance at March 31, 1996
(unaudited).......................... 39,168,297 $ 40,028 1,040,822 $ 1,579 $ (310) $ (938)
--------- ----------- --------- ----------- ----- -----
--------- ----------- --------- ----------- ----- -----
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------- -------------
<S> <C> <C>
Balances at December 31, 1992......... $ (753) $ 1,721
Issuance of Series B Convertible
Preferred Stock at $0.90 per share
for cash and conversion of notes
payable in September 1993, net of
issuance costs of $65.............. -- 14,935
Issuance of Common Stock at $0.25
per share in April 1993 for certain
technology and patent rights....... -- 9
Exercise of stock options at $0.25
per share for cash................. -- 1
Net loss............................ (3,772) (3,772)
------------- -------------
Balance at December 31, 1993.......... (4,525) 12,894
Exercise of stock options at $0.25
to $0.50 per share for cash........ -- 3
Net unrealized loss on available-
for-sale investments............... (33) (33)
Net loss............................ (6,502) (6,502)
------------- -------------
Balance at December 31, 1994.......... (11,060) 6,362
Issuance of Series B Convertible
Preferred Stock at $1.20 per share
in February 1995 for certain
in-process technology.............. -- 1,588
Issuance of Series C Convertible
Preferred Stock at $1.35 per share
for cash in June through November
1995, net of issuance costs of
$807............................... -- 20,850
Exercise of stock options at $0.25
to $0.50 per share for cash........ -- 31
Deferred compensation related to the
grant of certain stock options..... -- --
Amortization of deferred
compensation....................... -- 90
Change in net unrealized loss on
available-for-sale investments..... 19 19
Net loss............................ (11,403) (11,403)
------------- -------------
Balance at December 31, 1995.......... $ (22,444) $ 17,537
Issuance of Series C Convertible
Preferred Stock at $1.35 per share
for cash in March 1996
(unaudited)........................ -- 184
Exercise of stock options at $0.25
to $2.50 per share for cash
(unaudited)........................ -- 168
Exercise of stock options at $0.50
to $2.50 per share for notes
receivable (unaudited)............. -- --
Deferred compensation related to the
grant of certain stock options
(unaudited)........................ -- --
Amortization of deferred
compensation (unaudited)........... -- 26
Change in net unrealized gain on
available-for-sale Investments
(unaudited)........................ (12) (12)
Net loss (unaudited)................ (3,736) (3,736)
------------- -------------
Balance at March 31, 1996
(unaudited).......................... $ (26,192) $ 14,167
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
AVIRON
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................... $ (3,772) $ (6,502) $ (11,403) $ (3,757) $ (3,736)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................ 223 416 544 127 110
Acquired technology and patent rights.................... 9 -- 1,588 1,588 --
Amortization of deferred compensation.................... -- -- 90 -- 26
Changes in assets and liabilities:
Prepaid expenses and other current assets.............. (16) (46) (574) (66) (194)
Deposits and other assets.............................. (1) (4) (86) -- 13
Accounts payable....................................... (34) (39) 211 61 391
Accrued expenses and other liabilities................. 168 96 514 (19) 155
Deferred revenue....................................... -- -- 208 -- 229
--------- --------- --------- --------- ---------
Net cash used in operating activities...................... (3,423) (6,079) (8,908) (2,066) (3,006)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments........................ (7,854) (9,755) (9,493) (441) (3,147)
Maturities of short-term investments....................... 1,815 11,579 8,722 4,257 4,928
Expenditures for property and equipment.................... (593) (260) (238) (75) (545)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities........ (6,632) 1,564 (1,009) 3,741 1,236
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital lease line of credit................. -- 620 -- -- --
Principal payments on capital lease obligation............. -- (212) (384) (85) (114)
Proceeds from notes payable................................ 1,500 -- -- -- --
Cash proceeds from issuance of:
Series B Convertible Preferred Stock..................... 13,434 -- -- -- --
Series C Convertible Preferred Stock..................... -- -- 20,850 -- 184
Common Stock............................................. 1 3 31 1 168
--------- --------- --------- --------- ---------
Cash flows provided by financing activities................ 14,935 411 20,497 (84) 238
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... 4,880 (4,104) 10,580 1,591 (1,532)
Cash and cash equivalents at beginning of year............. 176 5,056 952 952 11,532
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year................... $ 5,056 $ 952 $ 11,532 $ 2,543 $ 10,000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Issuance of Common Stock and Preferred Stock for certain
technology and patent rights.............................. $ 9 $ -- $ 1,588 $ 1,588 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Conversion of notes payable to Series B Preferred Stock.... $ 1,500 $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Equipment acquired under line of credit.................... $ -- $ 648 $ 365 $ 114 $ 106
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Deferred compensation related to the grant of certain stock
options................................................... $ -- $ -- $ 270 $ -- $ 784
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Aviron (the "Company") was incorporated in the State of California on April
15, 1992 and will be reincorporated in the State of Delaware in June, 1996. The
Company was organized to develop and commercialize cost-effective forms of
disease prevention and treatment based on live virus vaccines. Prior to October
1995, the Company was considered to be in the development stage.
The Company anticipates working on a number of long-term development
projects which will involve experimental and unproven technology. The projects
may require many years and substantial expenditures to complete, and which may
ultimately be unsuccessful. Therefore, the Company will need to obtain
additional funds from outside sources to continue its research and development
activities, fund operating expenses, pursue regulatory approvals and build
production, sales and marketing capabilities, as necessary. Management believes
it has sufficient capital to achieve planned business objectives including
supporting preclinical development and clinical testing, through at least 1996.
INTERIM FINANCIAL INFORMATION
The financial information at March 31, 1996, for the three months ended
March 31, 1995 and 1996 is unaudited but includes all adjustments (consisting
only of normal recurring adjustments) which the Company considers necessary for
a fair presentation of the financial position at such date and of the operating
results and cash flows for those periods. Results of the 1996 period are not
necessarily indicative of results expected for the entire year.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents include
$11,831,000 and $9,667,000 in money market funds at December 31, 1995 and March
31, 1996, respectively.
SHORT-TERM INVESTMENTS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115") for investments held as of or acquired after
January 1, 1994.
The Company's entire short-term investment portfolio is currently classified
as available-for-sale and is carried at fair value based on quoted market prices
with the unrealized gains and losses included in stockholders' equity. The
amortized cost of debt securities classified as available-for-sale is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains or losses and
declines in value judged to be other-than-temporary are included in other
income. The cost of securities sold is based on the specific identification
method. The Company has not experienced any significant realized gains or losses
on its investments.
F-7
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the respective assets
which range from three to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of their useful lives or the term of the
lease.
REVENUE RECOGNITION
Collaborative research revenue earned is based on research expenses
incurred. Amounts received in advance of services to be performed are recorded
as deferred revenue until the related expenses are incurred. Milestone payments
are recognized as revenue in the period earned.
STOCK COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The
Statement is effective for Aviron beginning in 1996. Under SFAS No. 123,
stock-based compensation expense to employees is measured using either the
intrinsic-value method as prescribed by Accounting Principle Board Opinion No.
25 or the fair-value method described in SFAS No. 123. Companies choosing the
intrinsic-value method will be required to disclose but not actually record the
pro forma impact of the fair-value method on net income and earnings per share.
The Company plans to adopt the SFAS No. 123 in 1996 using the intrinsic-value
method for stock awards to employees. There will be no effect of adopting the
SFAS No. 123 on the Company's financial position or results of operations.
RECENT PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires the Company to review for
impairment of long-lived assets. SFAS 121 will become effective for the
Company's year ending December 31, 1996. The Company has studied the
implications of SFAS 121 and, based on its initial evaluation, does not expect
it to have a material impact on the Company's financial condition or results of
operations.
NET LOSS PER SHARE
Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from stock options, convertible preferred stock and warrants are excluded from
the computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued during the period beginning 12 months prior to the
initial filing of the proposed public offering at prices substantially below the
assumed public offering price have been included in the calculation as if they
were outstanding for all periods presented (using the treasury stock method and
the assumed public offering price for stock options and warrants and the
if-converted method for convertible preferred stock).
F-8
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Historical net loss per share information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net loss per share...................... $ (0.82) $ (1.41) $ (2.47) $ (0.81) $ (0.81)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Shares used in computing net loss per
share.................................. 4,600,440 4,614,907 4,624,721 4,624,078 4,624,953
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares not included
above that will automatically convert upon completion of the Company's initial
public offering (using the if-converted method) from the original date of
issuance.
2. LICENSE AGREEMENTS
ARCH DEVELOPMENT CORPORATION
On July 1, 1992, the Company entered into an exclusive license agreement
with ARCH Development Corporation ("ARCH") to acquire the rights to use or
sublicense certain technology and make, use or sell certain licensed products.
The agreement calls for the Company to make certain payments to ARCH totaling as
much as $2.6 million as certain milestones are met. No benchmark payments were
made or were due through 1995. If commercialization is achieved, the Company
will be required to pay ARCH royalties based on net sales of the licensed
products. Further, if the Company were to sublicense the technology, it would be
required to pay ARCH royalties on net sales of the sublicensee and, under
certain circumstances, up to 50% of the license fee paid by the sublicensee. In
conjunction with this license agreement, the Company sold 40,000 shares of
Common Stock to ARCH at $0.005 per share in 1992. Subsequent to this agreement,
affiliates of ARCH purchased 700,000, 300,000 and 113,999 shares of the
Company's Series A, B and C Preferred Stock, respectively.
THE MOUNT SINAI SCHOOL OF MEDICINE
In 1993, the Company entered into a technology transfer agreement with The
Mount Sinai School of Medicine of the City University of New York ("Mount
Sinai") to acquire certain patent rights and technical information. Pursuant to
the agreement, the Company issued to Mount Sinai 35,000 shares of Common Stock
which resulted in a charge to research and development expense of $8,750, and
warrants to purchase, in the aggregate, 225,000 shares of Series A Preferred
Stock. The warrants become exercisable upon the occurrence of specific
milestones and expire five years from such date or on the day preceding the sale
of the Company. Upon the closing of an initial public offering by the Company,
warrants covering 148,750 shares of Series A Preferred Stock will become
exercisable at a price per share of Common Stock of 125% of the initial public
offering price of the Common Stock. The remaining warrants will be cancelled. At
December 31, 1995 and March 31, 1996, warrants covering 45,000 shares of Series
A Preferred Stock are exercisable at $0.90 per share. The Company is also
required to reimburse Mount Sinai for costs incurred in connection with the
maintenance and protection of certain patents.
UNIVERSITY OF MICHIGAN
In February 1995, the Company signed a license agreement with the University
of Michigan. The license agreement gives the Company a worldwide license to the
University of Michigan's inventions and discoveries
F-9
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
2. LICENSE AGREEMENTS (CONTINUED)
related to a cold adapted influenza vaccine, including the ability to develop,
use, sublicense, manufacture and sell products and processes claimed in the
patent rights. Under the arrangement, the Company paid the University of
Michigan and expensed a $100,000 fee and issued 1,323,734 shares of Series B
Preferred Stock which resulted in a charge to research and development expense
of $1,588,481. Upon commercialization of the vaccine product, the license
agreement provides that the Company will pay royalties based on net revenues as
well as issuing warrants to purchase 1.25% of the Company's then total
outstanding Common Stock at an exercise price equal to 125% of the per share
price of Common Stock in the Company's initial public offering of Common Stock.
The warrant will be exercisable for five years after its issuance date. In
conjunction with the license agreement, the Company signed a research agreement
with the University of Michigan which obligates the Company to fund
approximately $530,000 of specific research projects. As of December 31, 1996,
the Company had funded $184,000 for research under this agreement. The Company
had also paid the University of Michigan $67,000 for other research services.
3. DEVELOPMENT AGREEMENTS
SMITHKLINE BEECHAM BIOLOGICALS S.A.
In October 1995, the Company signed an agreement with SmithKline Beecham
Biologicals S.A. ("SmithKline Beecham") which grants SmithKline Beecham
exclusive worldwide (excluding Korea) rights to produce and market any
prophylactic and therapeutic Epstein-Barr Virus ("EBV") vaccines under the
Company's patents. Under the Agreement, SmithKline Beecham paid the Company a
$1,500,000 nonrefundable licensing fee and is required to make additional
benchmark payments as certain milestones are met. Upon commercialization,
SmithKline Beecham will pay the Company a royalty based on net sales (by
country). In conjunction with the licensing rights, SmithKline Beecham will fund
the Company's development of the EBV vaccine for a minimum of two years based on
approved budgeted amounts. For the year ended December 31, 1995, the Company
recognized $1,500,000 of license revenue and $125,000 of development revenue
pursuant to the agreement. As of December 31, 1995, the Company has recorded
$208,000 in deferred revenue relating to development that will be recognized in
1996.
SANG-A PHARM. CO., LTD.
In May 1995, the Company signed a development and licensing agreement with
Sang-A Pharm. Co., Ltd. ("Sang-A"), a Korean pharmaceutical company. The
agreement covers a wide range of vaccine products and grants Sang-A the
exclusive rights and licenses to such products in South and North Korea
("Korea"). Under the terms of the agreement, Sang-A will conduct all clinical
development work necessary for approval in Korea at its expense, and is required
to make payments based on certain milestones and, upon commercialization of each
product, to pay royalties based on net revenues. The agreement also gives Sang-A
the first right of refusal to supply a percentage of Aviron's products in
selected countries.
In connection with this agreement, Sang-A purchased 2,941,863 shares of
Series C Preferred Stock for $3,971,515. Sang-A subsequently purchased 1,187,295
additional shares of Series C Preferred Stock for $1,602,848. In the future,
Sang-A is required to purchase 10% of any offering of new securities (as
defined) of the Company, if requested by the Company, until the earlier of 36
months following Sang-A's initial investment or an initial public offering.
During the three months ended March 31, 1996, Sang-A purchased 136,326 shares of
Series C Preferred Stock for $184,040.
F-10
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
4. SHORT-TERM INVESTMENTS
At December 31, 1994 and 1995, the Company's short-term investments
consisted of the following debt securities, all of which had maturities of one
year or less (in thousands):
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
As of December 31, 1994:
U.S. Treasury securities and
obligations of U.S. government
agencies............................ $2,261 $ -- $(22) $2,239
U.S. corporate commercial paper...... 2,983 -- (1) 2,982
U.S. corporate obligations........... 514 -- (1) 513
Foreign government securities........ 520 -- (9) 511
------ ---------- --- ---------
$6,278 $ -- $(33) $6,245
------ ---------- --- ---------
------ ---------- --- ---------
As of December 31, 1995:
U.S. Treasury securities and
obligations of U.S. government
agencies............................ $1,025 $ 2 $ (4) $1,023
U.S. corporate commercial paper...... 3,705 -- -- 3,705
U.S. corporate obligations........... 1,571 -- (12) 1,559
------ ---------- --- ---------
$6,301 $ 2 $(16) $6,287
------ ---------- --- ---------
------ ---------- --- ---------
</TABLE>
Included in the above table as of December 31, 1994 are corporate debt
obligations with a fair value of $748 which are classified as cash equivalents
in the accompanying balance sheet.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
Laboratory equipment................................... $ 1,220 $ 1,512 $ 1,601
Computer equipment..................................... 199 323 370
Office equipment....................................... 68 90 100
Leasehold improvements................................. 336 62 567
--------- --------- -----------
1,823 1,987 2,638
Less accumulated depreciation and amortization......... (607) (712) (822)
--------- --------- -----------
$ 1,216 $ 1,275 $ 1,816
--------- --------- -----------
--------- --------- -----------
</TABLE>
6. LEASE ARRANGEMENTS
In April 1994, the Company entered into a $2,500,000 equipment and leasehold
improvement lease line of credit that bears interest based on an average of the
three-year and five-year indices of U.S. Treasury bonds. Outstanding balances
under the line are secured by the related equipment purchased. The lease line
was extended and expires December 31, 1996. At March 31, 1996, $761,000 of the
line was available. In connection with this financing arrangement, the Company
issued warrants to purchase 116,667 shares of the Company's Series B Preferred
Stock. These warrants are exercisable at an exercise price of $0.90 per share
and will expire at the earlier of March 2000 or upon the initial public offering
of the Company's Common Stock. As consideration for extending the expiration
date of the lease line, the Company issued warrants in 1995 to purchase 77,778
F-11
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
6. LEASE ARRANGEMENTS (CONTINUED)
shares of the Company's Series B Preferred Stock. These warrants are exercisable
at an exercise price of $0.90 per share and will expire at the earlier of May
2001 or upon the initial public offering of the Company's Common Stock. As of
March 31, 1996, none of the warrants had been exercised.
Included in property and equipment at December 31, 1995 and March 31, 1996
are assets with a cost of $1,826,125 and $2,032,532, respectively, and
accumulated amortization of $688,594 and $786,784, respectively, which have been
financed pursuant to the lease line of credit.
The Company has entered into an operating lease agreement for office and
research facilities which expires in 2005 and includes an option allowing the
Company to extend the lease for two additional five-year terms. The agreement
requires the Company to pay operating costs, including property taxes,
utilities, insurance and maintenance. Rent expense for the years ended December
31, 1993, 1994 and 1995 was $130,400, $167,568 and $412,869, respectively.
At December 31, 1995, the Company's aggregate commitment under such
arrangements are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING
OBLIGATIONS LEASE
------------- -----------
<S> <C> <C>
Years ending December 31,
1996................................................. $ 528 $ 747
1997................................................. 424 866
1998................................................. 226 919
1999................................................. 49 924
2000................................................. -- 950
Thereafter........................................... -- 4,910
------ -----------
1,227 $ 9,316
-----------
-----------
Less amounts representing interest..................... (189)
------
1,038
Less current portion................................... (420)
------
$ 618
------
------
</TABLE>
7. STOCKHOLDERS' EQUITY
COMMON STOCK
During June and July 1992, 648,000 shares of Common Stock were issued to the
Company's founders, consultants and a licensor of technology at $0.005 per
share. These shares are subject to certain transfer restrictions. Certain of
these shares, until vested, are subject to repurchase at $0.005 per share
(adjusted to reflect any stock splits or stock dividends) on termination of
employment. In addition, certain shares of Common Stock issued to members of
management in 1995 and 1996 through exercises of stock options are subject to
repurchase by the Company at $0.50-$2.50 per share. The above shares vest over
periods specified by the Board of Directors. At December 31, 1995 and March 31,
1996, 101,700 and 268,480 shares remain subject to the Company's right of
repurchase, respectively.
PREFERRED STOCK
Preferred Stock is issuable in series. Series A, Series B and Series C
Preferred Stock are convertible into 0.20 share of Common Stock of the Company
at the option of the holder, and carry voting rights equivalent to
F-12
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock on a share-for-share basis. The conversion rate of the Preferred
Stock is subject to adjustment in the event of, among other things, stock splits
and stock dividends. Each share of Preferred Stock automatically converts into
0.20 shares of Common Stock in the event of an initial public offering of the
Company's Common Stock in which the gross offering proceeds equal or exceed
$10.0 million or upon approval of the conversion by a majority of the preferred
stockholders voting together as a single class. The Series A, Series B and
Series C preferred stockholders are entitled to noncumulative dividends at the
rate of $0.05, $0.09 and $0.135 per share, respectively, when and if declared by
the board of directors. None have been declared.
The Series A, Series B and Series C Preferred Stock are subject to a
liquidation preference of $0.50, $0.90 and $1.35 per share, respectively, plus
all declared but unpaid dividends.
The Preferred Stock authorized, issued and outstanding at December 31, 1995
is as follows:
<TABLE>
<CAPTION>
SHARES SHARES ISSUED LIQUIDATION
AUTHORIZED AND OUTSTANDING PREFERENCE
------------ --------------- -------------
<S> <C> <C> <C>
Series A............................................... 5,225,000 5,000,000 $ 2,500,000
Series B............................................... 18,650,000 17,990,401 16,191,361
Series C............................................... 18,000,000 16,041,570 21,656,120
Undesignated........................................... 1,125,000 -- --
------------ --------------- -------------
43,000,000 39,031,971 $ 40,347,481
------------ --------------- -------------
------------ --------------- -------------
</TABLE>
In November 1995, in conjunction with the private placement of Series C
Preferred Stock, the Company issued to the placement agent warrants to purchase
352,536 shares of the Company's Series C Preferred Stock. These warrants have an
exercise price of $1.62 per share and will expire in November 2000. As of March
31, 1996, none of the warrants had been exercised.
A total of 771,981 shares of Preferred Stock have been reserved for issuance
upon exercise of outstanding warrants as of December 31, 1995 and March 31,
1996.
In addition, 8,600,000 shares of Common Stock have been reserved for
issuance upon the conversion of convertible Preferred Stock.
STOCK OPTIONS
On September 15, 1992, the board of directors adopted the 1992 Stock Option
Plan (the "1992 Plan"). The Company initially reserved 272,000 shares of Common
Stock for issuance under the 1992 Plan which was increased by 200,000 shares in
1993 and 300,000 shares in 1994.
The 1992 Plan provides for both incentive and nonqualified stock options to
be granted to employees, directors and consultants. The 1992 Plan provides that
incentive stock options will be granted at no less than the fair value of the
Company's Common Stock (no less than 85% of the fair value for nonqualified
stock options), as determined by the board of directors at the date of the
grant. If, at the time the Company grants an option, the optionee owns more than
10% of the total combined voting power of all the classes of stock of the
Company, the option price shall be at least 110% of the fair value and the
option shall not be exercised more than five years after the date of grant. The
options vest and become exercisable over periods determined by the board of
directors. Except as noted above, options expire no more than 10 years after the
date of grant, or earlier if employment terminates.
F-13
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
Option activity under the Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------
SHARES EXERCISE
AVAILABLE NUMBER OF PRICE PER
FOR GRANT SHARES SHARE
--------- ----------- -------------
<S> <C> <C> <C>
Balance at December 31, 1992..................................... 157,100 114,900 $ 0.25
Options authorized............................................. 200,000 -- --
Options granted................................................ (235,117) 235,117 $0.25-$0.50
Options exercised.............................................. -- (2,550) $ 0.25
Options canceled............................................... 9,550 (9,550) $ 0.25
--------- ----------- -------------
Balance at December 31, 1993..................................... 131,533 337,917 $0.25-$0.50
Options authorized............................................. 300,000 -- --
Options granted................................................ (71,230) 71,230 $ 0.50
Options exercised.............................................. -- (9,864) $0.25-$0.50
Options canceled............................................... 29,996 (29,996) $0.25-$0.50
--------- ----------- -------------
Balance at December 31, 1994..................................... 390,299 369,287 $0.25-$0.50
Options granted................................................ (269,000) 269,000 $0.50-$1.25
Options exercised.............................................. -- (62,892) $0.50-$1.25
Options canceled............................................... 2,357 (2,357) $0.25-$0.50
--------- ----------- -------------
Balance at December 31, 1995..................................... 123,656 573,038 $0.25-$1.25
Options granted (unaudited).................................... (96,625) 96,625 $ 2.50
Options exercised (unaudited).................................. -- (64,516) $0.25-$0.50
Options canceled (unaudited)................................... 735 (735) $0.25-$2.50
--------- ----------- -------------
Balance at March 31, 1996 (unaudited)............................ 27,766 604,412 $0.25-$2.50
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
In addition, during 1995 fully-vested non-qualified stock options covering
40,000 shares were issued outside of the 1992 Plan at exercise prices of
$0.50-$1.25 per share. During January 1996, 208,000 non-qualified stock options
were issued outside the 1992 Plan at exercise prices of $1.75-$2.50 per share.
Of the stock options issued outside of the 1992 Plan, 218,000 options were
exercised at exercise prices of $0.50-$2.50 per share during the quarter ending
March 31, 1996.
During the three months ended March 31, 1996, officers of the Company
exercised options for 168,000 shares by signing promissory notes amounting to
$310,000 which bear interest at 5.73%.
As of December 31, 1995 and March 31, 1996, options to purchase 347,893 and
291,491 shares of Common Stock were exercisable.
For certain options granted during 1995 and 1996, the Company recognized as
deferred compensation the excess of the deemed value for financial reporting
purposes of the Common Stock issuable upon the exercise of such options over the
aggregate exercise price of such options. Total deferred compensation of
$270,000 recorded through December 31, 1995 is being amortized over the vesting
period of such options. A portion of these options vested immediately upon
grant. In January 1996, the Company granted an additional 304,625 options with
exercise prices of $1.75 to $2.50 and recorded related deferred compensation of
approximately $784,000. In May 1996, the Company granted 102,950 options with an
exercise price of $2.50 and recorded related deferred compensation of
approximately $463,000.
F-14
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
In March 1996, the Company amended and restated the 1992 Plan as the 1996
Equity Incentive Plan (the "1996 Plan"). Total shares of Common Stock reserved
for future issuance under the 1996 Plan were increased to 1,750,000. The 1996
Plan provides for the grant of incentive and nonstatutory stock options to
employees and consultants of the Company.
In March 1996, the Company adopted the 1996 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") under which 200,000 shares of Common Stock
are reserved for issuance pursuant to nonstatutory stock options.
In March 1996, the Company also adopted the Employee Stock Purchase Plan
(the "Purchase Plan"). A total of 250,000 shares of Common Stock are reserved
for issuance under the Purchase Plan. The Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions at a price equal
to the lower of 85% of the fair market value of the Company's Common Stock at
the beginning or end of the applicable offering period.
8. INCOME TAXES
As of December 31, 1995, the Company had a federal net operating loss
carryforward of approximately $20,000,000. The net operating loss carryforward
will expire at various dates beginning from 2007 through 2010, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "ownership change" provisions of the
Internal Revenue Code of 1986.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Net operating loss carryforward.......................................... $ 1,500 $ 3,800 $ 7,100
Capitalized research expenses............................................ -- 200 1,060
Research tax credits (expires from 2007-2010)............................ 100 300 550
Other.................................................................... 200 100 140
--------- --------- ---------
Net deferred tax assets.................................................. 1,800 4,400 8,850
Valuation allowance...................................................... (1,800) (4,400) (8,850)
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Because of the Company's lack of earnings history, the net deferred tax
asset has been fully offset by a valuation allowance. The valuation allowance
increased by approximately $1,500,000 in 1993.
9. RELATED PARTY TRANSACTIONS
In 1995, the Company made unsecured loans to officers totalling $100,000
which bear interest at 7.75% and are due in April 2000.
An officer of the Company is a shareholder in an investment advisory
business which was paid a commission by the Company of approximately $334,000
during 1995 related to the Sang-A transaction (see Note 3). The officer received
no direct compensation from the transaction.
10. SUBSEQUENT EVENT -- PROPOSED PUBLIC OFFERING AND RELATED MATTERS
On May 30, 1996, the board of directors authorized management of the Company
to file a Registration Statement with the Securities and Exchange Commission
offering shares of its Common Stock to the public. If the offering is
consummated under the terms presently anticipated, all of the Preferred Stock
outstanding will
F-15
<PAGE>
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
10. SUBSEQUENT EVENT -- PROPOSED PUBLIC OFFERING AND RELATED MATTERS (CONTINUED)
automatically convert into 7,833,634 shares of Common Stock upon the closing of
the offering. Unaudited pro forma stockholders' equity as of December 31, 1995
as adjusted for the assumed conversion of the Preferred Stock is set forth on
the accompanying balance sheet.
In May 1996, the Company filed restated Articles of Incorporation in
California to effect a one-for-five reverse stock split of all outstanding
shares of Common Stock, Common Stock options and warrants. The conversion ratio
of all outstanding shares of Convertible Preferred Stock were adjusted such that
each preferred share converts into .20 shares of common stock. All common share
and per share data in the accompanying financial statements has been adjusted
retroactively to give effect to the reverse stock split. In conjunction with the
registration, the board of directors also authorized the reincorporation of the
Company in Delaware.
F-16
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts are estimates except for
the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................... $ 15,466
NASD filing fee........................................... 4,985
Blue sky qualification fees and expenses.................. 5,000
Printing and engraving expenses........................... 125,000
Legal fees and expenses................................... 300,000
Accounting fees and expenses.............................. 130,000
Transfer agent and registrar fees......................... 10,000
Miscellaneous............................................. 9,549
---------
Total................................................. $ 600,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and agents to the fullest extent
permitted by Delaware law.
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement, will provide for indemnification by the Underwriters and their
controlling persons, on the one hand, and of the Registrant and its controlling
persons on the other hand, for certain liabilities arising under the Securities
Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since inception, the Registrant has sold and issued the following
unregistered securities (adjusted to give effect to the one-for-five reverse
stock split):
(1) From April 1992 through June 1, 1996, the Registrant has granted
stock options to purchase 889,822 shares of the Company's Common Stock at a
weighted average exercise price of $1.02 per share to employees, consultants
and directors pursuant to its 1996 Equity Incentive Plan, or predecessor
plans (the "Plans"). Of these options, 58,318 have been canceled without
being exercised, 218,024 have been exercised and 613,480 remain outstanding.
In January 1996, 208,000 options were issued outside the Plan to certain
senior executives and founders of the Company, at exercise prices ranging
from $1.75 to $2.50 per share.
II-1
<PAGE>
(2) In June and July 1992, the Registrant issued 5,000,000 shares of
Series A Preferred Stock to 14 purchasers at $0.50 per share, for an
aggregate purchase price of $2,500,000. Shares of Series A Preferred Stock
are convertible into shares of Common Stock at the rate of one share of
Common Stock for each five shares of Series A Preferred Stock owned.
(3) In February 1993, the Company issued warrants to purchase up to
225,000 shares of Series A Preferred Stock to The Mount Sinai School of
Medicine of the City University of New York ("Mount Sinai") in connection
with the transfer by Mount Sinai to the Company of certain technology
rights. The shares of Series A Preferred Stock issuable upon exercise of the
warrants are convertible into shares of Common Stock at the rate of one
share of Common Stock for each five shares of Series A Preferred Stock
owned.
(4) In September 1993, the Registrant issued 16,666,667 shares of Series
B Preferred Stock to 34 purchasers (including two purchasers who received
1,666,666 shares upon conversion of promissory notes aggregating $1,500,000)
at $0.90 per share, for an aggregate purchase price of $15,000,000. Shares
of Series B Preferred Stock are convertible into shares of Common Stock at
the rate of one share of Common Stock for each five shares of Series B
Preferred Stock owned.
(5) In September 1993, the Registrant issued warrants to purchase
400,000 shares of its Series B Preferred Stock, at an exercise price of
$1.25 per share, to entitles affiliated with IVP. These warrants expired
unexercised in June 1995.
(6) In February 1995, the Registrant entered into a license agreement
with the University of Michigan under which, in return for certain rights to
the University of Michigan's inventions and discoveries related to a cold
adapted influenza vaccine, the Registrant issued 1,323,734 shares of the
Registrant's Series B Preferred Shares, plus a warrant to purchase up to
1.25% of the Registrant's outstanding Common Stock under certain conditions.
Shares of Series B Preferred Stock are convertible into shares of Common
Stock at the rate of one share of Common Stock for each five shares of
Series B Preferred Stock owned.
(7) In April 1994 and May 1995, the Registrant issued warrants to
purchase an aggregate of 194,445 shares of Series B Preferred Stock at an
exercise price of $0.90 per share to Lease Management Services, Inc.
(8) In May 1995, the Registrant entered into a license agreement with
Sang-A Pharm Co., Ltd., ("Sang-A") under which, in return for certain rights
to certain of the Registrant's products in Korea, Sang-A purchased 2,941,863
of the Registrant's Series C Preferred Stock for $3,971,575, or $1.35 per
share. Shares of Series C Preferred Stock are convertible into shares of
Common Stock at the rate of one share of Common Stock for each five shares
of Series C Preferred Stock owned.
(9) From July through November 1995, the Registrant issued 13,099,707
shares of Series C Preferred Stock to 66 purchasers at a purchase price of
$1.35 per share (including 1,187,295 shares to Sang-A), for an aggregate
purchase price of $17,684,604. Shares of Series C Preferred Stock are
convertible into shares of Common Stock at the rate of one share of Common
Stock for each five shares of Series C Preferred Stock owned.
(10) In November 1995, the Registrant issued a warrant to purchase
352,536 shares of the Series C Preferred Stock of the Company to Raymond,
James & Associates, Inc., for an exercise price of $1.62 per share
(convertible into 70,507 shares of Common Stock) issuable upon exercise of
the warrant. Shares of Series C Preferred Stock are convertible into shares
of Common Stock at the rate of one share of Common Stock for each five
shares of Series C Preferred Stock owned.
(11) In March 1996, the Registrant issued 136,315 shares of Series C
Preferred Stock to Sang-A Pharm Co., Ltd. at $1.35 per share, for an
aggregate purchase price of $184,025. Shares of Series C Preferred Stock are
convertible into shares of Common Stock at the rate of one share of Common
Stock for each five shares of Series C Preferred Stock owned.
The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of Rule
701 of the Securities Act. The sales and issuances of securities described in
paragraphs (2) through (9) above were deemed to be exempt from registration
under the
II-2
<PAGE>
Securities Act by virtue of Rule 4(2) of the Securities Act. The sale and
issuance of securities described in paragraph (10) above were deemed to be
exempt from registration under the Securities Act by virtue of Rule 3(a)(9) of
the Securities Act.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits filed as a part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant, as amended.
*3.2 Amendment to the Amended and Restated Articles of
Incorporation of the Registrant.
3.3 Bylaws of the Registrant.
*3.4 Form of Certificate of Incorporation of the Registrant to be
filed upon reincorporation in Delaware.
*3.5 Form of Bylaws of the Registrant to be effective upon
reincorporation in Delaware.
*3.6 Form of Restated Certificate of Incorporation of the
Registrant, to be filed after completion of this offering.
*3.7 Form of Restated Bylaws of the Registrant, to be effective
upon the completion of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4., 3.5 and
3.6.
*4.2 Specimen Stock Certificate.
4.3 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York.
4.4 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York.
*4.5 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York.
*4.6 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York.
*4.7 Warrant for Series C Preferred Stock, issued to Raymond,
James & Associates.
4.8 Investors Rights Agreement, dated July 18, 1995, among the
Registrant and the investors named therein.
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
+10.1 License Agreement between the Registrant and ARCH
Development Corporation, dated July 1, 1992.
+10.2 Technology Transfer Agreement between the Registrant and The
Mount Sinai School of Medicine of the City University of
New York, dated February 9, 1993.
+10.3 Materials Transfer and Intellectual Property Agreement
between the Registrant and the Regents of the University of
Michigan, dated February 24, 1995.
10.4 Stock Transfer Agreement between the Registrant and the
Regents of the University of Michigan, dated February 24,
1995.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ------------------------------------------------------------
<C> <S>
+10.5 Development and License Agreement between the Registrant and
Sang-A Pharm. Co., Ltd., dated May 3, 1995.
+10.6 Cooperative Research and Development Agreement between the
Registrant and the National Institutes of Health, dated May
30, 1995.
*+10.7 Heads of Agreement between the Registrant and SmithKline
Beecham Biologicals S.A., dated October 8, 1995.
+10.8 Manufacturing and Development Agreement between the
Registrant and Evans Medical Limited, dated November 7,
1995.
10.9 1996 Equity Incentive Plan.
10.10 1996 Non-Employee Directors' Stock Option Plan.
10.11 1996 Employee Stock Purchase Plan.
10.12 Industrial Lease between the Registrant and the Vanni
Business Park General Partnership, dated August 29, 1995.
11.1 Statement regarding Computation of Pro Forma Net Loss Per
Share.
23.1 Consent of Ernst & Young LLP.
24.2 Consent of Cooley Godward Castro Huddleson & Tatum.
Reference is made to Exhibit 5.1.
25.1 Power of Attorney. Reference is made to page II-5.
27.1 Financial Data Schedules.
</TABLE>
- -------------------
* To be filed by amendment.
+ Confidential treatment has been requested for portions of this exhibit.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Moutain View, County of Santa
Clara, State of California, on the 4th day of June, 1996.
AVIRON
By: /s/ J. LEIGHTON READ
-----------------------------------
J. Leighton Read, M.D.
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Leighton Read, M.D. as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any all capacities, to sign any and
all amendments (including post-effective amendments and registration statements
filed pursuant to Rule 462) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT WAS SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------ --------------
Chairman, Chief Executive
Officer and Chief Financial
/s/ J. LEIGHTON READ Officer
-------------------------------------- (PRINCIPAL EXECUTIVE OFFICER June 4, 1996
J. Leighton Read, M.D. AND PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ REID W. DENNIS
-------------------------------------- Director June 4, 1996
Reid W. Dennis
/s/ PAUL H. KLINGENSTEIN
-------------------------------------- Director June 4, 1996
Paul H. Klingenstein
/s/ BERNARD ROIZMAN
-------------------------------------- Director June 4, 1996
Bernard Roizman, Sc.D.
/s/ L. JAMES STRAND
-------------------------------------- Director June 4, 1996
L. James Strand, M.D.
/s/ JANE E. SHAW
-------------------------------------- Director June 4, 1996
Jane E. Shaw, Ph.D.
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 26,
1996 (except as to the first paragraph of Note 1 and Note 10 as to which the
date is June , 1996), in the Registration Statement (Form S-1) and related
Prospectus of Aviron for the registration of 3,450,000 shares of its Common
Stock.
ERNST & YOUNG LLP
Palo Alto, California
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion of
the restatement of capital accounts described in Note 10 to the financial
statements.
Palo Alto, California
June , 1996
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- --------- ------------------------------------------------------------------------------------------- ----------
<C> <S> <C>
*1.1 Form of Underwriting Agreement.............................................................
3.1 Amended and Restated Articles of Incorporation of the Registrant, as amended...............
*3.2 Amendment to the Amended and Restated Articles of Incorporation of the Registrant..........
3.3 Bylaws of the Registrant...................................................................
*3.4 Form of Certificate of Incorporation of the Registrant to be filed upon reincorporation in
Delaware..................................................................................
*3.5 Form of Bylaws of the Registrant to be effective upon reincorporation in Delaware..........
*3.6 Form of Restated Certificate of Incorporation of the Registrant, to be filed after
completion of this offering...............................................................
*3.7 Form of Restated Bylaws of the Registrant, to be effective upon the completion of this
offering..................................................................................
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4., 3.5 and 3.6.............................
*4.2 Specimen Stock Certificate.................................................................
4.3 Warrant for Series A Preferred Stock, issued to The Mount Sinai School of Medicine of the
City of New York..........................................................................
4.4 Warrant for Series A Preferred Stock, issued to The Mount Sinai School of Medicine of the
City of New York..........................................................................
4.5 Warrant for Series A Preferred Stock, issued to The Mount Sinai School of Medicine of the
City of New York..........................................................................
4.6 Warrant for Series A Preferred Stock, issued to The Mount Sinai School of Medicine of the
City of New York..........................................................................
4.7 Warrant for Series C Preferred Stock, issued to Raymond, James & Associates................
4.8 Amended and Restated Investors Rights Agreement, dated July 18, 1995, among the Registrant
and the investors named therein...........................................................
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.........................................
+10.1 License Agreement between the Registrant and ARCH Development Corporation, dated July 1,
1992......................................................................................
+10.2 Technology Transfer Agreement between the Registrant and The Mount Sinai School of Medicine
of the City University of New York, dated February 9, 1993................................
+10.3 Materials Transfer and Intellectual Property Agreement between the Registrant and the
Regents of the University of Michigan, dated February 24, 1995............................
10.4 Stock Transfer Agreement between the Registrant and the Regents of the University of
Michigan, dated February 24, 1995.........................................................
+10.5 Development and License Agreement between the Registrant and Sang-A Pharm. Co., Ltd., dated
May 3, 1995...............................................................................
+10.6 Cooperative Research and Development Agreement between the Registrant and the National
Institutes of Health, dated May 30, 1995..................................................
*+10.7 Heads of Agreement between the Registrant and SmithKline Beecham Biologicals S.A., dated
October 8, 1995...........................................................................
+10.8 Manufacturing and Development Agreement between the Registrant and Evans Medical Limited,
dated November 7, 1995....................................................................
10.9 1996 Equity Incentive Plan.................................................................
10.10 1996 Non-Employee Directors' Stock Option Plan.............................................
10.11 1996 Employee Stock Purchase Plan..........................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- --------- ------------------------------------------------------------------------------------------- ----------
<C> <S> <C>
10.12 Industrial Lease between the Registrant and the Vanni Business Park General Partnership,
dated August 29, 1995.....................................................................
*+10.13 First Amendment to License Agreement between the Registrant and ARCH Development
Corporation, dated March 15, 1996.........................................................
*+10.14 Biological Materials License Agreement between the Registrant and the National Institutes
of Health, dated May 31, 1996.............................................................
11.1 Statement regarding Computation of Pro Forma Net Loss Per Share............................
23.1 Consent of Ernst & Young LLP...............................................................
24.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1.......
25.1 Power of Attorney. Reference is made to page II-5..........................................
27.1 Financial Data Schedules...................................................................
</TABLE>
- -------------------
* To be filed by amendment.
+ Confidential treatment has been requested for portions of this exhibit.
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
AVIRON
J. Leighton Read and Alan C. Mendelson certify that:
1. They are the Chief Executive Officer and Secretary, respectively,
of Aviron, a California corporation (the "Corporation").
2. The Articles of Incorporation of this Corporation are amended and
restated as follows:
"I.
The name of this corporation is Aviron.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Ninety-Six
Million (96,000,000) shares. Fifty-Three Million (53,000,000) shares shall be
Common Stock. Forty-Three Million (43,000,000) shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or
more series. Subject to the protective provisions set forth in Section 5 below,
the Board of Directors is hereby authorized to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or prices, and the
liquidation preferences of any wholly unissued series of Preferred Stock, and
the number of shares
1
<PAGE>
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
B. Five million two hundred twenty-five thousand (5,225,000) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock." Eighteen million six hundred fifty thousand (18,650,000) of the
authorized shares of Preferred Stock are hereby designated "Series B Preferred
Stock," and eighteen million (18,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series C Preferred Stock." The Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock are collectively
referred to as the "Preferred Stock."
C. The respective rights, preferences, privileges, restrictions and
other matters relating to the Preferred Stock are as follows:
1. DIVIDENDS. The holders of the Preferred Stock shall be entitled
to receive, payable in preference and priority to the holders of Common Stock,
when and as declared by the Board of Directors, out of any assets at the time
legally available therefor, dividends at the rate of:
(a) with respect to the Series A Preferred Stock, $.05 per share
per annum (as appropriately adjusted for any combination, consolidation, stock
distribution, stock dividend, stock split or similar event with respect to such
shares (a "Recapitalization"));
(b) with respect to the Series B Preferred Stock, $.09 per share
per annum (as adjusted for any Recapitalization); and
(c) with respect to the Series C Preferred Stock, $.135 per
share per annum (as adjusted for any Recapitalization).
Such dividends shall not be cumulative and no right to such dividends shall
accrue to holders of Preferred Stock unless declared by the Board of Directors.
No dividends shall be declared or paid with respect to the Common Stock (other
than a dividend payable solely in Common Stock of the Corporation) unless a
dividend of equal or greater amount per share (on an as-if-converted to Common
Stock basis) is first declared and paid with respect to the Preferred Stock.
Each share of Preferred Stock shall rank on parity with every other share of
Preferred Stock, irrespective of series, with regard to dividends, and no
dividends shall be paid, declared or set apart for payment
2
<PAGE>
on the shares of any series of Preferred Stock unless at the same time a
dividend for the same percentage of the respective dividend rates shall also be
paid, declared or set apart for payment, as the case may be, on the shares of
Preferred Stock or each other series then outstanding.
So long as any shares of Preferred Stock shall be outstanding, no dividend,
whether in cash or property, shall be paid or declared, nor shall any other
distribution be made, on any Common Stock, nor shall any shares of the Common
Stock of the Corporation be purchased, redeemed, or otherwise acquired for value
by the Corporation (except for acquisitions of Common Stock by the Corporation
from the founders, directors, employees or consultants of the Corporation
pursuant to agreements which permit the Corporation to repurchase such shares
upon termination of an employment or consulting relationship or in exercise of
the Corporation's right of first refusal upon a proposed transfer) until all
accrued but unpaid dividends on the Preferred Stock shall have been paid or
declared and set apart. In the event dividends are paid on any share of Common
Stock, an additional dividend shall be paid with respect to all outstanding
shares of Preferred Stock in an amount for each such share of Preferred Stock
equal to the aggregate amount of such dividends for all shares of Common Stock
into which each such share of Preferred Stock could then be converted. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Common Stock in
exchange for shares of any other Common Stock, or (iii) any repurchase of any
outstanding securities of the Corporation that is approved by the Corporation's
Board of Directors.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series
A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of Common Stock by
reason of their ownership thereof, the amount of $.50, $.90, and $1.35 per
share, respectively (appropriately adjusted for any Recapitalization), plus all
declared but unpaid dividends on such share for each share of Series A Preferred
Stock, Series B Preferred Stock, or Series C Preferred Stock then held by them.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among the holders of the Preferred Stock in proportion to
the full amounts to which they would otherwise be entitled and in proportion to
the number of shares of Preferred Stock then held by them.
(b) After payment to the holders of Preferred Stock of the
amount set forth in subparagraph (a) above, the entire remaining assets and
funds of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Preferred Stock and
3
<PAGE>
Common Stock pro rata based on the number of shares of Common Stock held by them
(assuming conversion of all Preferred Stock).
(c) A consolidation or merger of the Corporation with or into
any other corporation or corporations, or a sale of all or substantially all of
the assets of the Corporation, other transaction or series of related
transactions resulting in a change of voting control shall be deemed a
liquidation, dissolution or winding up within the meaning of this Section 2 if
(a) more than 50% of the outstanding securities of each class of the surviving
entity, or (b) an interest in equity securities representing at least 50% of the
voting power or at least 50% of the equity interest in the surviving entity, is
not owned by persons who were holders of capital stock or securities convertible
into capital stock of the Corporation immediately prior to such merger,
consolidation or sale; provided, however, that the sale of Preferred Stock to
private investors pursuant to a Preferred Stock Purchase Agreement shall not
constitute a liquidation, dissolution or winding up within the meaning of this
section.
3. VOTING RIGHTS. Except as otherwise expressly provided herein or
as required by law, the holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such share of Preferred Stock could be converted on the record date
for the vote or the date of the solicitation of any written consent of
shareholders and shall have voting rights and powers equal to the voting rights
and powers of the Common Stock (except as otherwise expressly provided herein or
as required by law, voting together with the Common Stock as a single class) and
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation. Fractional votes shall not, however, be permitted
and any fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
4. CONVERSION. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock. The number of fully paid and nonassessable shares of Common
Stock to which a holder of Series A Preferred Stock shall be entitled upon
conversion shall be the product obtained by multiplying the "Series A Conversion
Rate" then in effect (determined as provided in Section 4(b)) by the number of
shares of Series A Preferred Stock being converted. The number of fully paid
and nonassessable shares of Common Stock to which a holder of Series B Preferred
Stock shall be entitled upon conversion shall be the product obtained by
multiplying the "Series B Conversion Rate" then in effect (determined as
provided in Section 4(c)) by the number of shares of Series B Preferred being
4
<PAGE>
converted. The number of fully paid and nonassessable shares of Common Stock to
which a holder of Series C Preferred Stock shall be entitled upon conversion
shall be the product obtained by multiplying the "Series C Conversion Rate" then
in effect (determined as provided in Section 4(d)) by the number of shares of
Series C Preferred being converted.
(b) SERIES A CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Series A Preferred Stock (the "Series A
Conversion Rate") shall be the quotient obtained by dividing $.50 by the "Series
A Conversion Price," calculated as provided in Section 4(e).
(c) SERIES B CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Series B Preferred Stock (the "Series B
Conversion Rate") shall be the quotient obtained by dividing $.90 by the "Series
B Conversion Price," calculated as provided in Section 4(e).
(d) SERIES C CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Series C Preferred Stock (the "Series C
Conversion Rate") shall be the quotient obtained by dividing $1.35 by the
"Series C Conversion Price," calculated as provided in Section 4(e).
(e) CONVERSION PRICE. The conversion price for the Series A
Preferred Stock shall initially be $.50 (the "Series A Conversion Price"). The
conversion price of the Series B Preferred Stock shall initially be $.90 (the
"Series B Conversion Price"). The conversion price of the Series C Preferred
Stock shall initially be $1.35 (the "Series C Conversion Price"). Such initial
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price (the "Conversion Prices") shall be adjusted from time to time in
accordance with this Section 4. All references to the Conversion Prices herein
shall mean the Conversion Prices as so adjusted.
(f) AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price immediately upon (i) the closing of the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act of 1933, as amended (other than a
registration relating solely to a transaction under Rule 145 under such Act (or
any successor thereto) or to an employee benefit plan of the Company), at a
public offering price equal to or exceeding $2.50 per share of Common Stock
(appropriately adjusted for any Recapitalization) and the aggregate net proceeds
to the Corporation (before deduction for underwriter commissions and expenses
relating to the issuance, including without limitation fees of the Corporation's
counsel) of which equal or exceed $10,000,000 or (ii) upon receipt by the
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<PAGE>
Corporation of the affirmative vote at a duly noticed shareholders meeting or
pursuant to a duly solicited written consent of approval of the holders of at
least a majority of the then outstanding shares of the Series A Preferred Stock,
the Series B Preferred Stock, and the Series C Preferred Stock, voting together
as a single class in favor of the conversion of all of the shares of Preferred
Stock into Common Stock.
(g) MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, the
holder shall surrender the certificate or certificates thereof, duly endorsed,
at the office of the Corporation or of any transfer agent for such stock, and
shall give written notice to the Corporation at such office that he elects to
convert the same and shall state therein the name or names in which he wishes
the certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Preferred Stock to be
converted, except that in the case of an automatic conversion pursuant to
Section 4(f) hereof, such conversion shall be deemed to have been made (i)
immediately prior to the closing of the offering referred to in Section 4(f)(i)
or (ii) immediately upon the approval by vote or written consent referred to in
Section 4(f)(ii) above, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(h) ADJUSTMENTS TO CONVERSION PRICE.
(i) SPECIAL DEFINITIONS. For purposes of this Section 4(h)
`ORIGINAL ISSUE DATE' shall mean the date on which a share of Preferred Stock
was first issued.
(ii) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF COMMON
STOCK. In the event the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise), or in
the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the respective Conversion Prices of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.
6
<PAGE>
(i) OTHER DISTRIBUTIONS. In the event the Corporation shall at
any time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of its
subsidiaries, then in each such event provision shall be made so that the
holders of Preferred Stock shall receive, upon the conversion thereof, the
securities of the Corporation or any of its subsidiaries which they would have
received had their stock been converted into Common Stock on the date of such
event.
(j) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(k) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of Preferred Stock.
(l) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive shares of
Common Stock, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Preferred Stock at
least 20 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, security or right, and the amount and character of such dividend,
distribution, security or right.
7
<PAGE>
(m) ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes, excluding federal, state or local income taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Preferred Stock pursuant hereto; provided, however, that
the Corporation shall not be obligated to pay any transfer taxes resulting from
any transfer requested by any holder in connection with any such conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to this Articles of
Incorporation.
(o) CONSENT TO CERTAIN DISTRIBUTIONS. Each holder of
Preferred Stock shall be deemed to have consented for purposes of Sections 502,
503 and 506 of the General Corporation Law to distributions and payments made by
the Corporation and approved by the Board of Directors of the Corporation in
connection with the repurchases of shares of Common Stock issued or to held by
directors, board advisors and employees of, or consultants to, the Corporation
upon termination of their employment or services.
(p) FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
(q) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at its address appearing on the books of the
Corporation. Notwithstanding the above, any notice or communication to an
8
<PAGE>
address outside the United States shall be sent by telecopy and confirmed in
writing sent by courier guaranteeing delivery in no more than two (2) business
days.
(r) ADJUSTMENTS. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Preferred Stock would have been
entitled upon the record date of (or date of, if no record date is fixed) such
reorganization, reclassification, consolidation, merger or conveyance; and, in
any case, appropriate adjustment (as determined by the Board of Directors) shall
be made in the application of the provisions herein set forth with respect to
the rights and interests thereafter of the holders of such Preferred Stock, to
the end that the provisions set forth herein shall thereafter be applicable, as
nearly as equivalent as is practicable, in relation to any shares of stock or
the securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Preferred Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as at least 5,000,000 of
the authorized shares of Preferred Stock remain outstanding, the Corporation
shall not, without the vote or written consent by the holders of majority of the
then outstanding shares of Series A Preferred Stock, Series B Preferred Stock,
and Series C Preferred Stock, voting together as a single class on an as-
converted basis:
(a) Amend, repeal or waive any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action would
alter or change in an adverse manner the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Preferred Stock;
(b) Increase the total number of authorized shares of Common
Stock or Preferred Stock of the Corporation or the number of shares designated
as any series of Preferred Stock;
(c) Authorize or issue, or obligate itself to issue, any other
equity security senior to the Series A Preferred Stock Series B Preferred Stock
or Series C Preferred Stock as to dividend or redemption rights, liquidation
preferences, conversion rights, voting rights or otherwise, or create any
obligation or security convertible into or exchangeable for, or having any
option rights to purchase, any such equity security which is senior to the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
provided, however, that an equity security issued subsequent to the issuance of
the Series A Preferred Stock, Series B Preferred Stock or
9
<PAGE>
Series C Preferred Stock for a share price and corresponding liquidation price
higher than that of the Series A Preferred Stock, Series B Preferred Stock, or
Series C Preferred Stock shall not be deemed senior to the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock solely by reason of
such share price and liquidation price;
(d) Do any act or thing which would result in taxation of the
holders of shares of the Preferred Stock under Section 305 of the Internal
Revenue Code of 1968, as amended (the "Code") (or any comparable provision of
the Code as hereafter from time to time amended);
(e) Effect any sale or other conveyance of all or substantially
all of the assets of the Corporation or any of its subsidiaries, or any
consolidation or merger involving the Corporation or any of its subsidiaries
with or into any other corporation, if more than 50% of the surviving entity is
not owned by persons who were holders of capital stock or securities convertible
into capital stock of the Corporation immediately prior to such merger,
consolidation or sale; or
(f) Set aside any amounts for or purchase, or declare or pay any
dividend or make any other distribution on, any shares of capital stock other
than the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, except for repurchases required by current agreements with
directors, consultants or employees.
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be returned
to the status of undesignated shares of Preferred Stock.
IV.
A. The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the corporation and its shareholders through bylaw provisions
or through agreements with the agents, or through shareholder resolutions, or
otherwise, to the fullest extent permitted by California law.
C. Any repeal or modification of this Article shall only be
prospective and shall not affect the rights under this Article in effect at the
time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification."
10
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3. The foregoing Amended and Restated Articles of Incorporation has
been duly approved by the board of directors.
4. The foregoing Amended and Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Sections 902 and 903 of the Corporations Code. The total number of outstanding
shares of the corporation is 3,486,370 shares of Common Stock, 5,000,000 shares
of Series A Preferred Stock and 17,990,401 shares of Series B Preferred Stock.
The number of shares voting in favor of the amendment equaled or exceeded the
vote required. The percentage vote required was more than 50% of the Common
Stock, more than 50% of the Series A Preferred Stock and Series B Preferred
Stock voting together as a separate class and more than 50% of the Common Stock
and Preferred Stock voting together on an as-converted basis.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
DATE: , 1995
--------------------
-----------------------------------------
J. Leighton Read, Chief Executive Officer
-----------------------------------------
Alan C. Mendelson, Secretary
11
<PAGE>
BYLAWS
OF
AVIRON,
A CALIFORNIA CORPORATION
As amended as of September 2, 1993
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office. . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III - Shareholders' Meetings and Voting Rights . . . . . . . . . . . . 1
Section 4. Place of Meetings. . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Postponement of Annual Meeting . . . . . . . . . . . . . . . 2
Section 7. Special Meetings . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 2
Section 9. Manner of Giving Notice. . . . . . . . . . . . . . . . . . . 3
Section 10. Quorum and Transaction of Business . . . . . . . . . . . . . 4
Section 11. Adjournment and Notice of Adjourned Meetings . . . . . . . . 4
Section 12. Waiver of Notice, Consent to Meeting or Approval
of Minutes . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 13. Action by Written Consent Without a Meeting. . . . . . . . . 5
Section 14. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Persons Entitled to Vote or Consent. . . . . . . . . . . . . 6
Section 16. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 17. Inspectors of Election . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV - Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 18. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 19. Number of Directors. . . . . . . . . . . . . . . . . . . . . 8
Section 20. Election Of Directors, Term, Qualifications. . . . . . . . . 9
Section 21. Resignations . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 22. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 23. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 24. Regular Meetings . . . . . . . . . . . . . . . . . . . . . .10
Section 25. Participation by Telephone . . . . . . . . . . . . . . . . .10
Section 26. Special Meetings . . . . . . . . . . . . . . . . . . . . . .10
i.
<PAGE>
Section 27. Notice of Meetings . . . . . . . . . . . . . . . . . . . . .10
Section 28. Place of Meetings. . . . . . . . . . . . . . . . . . . . . .11
Section 29. Action by Written Consent Without a Meeting. . . . . . . . .11
Section 30. Quorum and Transaction of Business . . . . . . . . . . . . .11
Section 31. Adjournment. . . . . . . . . . . . . . . . . . . . . . . . .11
Section 32. Organization . . . . . . . . . . . . . . . . . . . . . . . .11
Section 33. Compensation . . . . . . . . . . . . . . . . . . . . . . . .11
Section 34. Committees . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE V - Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 35. Officers . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 36. Appointment. . . . . . . . . . . . . . . . . . . . . . . . .13
Section 37. Inability to Act . . . . . . . . . . . . . . . . . . . . . .13
Section 38. Resignations . . . . . . . . . . . . . . . . . . . . . . . .13
Section 39. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 40. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 41. Chairman of the Board. . . . . . . . . . . . . . . . . . . .13
Section 42. President. . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 43. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . .14
Section 44. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 45. Chief Financial Officer. . . . . . . . . . . . . . . . . . .15
Section 46. Compensation . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE VI - Contracts, Loans, Bank Accounts, Checks and Drafts. . . . . . . .16
Section 47. Execution of Contracts and Other Instruments . . . . . . . .16
Section 48. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 49. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . .16
Section 50. Checks, Drafts, Etc. . . . . . . . . . . . . . . . . . . . .16
ARTICLE VII - Certificates for Shares and Their Transfer . . . . . . . . . . .17
Section 51. Certificate for Shares . . . . . . . . . . . . . . . . . . .17
Section 52. Transfer on the Books. . . . . . . . . . . . . . . . . . . .17
Section 53. Lost, Destroyed and Stolen Certificates. . . . . . . . . . .17
Section 54. Issuance, Transfer and Registration of Shares. . . . . . . .18
ARTICLE VIII - Inspection of Corporate Records . . . . . . . . . . . . . . . .18
Section 55. Inspection by Directors. . . . . . . . . . . . . . . . . . .18
Section 56. Inspection by Shareholders . . . . . . . . . . . . . . . . .18
Section 57. Written Form . . . . . . . . . . . . . . . . . . . . . . . .19
ii.
<PAGE>
ARTICLE IX - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 58. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . .19
Section 59. Annual Report. . . . . . . . . . . . . . . . . . . . . . . .19
Section 60. Record Date. . . . . . . . . . . . . . . . . . . . . . . . .20
Section 61. Bylaw Amendments . . . . . . . . . . . . . . . . . . . . . .20
Section 62. Construction and Definition. . . . . . . . . . . . . . . . .20
ARTICLE X - Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 63. Indemnification of Directors, Officers, Employees
And Other Agents. . . . . . . . . . . . . . . . . . . . . .21
ARTICLE XI - Right of First Refusal. . . . . . . . . . . . . . . . . . . . . .25
Section 64. Right of First Refusal . . . . . . . . . . . . . . . . . . .25
ARTICLE XII - Loans of Officers and Others . . . . . . . . . . . . . . . . . .27
Section 65. Certain Corporate Loans and Guaranties. . . . . . . . . . .27
iii.
<PAGE>
BYLAWS
OF
AVIRON,
A CALIFORNIA CORPORATION
As Amended as of September 2, 1993
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal executive office of the
corporation shall be located at such place as the Board of Directors may from
time to time authorize. If the principal executive office is located outside
this state, and the corporation has one or more business offices in this state,
the board of directors shall fix and designate a principal business office in
the State of California.
Section 2. OTHER OFFICES. Additional offices of the corporation shall be
located at such place or places, within or outside the State of California, as
the Board of Directors may from time to time authorize.
ARTICLE II
CORPORATE SEAL
Section 3. CORPORATE SEAL. If the Board of Directors adopts a corporate
seal such seal shall have inscribed thereon the name of the corporation and the
state and date of its incorporation. If and when a seal is adopted by the Board
of Directors, such seal may be engraved, lithographed, printed, stamped,
impressed upon, or affixed to any contract, conveyance, certificate for shares,
or other instrument executed by the corporation.
ARTICLE III
SHAREHOLDERS' MEETINGS AND VOTING RIGHTS
Section 4. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the principal executive office of the corporation, or at any other place, within
or outside the State of California,
1.
<PAGE>
which may be fixed either by the Board of Directors or by the written consent of
all persons entitled to vote at such meeting, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 5. ANNUAL MEETING. The annual meeting of the shareholders of the
corporation shall be held on any date and time which may from time to time be
designated by the Board of Directors. At such annual meeting, directors shall
be elected and any other business may be transacted which may properly come
before the meeting.
Section 6. POSTPONEMENT OF ANNUAL MEETING. The Board of Directors and the
President shall each have authority to hold at an earlier date and/or time, or
to postpone to a later date and/or time, the annual meeting of shareholders.
Section 7. SPECIAL MEETINGS.
(a) Special meetings of the shareholders, for any purpose or
purposes, may be called by the Board of Directors, the Chairman of the Board of
Directors, the President, or the holders of shares entitled to cast not less
than ten percent (10%) of the votes at the meeting.
(b) Upon written request to the Chairman of the Board of Directors,
the President, any vice president or the Secretary of the corporation by any
person or persons (other than the Board of Directors) entitled to call a special
meeting of the shareholders, such officer forthwith shall cause notice to be
given to the shareholders entitled to vote, that a meeting will be held at a
time requested by the person or persons calling the meeting, such time to be not
less than thirty-five (35) nor more than sixty (60) days after receipt of such
request. If such notice is not given within twenty (20) days after receipt of
such request, the person or persons calling the meeting may give notice thereof
in the manner provided by law or in these bylaws. Nothing contained in this
Section 7 shall be construed as limiting, fixing or affecting the time or date
when a meeting of shareholders called by action of the Board of Directors may be
held.
Section 8. NOTICE OF MEETINGS. Except as otherwise may be required by law
and subject to subsection 7(b) above, written notice of each meeting of
shareholders shall be given to each shareholder entitled to vote at that meeting
(see Section 15 below), by the Secretary, assistant secretary or other person
charged with that duty, not less than ten (10) (or, if sent by third class mail,
thirty (30)) nor more than sixty (60) days before such meeting.
Notice of any meeting of shareholders shall state the date, place and hour
of the meeting and,
(a) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be transacted at such
meeting;
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(b) in the case of an annual meeting, the general nature of matters
which the Board of Directors, at the time the notice is given, intends to
present for action by the shareholders;
(c) in the case of any meeting at which directors are to be
elected, the names of the nominees intended at the time of the notice to be
presented by management for election; and
(d) in the case of any meeting, if action is to be taken on any of
the following proposals, the general nature of such proposal:
(1) a proposal to approve a transaction within the
provisions of California Corporations Code, Section 310 (relating to certain
transactions in which a director has an interest);
(2) a proposal to approve a transaction within the
provisions of California Corporations Code, Section 902 (relating to amending
the Articles of Incorporation of the corporation);
(3) a proposal to approve a transaction within the
provisions of California Corporations Code, Sections 181 and 1201 (relating to
reorganization);
(4) a proposal to approve a transaction within the
provisions of California Corporations Code, Section 1900 (winding up and
dissolution);
(5) a proposal to approve a plan of distribution within the
provisions of California Corporations Code, Section 2007 (relating to certain
plans providing for distribution not in accordance with the liquidation rights
of preferred shares, if any).
At a special meeting, notice of which has been given in accordance
with this Section, action may not be taken with respect to business, the general
nature of which has not been stated in such notice. At an annual meeting,
action may be taken with respect to business stated in the notice of such
meeting, given in accordance with this Section, and, subject to subsection 8(d)
above, with respect to any other business as may properly come before the
meeting.
Section 9. MANNER OF GIVING NOTICE. Notice of any meeting of shareholders
shall be given either personally or by first-class mail, or, if the corporation
has outstanding shares held of record by 500 or more persons (determined as
provided in California Corporations Code Section 605) on the record date for
such meeting, third-class mail, or telegraphic or other written communication,
addressed to the shareholder at the address of that shareholder appearing on the
books of the corporation or given by the shareholder to the corporation for the
purpose of notice. If no such address appears on the corporation's books or is
given, notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at least once in a
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newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, all
future notices shall be deemed to have been duly given without further mailing
if these shall be available to the shareholder on written demand by the
shareholder at the principal executive office of the corporation for a period of
one year from the date of the giving of the notice.
Section 10. QUORUM AND TRANSACTION OF BUSINESS.
(a) At any meeting of the shareholders, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum.
If a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter shall be the act
of the shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles of Incorporation, and except as provided in
subsection (b) below.
(b) The shareholders present at a duly called or held meeting of
the shareholders at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, provided that any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
(c) In the absence of a quorum, no business other than adjournment
may be transacted, except as described in subsection (b) above.
Section 11. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
shareholders may be adjourned from time to time, whether or not a quorum is
present, by the affirmative vote of a majority of shares represented at such
meeting either in person or by proxy and entitled to vote at such meeting.
In the event any meeting is adjourned, it shall not be necessary to give
notice of the time and place of such adjourned meeting pursuant to Sections 8
and 9 of these bylaws; provided that if any of the following three events occur,
such notice must be given:
(1) announcement of the adjourned meeting's time and place is not
made at the original meeting which it continues or
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(2) such meeting is adjourned for more than forty-five (45) days
from the date set for the original meeting or
(3) a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any business which
might have been transacted at the original meeting.
Section 12. WAIVER OF NOTICE, CONSENT TO MEETING OR APPROVAL OF MINUTES.
(a) Subject to subsection (b) of this Section, the transactions of
any meeting of shareholders, however called and noticed, and wherever held,
shall be as valid as though made at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the persons entitled to vote but not
present in person or by proxy signs a written waiver of notice or a consent to
holding of the meeting or an approval of the minutes thereof.
(b) A waiver of notice, consent to the holding of a meeting or
approval of the minutes thereof need not specify the business to be transacted
or transacted at nor the purpose of the meeting; provided that in the case of
proposals described in subsection (d) of Section 8 of these bylaws, the general
nature of such proposals must be described in any such waiver of notice and such
proposals can only be approved by waiver of notice, not by consent to holding of
the meeting or approval of the minutes.
(c) All waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
(d) A person's attendance at a meeting shall constitute waiver of
notice of and presence at such meeting, except when such person objects at the
beginning of the meeting to transaction of any business because the meeting is
not lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters which are required
by law or these bylaws to be in such notice (including those matters described
in subsection (d) of Section 8 of these bylaws), but are not so included if such
person expressly objects to consideration of such matter or matters at any time
during the meeting.
Section 13. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which
may be taken at any meeting of shareholders may be taken without a meeting and
without prior notice if written consents setting forth the action so taken are
signed by the holders of the outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
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Directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors; provided
that any vacancy on the Board of Directors (other than a vacancy created by
removal) which has not been filled by the Board of Directors may be filled by
the written consent of a majority of outstanding shares entitled to vote for the
election of directors.
Any written consent may be revoked pursuant to California Corporations Code
Section 603(c) prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
Such revocation must be in writing and will be effective upon its receipt by the
Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of any corporate action approved by the shareholders without a meeting to
those shareholders entitled to vote on such matters who have not consented
thereto in writing. This notice shall be given in the manner specified in
Section 8 of these bylaws. In the case of approval of (i) a transaction within
the provisions of California Corporations Code, Section 310 (relating to certain
transactions in which a director has an interest), (ii) a transaction within the
provisions of California Corporations Code, Section 317 (relating to
indemnification of agents of the corporation), (iii) a transaction within the
provisions of California Corporations Code, Sections 181 and 1201 (relating to
reorganization), and (iv) a plan of distribution within the provisions of
California Corporations Code, Section 2007 (relating to certain plans providing
for distribution not in accordance with the liquidation rights of preferred
shares, if any), the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
Section 14. VOTING. Voting at any meeting of shareholders need not be by
ballot; provided, however, that elections for directors must be by ballot if
balloting is demanded by a shareholder at the meeting and before the voting
begins.
Every person entitled to vote at an election for directors may cumulate the
votes to which such person is entitled, i.e., such person may cast a total
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such person's shares are entitled, and may cast said
total number of votes for one or more candidates in such proportions as such
person thinks fit; provided, however, no shareholder shall be entitled to so
cumulate such shareholder's votes unless the candidates for which such
shareholder is voting have been placed in nomination prior to the voting and a
shareholder has given notice at the meeting, prior to the vote, of an intention
to cumulate votes. In any election of directors, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Except as may be otherwise provided in the Articles of Incorporation or by
law, and subject to the foregoing provisions regarding the cumulation of votes,
each shareholder shall be entitled to one vote for each share held.
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Any shareholder may vote part of such shareholder's shares in favor of a
proposal and refrain from voting the remaining shares or vote them against the
proposal, other than elections to office, but, if the shareholder fails to
specify the number of shares such shareholder is voting affirmatively, it will
be conclusively presumed that the shareholder's approving vote is with respect
to all shares such shareholder is entitled to vote.
No shareholder approval, other than unanimous approval of those entitled to
vote, will be valid as to proposals described in subsection 8(d) of these bylaws
unless the general nature of such business was stated in the notice of meeting
or in any written waiver of notice.
Section 15. PERSONS ENTITLED TO VOTE OR CONSENT. The Board of Directors
may fix a record date pursuant to Section 60 of these bylaws to determine which
shareholders are entitled to notice of and to vote at a meeting or consent to
corporate actions, as provided in Sections 13 and 14 of these bylaws. Only
persons in whose name shares otherwise entitled to vote stand on the stock
records of the corporation on such date shall be entitled to vote or consent.
If no record date is fixed:
(1) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day notice is given or, if notice is waived,
at the close of business on the business day next preceding the day on which the
meeting is held;
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given;
(3) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting;
provided, however, that the Board of Directors shall fix a new record date if
the meeting is adjourned for more than forty-five (45) days from the date set
for the original meeting.
Shares of the corporation held by its subsidiary or subsidiaries (as
defined in California Corporations Code, Section 189(b)) are not entitled to
vote in any matter.
Section 16. PROXIES. Every person entitled to vote or execute consents
may do so either in person or by one or more agents authorized to act by a
written proxy executed by the person or such person's duly authorized agent and
filed with the Secretary of the corporation; provided
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that no such proxy shall be valid after the expiration of eleven (11) months
from the date of its execution unless otherwise provided in the proxy. The
manner of execution, suspension, revocation, exercise and effect of proxies is
governed by law.
Section 17. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request
of one or more shareholders or proxies, the majority of shares represented in
person or proxy shall determine whether one (1) or three (3) inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE IV
BOARD OF DIRECTORS
Section 18. POWERS. Subject to the provisions of law or any limitations
in the Articles of Incorporation or these bylaws, as to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate
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powers shall be exercised, by or under the direction of the Board of Directors.
The Board of Directors may delegate the management of the day-to-day operation
of the business of the corporation to a management company or other person,
provided that the business and affairs of the corporation shall be managed and
all corporate powers shall be exercised under the ultimate direction of the
Board of Directors.
Section 19. NUMBER OF DIRECTORS. The authorized number of directors of
the corporation shall be not less than a minimum of four (4) nor more than a
maximum of seven (7) (which maximum number in no case shall be greater than two
times said minimum, minus one) and the number of directors presently authorized
is six (6). The exact number of directors shall be set within these limits from
time to time (a) by approval of the Board of Directors, or (b) by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum) or by the written
consent of shareholders pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, an amendment reducing the minimum
number of directors to less than five (5), cannot be adopted if votes cast
against its adoption at a meeting or the shares not consenting to it in the case
of action by written consent are equal to more than 16-2/3 percent of the
outstanding shares entitled to vote.
No reduction of the authorized number of directors shall remove any
director prior to the expiration of such director's term of office.
Section 20. ELECTION OF DIRECTORS, TERM, QUALIFICATIONS. The directors
shall be elected at each annual meeting of shareholders to hold office until the
next annual meeting. Each director, including a director elected or appointed
to fill a vacancy, shall hold office either until the expiration of the term for
which elected or appointed and until a successor has been elected and qualified,
or until his death, resignation or removal. Directors need not be shareholders
of the corporation.
Section 21. RESIGNATIONS. Any director of the corporation may resign
effective upon giving written notice to the Chairman of the Board, the
President, the Secretary or the Board of Directors of the corporation, unless
the notice specifies a later time for the effectiveness of such resignation. If
the resignation specifies effectiveness at a future time, a successor may be
elected pursuant to Section 23 of these bylaws to take office on the date that
the resignation becomes effective.
Section 22. REMOVAL. The Board of Directors may declare vacant the office
of a director who has been declared of unsound mind by an order of court or who
has been convicted of a felony.
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The entire Board of Directors or any individual director may be removed
from office without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote on such removal; provided, however, that
unless the entire Board is removed, no individual director may be removed when
the votes cast against such director's removal, or not consenting in writing to
such removal, would be sufficient to elect that director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled to vote were voted)
and the entire number of directors authorized at the time of such director's
most recent election were then being elected.
Section 23. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in case of the death, resignation or removal of any
director, or upon increase in the authorized number of directors or if
shareholders fail to elect the full authorized number of directors at an annual
meeting of shareholders or if, for whatever reason, there are fewer directors on
the Board of Directors, than the full number authorized. Such vacancy or
vacancies, other than a vacancy created by the removal of a director, may be
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director. A vacancy created by the removal of a director
may be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) or by the written consent of shareholders pursuant to
Section 13 hereinabove. The shareholders may elect a director at any time to
fill any vacancy not filled by the directors. Any such election by written
consent, other than to fill a vacancy created by removal, requires the consent
of a majority of the outstanding shares entitled to vote. Any such election by
written consent to fill a vacancy created by removal requires the consent of all
of the outstanding shares entitled to vote.
If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of five percent (5%) or more of the shares outstanding at that time and having
the right to vote for such directors may call a special meeting of shareholders
to be held to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
Section 24. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times, places and dates as fixed in these bylaws or by the
Board of Directors; provided, however, that if the date for such a meeting falls
on a legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. Regular meetings of the Board of Directors held
pursuant to this Section 24 may be held without notice.
Section 25. PARTICIPATION BY TELEPHONE. Members of the Board of Directors
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Such participation constitutes presence in person at such
meeting.
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Section 26. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose may be called by the Chairman of the Board or the President or
any vice president or the Secretary of the corporation or any two (2) directors.
Section 27. NOTICE OF MEETINGS. Notice of the date, time and place of all
meetings of the Board of Directors, other than regular meetings held pursuant to
Section 24 above shall be delivered personally, orally or in writing, or by
telephone or telegraph to each director, at least forty-eight (48) hours before
the meeting, or sent in writing to each director by first-class mail, charges
prepaid, at least four (4) days before the meeting. Such notice may be given by
the Secretary of the corporation or by the person or persons who called a
meeting. Such notice need not specify the purpose of the meeting. Notice of any
meeting of the Board of Directors need not be given to any director who signs a
waiver of notice of such meeting, or a consent to holding the meeting or an
approval of the minutes thereof, either before or after the meeting, or who
attends the meeting without protesting prior thereto or at its commencement such
director's lack of notice. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Section 28. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at any place within or without the state which has been designated in the
notice of the meeting or, if not stated in the notice or there is no notice,
designated in the bylaws or by resolution of the Board of Directors.
Section 29. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Directors may be taken without
a meeting, if all members of the Board of Directors individually or collectively
consent in writing to such action. Such written consent or consents shall be
filed with the minutes of the proceedings of the Board of Directors. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors.
Section 30. QUORUM AND TRANSACTION OF BUSINESS. A majority of the
authorized number of directors shall constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the authorized
number of directors present at a meeting duly held at which a quorum is present
shall be the act of the Board of Directors, unless the law, the Articles of
Incorporation or these bylaws specifically require a greater number. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding withdrawal of directors, if any action taken is approved by at
least a majority of the number of directors constituting a quorum for such
meeting. In the absence of a quorum at any meeting of the Board of Directors, a
majority of the directors present may adjourn the meeting, as provided in
Section 31 of these bylaws.
Section 31. ADJOURNMENT. Any meeting of the Board of Directors, whether
or not a quorum is present, may be adjourned to another time and place by the
affirmative vote of a majority of the directors present. If the meeting is
adjourned for more than twenty-four (24)
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hours, notice of such adjournment to another time or place shall be given prior
to the time of the adjourned meeting to the directors who were not present at
the time of the adjournment.
Section 32. ORGANIZATION. The Chairman of the Board shall preside at
every meeting of the Board of Directors, if present. If there is no Chairman of
the Board or if the Chairman is not present, a Chairman chosen by a majority of
the directors present shall act as chairman. The Secretary of the corporation
or, in the absence of the Secretary, any person appointed by the Chairman shall
act as secretary of the meeting.
Section 33. COMPENSATION. Directors and members of committees may receive
such compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed or determined by the Board of Directors.
Section 34. COMMITTEES. The Board of Directors may, by resolution adopted
by a majority of the authorized number of directors, designate one or more
committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors, by a vote of the
majority of authorized directors, may designate one or more directors as
alternate members of any committee, to replace any absent member at any meeting
of such committee. Any such committee shall have authority to act in the manner
and to the extent provided in the resolution of the Board of Directors, and may
have all the authority of the Board of Directors in the management of the
business and affairs of the corporation, except with respect to:
(a) the approval of any action for which shareholders' approval or
approval of the outstanding shares also is required by the California
Corporations Code;
(b) the filling of vacancies on the Board of Directors or any of
its committees;
(c) the fixing of compensation of directors for serving on the
Board of Directors or any of its committees;
(d) the adoption, amendment or repeal of these bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) a distribution to shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors; or
(g) the appointment of other committees of the Board of Directors
or the members thereof.
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Any committee may from time to time provide by resolution for regular
meetings at specified times and places. If the date of such a meeting falls on
a legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. No notice of such a meeting need be given. Such
regular meetings need not be held if the committee shall so determine at any
time before or after the time when such meeting would otherwise have taken
place. Special meetings may be called at any time in the same manner and by the
same persons as stated in Sections 25 and 26 of these bylaws for meetings of the
Board of Directors. The provisions of Sections 24, 27, 28, 29, 30 and 31 of
these bylaws shall apply to committees, committee members and committee meetings
as if the words "committee" and "committee member" were substituted for the word
"Board of Directors", and "director", respectively, throughout such sections.
ARTICLE V
OFFICERS
Section 35. OFFICERS. The corporation shall have a Chairman of the Board
or a President or both, a Secretary, a Chief Financial Officer and such other
officers with such titles and duties as the Board of Directors may determine.
Any two or more offices may be held by the same person.
Section 36. APPOINTMENT. All officers shall be chosen and appointed by
the Board of Directors; provided, however, the Board of Directors may empower
the chief executive officer of the corporation to appoint such officers, other
than Chairman of the Board, President, Secretary or Chief Financial Officer, as
the business of the corporation may require. All officers shall serve at the
pleasure of the Board of Directors, subject to the rights, if any, of an officer
under a contract of employment.
Section 37. INABILITY TO ACT. In the case of absence or inability to act
of any officer of the corporation or of any person authorized by these bylaws to
act in such officer's place, the Board of Directors may from time to time
delegate the powers or duties of such officer to any other officer, or any
director or other person whom it may select, for such period of time as the
Board of Directors deems necessary.
Section 38. RESIGNATIONS. Any officer may resign at any time upon written
notice to the corporation, without prejudice to the rights, if any, of the
corporation under any contract to which such officer is a party. Such
resignation shall be effective upon its receipt by the Chairman of the Board,
the President, the Secretary or the Board of Directors, unless a different time
is specified in the notice for effectiveness of such resignation. The
acceptance of any such resignation shall not be necessary to make it effective
unless otherwise specified in such notice.
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Section 39. REMOVAL. Any officer may be removed from office at any time,
with or without cause, but subject to the rights, if any, of such officer under
any contract of employment, by the Board of Directors or by any committee to
whom such power of removal has been duly delegated, or, with regard to any
officer who has been appointed by the chief executive officer pursuant to
Section 36 above, by the chief executive officer or any other officer upon whom
such power of removal may be conferred by the Board of Directors.
Section 40. VACANCIES. A vacancy occurring in any office for any cause
may be filled by the Board of Directors, in the manner prescribed by this
Article of the bylaws for initial appointment to such office.
Section 41. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be
such an officer, shall, if present, preside at all meetings of the Board of
Directors and shall exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors or prescribed by these
bylaws. If no President is appointed, the Chairman of the Board is the general
manager and chief executive officer of the corporation, and shall exercise all
powers of the President described in Section 42 below.
Section 42. PRESIDENT. Subject to such powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the general manager and chief executive officer
of the corporation and shall have general supervision and control over the
business and affairs of the corporation, subject to the control of the Board of
Directors. The President may sign and execute, in the name of the corporation,
any instrument authorized by the Board of Directors, except when the signing and
execution thereof shall have been expressly delegated by the Board of Directors
or by these bylaws to some other officer or agent of the corporation. The
President shall have all the general powers and duties of management usually
vested in the president of a corporation, and shall have such other powers and
duties as may be prescribed from time to time by the Board of Directors or these
bylaws. The President shall have discretion to prescribe the duties of other
officers and employees of the corporation in a manner not inconsistent with the
provisions of these bylaws and the directions of the Board of Directors.
Section 43. VICE PRESIDENTS. In the absence or disability of the
President, in the event of a vacancy in the office of President, or in the event
such officer refuses to act, the Vice President shall perform all the duties of
the President and, when so acting, shall have all the powers of, and be subject
to all the restrictions on, the President. If at any such time the corporation
has more than one vice president, the duties and powers of the President shall
pass to each vice president in order of such vice president's rank as fixed by
the Board of Directors or, if the vice presidents are not so ranked, to the vice
president designated by the Board of Directors. The vice presidents shall have
such other powers and perform such other duties as may be prescribed for them
from time to time by the Board of Directors or pursuant to Sections 35 and 36 of
these bylaws or otherwise pursuant to these bylaws.
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Section 44. SECRETARY. The Secretary shall:
(a) Keep, or cause to be kept, minutes of all meetings of the
corporation's shareholders, Board of Directors, and committees of the Board of
Directors, if any. Such minutes shall be kept in written form.
(b) Keep, or cause to be kept, at the principal executive office of
the corporation, or at the office of its transfer agent or registrar, if any, a
record of the corporation's shareholders, showing the names and addresses of all
shareholders, and the number and classes of shares held by each. Such records
shall be kept in written form or any other form capable of being converted into
written form.
(c) Keep, or cause to be kept, at the principal executive office of
the corporation, or if the principal executive office is not in California, at
its principal business office in California, an original or copy of these
bylaws, as amended.
(d) Give, or cause to be given, notice of all meetings of
shareholders, directors and committees of the Board of Directors, as required by
law or by these bylaws.
(e) Keep the seal of the corporation, if any, in safe custody.
(f) Exercise such powers and perform such duties as are usually
vested in the office of secretary of a corporation, and exercise such other
powers and perform such other duties as may be prescribed from time to time by
the Board of Directors or these bylaws.
If any assistant secretaries are appointed, the assistant secretary, or one
of the assistant secretaries in the order of their rank as fixed by the Board of
Directors or, if they are not so ranked, the assistant secretary designated by
the Board of Directors, in the absence or disability of the Secretary or in the
event of such officer's refusal to act or if a vacancy exists in the office of
Secretary, shall perform the duties and exercise the powers of the Secretary and
discharge such duties as may be assigned from time to time pursuant to these
bylaws or by the Board of Directors.
Section 45. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall:
(a) Be responsible for all functions and duties of the treasurer
of the corporation.
(b) Keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of account for the corporation.
(c) Receive or be responsible for receipt of all monies due and
payable to the corporation from any source whatsoever; have charge and custody
of, and be responsible for, all monies and other valuables of the corporation
and be responsible for deposit of all such monies
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in the name and to the credit of the corporation with such depositaries as may
be designated by the Board of Directors or a duly appointed and authorized
committee of the Board of Directors.
(d) Disburse or be responsible for the disbursement of the funds
of the corporation as may be ordered by the Board of Directors or a duly
appointed and authorized committee of the Board of Directors.
(e) Render to the chief executive officer and the Board of
Directors a statement of the financial condition of the corporation if called
upon to do so.
(f) Exercise such powers and perform such duties as are usually
vested in the office of chief financial officer of a corporation, and exercise
such other powers and perform such other duties as may be prescribed by the
Board of Directors or these bylaws.
If any assistant financial officer is appointed, the assistant financial
officer, or one of the assistant financial officers, if there are more than one,
in the order of their rank as fixed by the Board of Directors or, if they are
not so ranked, the assistant financial officer designated by the Board of
Directors, shall, in the absence or disability of the Chief Financial Officer or
in the event of such officer's refusal to act, perform the duties and exercise
the powers of the Chief Financial Officer, and shall have such powers and
discharge such duties as may be assigned from time to time pursuant to these
bylaws or by the Board of Directors.
Section 46. COMPENSATION. The compensation of the officers shall be fixed
from time to time by the Board of Directors, and no officer shall be prevented
from receiving such compensation by reason of the fact that such officer is also
a director of the corporation.
ARTICLE VI
CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS AND DRAFTS
Section 47. EXECUTION OF CONTRACTS AND OTHER INSTRUMENTS. Except as these
bylaws may otherwise provide, the Board of Directors or its duly appointed and
authorized committee may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authorization may be general or confined
to specific instances. Except as so authorized or otherwise expressly provided
in these bylaws, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or in any amount.
Section 48. LOANS. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name, unless and
except as authorized by the Board of Directors or its duly appointed and
authorized committee. When so authorized by the Board of
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Directors or such committee, any officer or agent of the corporation may effect
loans and advances at any time for the corporation from any bank, trust company,
or other institution, or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the corporation and, when authorized as
aforesaid, may mortgage, pledge, hypothecate or transfer any and all stocks,
securities and other property, real or personal, at any time held by the
corporation, and to that end endorse, assign and deliver the same as security
for the payment of any and all loans, advances, indebtedness, and liabilities of
the corporation. Such authorization may be general or confined to specific
instances.
Section 49. BANK ACCOUNTS. The Board of Directors or its duly appointed
and authorized committee from time to time may authorize the opening and keeping
of general and/or special bank accounts with such banks, trust companies, or
other depositaries as may be selected by the Board of Directors, its duly
appointed and authorized committee or by any officer or officers, agent or
agents, of the corporation to whom such power may be delegated from time to time
by the Board of Directors. The Board of Directors or its duly appointed and
authorized committee may make such rules and regulations with respect to said
bank accounts, not inconsistent with the provisions of these bylaws, as are
deemed advisable.
Section 50. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, acceptances or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents, of the corporation, and in such manner, as shall be
determined from time to time by resolution of the Board of Directors or its duly
appointed and authorized committee. Endorsements for deposit to the credit of
the corporation in any of its duly authorized depositaries may be made, without
counter-signature, by the President or any vice president or the Chief Financial
Officer or any assistant financial officer or by any other officer or agent of
the corporation to whom the Board of Directors or its duly appointed and
authorized committee, by resolution, shall have delegated such power or by
hand-stamped impression in the name of the corporation.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 51. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an assistant financial
officer or by the Secretary or an assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all
of the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
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corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
In the event that the corporation shall issue any shares as only partly
paid, the certificate issued to represent such partly paid shares shall have
stated thereon the total consideration to be paid for such shares and the amount
paid thereon.
Section 52. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent (if any) of the corporation of a certificate for shares of the
corporation duly endorsed, with reasonable assurance that the endorsement is
genuine and effective, or accompanied by proper evidence of succession,
assignment or authority to transfer and upon compliance with applicable federal
and state securities laws and if the corporation has no statutory duty to
inquire into adverse claims or has discharged any such duty and if any
applicable law relating to the collection of taxes has been complied with, it
shall be the duty of the corporation, by its Secretary or transfer agent, to
cancel the old certificate, to issue a new certificate to the person entitled
thereto and to record the transaction on the books of the corporation.
Section 53. LOST, DESTROYED AND STOLEN CERTIFICATES. The holder of any
certificate for shares of the corporation alleged to have been lost, destroyed
or stolen shall notify the corporation by making a written affidavit or
affirmation of such fact. Upon receipt of said affidavit or affirmation the
Board of Directors, or its duly appointed and authorized committee or any
officer or officers authorized by the board so to do, may order the issuance of
a new certificate for shares in the place of any certificate previously issued
by the corporation and which is alleged to have been lost, destroyed or stolen.
However, the Board of Directors or such authorized committee, officer or
officers may require the owner of the allegedly lost, destroyed or stolen
certificate, or such owner's legal representative, to give the corporation a
bond or other adequate security sufficient to indemnify the corporation and its
transfer agent and/or registrar, if any, against any claim that may be made
against it or them on account of such allegedly lost, destroyed or stolen
certificate or the replacement thereof. Said bond or other security shall be in
such amount, on such terms and conditions and, in the case of a bond, with such
surety or sureties as may be acceptable to the Board of Directors or to its duly
appointed and authorized committee or any officer or officers authorized by the
Board of Directors to determine the sufficiency thereof. The requirement of a
bond or other security may be waived in particular cases at the discretion of
the Board of Directors or its duly appointed and authorized committee or any
officer or officers authorized by the Board of Directors so to do.
Section 54. ISSUANCE, TRANSFER AND REGISTRATION OF SHARES. The Board of
Directors may make such rules and regulations, not inconsistent with law or with
these bylaws, as it may deem advisable concerning the issuance, transfer and
registration of certificates for shares of the capital stock of the corporation.
The Board of Directors may appoint a transfer agent or registrar of transfers,
or both, and may require all certificates for shares of the corporation to bear
the signature of either or both.
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ARTICLE VIII
INSPECTION OF CORPORATE RECORDS
Section 55. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind of the corporation and any of its subsidiaries and
to inspect the physical properties of the corporation and any of its
subsidiaries. Such inspection may be made by the director in person or by agent
or attorney, and the right of inspection includes the right to copy and make
extracts.
Section 56. INSPECTION BY SHAREHOLDERS.
(a) INSPECTION OF CORPORATE RECORDS.
(i) A shareholder or shareholders holding at least five
percent in the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a Schedule
14B with the United States Securities and Exchange Commission relating to the
election of directors of the corporation shall have an absolute right to do
either or both of the following:
(A) Inspect and copy the record of shareholders' names
and addresses and shareholdings during usual business hours upon five business
days' prior written demand upon the corporation; or
(B) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(ii) The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interest as a
shareholder or holder of a voting trust certificate.
(iii) The accounting books and records and minutes of
proceedings of the shareholders and the Board of Directors and of any committees
of the Board of Directors of the corporation and of each of its subsidiaries
shall be open to inspection, copying and making extracts upon written demand on
the corporation of any shareholder or holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or as a holder of such
voting trust certificate.
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(iv) Any inspection, copying, and making of extracts under
this subsection (a) may be done in person or by agent or attorney.
(b) INSPECTION OF BYLAWS. The original or a copy of these bylaws
shall be kept as provided in Section 44 of these bylaws and shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is not in California, and the
corporation has no principal business office in the state of California, a
current copy of these bylaws shall be furnished to any shareholder upon written
request.
Section 57. WRITTEN FORM. If any record subject to inspection pursuant to
Section 56 above is not maintained in written form, a request for inspection is
not complied with unless and until the corporation at its expense makes such
record available in written form.
ARTICLE IX
MISCELLANEOUS
Section 58. FISCAL YEAR. Unless otherwise fixed by resolution of the
Board of Directors, the fiscal year of the corporation shall end on the 31st day
of December in each calendar year.
Section 59. ANNUAL REPORT.
(a) Subject to the provisions of Section 59(b) below, the Board of
Directors shall cause an annual report to be sent to each shareholder of the
corporation in the manner provided in Section 9 of these bylaws not later than
one hundred twenty (120) days after the close of the corporation's fiscal year.
Such report shall include a balance sheet as of the end of such fiscal year and
an income statement and statement of changes in financial position for such
fiscal year, accompanied by any report thereon of independent accountants or, if
there is no such report, the certificate of an authorized officer of the
corporation that such statements were prepared without audit from the books and
records of the corporation. When there are more than 100 shareholders of record
of the corporation's shares, as determined by Section 605 of the California
Corporations Code, additional information as required by Section 1501(b) of the
California Corporations Code shall also be contained in such report, provided
that if the corporation has a class of securities registered under Section 12 of
the United States Securities Exchange Act of 1934, that Act shall take
precedence. Such report shall be sent to shareholders at least fifteen (15)
days prior to the next annual meeting of shareholders after the end of the
fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
shareholders of the corporation is hereby expressly waived.
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Section 60. RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of or to vote at any meeting or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any change, conversion or exchange of shares
or entitled to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days nor less than ten
(10) days prior to the date of the meeting nor more than sixty (60) days prior
to any other action or event for the purpose of which it is fixed. If no record
date is fixed, the provisions of Section 15 of these bylaws shall apply with
respect to notice of meetings, votes, and consents and the record date for
determining shareholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolutions relating
thereto, or the sixtieth (60th) day prior to the date of such other action or
event, whichever is later.
Only shareholders of record at the close of business on the record date
shall be entitled to notice and to vote or to receive the dividend, distribution
or allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Articles of Incorporation,
by agreement or by law.
Section 61. BYLAW AMENDMENTS. Except as otherwise provided by law or
Section 19 of these bylaws, these bylaws may be amended or repealed by the Board
of Directors or by the affirmative vote of a majority of the outstanding shares
entitled to vote, including, if applicable, the affirmative vote of a majority
of the outstanding shares of each class or series entitled by law or the
Articles of Incorporation to vote as a class or series on the amendment or
repeal or adoption of any bylaw or bylaws; provided, however, after issuance of
shares, a bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa may only be adopted by approval of the outstanding shares as provided
herein.
Section 62. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the California Corporations Code shall govern the construction of
these bylaws.
Without limiting the foregoing, "shall" is mandatory and "may" is
permissive.
ARTICLE X
INDEMNIFICATION
Section 63. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
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(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers to the fullest extent not
prohibited by the California General Corporation Law; PROVIDED, HOWEVER, that
the corporation may limit the extent of such indemnification by individual
contracts with its directors and executive officers; and, PROVIDED, FURTHER,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the board of directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the California General Corporation Law.
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have the power to indemnify its other officers, employees and other agents
as set forth in the California General Corporation Law.
(c) DETERMINATION BY THE CORPORATION. Promptly after receipt of a
request for indemnification hereunder (and in any event within ninety (90) days
thereof) a reasonable, good faith determination as to whether indemnification of
the director or executive officer is proper under the circumstances because such
director or executive officer has met the applicable standard of care shall be
made by:
(1) a majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) if such quorum is not obtainable, by independent legal
counsel in a written opinion; or
(3) approval or ratification by the affirmative vote of a
majority of the shares of this corporation represented and voting at a duly held
meeting at which a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) or by written consent of
a majority of the outstanding shares entitled to vote; where in each case the
shares owned by the person to be indemnified shall not be considered entitled to
vote thereon.
(d) GOOD FAITH.
(1) For purposes of any determination under this bylaw, a
director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in the best interests of the corporation
and its shareholders, and, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe that his conduct was unlawful, if his
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:
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(i) one or more officers or employees of the corporation
whom the director or executive officer believed to be reliable and competent in
the matters presented;
(ii) counsel, independent accountants or other persons as
to matters which the director or executive officer believed to be within such
person's professional competence; and
(iii) with respect to a director, a committee of the Board
upon which such director does not serve, as to matters within such committee's
designated authority, which committee the director believes to merit confidence;
so long as, in each case, the director or executive officer acts without
knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in the best interests of the
corporation and its shareholders or that he had reasonable cause to believe that
his conduct was unlawful.
(3) The provisions of this paragraph (d) shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
California General Corporation Law.
(e) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it shall be determined ultimately that such person is not entitled to
be indemnified under this bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (f) of this bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding (or, if no such quorum exists, by independent legal counsel in a
written opinion) that the facts known to the decision making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in the
best interests of the corporation and its shareholders.
(f) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in the forum in
which the proceeding
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is or was pending or, if such forum is not available or a determination is made
that such forum is not convenient, in any court of competent jurisdiction if (i)
the claim for indemnification or advances is denied, in whole or in part, or
(ii) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim.
The corporation shall be entitled to raise as a defense to any such action that
the claimant has not met the standards of conduct that make it permissible under
the California General Corporation Law for the corporation to indemnify the
claimant for the amount claimed. Neither the failure of the corporation
(including its board of directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the
California General Corporation Law, nor an actual determination by the
corporation (including its board of directors, independent legal counsel or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(g) NON-EXCLUSIVITY OF RIGHTS. To the fullest extent permitted by
the corporation's Articles of Incorporation and the California General
Corporation Law, the rights conferred on any person by this bylaw shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, bylaws,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent permitted
by the California General Corporation Law and the corporation's Articles of
Incorporation.
(h) SURVIVAL OF RIGHTS. The rights conferred on any person by this
bylaw shall continue as to a person who has ceased to be a director or executive
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(i) INSURANCE. The corporation, upon approval by the board of
directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this bylaw.
(j) AMENDMENTS. Any repeal or modification of this bylaw shall only
be prospective and shall not affect the rights under this bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(k) EMPLOYEE BENEFIT PLANS. The corporation shall indemnify the
directors and officers of the corporation who serve at the request of the
corporation as trustees, investment managers or other fiduciaries of employee
benefit plans to the fullest extent permitted by the California General
Corporation Law.
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(l) SAVING CLAUSE. If this bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the fullest extent permitted by any applicable portion of this bylaw that shall
not have been invalidated, or by any other applicable law.
(m) CERTAIN DEFINITIONS. For the purposes of this bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
ARTICLE XI
RIGHT OF FIRST REFUSAL
Section 64. RIGHT OF FIRST REFUSAL. No shareholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein,
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whether voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements hereinafter set forth in this bylaw:
(a) If the shareholder desires to sell or otherwise transfer any of
his shares of stock, then the shareholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the shareholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 64, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the shareholder, a lesser portion
of the shares, it shall give written notice to the transferring shareholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring shareholder as specified in said
transferring shareholder's notice, the Secretary of the corporation shall so
notify the transferring shareholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring shareholder's notice; provided that if the terms of payment set
forth in said transferring shareholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring shareholder's
notice.
(e) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring shareholder's notice,
said transferring shareholder may, within the sixty-day (60-day) period
following the expiration of the option rights granted to the corporation and/or
its assignees(s) herein, transfer the shares specified in said transferring
shareholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring shareholder's notice. All shares
so sold by said transferring shareholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
26.
<PAGE>
(1) A shareholder's transfer of any or all shares held either
during such shareholder's lifetime or on death by will or intestacy to such
shareholder's immediate family or to any custodian or trustee for the account of
such shareholder or such shareholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother,
sister, brother-in-law or sister-in-law of the shareholder making such transfer.
(2) A shareholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A shareholder's transfer of any or all of such
shareholder's shares to the corporation or to any other shareholder of the
corporation.
(4) A shareholder's transfer of any or all of such
shareholder's shares to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate shareholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate shareholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate shareholder.
(6) A corporate shareholder's transfer of any or all of its
shares to any or all of its shareholders.
(7) A transfer by a shareholder which is a limited or general
partnership (i) to any or all of its partners or former partners or (ii) to any
or all of its affiliated limited or general partnerships, which partnerships are
in a substantially similar line of business.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring shareholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the shareholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
27.
<PAGE>
(i) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On April 15, 2002; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"The shares represented by this certificate are subject to a right of
first refusal option in favor of the corporation and/or its assignee(s), as
provided in the bylaws of the corporation."
ARTICLE XII
LOANS OF OFFICERS AND OTHERS
Section 65. CERTAIN CORPORATE LOANS AND GUARANTIES. If the corporation
has outstanding shares held of record by 100 or more persons on the date of
approval by the Board of Directors, the corporation may make loans of money or
property to, or guarantee the obligations of, any officer of the corporation or
its parent or any subsidiary, whether or not a director of the corporation or
its parent or any subsidiary, or adopt an employee benefit plan or plans
authorizing such loans or guaranties, upon the approval of the Board of
Directors alone, by a vote sufficient without counting the vote of any
interested director or directors, if the Board of Directors determines that such
a loan or guaranty or plan may reasonably be expected to benefit the
corporation.
28.
<PAGE>
Warrant No. PW-1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
AVIRON
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK
This certifies that MOUNT SINAI SCHOOL OF MEDICINE, ("MOUNT SINAI") for
value received, is entitled to purchase from AVIRON, a California corporation
(the "COMPANY"), having a principal place of business at 1815 Old County Road,
Belmont, California 94002, at any time after the Eligibility Date (as defined
below) and prior to the Termination Date (as defined below), twenty-five
thousand (25,000) fully paid and nonassessable shares of Series A Preferred
Stock (the "Series A Stock") of the Company at the Purchase Price (as defined
below), subject to the provisions and upon the terms and conditions hereinafter
set forth.
1. EXERCISABILITY. Until terminated pursuant to Section 2 below, and
except as otherwise provided in Section 11(c) and Section 12, the purchase
rights represented by this Warrant are exercisable at the option of the holder
of record hereof, at any time or from time to time after the date of initiation
by the Company, its affiliate, licensee or other transferee of the first animal
study of a Product (as defined in that certain Technology Transfer Agreement
between the Company and Mount Sinai of even date herewith) (the "ELIGIBILITY
DATE"), for all or any part of the Series A Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company shall deliver to the
holder of this Warrant notice of the occurrence of any Eligibility Date within
ten (10) days of such occurrence.
2. TERMINATION. Where the Eligibility Date has occurred, this Warrant,
and all rights to exercise this Warrant in whole or in part, shall immediately
terminate at the earlier of (a) 5:00 p.m. (Pacific Time), on the fifth (5th)
anniversary of the Eligibility Date, or (b) 5:00 p.m. (Pacific Time), on the day
preceding the closing of the Company's sale of all or substantially all of its
assets or the acquisition of the Company by another entity by means of a merger
or consolidation or sale of stock resulting in the exchange of more than fifty
percent (50%) of the outstanding shares of the Company for securities or
consideration issued, or caused to be issued,
1.
<PAGE>
by the acquiring entity (a "SALE OF THE COMPANY") (such earlier date herein
referred to as the "TERMINATION DATE"). Where the Eligibility Date has not yet
occurred and the events described in (b) above transpire, this Warrant shall
terminate as provided above, except that the Eligibility Date shall be
accelerated as provided in Section 11(c).
3. PURCHASE PRICE. Except as otherwise provided in Section 11(c) and
Section 12, this Warrant shall be exercisable, on or after the Eligibility Date,
at a price per share (the "PURCHASE PRICE") equal to (a) the price per share
(the "PREFERRED SHARE PRICE") at which the most recent series of preferred stock
of the Company (the "PREFERRED STOCK") was sold in the most recent offering of
such Preferred Stock to investors of the Company prior to the Eligibility Date
(it being understood that the sale or issuance of Preferred Stock pursuant to a
transaction with a corporate partner at a price above or below that most
recently paid for such Preferred Stock by the Company's investors shall not
constitute such an "offering"), and, if such Preferred Stock was not Series A
Stock, adjusted as provided below to reflect any difference in the terms of the
dividends payable and paid on or the conversion rights of such Preferred Stock
from the corresponding terms of the Series A Stock, or (b) if the common stock
of the Company (the "COMMON STOCK") is traded on the public market on the date
immediately prior to the Eligibility Date, the average of the closing prices of
the Common Stock reported in the consolidated reporting system for the sixty
(60) trading-day period ending on the trading day immediately prior to the
Eligibility Date or such other shorter period in the event the Eligibility Date
transpires prior to the Common Stock having been traded for such sixty (60)
trading-day period.
If, as of the Eligibility Date, each share of Preferred Stock is
convertible into more or less than one share of Common Stock, or if any
dividends have been paid on the Preferred Stock in additional shares of
Preferred Stock or shares of Common Stock, then the Preferred Share Price shall
be adjusted by dividing the Preferred Share Price by the number of shares of
Common Stock into which each original share of Preferred Stock converts (after
giving effect to any stock dividends). If, as of the Eligibility Date, the
dividend terms of the Preferred Stock differ from those of the Series A Stock,
the Preferred Share Price shall be adjusted as agreed upon by the Company and
the holder of this Warrant, or if they fail to agree, by an investment banker
mutually acceptable to the Company and the holder (the fees of the investment
banker to be shared by the Company and Mount Sinai; provided, however, that
Mount Sinai shall not be required to remit its portion of such fees to the
Company until the exercise of this Warrant).
4. RESERVATION OF PREFERRED STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Preferred Stock and Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Series A Stock (and
Common Stock upon conversion of the Series A Stock) as shall from time to time
be sufficient to effect the exercise of the Warrants and the conversion of the
Series A Stock to Common Stock.
5. NO SHAREHOLDER RIGHTS. Except as expressly provided herein, nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof or any other person the right to vote or to consent or to receive notice
as a stockholder in respect of meetings of
2.
<PAGE>
stockholders for the election of directors of the Company or any other matter or
any rights whatsoever as a stockholder of the Company; and no dividends or
interest shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised.
6. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 2 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed notice of exercise in the form attached hereto as
Exhibit A) at the principal office of the Company and by the payment to the
Company, by check or wire transfer, of an amount equal to the then applicable
Purchase Price per share multiplied by the number of shares then being
purchased. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be in the name
of, and delivered to, the holder hereof, or as such holder may direct (subject
to the restrictions upon transfer contained herein and upon payment by such
holder hereof of any applicable transfer taxes). Such delivery shall be made
within ten (10) business days after exercise of the Warrant and at the Company's
expense and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the number of shares of Series A Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof within ten (10) business days after exercise of the
Warrant.
7. EXCHANGE OF WARRANT FOR OTHER WARRANTS. This Warrant, with or without
similar Warrants, when surrendered properly endorsed at the principal offices of
the Company may be exchanged for another Warrant or Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Series A Stock of the Company; provided,
however, that the Company's obligations under this Section 7 shall be subject to
and conditioned upon the compliance of any such subdivision with applicable
state securities laws and with the Securities Act of 1933, as amended (the
"ACT").
8. CERTAIN RESTRICTIONS.
a. RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Series A
Stock (or such other securities at the time receivable upon exercise of this
Warrant) shall not be transferable except upon the conditions specified in this
Section 8, which conditions are intended to insure compliance with the
provisions of the Act and to assist in an orderly distribution. Each holder of
this Warrant or the Series A Stock issuable hereunder will cause any proposed
transferee of the Warrant or Series A Stock to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 8.
b. RESTRICTIVE LEGENDS. Each certificate representing (a) this
Warrant, (b) the Series A Stock and (c) any other securities issued in respect
of the Series A Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 8.c or Section 9 below or unless such securities have been
registered under the Act or sold under Rule 144) be stamped or otherwise
imprinted
3.
<PAGE>
with legends substantially in the following form (in addition to any legend
required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. COPIES OF THE WARRANT DATED APRIL 23, 1993, WHICH
CONTAINS RESTRICTIONS APPLICABLE TO THESE SECURITIES, MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE
SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED
IN THE BYLAWS OF THE CORPORATION.
In addition, the certificates shall bear all legends required pursuant to
state securities and blue sky laws.
c. RESTRICTIONS ON TRANSFER. The holder of this Warrant and each
person to whom this Warrant is subsequently transferred represents and warrants
to the Company (by acceptance of such transfer) that it will not transfer the
Warrant (or securities issuable upon exercise hereof unless a registration
statement under the Act was in effect with respect to such securities at the
time of issuance thereof) except pursuant to (a) an effective registration
statement under the Act, (b) Rule 144 under the Act (or any other rule under the
Act relating to the disposition of securities), or (c) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such
registration is available.
9. WARRANTS TRANSFERABLE. Subject to the provisions of Section 8, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed; PROVIDED, HOWEVER, that the Company's Bylaws provide
for a right of first refusal in favor of the Company with respect to all sales,
assignments, pledges or transfers of shares of stock of the Company or any
interest therein. The Company agrees, however, that transfers of this Warrant
to any person or entity listed on Schedule 1 (the "Permitted Transferees")
hereto shall not be subject to such right of first refusal and hereby waives any
such rights with respect thereto, provided that any subsequent transfer by any
of the Permitted Transferees shall nonetheless be subject to such right of first
refusal. Each permitted taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company and all other persons dealing
with this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant, or to the transfer
hereof on the books of the Company any notice to the contrary notwithstanding;
but until
4.
<PAGE>
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, contained in
Sections 8 and 9 shall survive the exercise of this Warrant.
11. ADJUSTMENT FOR CHANGES IN SERIES A STOCK. The Purchase Price and the
number of shares purchasable upon the exercise of this Warrant, as well as the
date of exercisability of this Warrant, shall be subject to adjustment from time
to time upon the occurrence of certain events described in this Section 11.
Upon each adjustment of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Purchase Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Purchase Price resulting from such adjustment.
a. SUBDIVISION OR COMBINATION OF STOCK. Should the Company at any
time subdivide its outstanding shares of Series A Stock into a greater number of
shares, the Purchase Price then in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Series A Stock shall be combined into a smaller number of shares, the
Purchase Price then in effect immediately prior to such combination shall be
proportionately increased.
b. DIVIDENDS IN SERIES A STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Series A
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
i. Series A Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Series A Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
ii. Series A Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Series A Stock issued as a stock split, adjustments in respect of which shall be
covered by the terms of Section 11(a) above),
then and in each such case, the holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series A
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (i) and (ii) above) which such
5.
<PAGE>
holder would hold on the date of such exercise had he been the holder of record
of such Series A Stock as of the date on which holders of Series A Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
c. ACCELERATION OF EXERCISABILITY UPON SALE OF THE COMPANY. If,
prior to the Eligibility Date, any Sale of the Company shall be effected, then
notwithstanding Section 1, the exercisability of this Warrant shall be
accelerated to a date ten (10) days prior to the closing of such Sale of the
Company (the "MERGER ELIGIBILITY DATE"), and thereupon shall become exercisable
with respect to the total number of shares purchasable hereunder, at a price
equal to the lesser of (i) the Purchase Price, or (ii) One and One-half Dollars
($1.50) per share. The Company shall provide notice of the occurrence of such
Merger Eligibility Date pursuant to Section 14.
12. EVENTS UPON AN IPO.
a. If prior to the Eligibility Date the Company shall effect its
first public offering of any equity securities of the Company (an "IPO")
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to the Act, then notwithstanding
Section 1, the exercisability of this Warrant shall be accelerated to the date
of the closing of such IPO (the "IPO ELIGIBILITY DATE"), and this Warrant shall
be exercisable with respect to the same amount of shares, and in the same
manner, as is set forth in subsection 11(c) above with respect to a Sale of the
Company, EXCEPT that the Warrant shall be exercisable at a purchase price equal
to one hundred twenty-five percent (125%) of the price at which the Common Stock
of the Company is to be sold in such IPO. The Company shall provide notice of
the occurrence of such IPO Eligibility Date pursuant to Section 14. Such
accelerated Warrant, and all rights to exercise such Warrant in whole or in
part, shall immediately terminate at 5:00 p.m. (Pacific Time), on the fifth
(5th) anniversary of the IPO Eligibility Date. Any occurrence of the product
milestone event (i.e., the Eligibility Date) set forth in Section 1 following
such IPO shall have no effect upon such an accelerated Warrant.
b. If subsequent to the Eligibility Date the Company shall effect an
IPO, then this Warrant shall continue in full force and effect, and the holder
hereof shall have the right to purchase and receive upon the exercise of this
Warrant such shares of Series A Stock or Common Stock (assuming conversion of
the Series A Stock prior to such IPO) as is set forth in Section 1, at the
Purchase Price set forth in Section 3.
13. FRACTIONAL SHARES. No fractional share shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of exercise (as determined in good faith by
the Board of Directors of the Company).
14. NOTICE OF CERTAIN ACTIONS. In the event of any reclassification or
recapitalization of the capital stock of the Company, any Sale of the Company,
any IPO, or any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to
6.
<PAGE>
the holder of this Warrant at least fifteen (15) days prior to the record date
specified therein, a notice specifying (a) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution, (b) the date on which any such
reclassification, recapitalization, Sale of the Company, IPO, dissolution,
liquidation, or winding up is expected to become effective, and (c) the time, if
any, that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reclassification, recapitalization, Sale of the Company, IPO, dissolution,
liquidation, or winding up; provided, however, that the Company shall not be
required to provide any notice under this Section 14 unless and until the
occurrence of the Eligibility Date, except where required pursuant to Section
11(c) and Section 12.
15. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California, as applied to contracts entered into between California
residents and to be performed entirely within the State of California. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be made by personal delivery (including confirmed telex or
telecopy) or shall be mailed by first-class registered or certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing.
IN WITNESS WHEREOF the Company has caused this Warrant to be duly executed
by its officers thereunto duly authorized this 23rd day of April, 1993.
AVIRON
By
-----------------------------
J. Leighton Read, M.D.
Chief Executive Officer
7.
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To AVIRON:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________ _____________________ (___________)
shares of Series A Preferred Stock of AVIRON and herewith makes payment of ___
_______ _______________ DOLLARS ($__________) therefor, and requests the
certificates for such shares be issued in the name of, and delivered _________
to, whose address is__________________________________________________________.
The undersigned represents that it is acquiring such Series A Preferred
Stock for its own account for investment and not with a view to or for sale in
connection with any distribution thereof.
DATED: __________________
By:
-----------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
---------------------------------------------
1.
<PAGE>
SCHEDULE 1
PERMITTED TRANSFEREES
Masayoshi Enami, Ph.D.
Reinhard Vlasak, Ph.D.
Thomas Muster, Ph.D.
Jeffrey Parvin, Ph.D.
Mark Krystal, Ph.D.
Michael Bergmann, M.D.
2.
<PAGE>
Warrant No. PW-3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
AVIRON
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK
This certifies that MOUNT SINAI SCHOOL OF MEDICINE, ("MOUNT SINAI") for
value received, is entitled to purchase from AVIRON, a California corporation
(the "COMPANY"), having a principal place of business at 1815 Old County Road,
Belmont, California 94002, at any time after the Eligibility Date (as defined
below) and prior to the Termination Date (as defined below), one hundred twenty-
five thousand (125,000) fully paid and nonassessable shares of Series A
Preferred Stock (the "SERIES A STOCK") of the Company at the Purchase Price (as
defined below), subject to the provisions and upon the terms and conditions
hereinafter set forth.
1. EXERCISABILITY. Until terminated pursuant to Section 2 below, and
except as otherwise provided in Section 11(c) and Section 12, the purchase
rights represented by this Warrant are exercisable at the option of the holder
of record hereof, at any time or from time to time after the date of receipt by
the Company of written approval by the United States Food and Drug Adminstration
with respect to the Company's, its affiliate's, licensee's or other transferee's
first New Drug Application with respect to a Product (as defined in that certain
Technology Transfer Agreement between the Company and Mount Sinai of even date
herewith) (the "ELIGIBILITY DATE"), for all or any part of the Series A Stock
(but not for a fraction of a share) which may be purchased hereunder. The
Company shall deliver to the holder of this Warrant notice of the occurrence of
any Eligibility Date within ten (10) days of such occurrence.
2. TERMINATION. Where the Eligibility Date has occurred, this Warrant,
and all rights to exercise this Warrant in whole or in part, shall immediately
terminate at the earlier of (a) 5:00 p.m. (Pacific Time), on the fifth (5th)
anniversary of the Eligibility Date, or (b) 5:00 p.m. (Pacific Time), on the day
preceding the closing of the Company's sale of all or substantially all of its
assets or the acquisition of the Company by another entity by means of a merger
or
1.
<PAGE>
consolidation or sale of stock resulting in the exchange of more than fifty
percent (50%) of the outstanding shares of the Company for securities or
consideration issued, or caused to be issued, by the acquiring entity (a "SALE
OF THE COMPANY") (such earlier date herein referred to as the "TERMINATION
DATE"). Where the Eligibility Date has not yet occurred and the events
described in (b) above transpire, this Warrant shall terminate as provided
above, except that the Eligibility Date shall be accelerated as provided in
Section 11(c).
3. PURCHASE PRICE. Except as otherwise provided in Section 11(c) and
Section 12, this Warrant shall be exercisable, on or after the Eligibility Date,
at a price per share (the "PURCHASE PRICE") equal to (a) the price per share
(the "PREFERRED SHARE PRICE") at which the most recent series of preferred stock
of the Company (the "PREFERRED STOCK") was sold in the most recent offering of
such Preferred Stock to investors of the Company prior to the Eligibility Date
(it being understood that the sale or issuance of Preferred Stock pursuant to a
transaction with a corporate partner at a price above or below that most
recently paid for such Preferred Stock by the Company's investors shall not
constitute such an "offering"), and, if such Preferred Stock was not Series A
Stock, adjusted as provided below to reflect any difference in the terms of the
dividends payable and paid on or the conversion rights of such Preferred Stock
from the corresponding terms of the Series A Stock, or (b) if the common stock
of the Company (the "COMMON STOCK") is traded on the public market on the date
immediately prior to the Eligibility Date, the average of the closing prices of
the Common Stock reported in the consolidated reporting system for the sixty
(60) trading-day period ending on the trading day immediately prior to the
Eligibility Date or such other shorter period in the event the Eligibility Date
transpires prior to the Common Stock having been traded for such sixty (60)
trading-day period.
If, as of the Eligibility Date, each share of Preferred Stock is
convertible into more or less than one share of Common Stock, or if any
dividends have been paid on the Preferred Stock in additional shares of
Preferred Stock or shares of Common Stock, then the Preferred Share Price shall
be adjusted by dividing the Preferred Share Price by the number of shares of
Common Stock into which each original share of Preferred Stock converts (after
giving effect to any stock dividends). If, as of the Eligibility Date, the
dividend terms of the Preferred Stock differ from those of the Series A Stock,
the Preferred Share Price shall be adjusted as agreed upon by the Company and
the holder of this Warrant, or if they fail to agree, by an investment banker
mutually acceptable to the Company and the holder (the fees of the investment
banker to be shared by the Company and Mount Sinai; provided, however, that
Mount Sinai shall not be required to remit its portion of such fees to the
Company until the exercise of this Warrant).
4. RESERVATION OF PREFERRED STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Preferred Stock and Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Series A Stock (and
Common Stock upon conversion of the Series A Stock) as shall from time to time
be sufficient to effect the exercise of the Warrants and the conversion of the
Series A Stock to Common Stock.
2.
<PAGE>
5. NO SHAREHOLDER RIGHTS. Except as expressly provided herein, nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof or any other person the right to vote or to consent or to receive notice
as a stockholder in respect of meetings of stockholders for the election of
directors of the Company or any other matter or any rights whatsoever as a
stockholder of the Company; and no dividends or interest shall be payable or
accrued in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until, and only to the extent that, this Warrant
shall have been exercised.
6. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 2 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed notice of exercise in the form attached hereto as
Exhibit A) at the principal office of the Company and by the payment to the
Company, by check or wire transfer, of an amount equal to the then applicable
Purchase Price per share multiplied by the number of shares then being
purchased. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be in the name
of, and delivered to, the holder hereof, or as such holder may direct (subject
to the restrictions upon transfer contained herein and upon payment by such
holder hereof of any applicable transfer taxes). Such delivery shall be made
within ten (10) business days after exercise of the Warrant and at the Company's
expense and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the number of shares of Series A Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof within ten (10) business days after exercise of the
Warrant.
7. EXCHANGE OF WARRANT FOR OTHER WARRANTS. This Warrant, with or without
similar Warrants, when surrendered properly endorsed at the principal offices of
the Company may be exchanged for another Warrant or Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Series A Stock of the Company; provided,
however, that the Company's obligations under this Section 7 shall be subject to
and conditioned upon the compliance of any such subdivision with applicable
state securities laws and with the Securities Act of 1933, as amended (the
"ACT").
8. CERTAIN RESTRICTIONS.
a. RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Series A
Stock (or such other securities at the time receivable upon exercise of this
Warrant) shall not be transferable except upon the conditions specified in this
Section 8, which conditions are intended to insure compliance with the
provisions of the Act and to assist in an orderly distribution. Each holder of
this Warrant or the Series A Stock issuable hereunder will cause any proposed
transferee of the Warrant or Series A Stock to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 8.
b. RESTRICTIVE LEGENDS. Each certificate representing (a) this
Warrant, (b) the Series A Stock and (c) any other securities issued in respect
of the Series A Stock upon any stock
3.
<PAGE>
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 8.c or Section 9
below or unless such securities have been registered under the Act or sold under
Rule 144) be stamped or otherwise imprinted with legends substantially in the
following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. COPIES OF THE WARRANT DATED APRIL 23, 1993 WHICH
CONTAINS RESTRICTIONS APPLICABLE TO THESE SECURITIES, MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE
SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED
IN THE BYLAWS OF THE CORPORATION.
In addition, the certificates shall bear all legends required pursuant to
state securities and blue sky laws.
c. RESTRICTIONS ON TRANSFER. The holder of this Warrant and each
person to whom this Warrant is subsequently transferred represents and warrants
to the Company (by acceptance of such transfer) that it will not transfer the
Warrant (or securities issuable upon exercise hereof unless a registration
statement under the Act was in effect with respect to such securities at the
time of issuance thereof) except pursuant to (a) an effective registration
statement under the Act, (b) Rule 144 under the Act (or any other rule under the
Act relating to the disposition of securities), or (c) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such
registration is available.
9. WARRANTS TRANSFERABLE. Subject to the provisions of Section 8, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed; PROVIDED, HOWEVER, that the Company's Bylaws provide
for a right of first refusal in favor of the Company with respect to all sales,
assignments, pledges or transfers of shares of stock of the Company or any
interest therein. The Company agrees, however, that transfers of this Warrant
to any person or entity listed on Schedule 1 (the "Permitted Transferees")
hereto shall not be subject to such right of first refusal and hereby waives any
such rights with respect thereto, provided that any subsequent transfer by any
of the Permitted Transferees shall nonetheless be subject to such right of first
refusal. Each permitted taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and
4.
<PAGE>
that the holder hereof, when this Warrant shall have been so endorsed, may be
treated by the Company and all other persons dealing with this Warrant as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this Warrant, or to the transfer hereof on the books of
the Company any notice to the contrary notwithstanding; but until such transfer
on such books, the Company may treat the registered owner hereof as the owner
for all purposes.
10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, contained in
Sections 8 and 9 shall survive the exercise of this Warrant.
11. ADJUSTMENT FOR CHANGES IN SERIES A STOCK. The Purchase Price and the
number of shares purchasable upon the exercise of this Warrant, as well as the
date of exercisability of this Warrant, shall be subject to adjustment from time
to time upon the occurrence of certain events described in this Section 11.
Upon each adjustment of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Purchase Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Purchase Price resulting from such adjustment.
a. SUBDIVISION OR COMBINATION OF STOCK. Should the Company at any
time subdivide its outstanding shares of Series A Stock into a greater number of
shares, the Purchase Price then in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Series A Stock shall be combined into a smaller number of shares, the
Purchase Price then in effect immediately prior to such combination shall be
proportionately increased.
b. DIVIDENDS IN SERIES A STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Series A
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
i. Series A Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Series A Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
ii. Series A Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Series A Stock issued as a stock split, adjustments in respect of which shall be
covered by the terms of Section 11(a) above),
5.
<PAGE>
then and in each such case, the holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series A
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (i) and (ii) above) which such holder would
hold on the date of such exercise had he been the holder of record of such
Series A Stock as of the date on which holders of Series A Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
c. ACCELERATION OF EXERCISABILITY UPON SALE OF THE COMPANY. If,
prior to the Eligibility Date, any Sale of the Company shall be effected, then
notwithstanding Section 1, the exercisability of this Warrant shall be
accelerated to a date ten (10) days prior to the closing of such Sale of the
Company (the "MERGER ELIGIBILITY DATE"), and thereupon shall become exercisable
with respect to (i) fifty percent percent (50%) of the shares purchasable
hereunder where the Company, its affiliate, licensee or other transferee has not
yet initiated the first animal study of a Product prior to the date of such
accelerated exercise, or (ii) seventy-five percent (75%) where the Company, its
affiliate, licensee or other transferee has initiated the first animal study of
a Product prior to the date of such accelerated exercise, or (iii) eighty
percent (80%) where the Company, its affiliate, licensee or other transferee has
received written acceptance by the United States Food and Drug Administration of
the Company's, its affiliate's, licensee's or other transferee's first
Investigational New Drug application with respect to a Product prior to the date
of such accelerated exercise. In each such case the Warrant shall be
exercisable at a price equal to the lesser of (iv) the Purchase Price, or (v)
Four and One-half Dollars ($4.50) per share. The Company shall provide notice
of such Merger Eligibility Date pursuant to Section 14. This Warrant shall be
cancelled with respect to that percentage of shares as to which exercisability
is not accelerated under this Section 11(c).
12. EVENTS UPON AN IPO.
a. If prior to the Eligibility Date the Company shall effect its
first public offering of any equity securities of the Company (an "IPO")
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to the Act, then notwithstanding
Section 1, the exercisability of this Warrant shall be accelerated to the date
of the closing of such IPO (the "IPO ELIGIBILITY DATE"), and this Warrant shall
be exercisable with respect to the same amount of shares, and in the same
manner, as is set forth in subsection 11(c) above with respect to a Sale of the
Company, EXCEPT that the Warrant shall be exercisable at a purchase price equal
to one hundred twenty-five percent (125%) of the price at which the Common Stock
of the Company is to be sold in such IPO. The Company shall provide notice of
the occurrence of such IPO Eligibility Date pursuant to Section 14. Such
accelerated Warrant, and all rights to exercise such Warrant in whole or in
part, shall immediately terminate at 5:00 p.m. (Pacific Time), on the fifth
(5th) anniversary of the IPO Eligibility Date. Any occurrence of the product
milestone event (i.e., the Eligibility Date) set forth in Section 1 following
such IPO shall have no effect upon such an accelerated Warrant.
6.
<PAGE>
b. If subsequent to the Eligibility Date the Company shall effect an
IPO, then this Warrant shall continue in full force and effect, and the holder
hereof shall have the right to purchase and receive upon the exercise of this
Warrant such shares of Series A Stock or Common Stock (assuming conversion of
the Series A Stock prior to such IPO) as is set forth in Section 1, at the
Purchase Price set forth in Section 3.
13. FRACTIONAL SHARES. No fractional share shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of exercise (as determined in good faith by
the Board of Directors of the Company).
14. NOTICE OF CERTAIN ACTIONS. In the event of any reclassification or
recapitalization of the capital stock of the Company, any Sale of the Company,
any IPO, or any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to the holder of this Warrant at least
fifteen (15) days prior to the record date specified therein, a notice
specifying (a) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reclassification, recapitalization,
Sale of the Company, IPO, dissolution, liquidation, or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reclassification, recapitalization, Sale of
the Company, IPO, dissolution, liquidation, or winding up; provided, however,
that the Company shall not be required to provide any notice under this Section
14 unless and until the occurrence of the Eligibility Date, except where
required pursuant to Section 11(c) and Section 12.
15. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California, as applied to contracts entered into between California
residents and to be performed entirely within the State of California. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be made by personal delivery (including confirmed telex or
telecopy) or shall be mailed by first-class registered or certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing.
IN WITNESS WHEREOF the Company has caused this Warrant to be duly executed
by its officers thereunto duly authorized this 23rd day of April, 1993.
AVIRON
7.
<PAGE>
By
-----------------------------
J. Leighton Read, M.D.
Chief Executive Officer
8.
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To AVIRON:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________ _____________________ (___________)
shares of Series A Preferred Stock of AVIRON and herewith makes payment of ____
_______ _______________ DOLLARS ($__________) therefor, and requests the
certificates for such shares be issued in the name of, and delivered __________
to, whose address is _________________________________________________________.
The undersigned represents that it is acquiring such Series A Preferred
Stock for its own account for investment and not with a view to or for sale in
connection with any distribution thereof.
DATED:
------------------
By:
-----------------------------------------
Title:
-------------------------------------
Address:
-------------------------------------
---------------------------------------------
1.
<PAGE>
SCHEDULE 1
PERMITTED TRANSFEREES
Masayoshi Enami, Ph.D.
Reinhard Vlasak, Ph.D.
Thomas Muster, Ph.D.
Jeffrey Parvin, Ph.D.
Mark Krystal, Ph.D.
Michael Bergmann, M.D.
2.
<PAGE>
1.
<PAGE>
Warrant No. PW-2B
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
AVIRON
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK
This certifies that MOUNT SINAI SCHOOL OF MEDICINE, ("MOUNT SINAI") for
value received, is entitled to purchase from AVIRON, a California corporation
(the "COMPANY"), having a principal place of business at 297 North Bernardo
Avenue, Mountain View, California 94043, at any time after the Eligibility Date
(as defined below) and prior to the Termination Date (as defined below), fifty-
five thousand 55,000 shares fully paid and nonassessable shares of Series A
Preferred Stock (the "SERIES A STOCK") of the Company at the Purchase Price (as
defined below), subject to the provisions and upon the terms and conditions
hereinafter set forth.
1. EXERCISABILITY. Until terminated pursuant to Section 2 below, and except
as otherwise provided in Section 11(c) and Section 12, the purchase rights
represented by this Warrant are exercisable at the option of the holder of
record hereof, at any time or from time to time after the date of receipt by the
Company of written acceptance by the United States Food and Drug Administration
of the Company's, its affiliate's, licensee's or other transferee's first
Investigational New Drug application with respect to a Product (as defined in
that certain Technology Transfer Agreement between the Company and Mount Sinai
dated February 9, 1993) (the "ELIGIBILITY DATE"), for all or any part of the
Series A Stock (but not for a fraction of a share) which may be purchased
hereunder. The Company shall deliver to the holder of this Warrant notice of
the occurrence of any Eligibility Date within ten (10) days of such occurrence.
2. TERMINATION. Where the Eligibility Date has occurred, this Warrant,
and all rights to exercise this Warrant in whole or in part, shall immediately
terminate at the earlier of (a) 5:00 p.m. (Pacific Time), on the fifth (5th)
anniversary of the Eligibility Date, or (b) 5:00 p.m. (Pacific Time), on the day
preceding the closing of the Company's sale of all or substantially all of its
assets or the acquisition of the Company by another entity by means of a merger
or consolidation or sale of stock resulting in the exchange of more than fifty
percent (50%) of the
1.
<PAGE>
outstanding shares of the Company for securities or consideration issued, or
caused to be issued, by the acquiring entity (a "SALE OF THE COMPANY") (such
earlier date herein referred to as the "TERMINATION DATE"). Where the
Eligibility Date has not yet occurred and the events described in (b) above
transpire, this Warrant shall terminate as provided above, except that the
Eligibility Date shall be accelerated as provided in Section 11(c).
3. PURCHASE PRICE. Except as otherwise provided in Section 11(c) and
Section 12, this Warrant shall be exercisable, on or after the Eligibility Date,
at a price per share (the "PURCHASE PRICE") equal to (a) the price per share
(the "PREFERRED SHARE PRICE") at which the most recent series of preferred stock
of the Company (the "PREFERRED STOCK") was sold in the most recent offering of
such Preferred Stock to investors of the Company prior to the Eligibility Date
(it being understood that the sale or issuance of Preferred Stock pursuant to a
transaction with a corporate partner at a price above or below that most
recently paid for such Preferred Stock by the Company's investors shall not
constitute such an "offering"), and, if such Preferred Stock was not Series A
Stock, adjusted as provided below to reflect any difference in the terms of the
dividends payable and paid on or the conversion rights of such Preferred Stock
from the corresponding terms of the Series A Stock, or (b) if the common stock
of the Company (the "COMMON STOCK") is traded on the public market on the date
immediately prior to the Eligibility Date, the average of the closing prices of
the Common Stock reported in the consolidated reporting system for the sixty
(60) trading-day period ending on the trading day immediately prior to the
Eligibility Date or such other shorter period in the event the Eligibility Date
transpires prior to the Common Stock having been traded for such sixty (60)
trading-day period.
If, as of the Eligibility Date, each share of Preferred Stock is
convertible into more or less than one share of Common Stock, or if any
dividends have been paid on the Preferred Stock in additional shares of
Preferred Stock or shares of Common Stock, then the Preferred Share Price shall
be adjusted by dividing the Preferred Share Price by the number of shares of
Common Stock into which each original share of Preferred Stock converts (after
giving effect to any stock dividends). If, as of the Eligibility Date, the
dividend terms of the Preferred Stock differ from those of the Series A Stock,
the Preferred Share Price shall be adjusted as agreed upon by the Company and
the holder of this Warrant, or if they fail to agree, by an investment banker
mutually acceptable to the Company and the holder (the fees of the investment
banker to be shared by the Company and Mount Sinai; provided, however, that
Mount Sinai shall not be required to remit its portion of such fees to the
Company until the exercise of this Warrant).
4. RESERVATION OF PREFERRED STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Preferred Stock and Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Series A Stock (and
Common Stock upon conversion of the Series A Stock) as shall from time to time
be sufficient to effect the exercise of the Warrants and the conversion of the
Series A Stock to Common Stock.
5. NO SHAREHOLDER RIGHTS. Except as expressly provided herein, nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof or any other
2.
<PAGE>
person the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matter or any rights whatsoever as a stockholder of the Company;
and no dividends or interest shall be payable or accrued in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, this Warrant shall have been exercised.
6. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 2 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed notice of exercise in the form attached hereto as
Exhibit A) at the principal office of the Company and by the payment to the
Company, by check or wire transfer, of an amount equal to the then applicable
Purchase Price per share multiplied by the number of shares then being
purchased. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be in the name
of, and delivered to, the holder hereof, or as such holder may direct (subject
to the restrictions upon transfer contained herein and upon payment by such
holder hereof of any applicable transfer taxes). Such delivery shall be made
within ten (10) business days after exercise of the Warrant and at the Company's
expense and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the number of shares of Series A Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof within ten (10) business days after exercise of the
Warrant.
7. EXCHANGE OF WARRANT FOR OTHER WARRANTS. This Warrant, with or without
similar Warrants, when surrendered properly endorsed at the principal offices of
the Company may be exchanged for another Warrant or Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Series A Stock of the Company; provided,
however, that the Company's obligations under this Section 7 shall be subject to
and conditioned upon the compliance of any such subdivision with applicable
state securities laws and with the Securities Act of 1933, as amended (the
"ACT").
8. CERTAIN RESTRICTIONS.
a. RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Series A
Stock (or such other securities at the time receivable upon exercise of this
Warrant) shall not be transferable except upon the conditions specified in this
Section 8, which conditions are intended to insure compliance with the
provisions of the Act and to assist in an orderly distribution. Each holder of
this Warrant or the Series A Stock issuable hereunder will cause any proposed
transferee of the Warrant or Series A Stock to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 8.
b. RESTRICTIVE LEGENDS. Each certificate representing (a) this
Warrant, (b) the Series A Stock and (c) any other securities issued in respect
of the Series A Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 8.c or Section 9 below or unless such securities have been
registered under the Act or sold under Rule 144) be stamped or otherwise
imprinted
3.
<PAGE>
with legends substantially in the following form (in addition to any legend
required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. COPIES OF THE WARRANT DATED DECEMBER 1, 1994, _____
WHICH CONTAINS RESTRICTIONS APPLICABLE TO THESE SECURITIES, MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE CERTIFICATE TO
THE SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED
IN THE BYLAWS OF THE CORPORATION.
In addition, the certificates shall bear all legends required pursuant to
state securities and blue sky laws.
c. RESTRICTIONS ON TRANSFER. The holder of this Warrant and each
person to whom this Warrant is subsequently transferred represents and warrants
to the Company (by acceptance of such transfer) that it will not transfer the
Warrant (or securities issuable upon exercise hereof unless a registration
statement under the Act was in effect with respect to such securities at the
time of issuance thereof) except pursuant to (a) an effective registration
statement under the Act, (b) Rule 144 under the Act (or any other rule under the
Act relating to the disposition of securities), or (c) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such
registration is available.
9. WARRANTS TRANSFERABLE. Subject to the provisions of Section 8, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed; provided, however, that the Company's Bylaws provide
for a right of first refusal in favor of the Company with respect to all sales,
assignments, pledges or transfers of shares of stock of the Company or any
interest therein. The Company agrees, however, that transfers of this Warrant
to any person or entity listed on Schedule 1 (the "Permitted Transferees")
hereto shall not be subject to such right of first refusal and hereby waives any
such rights with respect thereto, provided that any subsequent transfer by any
of the Permitted Transferees shall nonetheless be subject to such right of first
refusal. Each permitted taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company and all other persons dealing
with this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant, or to the transfer
hereof on the books of the Company any notice to the contrary notwithstanding;
but until
4.
<PAGE>
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, contained in
Sections 8 and 9 shall survive the exercise of this Warrant.
11. ADJUSTMENT FOR CHANGES IN SERIES A STOCK. The Purchase Price and the
number of shares purchasable upon the exercise of this Warrant, as well as the
date of exercisability of this Warrant, shall be subject to adjustment from time
to time upon the occurrence of certain events described in this Section 11.
Upon each adjustment of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Purchase Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Purchase Price resulting from such adjustment.
a. SUBDIVISION OR COMBINATION OF STOCK. Should the Company at any
time subdivide its outstanding shares of Series A Stock into a greater number of
shares, the Purchase Price then in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Series A Stock shall be combined into a smaller number of shares, the
Purchase Price then in effect immediately prior to such combination shall be
proportionately increased.
b. DIVIDENDS IN SERIES A STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Series A
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
i. Series A Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Series A Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
ii. Series A Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Series A Stock issued as a stock split, adjustments in respect of which shall be
covered by the terms of Section 11(a) above),
then and in each such case, the holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series A
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (i) and (ii) above) which such
5.
<PAGE>
holder would hold on the date of such exercise had he been the holder of record
of such Series A Stock as of the date on which holders of Series A Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
c. ACCELERATION OF EXERCISABILITY UPON SALE OF THE COMPANY. If,
prior to the Eligibility Date, any Sale of the Company shall be effected, then
notwithstanding Section 1, the exercisability of this Warrant shall be
accelerated to a date ten (10) days prior to the closing of such Sale of the
Company (the "MERGER ELIGIBILITY DATE"), at a price equal to the lesser of (i)
the Purchase Price or (ii) $3.00 per share. The Company shall provide notice of
such Merger Eligibility Date pursuant to Section 14.
12. EVENTS UPON AN IPO.
a. If prior to the Eligibility Date the Company shall effect its
first public offering of any equity securities of the Company (an "IPO")
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to the Act, then notwithstanding
Section 1, the exercisability of this Warrant shall be accelerated to the date
of the closing of such IPO (the "IPO ELIGIBILITY DATE"), and this Warrant shall
be exercisable with respect to the same amount of shares, and in the same
manner, as is set forth in subsection 11(c) above with respect to a Sale of the
Company, except that the Warrant shall be exercisable at a purchase price equal
to one hundred twenty-five percent (125%) of the price at which the Common Stock
of the Company is to be sold in such IPO. The Company shall provide notice of
the occurrence of such IPO Eligibility Date pursuant to Section 14. Such
accelerated Warrant, and all rights to exercise such Warrant in whole or in
part, shall immediately terminate at 5:00 p.m. (Pacific Time), on the fifth
(5th) anniversary of the IPO Eligibility Date. Any occurrence of the product
milestone event (i.e., the Eligibility Date) set forth in Section 1 following
such IPO shall have no effect upon such an accelerated Warrant.
b. If subsequent to the Eligibility Date the Company shall effect an
IPO, then this Warrant shall continue in full force and effect, and the holder
hereof shall have the right to purchase and receive upon the exercise of this
Warrant such shares of Series A Stock or Common Stock (assuming conversion of
the Series A Stock prior to such IPO) as is set forth in Section 1, at the
Purchase Price set forth in Section 3.
13. FRACTIONAL SHARES. No fractional share shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of exercise (as determined in good faith by
the Board of Directors of the Company).
14. NOTICE OF CERTAIN ACTIONS. In the event of any reclassification or
recapitalization of the capital stock of the Company, any Sale of the Company,
any IPO, or any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to the holder of this Warrant at least
fifteen (15) days prior to the record date specified therein, a notice
specifying (a) the date on which any such record is to be taken for the purpose
6.
<PAGE>
of such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reclassification, recapitalization,
Sale of the Company, IPO, dissolution, liquidation, or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reclassification, recapitalization, Sale of
the Company, IPO, dissolution, liquidation, or winding up; provided, however,
that the Company shall not be required to provide any notice under this Section
14 unless and until the occurrence of the Eligibility Date, except where
required pursuant to Section 11(c) and Section 12.
15. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California, as applied to contracts entered into between California
residents and to be performed entirely within the State of California. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be made by personal delivery (including confirmed telex or
telecopy) or shall be mailed by first-class registered or certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing.
IN WITNESS WHEREOF the Company has caused this Warrant to be duly executed
by its officers thereunto duly authorized this ___ day of ___________, 1996.
AVIRON
By
------------------------------------
J. Leighton Read, M.D.
Chairman and Chief Executive Officer
7.
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Aviron:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________ _____________________ (___________)
shares of Series A Preferred Stock of Aviron and herewith makes payment of
____________ _______________ DOLLARS ($__________) therefor, and requests the
certificates for such shares be issued in the name of, and delivered
____________________ to, whose address is .
The undersigned represents that it is acquiring such Series A Preferred
Stock for its own account for investment and not with a view to or for sale in
connection with any distribution thereof.
DATED:
-----------------
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
--------------------------------------
1.
<PAGE>
SCHEDULE 1
PERMITTED TRANSFEREES
Masayoshi Enami, Ph.D.
Reinhard Vlasak, Ph.D.
Thomas Muster, Ph.D.
Jeffrey Parvin, Ph.D.
Mark Krystal, Ph.D.
Michael Bergmann, M.D.
2.
<PAGE>
Warrant No. PW-2A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
AVIRON
WARRANT TO PURCHASE SHARES OF
SERIES A PREFERRED STOCK
This certifies that MOUNT SINAI SCHOOL OF MEDICINE, ("MOUNT SINAI") for
value received, is entitled to purchase from AVIRON, a California corporation
(the "COMPANY"), having a principal place of business at 297 North Bernardo
Avenue, Mountain View, California 94043, at any time after the Eligibility Date
(as defined below) and prior to the Termination Date (as defined below), twenty
thousand 20,000 shares fully paid and nonassessable shares of Series A Preferred
Stock (the "SERIES A STOCK") of the Company at the Purchase Price (as defined
below), subject to the provisions and upon the terms and conditions hereinafter
set forth.
1. EXERCISABILITY. Until terminated pursuant to Section 2 below, and except
as otherwise provided in Section 12, the purchase rights represented by this
Warrant are exercisable at the option of the holder of record hereof, at any
time or from time to time after May 1, 1995 (the "ELIGIBILITY DATE"), for all or
any part of the Series A Stock (but not for a fraction of a share) which may be
purchased hereunder.
2. TERMINATION. This Warrant, and all rights to exercise this Warrant in
whole or in part, shall immediately terminate at the earlier of (a) 5:00 p.m.
(Pacific Time), on May 1, 2000, or (b) 5:00 p.m. (Pacific Time), on the day
preceding the closing of the Company's sale of all or substantially all of its
assets or the acquisition of the Company by another entity by means of a merger
or consolidation or sale of stock resulting in the exchange of more than fifty
percent (50%) of the outstanding shares of the Company for securities or
consideration issued, or caused to be issued, by the acquiring entity (a "SALE
OF THE COMPANY") (such earlier date herein referred to as the "TERMINATION
DATE").
3. PURCHASE PRICE. Except as otherwise provided in Section 12, this
Warrant shall be exercisable, on or after the Eligibility Date, at $0.90 per
share (the "PURCHASE PRICE").
1.
<PAGE>
4. RESERVATION OF PREFERRED STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Preferred Stock and Common Stock, solely for the purpose of effecting the
exercise of this Warrant, such number of its shares of Series A Stock (and
Common Stock upon conversion of the Series A Stock) as shall from time to time
be sufficient to effect the exercise of the Warrants and the conversion of the
Series A Stock to Common Stock.
5. NO SHAREHOLDER RIGHTS. Except as expressly provided herein, nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof or any other person the right to vote or to consent or to receive notice
as a stockholder in respect of meetings of stockholders for the election of
directors of the Company or any other matter or any rights whatsoever as a
stockholder of the Company; and no dividends or interest shall be payable or
accrued in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until, and only to the extent that, this Warrant
shall have been exercised.
6. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 2 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed notice of exercise in the form attached hereto as
Exhibit A) at the principal office of the Company and by the payment to the
Company, by check or wire transfer, of an amount equal to the then applicable
Purchase Price per share multiplied by the number of shares then being
purchased. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be in the name
of, and delivered to, the holder hereof, or as such holder may direct (subject
to the restrictions upon transfer contained herein and upon payment by such
holder hereof of any applicable transfer taxes). Such delivery shall be made
within ten (10) business days after exercise of the Warrant and at the Company's
expense and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the number of shares of Series A Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof within ten (10) business days after exercise of the
Warrant.
7. EXCHANGE OF WARRANT FOR OTHER WARRANTS. This Warrant, with or without
similar Warrants, when surrendered properly endorsed at the principal offices of
the Company may be exchanged for another Warrant or Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Series A Stock of the Company; provided,
however, that the Company's obligations under this Section 7 shall be subject to
and conditioned upon the compliance of any such subdivision with applicable
state securities laws and with the Securities Act of 1933, as amended (the
"ACT").
8. CERTAIN RESTRICTIONS.
a. RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Series A
Stock (or such other securities at the time receivable upon exercise of this
Warrant) shall not be transferable except upon the conditions specified in this
Section 8, which conditions are intended to insure compliance with the
provisions of the Act and to assist in an orderly distribution. Each holder
2.
<PAGE>
of this Warrant or the Series A Stock issuable hereunder will cause any proposed
transferee of the Warrant or Series A Stock to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 8.
b. RESTRICTIVE LEGENDS. Each certificate representing (a) this
Warrant, (b) the Series A Stock and (c) any other securities issued in respect
of the Series A Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 8.c or Section 9 below or unless such securities have been
registered under the Act or sold under Rule 144) be stamped or otherwise
imprinted with legends substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. COPIES OF THE WARRANT DATED DECEMBER 1, 1994 WHICH
CONTAINS RESTRICTIONS APPLICABLE TO THESE SECURITIES, MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE
SECRETARY OF THE CORPORATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED
IN THE BYLAWS OF THE CORPORATION.
In addition, the certificates shall bear all legends required pursuant to
state securities and blue sky laws.
c. RESTRICTIONS ON TRANSFER. The holder of this Warrant and each
person to whom this Warrant is subsequently transferred represents and warrants
to the Company (by acceptance of such transfer) that it will not transfer the
Warrant (or securities issuable upon exercise hereof unless a registration
statement under the Act was in effect with respect to such securities at the
time of issuance thereof) except pursuant to (a) an effective registration
statement under the Act, (b) Rule 144 under the Act (or any other rule under the
Act relating to the disposition of securities), or (c) an opinion of counsel,
reasonably satisfactory to counsel for the Company, that an exemption from such
registration is available.
9. WARRANTS TRANSFERABLE. Subject to the provisions of Section 8, this
Warrant and all rights hereunder are transferable, in whole or in part, without
charge to the holder hereof (except for transfer taxes), upon surrender of this
Warrant properly endorsed; provided, however, that the Company's Bylaws provide
for a right of first refusal in favor of the Company with respect to all sales,
assignments, pledges or transfers of shares of stock of the Company or any
interest therein. The Company agrees, however, that transfers of this Warrant
to any person or
3.
<PAGE>
entity listed on Schedule 1 (the "Permitted Transferees") hereto shall not be
subject to such right of first refusal and hereby waives any such rights with
respect thereto, provided that any subsequent transfer by any of the Permitted
Transferees shall nonetheless be subject to such right of first refusal. Each
permitted taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, contained in
Sections 8 and 9 shall survive the exercise of this Warrant.
11. ADJUSTMENT FOR CHANGES IN SERIES A STOCK. The Purchase Price and the
number of shares purchasable upon the exercise of this Warrant, as well as the
date of exercisability of this Warrant, shall be subject to adjustment from time
to time upon the occurrence of certain events described in this Section 11.
Upon each adjustment of the Purchase Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Purchase Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Purchase Price resulting from such adjustment.
a. SUBDIVISION OR COMBINATION OF STOCK. Should the Company at any
time subdivide its outstanding shares of Series A Stock into a greater number of
shares, the Purchase Price then in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Series A Stock shall be combined into a smaller number of shares, the
Purchase Price then in effect immediately prior to such combination shall be
proportionately increased.
b. DIVIDENDS IN SERIES A STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Series A
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
i. Series A Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Series A Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
4.
<PAGE>
ii. Series A Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Series A Stock issued as a stock split, adjustments in respect of which shall be
covered by the terms of Section 11(a) above),
then and in each such case, the holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series A
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (i) and (ii) above) which such holder would
hold on the date of such exercise had he been the holder of record of such
Series A Stock as of the date on which holders of Series A Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
12. EVENTS UPON AN IPO. If the Company shall effect an IPO, then this
Warrant shall continue in full force and effect, and the holder hereof shall
have the right to purchase and receive upon the exercise of this Warrant such
shares of Series A Stock or Common Stock (assuming conversion of the Series A
Stock prior to such IPO) as is set forth in Section 1, at the Purchase Price set
forth in Section 3.
13. FRACTIONAL SHARES. No fractional share shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of exercise (as determined in good faith by
the Board of Directors of the Company).
14. NOTICE OF CERTAIN ACTIONS. In the event of any reclassification or
recapitalization of the capital stock of the Company, any Sale of the Company,
any IPO, or any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company shall mail to the holder of this Warrant at least
fifteen (15) days prior to the record date specified therein, a notice
specifying (a) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reclassification, recapitalization,
Sale of the Company, IPO, dissolution, liquidation, or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reclassification, recapitalization, Sale of
the Company, IPO, dissolution, liquidation, or winding up.
15. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California, as applied to contracts entered into between California
residents and to be performed entirely within the State of California. The
headings in this Warrant are for purposes of convenience and reference only, and
shall not be deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the Company and the registered holder hereof.
All notices and other communications from the Company to the holder of this
Warrant shall be made by
5.
<PAGE>
personal delivery (including confirmed telex or telecopy) or shall be mailed by
first-class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the last holder of this Warrant who shall
have furnished an address to the Company in writing.
IN WITNESS WHEREOF the Company has caused this Warrant to be duly executed
by its officers thereunto duly authorized this ___ day of ___________, 1996.
AVIRON
By
-----------------------------------------
J. Leighton Read, M.D.
Chairman and Chief Executive Officer
6.
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Aviron:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________ _____________________ (___________)
shares of Series A Preferred Stock of Aviron and herewith makes payment of
____________ _______________ DOLLARS ($__________) therefor, and requests the
certificates for such shares be issued in the name of, and delivered
____________________ to, whose address is ____________________________________.
The undersigned represents that it is acquiring such Series A Preferred
Stock for its own account for investment and not with a view to or for sale in
connection with any distribution thereof.
DATED:
------------------
By:
----------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
-------------------------------------------
1.
<PAGE>
SCHEDULE 1
PERMITTED TRANSFEREES
Masayoshi Enami, Ph.D.
Reinhard Vlasak, Ph.D.
Thomas Muster, Ph.D.
Jeffrey Parvin, Ph.D.
Mark Krystal, Ph.D.
Michael Bergmann, M.D.
2.
<PAGE>
No. PCW-1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THIS WARRANT WILL BE ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SUCH
SALE OR OTHER DISTRIBUTION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES
LAW RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, AND ITS COUNSEL, THAT SAID REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, RESPECTIVELY.
WARRANT TO PURCHASE
SERIES C PREFERRED STOCK OF AVIRON
(Void after November 9, 2000)
WHEREAS, Raymond James & Associates, Inc. (the "Holder") has acted as
placement agent in the sale of 7,050,714 shares of the Series C Preferred Stock
of Aviron, a California corporation (the "Company"), having a place of business
at 297 North Bernardo Avenue, Mountain View, California 94043, pursuant to a
Placement Agent Agreement dated July 17, 1995 (the "Placement Agreement"); and
WHEREAS, the parties intend to grant the Holder a right to purchase equity
securities of the Company in proportion to the number of shares sold;
NOW, THEREFORE, it is agreed as follows:
1. GRANT OF RIGHT. This certifies that the Holder, or assigns, for value
received, is entitled to purchase at the Stock Purchase Price (as defined below)
from the Company Three Hundred Fifty-Two Thousand, Five Hundred Thirty-Six
(352,536) fully paid and nonassessable shares of the Company's Series C
Preferred Stock ("Series C Stock") at an exercise price of One Dollar and Sixty-
Two Cents ($1.62) (the "Stock Purchase Price"), at any time from the date
hereof, up to and including 5:00 p.m. (Pacific time) on November 9, 2000, such
day being referred to herein as the "Expiration Date," upon surrender to the
Company at its principal office (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 4 of this
Warrant.
<PAGE>
2. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
2.1 GENERAL. This Warrant is exercisable at the option of the holder of
record hereof, at any time or from time to time up to the Expiration Date, for
all or any part of the shares (but not for a fraction of a share) of Series C
Stock, or Common Stock issuable upon conversion of Series C Stock, which may be
purchased hereunder (the "Exercise Stock"). The Company agrees that the shares
of Exercise Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Subscription Form delivered and
payment made for such shares. Certificates for the shares of Exercise Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a
purchase of less than all the shares which may be purchased under this Warrant,
the Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Exercise Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.
2.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Exercise Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), 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 the properly endorsed Form of
Subscription and notice of such election, in which event the Company shall issue
to the Holder a number of shares of Exercise Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Exercise Stock to be issued to the
Holder
Y = the number of shares of Exercise Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Exercise
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
2.
<PAGE>
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event the Company makes an initial public
offering of its Common Stock and (i) if the Exercise Stock is Common Stock, the
fair market value per share shall be the Current Market Price of the Company's
Common Stock on the date of exercise (the "Common Stock Price") or (ii) if the
Exercise Stock is Preferred Stock, the product of (x) the Common Stock Price,
and (x) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise.
For purposes of this Warrant, the "Current Market Price" of a share of Common
Stock is the last reported sales price of the Common Stock as reported by the
Nasdaq National Market, or the primary national securities exchange on which the
Common Stock is then quoted, on the last trading day prior to the exercise date;
PROVIDED, HOWEVER, that if the Common Stock is neither traded on the Nasdaq
National Market nor on a national securities exchange, the price referred to
above shall be the price reflected in the over-the-counter market as reported by
the National Quotation Bureau, Inc. or any organization performing a similar
function, and if the Common Stock is not so reported, the Current Market Price
shall be determined by the Company's Board of Directors.
3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all shares of Exercise Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Exercise Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant and the
conversion of the Exercise Stock. The Company will take all such action as may
be necessary to assure that such shares of Exercise Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Exercise Stock
may be listed; provided, however, that the Company shall not be required to
effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i) if
the total number of shares of Exercise Stock issuable after such action upon
exercise of all outstanding warrants, together with all shares of Exercise Stock
then outstanding and all shares of Exercise Stock then issuable upon exercise of
all options and upon the conversion of all convertible securities then
outstanding, would exceed the total number of shares of Exercise Stock then
authorized by the Company's Articles of Incorporation, or (ii) if the total
number of shares of Common Stock issuable after such action upon the conversion
of all such shares of Exercise Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Exercise Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options
3.
<PAGE>
and upon the conversion of all convertible securities then outstanding would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
4. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
4.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Exercise Stock into a greater number of
shares, the Stock Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Exercise Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such combination
shall be proportionately increased.
4.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION.
If at any time or from time to time the Holders of Exercise Stock (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or become entitled to receive, without payment
therefor,
(A) Exercise Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Exercise Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution,
(B) any cash paid or payable otherwise than as a cash dividend, or
(C) Exercise Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than (i) shares
of Exercise Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 4.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 4.4 below), then and in each
such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Exercise Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had it been the holder of record of such
Exercise Stock as of the date on which holders of Exercise Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
4.
<PAGE>
4.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Exercise Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Exercise
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Exercise Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Exercise Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of the merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to the reorganization. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
4.4 ADJUSTMENT UPON CONVERSION OF SERIES C PREFERRED STOCK. If at any
time after the date hereof, all of the Series C Preferred Stock of the Company
is converted to Common Stock, either as part of an initial public offering of
the Company's Common Stock or for any other reason, then the Exercise Stock of
this Warrant shall hereinafter be Common Stock. The Holder of this Warrant
shall have the right to receive upon the exercise of this Warrant such shares of
Common Stock as it would have been entitled to had the Warrant been exercised
for Series C Preferred Stock immediately prior to such conversion.
4.5 ADJUSTMENTS SET FORTH IN ARTICLES OF INCORPORATION. In addition to
the foregoing adjustments, the conversion rate of the Exercise Stock into Common
Stock will be subject to adjustments as set forth in the Company's Articles of
Incorporation. The Company represents that as of the date this Warrant was
first issued, the Company anticipates each share of Preferred Stock will be
convertible into one share of Common Stock.
5.
<PAGE>
4.6 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase Price
or in the conversion ratio of the Preferred Stock or any increase or decrease in
the number of shares purchasable upon the exercise of this Warrant, the Company
shall give written notice thereof, by first class mail, postage prepaid,
addressed to the registered Holder of this Warrant at the address of such Holder
as shown on the books of the Company. The notice shall be signed by the
Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Any written notice delivered pursuant to this
Section 4.5 shall be attached to this Warrant and incorporated herein by
reference.
4.7 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon its Exercise
Stock;
(2) the Company shall declare any dividend upon its Exercise Stock
payable in stock or make any special dividend or other distribution to the
holders of its Exercise Stock;
(3) the Company shall offer for subscription pro rata to the holders
of its Exercise Stock any additional shares of stock of any class or other
rights;
(4) there shall be any capital reorganization or reclassification of
the capital stock of the Company; or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Preferred Stock shall be entitled
thereto. Any notice given in accordance with the foregoing clause (b) shall
also specify the date on which the holders of Exercise Stock shall be entitled
to exchange their Exercise Stock for securities or other property deliverable
upon such reorganization, reclassification, consoli-
6.
<PAGE>
dation, merger, sale, dissolution, liquidation, winding-up, conversion or public
offering, as the case may be.
4.8 CERTAIN EVENTS. If any change in the outstanding Exercise Stock of
the Company or any other event occurs as to which the other provisions of this
Section 4 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had it continued to hold such
shares until after the event requiring adjustment.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Holder as follows:
5.1 CORPORATE POWER. The Company will have on the date hereof all
requisite corporate power to execute and deliver this Warrant and to carry out
and perform its obligations under the terms of this Warrant.
5.2 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its stockholders necessary for the authorization, execution,
delivery and performance of this Warrant by the Company and the performance of
the Company's obligations hereunder, has been taken or will be taken prior to
the date hereof. This Warrant, when executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors and, with respect to rights to
indemnity, subject to federal and state securities laws.
5.3 GOVERNMENTAL CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority, required on the part of the Company
in connection with the offer, sale or issuance of this Warrant shall have been
obtained and will be effective on the date hereof, except for notices required
or permitted to be filed with certain state and federal securities commissions,
which notices will be filed on a timely basis.
5.4 OFFERING. Assuming the accuracy of the representations and warranties
of the Purchasers contained in Section 6 hereof, the offer, issue and sale of
this Warrant is and will be exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and has
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
7.
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF THE HOLDER.
6.1 PURCHASE FOR OWN ACCOUNT. The Holder represents that it is acquiring
this Warrant and the Exercise Stock issuable upon exercise of this Warrant
(collectively, the "Securities") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
6.2 INFORMATION AND SOPHISTICATION. The Holder acknowledges that it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire the Warrant. The
Holder represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Warrant and to obtain any additional information necessary to verify the
accuracy of the information given the Holder. The Holder further represents
that it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risk of this investment.
6.3 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the Holder further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the 1933 Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by the Holder to a stockholder or partner (or retired partner) of the
Holder, or transfers by gift, will or intestate succession to any spouse or
lineal descendants or ancestors, if all transferees agree in writing to be
subject to the terms hereof to the same extent as if they were the Holder
hereunder.
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 (THE "ACT") AND
8.
<PAGE>
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
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 provision of this Section
6.3(d) 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.
6.4 ACCREDITED INVESTOR. The Holder is an "accredited investor" as such
term is defined in Rule 501 under the Securities Act.
7. ISSUE TAX. The issuance of certificates for shares of Exercise Stock upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
8. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Exercise Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
9. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. 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
or any other matters or 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 shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the holder to
purchase shares of Exercise Stock, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Stock Purchase Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.
10. REGISTRATION RIGHTS. The registration rights and related obligations of
the Holder with respect to this Warrant and the Exercise Stock will be the same
as those agreed to with certain holders of the Company's Preferred Stock under
Section 3 (but excluding Sections 3.1, 3.9 and
9.
<PAGE>
3.11) of that certain Amended and Restated Investor's Rights Agreement among the
Company and certain of its investors dated as of July 18, 1995.
11. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal and
state securities laws and the transfer restrictions set forth Section 6.4 above,
this Warrant and all rights hereunder are transferable, in whole or in part,
without charge to the holder hereof (except for transfer taxes), upon surrender
of this Warrant properly endorsed and compliance with the provisions of this
Warrant. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
12. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Exercise Stock issued upon exercise of this Warrant, referred to in
Sections 10 and 11 shall survive the exercise of this Warrant.
13. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
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 or such other address
as either may from time to time provide to the other.
15. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Exercise Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
16. DESCRIPTIVE HEADINGS AND GOVERNING LAW. 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. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
17. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or
10.
<PAGE>
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant, the Company, at its expense, will make and deliver a new
Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant.
18. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 10th day of November, 1995.
AVIRON
a California corporation
By:
-----------------------------------
Title:
--------------------------------
ATTEST:
- -----------------------------------
Secretary
RAYMOND JAMES & ASSOCIATES, INC.
By:
-----------------------------------
Title:
--------------------------------
11.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date:
--------------
AVIRON
297 North Bernardo Avenue
Mountain View, California 94043
Attn: Chief Executive Officer
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
AVIRON (the "Company") and dated November 10, 1995 Warrant No. PCW-1 (the
"Warrant") and to purchase thereunder Three Hundred Fifty-Two Thousand,
Five Hundred Thirty-Six (352,536) shares of the Series C Preferred Stock of
the Company at a purchase price of One Dollar and Sixty-Two Cents ($1.62)
per Share or an aggregate purchase price of Five Hundred Seventy-One
Thousand, One Hundred Eight Dollars and Thirty-Two Cents ($571,108.32) (the
"Purchase Price").
FOR USE IN CONNECTION WITH A NET ISSUE EXERCISE:
/ / The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
2.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
--------------------------------------
By
-----------------------------------
Title
--------------------------------
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO AVIRON ALONG WITH THE
SUBSCRIPTION FORM BEFORE THE SERIES C PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THE WARRANT CERTIFICATE DATED NOVEMBER 10, 1995, WILL BE ISSUED.
, 19
--------------------- --
AVIRON
297 North Bernardo Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
The undersigned, Raymond James & Associates, Inc. ("Purchaser"), intends to
acquire up to 352,536 shares of the Series C Preferred Stock (the "Stock") of
AVIRON (the "Company") from the Company pursuant to the exercise or conversion
of certain Warrants to purchase Stock held by Purchaser. The Stock will be
issued to Purchaser in a transaction not involving a public offering and
pursuant to an exemption from registration under the Securities Act of 1933, as
amended (the "1933 Act") and applicable state securities laws. In connection
with such purchase and in order to comply with the exemptions from registration
relied upon by the Company, Purchaser represents, warrants and agrees as
follows:
Purchaser is acquiring the Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Stock in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law.
Purchaser has been advised that the Stock has not been registered under the
1933 Act or state securities laws on the ground that this transaction is exempt
from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Stock must be held
indefinitely unless it is subsequently registered under the 1933 Act or unless
an exemption from such registration (such as Rule 144) is available with respect
to any proposed transfer or disposition by Purchaser of the Stock. Purchaser
further agrees that the Company may refuse to permit Purchaser to sell, transfer
or dispose of the Stock (except as permitted under Rule 144) unless there is in
effect a registration statement under the 1933 Act and any applicable state
securities
<PAGE>
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Stock, or any substitutions therefor, legends stating in
substance:
"These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated in the
absence of an effective registration statement as to the securities under said
act or an opinion of counsel satisfactory to the Company that registration is
not required."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Stock with
Purchaser's counsel.
Very truly yours,
RAYMOND JAMES & ASSOCIATES, INC.
By:
--------------------------------
Title:
-----------------------------
<PAGE>
AVIRON
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
JULY 18, 1995
<PAGE>
AVIRON
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT (the "Agreement") is
entered into as of July 18, 1995 by and among AVIRON, a California corporation
(the "Company"), the parties listed on Exhibit A hereto (the "Investors"), the
parties listed on Exhibit B hereto (the "Series A Warrant Holders"), and the
parties listed on Exhibit C hereto (the "Series B Warrant Holders").
RECITALS
WHEREAS the Company proposes to issue and sell up to 11,111,111 shares of
its Series C Preferred Stock ("Series C Preferred") as more fully described in
the Private Placement Memorandum, dated as of May 1995 (the "Private
Placement");
WHEREAS the Investors are the purchasers of the Company's Series A
Preferred Stock pursuant to that certain Series A Preferred Stock Purchase
Agreement, dated as of June 19, 1992, by and among the Company and the
purchasers named therein (the "Series A Agreement"); the purchasers of the
Company's Series B Preferred Stock pursuant to that certain Series B Preferred
Stock Purchase Agreement, dated as of September 3, 1993, by and among the
Company and the Purchasers named therein (the "Series B Agreement"); and the
purchasers of the Company's Series C Preferred Stock pursuant to the Private
Placement;
WHEREAS the Series A Warrant Holders are the holders of either Series A
Preferred Stock or Warrants to purchase Series A Preferred Stock of the Company,
the Series B Warrant Holders are the holders of either Series B Preferred Stock
or Warrants to purchase Series B Preferred Stock of the Company, and the
Founders are Peter Palese, J. Leighton Read, Bernard Roizman and Richard J.
Whitley; and
WHEREAS, in connection with the Private Placement, the prospective
purchasers have requested that the Company extend certain rights to them with
respect to the Series C Preferred. The Company has requested and the existing
Holders are willing to amend the rights given to them under the Amended and
Restated Investor Rights Agreement, dated as of September 3, 1993 (the "Prior
Agreement"), as amended as of March 15, 1995 by replacing such rights in their
entirety with the rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants, and conditions set forth in this Agreement and in the
agreements pursuant to which the Investors acquired their securities in the
Company, the parties mutually agree as follows:
1.
<PAGE>
I. GENERAL
1.1 PRIOR AGREEMENT SUPERSEDED. Effective upon the initial closing of the
Private Placement, the Prior Agreement is hereby terminated and superseded in
its entirety by this Agreement.
1.2 DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean shares of the Company's Common Stock, no par
value.
"HOLDER" shall mean any holder of outstanding Registrable Securities.
For purposes of Sections 3.2 through 3.12 of this Agreement only, the definition
of "Holder" also includes Michigan.
"INITIATING HOLDERS" shall mean any Holder or Holders of not less than
40% of the then outstanding Registrable Securities.
"MICHIGAN" refers to the Regents of the University of Michigan, a
constitutional corporation of the state of Michigan.
"MICHIGAN SHARES" refers to shares of Series B Preferred Stock of the
Company issued to Michigan, pursuant to the Stock Transfer Agreement, dated as
of February 24, 1995, between the Company and Michigan (the "Michigan
Agreement").
"MICHIGAN WARRANT" refers to a warrant to purchase shares of Common
Stock which the Company is obligated to issue to Michigan under certain
circumstances, as provided in the Michigan Agreement.
"MICHIGAN WARRANT SHARES" refers to the shares of Common Stock issued
under the Michigan Warrant.
"PREFERRED STOCK" shall mean shares of the Company's Preferred Stock.
"REGISTRABLE SECURITIES" means (i) shares of Common Stock issued or
issuable pursuant to the conversion or exercise of the Shares and (ii) shares
of Common Stock issued as a dividend or other distribution with respect to, or
in exchange or in replacement of, the Shares, excluding in all cases, however
(including exclusion from the calculation of the number of outstanding
Registrable Securities), any Registrable Securities sold by a person, (x) in a
transaction pursuant to Rule 144, or (y) pursuant to a registration statement
under this Agreement
2.
<PAGE>
or (z) in a transaction in which his rights under this Agreement are not
transferred, including a transaction pursuant to a registration statement under
this Agreement. For purposes of Sections 3.2 through 3.12 of this Agreement
only, the definition of "Registrable Securities" also includes the Michigan
Warrant Shares.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 3.1, 3.2 and 3.9 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and disbursements of a single
special counsel for the Holders not to exceed $20,000, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 2.2 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (i) the securities of the Company held by the
Investors and Founders as described on Exhibit A, (ii) the securities issuable
upon exercise of the Warrants to purchase Series A Preferred Stock held by the
Series A Warrant Holders as described on Exhibit B, or (iii) the securities
issuable upon exercise of the Warrants to purchase Series B Preferred Stock held
by the Series B Warrant Holders as described on Exhibit C. For purposes of
Sections 3.2 through 3.12 of this Agreement only, the definition of "Shares"
also includes the Michigan Shares and the Michigan Warrant Shares.
II. TRANSFERABILITY
2.1 RESTRICTIONS ON TRANSFERABILITY. The Shares and any Preferred Stock
or Common Stock into which the Shares may be convertible or exercisable, shall
not be transferable except upon the conditions specified in this Agreement,
which conditions are intended to insure compliance with the provisions of the
Securities Act, or, in the case of Section 3.8 hereof, to assist in an orderly
distribution. Each Investor will cause any proposed transferee of the Shares
(or of the Preferred Stock or Common Stock into which the Shares may be
convertible or
3.
<PAGE>
exercisable) held by an Investor to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.
2.2 RESTRICTIVE LEGEND. Each certificate representing (i) the Shares, or
(ii) shares of the Company's Common Stock or Preferred Stock issued upon
conversion or exercise of the Shares and (iii) any securities issued in respect
of the Shares or such Common Stock or Preferred Stock, shall (unless otherwise
permitted by the provisions of Section 2.3 below) be stamped or otherwise
imprinted with a legend in substantially the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT UNDER AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR AN EXEMPTION THEREFROM OR IN CONTRAVENTION OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER. COPIES OF THE AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL OFFICE.
2.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in the following cases, with respect to which the
requirements set forth in the balance of this sentence need not be complied
with: transactions in compliance with Rule 144 or Rule 144A so long as the
Company is furnished with evidence of compliance with such Rule; transactions
involving the distribution of Restricted Securities by any Investor which is a
general or limited partnership to any of its partners, or retired partners, or
to the estate of any of its partners or retired partners; transactions involving
the transfer of Restricted Securities by any holder who is an individual to his
family members or to a trust for the benefit of such shareholder or his family
members; or transfers not involving a change in beneficial ownership) by (i) a
written opinion of legal counsel who shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, (ii) a "no action" letter from the Commission to the effect that
the distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or
4.
<PAGE>
(iii) such other showing that may be reasonably satisfactory to legal counsel to
the Company, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 2.2 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for the Company such legend is not required in order to establish compliance
with any provisions of the Securities Act. All Restricted Securities
transferred as above that continue to bear the restrictive legend set forth in
Section 2.2 shall continue to be subject to the provisions of this Section 2.3
in the same manner as before such transfer.
III. REGISTRATION RIGHTS
3.1 REQUESTED REGISTRATION. Prior to such time as the Company has
effected two registrations pursuant to this Section 3.1 and such registrations
have been declared or ordered effective, if the Company shall receive from
Initiating Holders a written request that the Company effect any registration
(other than a registration on Form S-3 or any comparable form of registration
statement) with respect to Registrable Securities having an anticipated
aggregate offering price to the public of at least $7,500,000 (before deduction
of underwriter commissions and expenses), the Company will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided
that the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 3.1:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(ii) Prior to the earlier to occur of (x) six months following
the effective date of the registration statement pertaining to the first
underwritten public offering of securities of the Company for its own account
and (y) August 31, 1997; or
5.
<PAGE>
(iii) If at the time of the request to register Registrable
Securities the Company gives notice within 30 days of such request that it is
engaged or has fixed plans to engage within 90 days of the time of the request
in an initial firmly underwritten registered public offering as to which the
Holders may include Registrable Securities pursuant to Sections 3.1 or 3.2.
Subject to the foregoing clauses (i) through (iii) and to Section 3.1(d),
the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request of the Initiating Holders.
(c) UNDERWRITING. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 3.1 and the Company shall include such information in the written notice
referred to in Section 3.1(a). The right of any Holder to registration pursuant
to Section 3.1 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested (unless otherwise mutually agreed by a
majority in interest of the Holders and such Holder) to the extent provided
herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders with the
approval of the Company, which approval shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 3.1, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten and so advises the Initiating Holders in writing, then the
Initiating Holders shall so advise all Holders (except those Holders who have
indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities owned by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities and/or other securities
so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used above in determining the
underwriter limitation; and, provided further that in the event that the
withdrawal of a Holder, and the subsequent inclusion of additional Registrable
Securities by other
6.
<PAGE>
Holders, results in an anticipated aggregate offering price to the public of
less than $1,000,000 the Company shall no longer be required to effect such
registration pursuant to this Section 3.1.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account or the
account of others in such registration if the underwriter so agrees and if the
number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
(d) DELAY OF REGISTRATION. If the Company shall furnish to the
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed on or before the date
filing would be required and it is therefore essential to defer the filing of
such registration statement, then the Company may direct that such request for
registration be delayed for two periods not in excess of 90 days each in any
one-year period.
3.2 COMPANY REGISTRATION.
(a) If at any time or from time to time, the Company shall determine
to register any of its Common Stock, for its own account or for the account of
others (other than the Holders), other than a registration relating solely to
employee benefit plans or a registration relating solely to a Commission Rule
145 transaction or a registration on any registration form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 20 days after receipt of such written notice from the
Company, by any Holder or Holders.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 3.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company with the approval of the Board of Directors. Notwithstanding any other
provision of this Section 3.2, if the underwriter determines that marketing
factors require a limitation of the number of shares
7.
<PAGE>
to be underwritten, the underwriter may limit the number of Registrable
Securities and shares of Common Stock to be included in the registration and
underwriting. The Company shall so advise all Holders (except those Holders who
have indicated to the Company their decision not to distribute any of their
Registrable Securities or Common Stock through such underwriting), and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities owned by the Holders at the time of filing the registration
statement.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The securities so withdrawn from such underwriting shall also be
withdrawn from such registration; provided, however, that, if by the withdrawal
of such securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used above
in determining the underwriter limitation.
3.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 3.1, Section 3.2 or Section 3.9 herein shall be borne by the Company.
All Selling Expenses incurred in connection with any registrations hereunder
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of shares so registered. The Company shall not, however, be
required to pay for expenses of any registration proceeding begun pursuant to
Section 3.1, the request of which has been subsequently withdrawn by the
Initiating Holders (unless the withdrawal is based upon material information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or unless the Holders of a majority of Registrable
Securities agree to forfeit their right to one requested registration pursuant
to Section 3.1 in which event such right shall be forfeited by all Holders), in
which case such expenses shall be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
3.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 3,
the Company will keep each participating Holder advised in writing as to the
qualification and compliance and as to the completion thereof. At its expense
the Company will:
(a) Keep such registration, qualification or compliance effective for
a period of 90 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) Furnish such number of prospectuses and other documents incident
thereto in conformity with the requirements of the Act;
8.
<PAGE>
(c) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(i) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
if such securities are being sold through underwriters or, if such securities
are not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities and (ii) a
letter dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
9.
<PAGE>
3.5 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors, partners and legal counsel, and each person controlling such Holder,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 3, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other similar document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, or (ii) any violation by the Company
of any federal, state or common law rule or regulation applicable to the Company
in connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors, partners and legal
counsel, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or furnished by the Holder to the Company in
response to a request by the Company stating specifically that such information
will be used by the Company therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each legal counsel and independent accountant of the Company, each
person who controls the Company within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors, and partners and each
person controlling such Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other similar
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and
will reimburse the Company, such Holders, such directors, officers, persons, or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of such Holders hereunder shall be limited to an amount equal to
the proceeds to each such Holder of Registrable Securities sold as contemplated
herein.
10.
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(c) Each party entitled to indemnification under this Section 3.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if in the
opinion of counsel to the Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as provided herein
shall relieve the Indemnifying Party of its obligations under this Section 3.5
only to the extent that such failure to give notice shall materially adversely
prejudice the Indemnifying Party in the defense of any such claim or any such
litigation. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
3.6 INFORMATION BY HOLDER. Each Holder including securities of the
Company in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 3.
3.7 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Use its best efforts to facilitate the sale of the Restricted
Securities to the public, without registration under the Securities Act,
pursuant to Rule 144 under the Securities Act, provided that this shall not
require the Company to file reports under the Securities Act and the Exchange
Act at anytime prior to the Company's being otherwise required to file such
reports.
(b) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act at all times after
90 days after the effective date of the first registration under the Securities
Act filed by the Company for an offering of its securities to the general
public;
(c) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (at any time after it has become subject to such reporting
requirements);
11.
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(d) So long as a Holder owns any Restricted Securities to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
3.8 "MARKET STAND-OFF" AGREEMENT. Each Holder agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it for a period not to exceed 120 days following the effective
date of a registration statement of the Company filed under the Securities Act
if so requested by the Company and the underwriter of Common Stock (or other
securities of the Company), provided that:
(a) such agreement shall apply only to the first underwritten
registered public offering of the Company; and
(b) all officers and directors of the Company enter into similar
agreements and the Company uses its best efforts to cause all other holders of
at least 1% of the Company's voting securities enter into similar agreements.
The Company may impose stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of such period.
3.9 FORM S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 and to that end the Company shall register (whether or
not required by law to do so) its Common Stock under the Exchange Act within 12
months following the effective date of the first registration of any securities
of the Company on Form S-1. After the Company has qualified for the use of Form
S-3, in addition to the rights contained in the foregoing provisions of this
Section 3, the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 thereafter under this Section 3.9 (such requests shall
be in writing and shall state the number of shares of Registrable Securities to
be disposed of and the intended method of disposition of such shares by such
Holder or Holders), provided that the Company shall not be required to effect a
registration pursuant to this Section 3.9 unless the Holder or Holders
requesting registration propose to dispose of shares of Registrable Securities
which they reasonably anticipate will have an aggregate disposition price
(before deduction of underwriting discounts and expenses of sale) of at least
$1,000,000, and provided further that the Company shall not be required to
effect more than two registrations pursuant to this Section 3.9 in any 12 month
period.
The Company shall give notice to all Holders of Registrable Securities of
the receipt of a request for registration pursuant to this Section 3.9 and shall
provide a reasonable opportunity for other Holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Registrable Securities on
12.
<PAGE>
Form S-3, as the case may be, to the extent requested by the Holder or Holders
thereof for purposes of disposition.
3.10 TRANSFER OF REGISTRATION RIGHTS.
(a) Except as otherwise provided herein, the rights contained in this
Section 3 may be assigned or otherwise conveyed to a transferee or assignee of
Registrable Securities held by the Investors, which transferee or assignee shall
be considered a "Holder" for purposes of this Section 3, provided that (i) such
transfer is effected in accordance with applicable federal and state securities
laws, (ii) such transferee or assignee becomes a party to this Agreement or
agrees in writing to be subject to the terms hereof to the same extent as if he
were an original purchaser hereunder and (iii) such transferee or assignee (A)
is a wholly owned subsidiary or constituent partner (including limited partners
and retired partners) or affiliate of the transferring Holder if such Holder is
a partnership, or (B) acquires a number of shares of Registrable Securities
originally held by the transferring Holder equal to at least 1% of the then-
outstanding capital stock of the Company, and, provided further, that the
Company is given written notice by such Holder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned.
(b) Except as otherwise provided herein, the rights contained in
Section 3, except for the rights contained in Section 3.1, may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities held by
the Series A Warrant Holders, which transferee or assignee shall be considered a
"Holder" for purposes of this Section 3, provided that (i) such transfer is
effected in accordance with applicable federal and state securities laws, (ii)
such transferee or assignee becomes a party to this Agreement or agrees in
writing to be subject to the terms hereof to the same extent as if he were an
original purchaser hereunder and, provided further, that the Company is given
written notice by such Holder at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned.
3.11 CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF REGISTRATION
RIGHTS. From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least a majority of the
outstanding Registrable Securities enter into any agreement with any person or
persons providing for the granting to such holder of registration rights
superior to those granted to Holders pursuant to this Section 3.
3.12 TERMINATION OF REGISTRATION RIGHTS. All rights and duties provided
for with respect to any Holder in this Section 3 shall terminate on the later of
(a) the date five (5) years from the date of a Qualified IPO (as defined below
in Section 4.1 (d)), and (b) on which such Holder owns less than 1% of the then-
outstanding capital stock of the Company, except where such amount is held by a
Series A Warrant Holder.
IV. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES
13.
<PAGE>
4.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Investor
(and its affiliates) who holds not less than 1,000,000 shares of Preferred Stock
(or Common Stock issued or issuable upon conversion of the Preferred Stock) the
right of first refusal to purchase, pro rata, all (or any part) of New
Securities (as defined in this Section 4.1) that the Company may, from time to
time propose to sell and issue. In the case where the price per share at which
the New Securities are being offered is indeterminable or is equal to or less
than $1 (as adjusted for stock splits, reclassification or otherwise), such
Investor's (and its affiliates') pro rata share, for purposes of this right of
first refusal with respect to an offering at such a price, is the ratio, the
numerator of which is the number of shares of Common Stock then owned by such
Investor (and its affiliates) as a result of the conversion of any Preferred
Stock of the Company and issuable upon conversion of the Preferred Stock of the
Company then owned by such Investor (and its affiliates), and the denominator of
which is the total number of shares of Common Stock then outstanding as a result
of the conversion of any Preferred Stock of the Company or issuable upon
conversion of the Preferred Stock of the Company then outstanding. In the case
where the price per share at which the New Securities are being offered is
greater than $1 (as adjusted for stock splits, reclassifications or otherwise),
such Investor's (and its affiliates') pro rata share, for purposes of this right
of first refusal with respect to an offering at such a price, is the ratio, the
numerator of which is the number of shares of Common Stock then owned by such
Investor (and its affiliates) as a result of the conversion of any Preferred
Stock of the Company and issuable upon conversion of the Preferred Stock of the
Company then owned by such Investor (and its affiliates), and the denominator of
which is the total number of shares of Common Stock outstanding immediately
prior to the issuance of the New Securities, assuming full conversion of all
outstanding shares of Preferred Stock of the Company. This right of first
refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options, or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock; provided, however, that "New Securities"
does not include (i) securities issued in any additional Closings (as defined in
the Series B Agreement); (ii) securities issuable upon conversion of or with
respect to Series A Preferred Stock or Series B Preferred Stock; (iii)
securities issued pursuant to an acquisition by the Company by merger, purchase
of substantially all of the assets, or other reorganization whereby the Company
owns more than 50% of the voting power of such entity; (iv) shares of the
Company's Common Stock (or related options) issued to employees, directors or
consultants of the Company pursuant to any employee stock offering, plan, or
arrangement approved by the Board of Directors; (v) shares of the Company's
Common Stock or Preferred Stock issued in connection with any stock split, stock
dividend, or similar recapitalization by the Company; (vi) securities issued
pursuant to equipment or debt financing or leases which are approved by the
Company's Board of Directors; (vii) securities issued pursuant to any corporate
partnering, strategic alliance, joint venture or licensing arrangement between
the Company and a third party; or (viii) securities issued by the Company other
than for cash or cash equivalents.
(b) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each Investor who together with its affiliates
holds not less than 1,000,000 shares of Common Stock of the Company issued or
issuable upon conversion of Preferred Stock,
14.
<PAGE>
written notice of its intention, describing the type of New Securities, the
price, and the general terms upon which the Company proposes to issue the same.
Each Investor who together with its affiliates holds not less than 1,000,000
shares of Common Stock of the Company, issued or issuable upon conversion of
Preferred Stock, shall have 20 days from the date of mailing of any such notice
to agree to purchase up to its full pro rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Investor who together with its affiliates holds not less than
1,000,000 shares of Common Stock of the Company, issued or issuable upon
conversion of Preferred Stock, shall have a right of over allotment such that if
any Investor fails to exercise its right hereunder to purchase its full pro rata
portion of New Securities, the Company shall so notify the other Investors and
such Investors (and their affiliates) who have agreed to purchase all or any
part of their pro rata share of New Securities may purchase the nonpurchasing
Investors' portions on a pro rata basis, within ten days from the date of such
notice.
(c) In the event that Investors (and their affiliates) fail to
exercise in full the right of first refusal within said 20 day period (plus the
ten day overallotment period, if applicable) the Company shall have 60 days
thereafter to sell or enter into an agreement providing for the closing of the
sale of the New Securities respecting which the Investors' (and their
affiliates') rights were not exercised within 30 days of such agreement at a
price and upon general terms no more favorable to the purchasers thereon than
specified in the Company's notice. In the event the Company has not sold the New
Securities within such 60 day period, the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Investors
(and its affiliates) in the manner provided above.
(d) The right of first refusal granted under this Agreement shall not
apply to and shall expire upon the first closing of the first firmly
underwritten public offering of Common Stock of the Company that is pursuant to
a registration statement filed with, and declared effective by, the Commission
under the Securities Act, covering the offer and sale of Common Stock to the
public at a per share price (prior to underwriter commissions and expenses) of
at least $2.50 (as adjusted for stock splits, dividends and similar events) and
at an aggregate offering price (before deduction for underwriter commissions and
expenses) of not less than $10,000,000 (a "Qualified IPO").
(e) This right of first refusal is assignable only to an affiliate of
a Holder or in connection with a sale or transfer of a number of shares of
Registrable Securities originally held by the assigning Holder equal to at least
1% of the then-outstanding capital stock of the Company.
15.
<PAGE>
V. INFORMATION RIGHTS
5.1 FINANCIAL INFORMATION.
(a) The Company will furnish the following information to each
Investor who holds together with its affiliates not less than 1,000,000 of
Common Stock issued or issuable upon conversion of Preferred Stock:
(i) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 120 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated statements of income and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form and figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of national standing selected by the Company.
(ii) As soon as practicable after the end of each of the first
three quarterly accounting periods in each fiscal year, and in any event within
45 days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such quarter, and consolidated statements
of income and consolidated statements of cash flows of the Company and its
subsidiaries, if any, for each quarter and for the current fiscal year of the
Company to date, prepared in accordance with generally accepted accounting
principles consistently applied, except that such financial statements will not
contain the notes normally required by generally accepted accounting principles.
(iii) As soon as practicable after the adoption thereof, and
in any event no later than 15 days prior to the commencement of its fiscal year,
an annual operating plan for the forthcoming fiscal year, prepared on a
consolidated basis, including projected statements of profit and loss, cash flow
and balance sheets for each calendar quarter of such year, and, promptly after
preparation thereof, any revisions to such annual operating plan and any other
budgets.
(b) The covenants provided in Sections 5.1 and 5.2 shall terminate
upon the closing of a Qualified IPO.
5.2 INSPECTION RIGHTS. The Company shall permit each Investor who with
its affiliates holds at least 1,000,000 shares of Preferred Stock of the
Company, its attorney, or its other representative to visit and inspect the
Company's properties, to examine the Company's books of account and other
records, to make copies or extracts therefrom and to discuss the Company's
affairs, finances and accounts with its officers, management employees and
independent accountants, all at such reasonable times and as often as such
Investor may reasonably request.
5.3 ASSIGNMENT OF RIGHTS TO INFORMATION. The rights granted pursuant to
Sections 5.1 and 5.2 may not be assigned or otherwise conveyed by any Investor
or by any subsequent transferee of any such rights without the written consent
of the Company, which consent shall not
16.
<PAGE>
be unreasonably withheld; provided that the Company may refuse such written
consent if the proposed transferee is a competitor of the Company as determined
by the Company's Board of Directors; and provided further, that no such written
consent shall be required if the transfer is made to a party who is not a
competitor of the Company and who is a parent, subsidiary, affiliate, partner or
group member of any Investor.
5.4 CONFIDENTIALITY. Each Investor agrees that it will keep confidential
and will not disclose or divulge any confidential, proprietary or secret
information which such Investor may obtain from the Company, and which the
Company has prominently marked "confidential", "proprietary" or "secret" or has
otherwise identified as being such, pursuant to financial statements, reports
and other materials submitted by the Company as required hereunder, or pursuant
to visitation or inspection rights granted hereunder unless such information is
or becomes known to the Investor from a source other than the Company or is or
becomes publicly known, or unless the Company gives its written consent to the
Investor's release of such information, except that no such written consent
shall be required (and the Investor shall be free to release such information to
such recipient) if such information is to be provided to an Investor's counsel
or accountant, or to an officer, director or partner of an Investor, provided
that the Investor shall inform the recipient of the confidential nature of such
information, and shall instruct the recipient to treat the information as
confidential.
VI. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 ENTIRE AGREEMENT. This Agreement, the Series A Agreement and the
Series B Agreement constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be effective five (5) days
after deposited by first-class mail, postage prepaid, with the United States
mail or delivery by hand or by messenger, if addressed (a) to an Investor, at
such Investor's address set forth on the attached Exhibit A, or at such other
address as such Investor shall have furnished to the Company in writing, or (b)
to any other holder of Registrable Securities, at such address as such holder
shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Registrable Securities who has so furnished an address to the
Company, or (c) to the Company, at the address set forth below the Company's
name on the signature page to this Agreement or such other address as the
Company shall have furnished to each Investor and each such other holder in
writing. Notwithstanding the above, any notice or
17.
<PAGE>
communication to an address outside the United States shall be sent by telecopy
and confirmed in writing sent by courier guaranteeing delivery in no more than
two (2) business days.
6.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
6.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
6.7 SEVERABILITY. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.8 AMENDMENTS. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of not less than a majority of the number of shares
of Registrable Securities outstanding as of the date of such amendment or
waiver. Each Investor, Series A Warrant Holder, and Series B Warrant Holder
acknowledges that by the operation of this Section 6.8 the holders of a majority
of the outstanding Registrable Securities may have the right and power to
diminish or eliminate all rights of such Investor, Series A Warrant Holder, or
Series B Warrant Holder under this Agreement. Notwithstanding anything herein
to the contrary, the parties agree that the Company may amend this Agreement at
any time after the date hereof, without obtaining the consent of any Holder, to
add as parties to this Agreement any purchasers of the Company's Series C
Preferred Stock pursuant to the Private Placement. Any persons added to this
Agreement pursuant to this subparagraph shall become "Investors" under this
Agreement, and shares of Common Stock issuable upon conversion of the Series C
Preferred Stock held by such persons shall be "Registrable Securities" under
this Agreement.
18.
<PAGE>
The foregoing Investors Rights Agreement is hereby executed as of the date
first above written.
COMPANY
AVIRON
By:
----
J. Leighton Read, M.D.
Chief Executive Officer
1450 Rollins Road
Burlingame, CA 94010
INVESTORS:
Name of Investor:
----------------------------
Authorized Signature:
------------------------
Name and Title
19.
<PAGE>
INSTITUTIONAL VENTURE
PARTNERS V
by its General Partner
Institutional Venture Management V
By:
-----------------------------------
Reid W. Dennis
General Partner
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
INSTITUTIONAL VENTURE
MANAGEMENT V
By:
-----------------------------------
Reid W. Dennis
General Partner
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
--------------------------------------
J. Leighton Read, M.D.
c/o Aviron
1450 Rollins Road
Burlingame, California 94010
--------------------------------------
Bernard Roizman
5555 S. Everett, Apt. 11A
Chicago, Illinois 60637
--------------------------------------
Betty Roizman
5555 S. Everett, Apt. 11A
20.
<PAGE>
Chicago, Illinois 60637
21.
<PAGE>
ARCH VENTURE FUND LIMITED
PARTNERSHIP
a Delaware Limited Partnership
By: ARCH Development Corporation
By:
-----------------------------------
Steven Lazarus, President
135 South LaSalle Street
Suite 3702
Chicago, Illinois 60603
--------------------------------------
Albert L. Zesiger
75 Bluff Avenue
Rowayton, Connecticut 06853
--------------------------------------
Peter Palese, Ph.D.
414 Highwood Avenue
Leonia, New Jersey 07605
--------------------------------------
John P. Curran
237 Park Avenue
Suite 900
New York, New York 10017
22.
<PAGE>
--------------------------------------
Steven R. Frank
c/o Bear Sterns & Co.
245 Park Avenue, 3rd Floor
New York, NY 10169
--------------------------------------
David B. Musket
One Boston Place, 35th Floor
Boston, Massachusetts 02108
GC&H INVESTMENTS
By:
-----------------------------------
Name:
---------------------------------
Executive Partner
c/o Jeanne Meyer
Cooley Godward Castro
Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
--------------------------------------
Julian N. Stern
84 Selby Lane
Atherton, California 94027
--------------------------------------
Richard Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
23.
<PAGE>
--------------------------------------
Sally B. Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
--------------------------------------
Bruce A. Hironaka
26 Lenox Road
Kensington, California 94707
--------------------------------------
Valerie Hironaka
26 Lenox Road
Kensington, California 94707
THE MOUNT SINAI SCHOOL
OF MEDICINE
By:
-----------------------------------
Frank R. Landsberger, Ph.D
One Gustave L. Levy Plaza
New York, NY 10029-6574
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By:
-----------------------------------
General Partner
1 Embarcadero Center
Suite 3820
San Francisco, CA 94111
24.
<PAGE>
ACCEL JAPAN L.P.
By: Accel Japan Associates L.P.
Its: General Partner
By:
-----------------------------------
General Partner
1 Embarcadero Center
Suite 3820
San Francisco, CA 94111
ABINGWORTH BIOVENTURES
By:
-----------------------------------
Daniel P. Finkelman
Attorney-in-Fact
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg
with a copy to:
Dr. Stephen W. Bunting
Abingworth Management Limited
26 St. James Street
London SW1A 1HA
England
FERRIS F. HAMILTON
FAMILY TRUST
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
25.
<PAGE>
MARY ANN HAMILTON
TRUST FOR SELF
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
TAB PRODUCTS CO. PENSION PLAN
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
THE JENIFER ALTMAN
FOUNDATION
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
AMERICAN MEDICAL INT'L.
PENSION PLAN
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
26.
<PAGE>
TEMPLE-INLAND MASTER TRUST
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
ARTHUR D. LITTLE
EMPLOYEE INVES. PLAN
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
THE DEAN WITTER FOUNDATION
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
ANDREW HEISKELL
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
27.
<PAGE>
ALFRED E. HELLER
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
ELIZABETH HELLER MANDELL
TRUST
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
DOMENIC MIZIO
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
THE RAISER MARITAL TRUST
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
28.
<PAGE>
MARY VAN SCHUYLER RAISER
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
BARRIE RAMSAY ZESIGER
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
BEA ASSOCIATES
PROFIT SHARING TRUST
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
BRINSON PARTNERS, INC.
By:
-----------------------------------
Robert D. Blank
Partner
Brinson Partners, Inc.
209 South LaSalle Street
Suite 114
Chicago, IL 60604-1295
29.
<PAGE>
INTERHEALTH LIMITED, a California
Limited Partnership
---------------------------------
Dr. Alejandro Zaffaroni
4005 Miranda Avenue, Suite 180
Palo Alto, CA 94304
ARCH VENTURE FUND II, L.P.
a Delaware limited partnership
By: ARCH Management Partners II, L.P.
its general partner
By: ARCH Venture Partners, L.P.
its general partner
By: Lifework, Inc.
its general partner
By:
--------------------
Name:
------------------
Title: Managing Director
-------------------------------------------
Eugene Garfield
3501 Market Street
Philadelphia, PA 19104
-------------------------------------------
Dr. H. R. Shepherd
Opportunities Unlimited
c/o Armstrong Pharmaceuticals
71 Elm Street
New Caanan, CT 06840
30.
<PAGE>
BRINSON VENTURE CAPITAL FUND III, L.P.
By: Brinson Partners, Inc.
its General Partner
By:
-----------------------------------
Robert D. Blank, Partner
BRINSON TRUST COMPANY AS TRUSTEE
OF THE BRINSON MAP VENTURE
CAPITAL FUND III
By:
--------------------------------------
Robert D. Blank, Partner
31.
<PAGE>
WELLS FAMILY TRUST
S/P JOEL W. SCHRECK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
A. CAREY ZESIGER REVOCABLE TRUST
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
NICOLA L. ZESIGER
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ALEXA L. ZESIGER
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
32.
<PAGE>
ALZA CORPORATION RETIREMENT PLAN
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
SHEANA BUTLER
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
33.
<PAGE>
ROVENT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
-----------------------------------
Charles Hsu, Vice President
ADVENTACT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
-----------------------------------
Charles Hsu, Vice President
GOLDEN GATE DEVELOPMENT AND INVESTMENT
LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By:
-----------------------------------
Charles Hsu, Vice President
34.
<PAGE>
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Corporation,
General Partner
By:
-----------------------------------
Charles Hsu, Vice President
--------------------------------------
George Rupp
202 Low Library
Columbia University
60 Morningside Drive
New York, New York 10027
35.
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
AS OF JULY 18, 1995
Name and Address Shares
- --------------------------------------------------------------------------------
SERIES A PREFERRED STOCK:
Institutional Venture Partners V . . . . . . . . . . . . . . . . . 2,955,000
Institutional Venture Management V . . . . . . . . . . . . . . . . 45,000
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
J. Leighton Read, M.D. . . . . . . . . . . . . . . . . . . . . . . 500,000
c/o Aviron
1450 Rollins Road
Burlingame, California 94010
Bernard Roizman, Sc.D. and Betty Roizman.. . . . . . . . . . . . . 100,000
5555 S. Everett, Apt. 11A
Chicago, Illinois 60637
Albert L. Zesiger. . . . . . . . . . . . . . . . . . . . . . . . . 300,000
75 Bluff Avenue
Rowayton, Connecticut 06853
Peter Palese, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . 100,000
Professor and Chairman
Department of Microbiology
Mount Sinai Medical Center
New York, New York 10029
John P. Curran . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
237 Park Avenue
Suite 900
New York, New York 10017
1.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Steven R. Frank. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
c/o Bear Sterns & Co.
245 Park Avenue, 3rd Floor
New York, NY 10169
David B. Musket. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
One Boston Place, 35th Floor
Boston, Massachusetts 02108
GC&H Investments.. . . . . . . . . . . . . . . . . . . . . . . . . 50,000
c/o Jeanne Meyer
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Julian N. Stern. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
84 Selby Lane
Atherton, California 94025
Richard Whitley. . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Sally B. Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
Bruce A. Hironaka. . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Valerie Hironaka
26 Lenox Road
Kensington, California 94707
ARCH VENTURE FUND . . . . . . . . . . . . . . . . . . . . . . . . 700,000
Limited Partnership
135 South LaSalle Street
Suite 3702
Chicago, Illinois 60603
2.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
SERIES B PREFERRED STOCK:
Accel IV L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,811,111
Accel Japan L.P. . . . . . . . . . . . . . . . . . . . . . . . . . 244,444
One Embarcadero Center
Suite 3820
San Francisco, CA 94111
Abingworth Bioventures . . . . . . . . . . . . . . . . . . . . . . 2,777,778
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg
Attn: Karl U. Sanne
Telecopier: (352) 43 54 10
With a copy to:
Dr. Stephen W. Bunting
Abingworth Management Limited
26 St. James's Street
London SW1A 1HA
England
Telecopier: (44) (71) 930-1891
and to:
Daniel P. Finkelman, Esq.
Testa, Hurwitz & Thibeault
53 State Street, Exchange Place
Boston, Massachusetts 02109
Telecopier: (617) 248-7100
Brinson Venture Capital Fund III, L.P. . . . . . . . . . . . . . . 1,910,624
Brinson Trust Company as Trustee of the. . . . . . . . . . . . . . 311,598
Brinson MAP Venture Capital Fund III
c/o Brinson Partners, Inc.
209 South LaSalle Street
Suite 114
Chicago, IL 60604-1295
3.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Institutional Venture Partners V. . . . . . . . . . . . . . . . . 2,695,500
Institutional Venture Management V. . . . . . . . . . . . . . . . 61,100
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
ARCH VENTURE FUND II, L. P.. . . . . . . . . . . . . . . . . . . . 277,778
135 South LaSalle Street
Suite 3702
Chicago, Illinois 60603
Ferris F. Hamilton Family Trust. . . . . . . . . . . . . . . . . . 49,500
Mary Ann Hamilton Trust for Self . . . . . . . . . . . . . . . . . 76,500
The Jenifer Altman Foundation. . . . . . . . . . . . . . . . . . . 49,500
American Medical Int'l. Pension Plan . . . . . . . . . . . . . . . 450,000
Temple-Inland Master Trust . . . . . . . . . . . . . . . . . . . . 495,000
Arthur D. Little Employee Inves. Plan. . . . . . . . . . . . . . . 405,000
The Dean Witter Foundation . . . . . . . . . . . . . . . . . . . . 72,000
Andrew Heiskell. . . . . . . . . . . . . . . . . . . . . . . . . . 76,500
Alfred E. Heller . . . . . . . . . . . . . . . . . . . . . . . . . 49,500
Elizabeth Heller Mandell Trust . . . . . . . . . . . . . . . . . . 49,500
Domenic Mizio. . . . . . . . . . . . . . . . . . . . . . . . . . . 76,500
The Raiser Marital Trust . . . . . . . . . . . . . . . . . . . . . 99,000
Mary Van Schuyler Raiser . . . . . . . . . . . . . . . . . . . . . 27,000
Barrie Ramsay Zesiger. . . . . . . . . . . . . . . . . . . . . . . 99,000
BEA Associates Profit Sharing Trust. . . . . . . . . . . . . . . . 99,000
Wells Family Trust S/P Joel W. Schreck . . . . . . . . . . . . . . 99,000
A. Carey Zesiger Revocable Trust . . . . . . . . . . . . . . . . . 36,000
Nicola L. Zesiger. . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Alexa L. Zesiger . . . . . . . . . . . . . . . . . . . . . . . . . 31,500
Alza Corporation Retirement Plan . . . . . . . . . . . . . . . . . 49,500
Sheana Butler. . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000
c/o BEA Associates
153 E. 53rd Street, 58th Floor
New York, NY 10022
Dr. H.R. Shepherd. . . . . . . . . . . . . . . . . . . . . . . . . 166,667
Opportunities Unlimited
c/o Armstrong Pharmaceuticals
71 Elm Street
New Caanan, CT 06840
4.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Dr. Alejandro Zaffaroni. . . . . . . . . . . . . . . . . . . . . . 277,778
Attention: Gonzalo Silviera
c/o Interhealth Limited
4005 Miranda Avenue, Suite 180
Palo Alto, CA 94304
Eugene Garfield. . . . . . . . . . . . . . . . . . . . . . . . . . 277,778
3501 Market Street
Philadelphia, PA 19104
Peter Palese, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . 55,556
414 Highwood Avenue
Leonia, New Jersey 07605
GC&H Investments.. . . . . . . . . . . . . . . . . . . . . . . . . 40,000
c/o Jeanne Meyer
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
COMMON STOCK:
Peter Palese, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . 750,000
414 Highwood Avenue
Leonia, New Jersey 07605
J. Leighton Read, M.D. . . . . . . . . . . . . . . . . . . . . . . 750,000
c/o Aviron
1450 Rollins Road
Burlingame, CA 94010
Bernard Roizman, Sc.D. . . . . . . . . . . . . . . . . . . . . . . 750,000
5555 S. Everett, Apt. 11A
Chicago, IL 60637
Richard J. Whitley . . . . . . . . . . . . . . . . . . . . . . . . 750,000
216 Shades Crest Circle
Birmingham, AL 35216
5.
<PAGE>
EXHIBIT B
SCHEDULE OF SERIES A WARRANT HOLDERS
Name and Address No. of Shares Purchasable
- --------------------------------------------------------------------------------
Mount Sinai Medical Center . . . . . . . . . . . . . . . . . . . . 225,000
One Gustave L. Levy Plaza
New York, New York 10029-6574
<PAGE>
EXHIBIT C
SCHEDULE OF SERIES B WARRANT HOLDERS
Name and Address No. of Shares Purchasable
- --------------------------------------------------------------------------------
Lease Management Services, Inc.. . . . . . . . . . . . . . . . . . 194,445
2500 Sand Hill Road
Suite 101
Menlo Park, CA 94025
<PAGE>
TABLE OF CONTENTS
PAGE
I. General................................................................. 2.
1.1 Prior Agreement Superseded..................................... 2.
II. Transferability........................................................ 3.
2.1 Restrictions on Transferability................................ 3.
2.2 Restrictive Legend............................................. 4.
2.3 Notice of Proposed Transfers................................... 4.
III. Registration Rights................................................... 5.
3.1 Requested Registration......................................... 5.
3.2 Company Registration........................................... 7.
3.3 Expenses of Registration....................................... 8.
3.4 Registration Procedures........................................ 8.
3.5 Indemnification................................................ 9.
3.6 Information by Holder.......................................... 11.
3.7 Rule 144 Reporting............................................. 11.
3.8 "Market Stand-off" Agreement................................... 12.
3.9 Form S-3....................................................... 12.
3.10 Transfer of Registration Rights................................ 12.
3.11 Certain Limitations in Connection with Future Grants of
Registration Rights............................................ 13.
3.12 Termination of Registration Rights............................. 13.
IV. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES............................ 13.
4.1 Right of First Refusal......................................... 13.
V. Information Rights...................................................... 15.
5.1 Financial Information.......................................... 15.
5.2 Inspection Rights.............................................. 16.
5.3 Assignment of Rights to Information............................ 16.
5.4 Confidentiality................................................ 16.
VI. Miscellaneous.......................................................... 17.
6.1 Governing Law.................................................. 17.
6.2 Successors and Assigns......................................... 17.
6.3 Entire Agreement............................................... 17.
6.4 Notices, etc................................................... 17.
6.5 Delays or Omissions............................................ 17.
6.6 Counterparts................................................... 18.
6.7 Severability................................................... 18.
6.8 Amendments..................................................... 18.
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ii
<PAGE>
Exhibit 5.1
[Letterhead]
COOLEY GODWARD
COOLEY GODWARD CASTRO HUDDLESON & TATUM
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
MAIN 415 843-5000
FAX 415 857-0663
June 3, 1996
Aviron
297 North Bernardo Avenue
Mountain View, CA 94043
RE: OPINION
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing on June 4, 1996 by Aviron (the "Company") of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission"), including a prospectus (which may be
filed with the Commission pursuant to Rule 424(b) of Regulation C promulgated
under the Securities Act of 1933, as amended) (the "Prospectus"), and the
underwritten public offering of up to 3,450,000 shares of the Company's
common stock (the "Common Stock") (including 450,000 shares of Common Stock
for which the underwriters have been granted an over allotment option).
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Articles of
Incorporation and Bylaws, as amended, and the originals or copies certified
to our satisfaction of such records, documents, certificates, memoranda and
other instruments as in our judgment are necessary or appropriate to enable
to render the opinion expressed below and (ii) assumed that the shares of the
Common Stock will be sold by the underwriters at a price established by the
Pricing Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the
Registration Statement and related Prospectus, will be validly issued, fully
paid and nonassessable.
<PAGE>
Aviron
June 3, 1996
Page 2
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
Robert J. Brigham
cc: J. Leighton Read, M.D.
<PAGE>
EXHIBIT 10.1
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN DELETED, AS
MARKED BY BRACKETS, AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
LICENSE AGREEMENT
License Agreement dated as of July 1, 1992, between ARCH DEVELOPMENT
CORPORATION, an Illinois not-for-profit corporation ("ARCH"), and VECTOR
PHARMACEUTICALS, INC., a California corporation ("Licensee").
PRELIMINARY STATEMENT
ARCH holds rights to the Licensed Patent Rights described below.
Licensee wishes to obtain the right to exploit the Licensed Patent Rights
in commercial settings.
Therefore, in consideration of the mutual obligations set forth herein and
of other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ARCH and Licensee agree as follows.
ARTICLE I
DEFINITIONS
The following capitalized terms are used in this Agreement with the
following meanings:
"AFFILIATE" means, as to any person or entity, any other person or entity
which is directly or indirectly controlled by, or is under common control with,
such person or entity. For purposes of the preceding definition, "control"
means the right to control, or actual control of, the management of such other
entity, whether by ownership of voting securities, by agreement, or otherwise.
"COMBINATION PRODUCT" means any product that is comprised in part of a
Licensed Product and in part of one or more other biologically active
diagnostic, preventive or therapeutic agents which are not themselves Licensed
Products (the "Other Agents"). "Other Agents" excludes diluents and vehicles of
Licensed Products.
"COMMERCIAL SALE" means any transfer to another person or entity, for
value, after which transfer the seller has no right or power to determine the
transferee's resale price, if any. A transfer by Licensee to an Affiliate or
sublicensee shall not constitute a Commercial Sale. "Commercial Sale" does not
include distribution of free promotional samples of any Licensed Product or
Combination Product by Licensee or any of its Affiliates or sublicensees in
amounts determined to be commercially reasonable by Vector.
<PAGE>
"IMPROVEMENTS" means all modifications, revisions or improvements to the
Inventions within the Scope hereafter owned by or subject to the rights of ARCH
which improve the performance, marketability, manufacture or quality of the
Inventions or any Licensed Product, but only to the extent such modifications,
revisions or improvements are not subject to the rights of any third party
funding source.
"INVENTIONS" means the devices, machines, methods, processes,
manufactures, compositions of matter and uses (in each case whether patentable
or unpatentable) disclosed in or by the patents and patent applications listed
on Schedule I attached hereto.
"LATER DEVELOPMENTS" means all discoveries, inventions, or other
proprietary matters within the Scope (other than Improvements) now or hereafter
owned by or subject to the rights of ARCH, but only to the extent such
discoveries, inventions or other proprietary matters are not subject to the
rights of any third party funding source.
"LICENSED FIELD" means the prediction, monitoring,
diagnosis, prevention and treatment of disease in humans, animals and plants.
"LICENSED PATENT RIGHTS" means (a) the patents and patent applications in
which are disclosed any and all Inventions, and (b) all patents and patent
applications which are divisions, continuations, continuations-in-part,
reissues, renewals, reexaminations, foreign counterparts, substitutions, or
extensions of or to any patent applications or patents described in clause (a)
of this sentence.
"LICENSED PRODUCT" means any product within the scope of any claim of any
patent or patent application within the Licensed Patent Rights and any product
made by any art, method or process within the scope of any claim of any patent
or patent application within the Licensed Patent Rights.
"NET SALES" means:
(a) with respect to Licensed Products, the gross sales price actually
charged by Licensee or an Affiliate or sublicensee of Licensee in the
Commercial Sale of such Licensed Product, less:
(i) trade, prompt payment, quantity or cash discounts, rebates,
and non-affiliated brokers' or agents' commissions, each as actually
and customarily allowed and taken;
-2-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(ii) amounts actually repaid or credited to customers on account
of rejections or returns of specified products on which Royalties have
been paid hereunder or on account of retroactive price reductions
affecting such products;
(iii) customary freight and other transportation costs, including
insurance charges, and duties, tariffs, sales, use and excise taxes
and other governmental charges based directly on sales, turnover or
delivery of the specified products and actually paid or allowed by
Licensee, an Affiliate of Licensee or a sublicensee; and
(iv) commercially reasonable allowances for bad debts incurred
with respect to the initial Licensed Product during the first full
year of Commercial Sales of such Licensed Product, PROVIDED that such
bad debt reserve shall be deemed extinguished within 180 days of the
end of such first full year, and any amount of such reserve not
actually debited in accordance with commercially reasonable practices
during that period shall be deemed to be receipts of Net Sales for all
purposes of this Agreement; and
(b) with respect to Combination Products, the gross sales price
actually charged by Licensee or an Affiliate or sublicensee of Licensee in
the Commercial Sale of such Combination Product, less the deductions set
forth in subsections (a)(i) - (iv) above, multiplied by a fraction having
(i) a numerator of [ ] and (ii) a denominator of the [ ]
The "fair market value" for any Licensed Product or Other Agent shall be
determined for [
] When no fair market value is available, the fraction set forth
above shall be changed to a fraction having (x) a numerator of [ ]
and (y) a denominator
of [
] PROVIDED that in no event shall the fraction be less than [
] if only one Other Agent is included with a Licensed
Product(s) in such
-3-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Combination Product, (B) [ ], if two Other Agents are included with a
Licensed Product(s) in such Combination Product, and (C) [ ], if three or
more Other Agents are included with a Licensed Product(s) in such
Combination Product. "Cost" as used above means [ ]
"PATENT COSTS" means a person's out-of-pocket expenses incurred in
connection with the preparation, filing, prosecution and maintenance of the
patents under the Licensed Patent Rights, including, among other items, the fees
and expenses of attorneys and patent agents, filing fees and maintenance fees,
but excluding costs involved in any patent infringement claims.
"ROYALTIES" means all amounts payable under clauses (b) and
(c) of Section 3.1 of this Agreement.
"SCOPE" means and shall be limited to (i) [ ] adapted for use in
[ ] that are subject to an obligation of assignment to the University and
in which ARCH has obtained property rights, and which have been developed (a)
by [ ] in the course of a collaborative
research effort with one or more scientists from entities other than the
University, or (b) by [ ]in the course of a research effort conducted
principally in the laboratory [ ] and not in the course of a collaborative
effort with one or more senior scientists at the University, and (ii) the
[ ] described in [ ]of Schedule I attached hereto. "Scope" does
not include [ ]
"SUBLICENSE" means any grant by Licensee of any rights to a sublicensee
under the terms of Section 2.1 of this Agreement.
"TECHNICAL INFORMATION" means the technical information, know-how,
processes, reagents, protocols, and samples of assay components, media and/or
cell lines and procedures and formulations for producing same, if any, in
ARCH's or [ ] possession, claimed or described in the Licensed Patent
Rights, and which contribute in whole or in part to the practice of the
Inventions.
"TERRITORY" means worldwide.
"UNIVERSITY" means the University of Chicago.
-4-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE II
GRANT OF LICENSE
2.1. GRANT. ARCH hereby grants and agrees to grant to Licensee and its
Affiliates:
(a) an exclusive (except as otherwise specified in Sections
2.2 and 2.3) license to practice the Inventions and make, have made, use and
sell Licensed Products (whether singly or as part of a Combination Product, and
including the provision of services in connection therewith) under the Licensed
Patent Rights within the Licensed Field and within the Territory; and
(b) the exclusive right and authority to grant Sublicenses of the rights
granted in clause (a) above, subject to the provisions of this Agreement.
2.2. RESERVATIONS. ARCH reserves for itself and the University the
irrevocable, non-transferable right to make and use (but not sell) Licensed
Products and to use the Licensed Patent Rights, all for educational and
research purposes only. In addition, the Inventions may have been conceived
with the use of United States government funds. Therefore, there is reserved
from the rights granted hereunder the right of the United States government
to practice the Inventions for its own purposes in such manner as it sees
fit. Licensee further acknowledges that third parties may have ownership
interests in Improvements or Later Developments which may preclude the grant
of an exclusive license to Licensee in such Improvements or Later
Developments. Neither ARCH nor the University shall have any obligation to
pay Licensee a royalty or any other fee for the rights reserved in this
Section.
2.3. OTHER RIGHTS. Licensee acknowledges and understands that pursuant
to that certain Research Agreement by and between the University and
[ ] dated [ ] as amended, the patents and patent
applications identified as [ ] have been issued and filed [ ]
ARCH agrees that it will use its good faith efforts to cause the University
to obtain, and thereafter assign to ARCH, the patents and patent applications
described above pursuant to the proposed Assignment Agreement between the
University [ ] attached hereto as Exhibit A under substantially the same
terms as are set forth in the [ ] so as to effectuate fully
the intention of the parties to license to Licensee all of the patents and
patent applications set forth on Schedule I attached hereto. ARCH agrees
that it will keep Licensee fully informed of the status of its efforts to
obtain
-5-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[ ] agreement to the [ ] as currently exists
or as negotiated by ARCH in good faith. Vector acknowledges that (i)
notwithstanding ARCH's good faith efforts to enter into the [ ]
with [ ] the agreement which ARCH may eventually enter into
with [ ] may differ substantially from the [ ] and (ii) in the
event the [ ] (or some other assignment instrument) is entered into
between the University and [ ] the rights granted in Section
2.1 above are subject to all of the terms and conditions of such
[ ] (or alternative assignment instrument). ARCH shall not have
any obligation to pay Licensee a royalty or any other fee for the rights
granted to [ ] pursuant to the [ ] (or alternative assignment
instrument).
2.4. SUBLICENSES. Licensee may enter into Sublicenses for the Licensed
Patent Rights as Licensee shall determine in its reasonable discretion,
PROVIDED that (i) Licensee shall give ARCH written notice of the execution of
any Sublicense immediately upon such an event, (ii) Licensee shall promptly
provide ARCH with a copy of each such Sublicense and any amendments and
modifications thereto, (iii) Licensee may not assign any of its obligations
hereunder to any sublicensee, (iv) each Sublicense shall provide that ARCH
shall not be responsible for the performance by Licensee of any of Licensee's
obligations under such Sublicense, and (v) the terms of any such Sublicense
shall be consistent with the terms of this Agreement. Upon the termination
of this Agreement for any reason prior to the expiration of the
last-to-expire patent under the Licensed Patent Rights, Licensee's rights
(but not obligations) under each Sublicense shall automatically be deemed
transferred to ARCH without the necessity of any notice or other
communication from ARCH to the sublicensee, and each Sublicense shall
continue thereafter in full force and effect in accordance with its terms.
Licensee agrees to provide for such an event in each Sublicense in a manner
reasonably acceptable to ARCH.
2.5. IMPROVEMENTS. (a) ARCH hereby grants to Licensee an option, [ ]
to include any Improvements within the licenses granted pursuant to Section
2.1 on the terms otherwise set forth in this Agreement. Licensee shall have
the right, [ ] to request from [ ] either
telephonically or in writing, information regarding the existence or nature
of any Improvements PROVIDED Licensee acknowledges and agrees that any
failure of [ ] to provide such information will not constitute a breach of
this Agreement by ARCH. ARCH agrees to notify Licensee in writing of any
Improvement [ ]of ARCH acquiring title to such Improvement, which
notice shall describe the Improvement in general terms and shall be
accompanied by a confidentiality agreement in reasonable form to be executed
by Licensee. Upon the execution of such
-6-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
confidentiality agreement ARCH shall provide Licensee with sufficient details
regarding the subject Improvement to allow Licensee to evaluate its commercial
potential.
(b) Licensee shall have an exclusive period of [ ] after receipt of
detailed information concerning an Improvement in which to notify ARCH in
writing of its desire to exercise its option with respect to such
Improvement. If Licensee fails to deliver such notice within the applicable
time, or notifies ARCH that it does not wish to exercise such option,
Licensee shall have no further rights with respect to such Improvement of any
kind or nature whatsoever.
(c) If Licensee exercises its option with respect to an Improvement, the
Improvement shall thereafter be deemed an "Invention" for all purposes of this
Agreement, and ARCH's and Licensee's rights and obligations with respect thereto
shall be as set forth in this Agreement. Licensee agrees that it shall pay, or
at ARCH's option reimburse ARCH for, the Patent Costs incurred with respect to
the Licensed Patent Rights arising as a consequence of any such Invention
(including any Patent Costs for which ARCH is obligated to reimburse any
governmental agency), whether incurred before or after the date on which
Licensee exercises its option therefor.
2.6. TECHNICAL INFORMATION. ARCH agrees to provide Licensee with Technical
Information which comes within ARCH's possession from time to time during the
term of this Agreement. Licensee shall be entitled to use (and shall be
entitled to allow its Affiliates and sublicensees to use) such Technical
Information internally in support of development, discovery, manufacturing and
marketing efforts for sales of Licensed Products, PROVIDED that any such use by
Licensee or its Affiliates or sublicensees shall be subject to the restrictions
set forth in Section 5.4 below. ARCH further agrees to use its good faith
efforts to cause [ ] to promptly deliver the reagents contained
in the Technical Information and the patent applications contained within the
Licensed Patent Rights in his possession to Licensee, at Licensee's expense.
2.7. OWNERSHIP OF DISCOVERIES. Each party acknowledges and agrees that any
and all discoveries, know-how, inventions, methods, ideas and the like
("Discoveries") made or discovered solely by its employees, consultants or
agents acting within the scope of their respective engagements shall be owned
solely by it and that any and all Discoveries made jointly by employees,
consultants or agents of each shall be jointly owned, all as determined in
accordance with U.S. laws of inventorship. Nothing in the foregoing sentence
shall, however, be deemed to constitute the grant of any rights by one party to
the other in and to any Discoveries, or any other discoveries or inventions
owned by such party, which are not subject to this Agreement.
-7-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE III
PAYMENTS
3.1. ROYALTIES. For the licenses granted in Section 2.1 of this Agreement,
Licensee shall pay ARCH the amounts determined pursuant to subsections (a), (b)
and (c) below.
(a) Licensee shall provide ARCH written notice within fifteen (15) days
of achievement of each of the milestone events set forth below in respect of
any Licensed Products and Combination Products developed by Licensee, its
Affiliates or sublicensees, [ ]
events. Within thirty (30) days after delivering each such notice, Licensee
shall make the milestone payments to ARCH set forth below:
(i) Licensee, any of its Affiliates or any of its
sublicensees [ ] for any such Licensed Product or Combination
Product: [ ]
(ii) [ ] with respect to any such Licensed Product or Combination
Product: [ ] and
(iii)Licensee, any of its Affiliates or any of its sublicensees [ ] any
such Licensed Product or Combination Product: [ ]
up to an aggregate maximum amount of [ .] Such milestone payments shall
be credited against any and all Royalties due to ARCH hereunder in amounts
not to exceed [ ] of the Royalties due in any calendar quarter,
if any, until Licensee shall have received credit for all such milestone
payments actually made. If no U.S. patent issues to ARCH, or an issued
patent is invalidated, which patent or patent application contains
significant protection for the Inventions incorporated in a Licensed
Product for which milestone payments have been made, such milestone
payments shall instead be credited against any and all Royalties due to
ARCH hereunder in amounts not to exceed [ ] of the Royalties
due in any calendar quarter.
(b) A running royalty equal to [ ] of Net Sales of Licensed
Products and Combination Products sold by Licensee or any of its Affiliates; and
(c) A running royalty determined with respect to each Sublicense entered
into by Licensee or any of its Affiliates as follows:
-8-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(i) Where either (a) prior to execution of a Sublicense, Licensee or
an Affiliate of Licensee has failed to [
] or (b) Licensee has failed to provide evidence
reasonably satisfactory to ARCH that [
] then
all Licensee shall pay to ARCH [ ] of all amounts actually
paid to Licensee or an Affiliate of Licensee by a sublicensee with
respect to the Licensed Patent Rights so sublicensed (regardless of
whether such payments are denominated as fees, royalties or otherwise,
and whether paid at the time of or subsequent to the grant of such
Sublicense), except that Licensee or an Affiliate of Licensee shall
have the right to retain amounts received from such sublicensee
specifically related to research and development funding activity,
equity investments in Licensee or an Affiliate of Licensee by such
sublicensee, loans by such sublicensee to Licensee or an Affiliate of
Licensee, or other similar financing activities provided by such
sublicensee for the benefit of Licensee or an Affiliate of Licensee;
or
(ii) in all other such cases, [ ] of Net Sales of Licensed Products
and Combination Products sold by the subject sublicensee.
All payments made to ARCH pursuant to this Section 3.1 shall be non-refundable
under any and all circumstances.
3.2. CALCULATION OF ROYALTIES. (a) Royalties shall be calculated on a
calendar quarter basis. Payment of Royalties with respect to each calendar
quarter shall be due within sixty (60) days after the end of each quarter,
beginning with the calendar quarter in which the first commercial sale of
Licensed Products occurs.
(b) At the same time that it makes payment of Royalties due with respect
to a calendar quarter, Licensee shall deliver to ARCH a true and complete
accounting of Commercial Sales of Licensed Products and receipts from those
Commercial Sales by Licensee, its Affiliates and its sublicensees during the
quarter,
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CONFIDENTIAL TREATMENT REQUESTED
with separate accountings of (i) sales and receipts by country and by Licensed
Product and Combination Product, and (ii) a calculation of the Royalty due ARCH
for such calendar quarter showing the basis on which the Royalty for a
particular Licensed Product or Combination Product was determined. If no
Commercial Sales of Licensed Products or Sublicense payments were made in such
quarter then Licensee's statement shall be a statement to such effect.
(c) Licensee hereby covenants and agrees that it shall promptly notify
ARCH of the occurrence of the events giving rise to Licensee's obligations to
make payments pursuant to 3.1(b) and (c) above.
3.3. RECORDS. Licensee shall keep, and shall cause its Affiliates and
sublicensees to keep, accurate records in sufficient detail to permit the
Royalties payable under this Agreement to be determined. During the term of
this Agreement and for a period of three (3) years following termination of this
Agreement, Licensee shall permit (and shall cause each of its Affiliates and
sublicensees to permit), upon written request by ARCH and reasonable notice to
Licensee, its books and records regarding the sale of Licensed Products and
Combination Products to be examined and copied from time to time (but in no
event more than twice in any calendar year), at the request of ARCH during
normal business hours by ARCH or any representative of ARCH, and shall require
each of its Affiliates and sublicensees to do the same. Such examination shall
be made at ARCH's expense, except that if such examination discloses a
discrepancy of 5% or more in the amount of Royalties due ARCH, then Licensee
shall reimburse ARCH for the reasonable cost of such examination, including any
professional fees incurred by ARCH. In connection with any examination or
copying of books or records in accordance with the preceding sentence, ARCH or
such representative of ARCH shall examine only such information as is required
to verify the Licensee's compliance under this Agreement.
3.4. FOREIGN PAYMENTS. In the event of transactions giving rise to an
obligation to make a payment hereunder with respect to which Licensee, any of
its Affiliates or any sublicensee receives payment in a currency other than
currency which is legal tender in the United States of America, all payments
required to be made by Licensee under Section 3.1 hereof shall be converted,
prior to payment, into United States dollars at the applicable rate of exchange
of Citibank, N.A., in New York, New York, on the last day of the quarter in
which such transaction occurred.
3.5. OVERDUE PAYMENTS. Payments due to ARCH under this Agreement shall,
if not paid when due, bear simple interest at the lower of [ ] or the
highest rate permitted by law, calculated on the basis of a 360 day year for
the number of days actually elapsed, beginning on the due date and ending on
the day prior to
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the day on which payment is made in full. Interest accruing under this Section
shall be due to ARCH on demand. The accrual or receipt by ARCH of interest
under this Section shall not constitute a waiver by ARCH of any right it may
otherwise have to declare a default under this Agreement or to terminate this
Agreement.
3.6. TERMINATION REPORT AND PAYMENT. Within sixty (60) days after the date
of termination of this Agreement, Licensee shall make a written report to ARCH
which report shall state the number, description, and amount of Licensed
Products sold by Licensee, its Affiliates or any sublicensee upon which
Royalties are payable hereunder but which were not previously reported to ARCH,
a calculation of the Net Sales of such Licensed Products, and a calculation of
the Royalty payment due ARCH for such Licensed Products. Concurrent with the
making of such report, Licensee shall make the Royalty payment due ARCH for such
period.
3.7. PROGRESS REPORT. Licensee shall provide ARCH with an annual written
report (the "Annual Report") delivered on or before February 28 of each year
during the term of this Agreement. The Annual Reports shall be in reasonable
detail and shall include, with respect to the year just completed, reports
concerning (a) the status of Licensed Products targeted for commencement of
development efforts, (b) the status of Licensed Products under active
development, and (c) the status of developed Licensed Products.
ARTICLE IV
NO WARRANTIES; INDEMNIFICATION
4.1. WARRANTIES. ARCH warrants that it has the right to enter into and
perform all of its obligations under this Agreement, and that to ARCH's
knowledge there exists no impediment to ARCH's right to enter into this
Agreement or perform its obligations hereunder.
4.2. DISCLAIMER OF WARRANTIES. Except as otherwise specifically set
forth in Section 4.1 above, ARCH HEREBY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND OR NATURE, WHETHER EXPRESS OR IMPLIED, RELATING TO THE
INVENTIONS, THE TECHNICAL INFORMATION, THE LICENSED PRODUCTS, THE COMBINATION
PRODUCTS OR LICENSED PATENT RIGHTS. ARCH FURTHER HEREBY EXPRESSLY DISCLAIMS
ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR THAT THE PRACTICE OF THE LICENSED PATENT RIGHTS, OR
THE MAKING, USING OR SELLING OF LICENSED PRODUCTS OR COMBINATION PRODUCTS,
WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF THIRD
PARTIES. Without limiting the generality of the foregoing, ARCH expressly
does not warrant (i) the patentability of any of
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the Inventions, (ii) the accuracy of the Technical Information, or other
information contained in the patents and patent applications listed on
Schedule I attached hereto, or (iii) the accuracy, safety, or usefulness for
any purpose, of the Technical Information, Licensed Patent Rights,
Inventions, Licensed Products or Combination Products. Nothing contained in
this Agreement shall be construed as either a warranty or representation by
ARCH as to the validity or scope of any of any Licensed Patent Rights. ARCH
assumes no liability in respect of any infringement of any patent or other
right of third parties due to the activities of Licensee, any of its
Affiliates or any sublicensee under this Agreement.
4.3. INDEMNIFICATION. (a) None of ARCH, the University, any Affiliate of
any of the foregoing, or any trustee, director, officer, employee, agent or
representative of any of the foregoing (each an "Indemnified Person") shall have
any liability whatsoever to Licensee, any of its Affiliates, any sublicensee or
any other person for or on account of (and Licensee agrees and covenants, and
agrees to cause each of its Affiliates and sublicensees to agree and covenant,
not to sue any Indemnified Person in connection with) any injury, loss, or
damage, of any kind or nature, sustained by, or any damage assessed or asserted
against, or any other liability incurred by or imposed upon, Licensee, any of
its Affiliates or any sublicensee or any other person, arising out of or in
connection with or resulting from (i) the production, use or sale of the
Licensed Products and Combination Products by Licensee, any of its Affiliates or
its sublicensees, (ii) the use of any Technical Information or Invention by
Licensee, any of its Affiliates or its sublicensees, or (iii) any advertising or
other promotional activities with respect to either of the foregoing. Licensee
shall indemnify and hold ARCH harmless against all claims, demands, losses,
damages or penalties (including but not limited to reasonable attorney's fees at
the pretrial, trial or appellate level) made against any Indemnified Person with
respect to items (i), (ii) and (iii) above (excluding claims made by any third
party alleging the invalidity or challenging the scope of any patent included in
the Licensed Patent Rights), whether or not such claims are groundless or
without merit or basis. This Section 4.3(a) shall not apply to claims by any
third party brought against any Indemnified Person claiming an ownership
interest in the Inventions, Licensed Products, Combination Products, the
Licensed Patent Rights or the Technical Information.
(b) This Agreement is entered into by ARCH independently from the
University, and ARCH is acting independently from the University and in its own
private capacity and is not acting on behalf of the University, nor as its
contractor nor its agent. Correspondingly, it is understood and agreed that the
University is not a party to this Agreement and in no manner shall be liable for
nor assume any responsibility or obligation for any claim,
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cost or damages arising out of or resulting from this Agreement, the subject
matter licensed, or any action or lack thereof by ARCH, the University, Licensee
or any of Licensee's Affiliates or sublicensees with respect thereto.
(c) Licensee agrees to list ARCH, at Licensee's expense, as an additional
insured under each liability insurance policy covering products that Licensee
and each of its Affiliates and sublicensees obtains that includes any coverage
of claims relating to any of the Inventions, Licensed Patent Rights, Licensed
Products or Combination Products. At ARCH's request, Licensee will supply ARCH
from time to time with copies of each such policy, and will notify ARCH in
writing of any termination of or reduction in coverage under any such policies.
(d) Licensee's obligations under this Section 4.3 shall survive the
expiration or earlier termination of all or any part of this Agreement.
ARTICLE V
PROSECUTION AND MAINTENANCE OF LICENSED PATENT RIGHTS
5.1. PROSECUTION AND MAINTENANCE. During the term of this Agreement, and
subject to the exceptions and provisions of Section 5.3 below, Licensee shall be
solely responsible for prosecuting and maintaining the patents under the
Licensed Patent Rights. Except as otherwise specified in this Agreement,
Licensee shall pay when due all Patent Costs hereafter incurred with respect to
the Licensed Patent Rights. Licensee shall provide ARCH with copies of all
official actions and other communications received by Licensee or its patent
counsel with respect to patents under the Licensed Patent Rights. Licensee
shall further provide ARCH with copies of any and all draft filings with
governmental agencies with respect to the Licensed Patent Rights prior to the
submission to the recipients, and shall not submit any such filings without the
prior approval of ARCH (not unreasonably withheld or delayed). Licensee and
ARCH shall mutually agree on the patent counsel to be employed by licensee in
connection with the performance of Licensee's obligations under this Article V.
Section 5.2. COOPERATION. ARCH agrees to cooperate with Licensee in the
preparation, filing, prosecution and maintenance of patents under the Licensed
Patent Rights, by disclosing such information as may be necessary and by
promptly executing such documents as Licensee may reasonably request to effect
such efforts. Licensee shall reimburse ARCH for reasonable out-of-pocket costs
and expenses incurred by ARCH in connection with its cooperation with Licensee
under this Section 5.2. All patents
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under the Licensed Patent Rights shall be filed, prosecuted and maintained in
ARCH's name or as ARCH shall designate.
5.3. ARCH APPLICATIONS. (a) In the event that ARCH wishes to file a patent
application with respect to any of the Inventions in any jurisdiction in which
an application has not already been filed, ARCH shall identify the jurisdiction
and the Invention in writing to Licensee, and Licensee shall have ninety (90)
days after it receives such written notice in which to file such a patent
application. If Licensee declines or fails to file such a patent application
within the earlier of (i) ninety (90) days after receiving the written notice,
or (ii) thirty (30) days prior to the filing deadline with respect to such
proposed patent application in such proposed jurisdiction, Licensee shall
immediately notify ARCH, and ARCH may, in ARCH's discretion but in ARCH's name,
file and prosecute such patent application.
(b) If Licensee determines to abandon a patent application previously
filed with respect to any of the Inventions, it will give ARCH at least ninety
(90) days prior written notice of its intention to abandon such application.
ARCH may, by written notice to Licensee, elect to continue the prosecution of
the application at ARCH's sole expense and in ARCH's name. If ARCH determines
to abandon a patent application previously filed by Licensee with respect to any
of the Inventions, it will give Licensee at least ninety (90) days prior written
notice of its intention to abandon such application (but in no event shall such
period be less than thirty (30) days prior to any filing deadline with respect
to such application). Licensee may thereafter elect to continue the prosecution
of the application at Licensee's sole expense but in ARCH's name.
(c) The abandonment of any patent application by Licensee in accordance
with the terms of this Agreement shall not in any way affect the obligations of
Licensee for the payment of any amounts owing hereunder with respect to
Royalties or otherwise, nor shall it affect Licensee's license in and to the
Licensed Patent Rights or otherwise cause the termination of this Agreement
(unless the abandoned patent application is the last-to-expire of the Licensed
Patent Rights).
5.4. CONFIDENTIALITY. (a) Both Licensee and ARCH agree to treat (and, in
the case of Licensee, to cause its Affiliates and sublicensees to treat) as
confidential (i) all proprietary information with respect to the Inventions or
the Licensed Patent Rights (including the Technical Information) made available
by ARCH to Licensee or by Licensee to ARCH, and (ii) the terms and provisions
of this Agreement (PROVIDED that ARCH may provide all of the foregoing
information to the University). ARCH acknowledges that Licensee may find it
beneficial to disclose such information provided by ARCH during the conduct of
Licensee's business. Under such circumstances, Licensee may make
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such information available to third parties (including shareholders of
Licensee), PROVIDED that Licensee shall first obtain from the recipients a
fully-executed confidentiality agreement which is at least as restrictive as the
confidentiality agreement Licensee employs to protect its own most valuable
trade secrets.
(b) Neither Licensee nor ARCH shall be bound by the provisions of Section
5.4 with respect to information which (i) was previously known to the recipient
at the time of disclosure; or (ii) is in the public domain at the time of
disclosure; or (iii) becomes a part of the public domain after the time of
disclosure, other than through disclosure by the recipient or some other third
party who is under an agreement of confidentiality with respect to the subject
information; or (iv) is required to be disclosed by law.
(c) Notwithstanding the provisions of Section 5.4(a), each of ARCH and the
University shall be entitled to make and permit to be made disclosures of
information included in the Technical Information and the Inventions in
scholarly journals and publications, subject to this Section 5(c). ARCH agrees
that it shall use its good faith efforts to provide Licensee with a copy of any
manuscript proposed to be published at least 60 days prior to the scheduled
publication date. Licensee will review the text or any other material provided
to determine if patentable subject matter is disclosed in such text and other
material, and will notify ARCH within 20 days of the receipt of the proposed
manuscript if it reasonably feels that patentable subject matter is disclosed
and that corresponding patent applications should be filed by Licensee in
accordance with Section 5.1 above. If it is then determined by ARCH, in the
exercise of its reasonable judgement, that patent applications should be filed,
ARCH will use its good faith efforts to assist Licensee in the filing by
Licensee of patent applications with respect to the patentable subject matter
pursuant to Section 5.1 prior to the proposed publication date.
(d) Licensee and ARCH shall each take such actions as the other party may
reasonably request from time to time to safeguard the confidentiality of any
information subject to the terms of this Section 5.4.
(e) The obligations of Licensee and ARCH under this Section
5.4 shall survive the expiration or earlier termination of all or any other
part of this Agreement for three (3) years after such event.
(f) Licensee and ARCH acknowledge that ARCH has previously provided
Licensee with information described in Section 5.4(a) above, and that all such
information shall be deemed subject to
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the provisions of this Section 5.(4) as if delivered immediately following the
execution of this Agreement.
ARTICLE VI
INFRINGEMENT
6.1. NOTIFICATION. In the event that either ARCH or Licensee becomes aware
of the infringement of any patent under the Licensed Patent Rights within the
Licensed Field, each shall promptly inform the other in writing of all details
available.
6.2. LICENSEES RIGHT TO PROSECUTE. (a) In the event of infringement by a
third party of any patent under the Licensed Patent Rights within the Licensed
Field, Licensee may enforce the Licensed Patent Rights against the infringers by
appropriate legal proceedings or otherwise, provided that Licensee shall employ
counsel reasonably satisfactory to ARCH and shall inform ARCH of all
developments in such proceedings. Licensee shall be responsible for all costs
and expenses of any enforcement activities, including legal proceedings, against
infringers which licensee initiates. ARCH agrees to cooperate with and join in
any enforcement proceedings at the request of Licensee, and at Licensee's
expense. ARCH may be represented by ARCH's counsel in any such legal
proceedings, at ARCH's own expense (subject to reimbursement under
Section 6.2(c)), acting in an advisory but not controlling capacity.
(b) The prosecution, settlement, or abandonment of any proceeding under
Section 6.2(a) shall be at Licensee's reasonable discretion, provided that
Licensee shall not have any right to surrender any of ARCH's rights to the
Licensed Patent Rights or to grant any infringer any rights to the Licensed
Patent Rights other than a sublicense subject to the conditions which would
apply to the grant of any other sublicense.
(c) All recoveries by way of royalties, damages and claims with respect to
infringement actions instituted, and claims made (including penalties and
interest), during the term of this Agreement, excluding any prosecuted by ARCH
under Section 6.3, shall belong to Licensee. To the extent that Licensee's
recoveries with respect to an infringement action or claim exceed Licensee's
reasonable expenses with respect to such action or claim, Licensee shall
reimburse ARCH for ARCH's reasonable expenses for separate representation as
provided in Section 6.2(a) with respect to such action or claim. The gross
amount of any such recoveries by Licensee, less any amounts already reimbursed
to ARCH for its expenses as provided in the immediately preceding sentence,
shall be considered Net Sales under this Agreement, giving rise to Royalty
obligations under Section 3.1(b), without any deductions of any kind.
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6.3. ARCH'S RIGHT TO PROSECUTE - WITHIN LICENSED FIELD. In the event of
infringement by a third party of any Licensed Patent Rights within the Licensed
Field which ARCH wishes to prosecute, ARCH shall first make a written request
that Licensee proceed. In the event that Licensee fails or declines to proceed
within ninety (90) days after receipt of a written request by ARCH to do so,
then, in ARCH's sole discretion, (i) ARCH may prosecute the infringer in the
name of ARCH or Licensee and (ii) the grant of license to Licensee may become
non-exclusive. Any actions by ARCH pursuant to this clause shall be ARCH's own
expense, and ARCH may collect and retain for ARCH's own use any and all
recoveries in any proceeding by ARCH under this Section 6.3. Recoveries
collected and retained by ARCH under this Section 6.3 shall not be considered
Net Sales or give rise to royalty obligations under Article III. Licensee will
cooperate with ARCH and execute any documents necessary for ARCH to exercise
ARCH's rights under this clause. To the extent that ARCH's recoveries with
respect to an infringement action or claim exceed ARCH's reasonable expenses
with respect to such action or claim, ARCH shall reimburse Licensee for
Licensee's reasonable costs in connection with cooperating with ARCH in the
prosecution of such action or claim.
6.4 INFRINGEMENT OF RIGHTS OF THIRD PARTIES. If a Licensed Product
becomes the subject of a claim for patent infringement anywhere in the world by
virtue of the incorporation of the Licensed Patent Rights or the Inventions, the
parties shall promptly give notice to the other and meet to consider the claim
and the appropriate course of action. Licensee shall have the right to conduct
the defense of any such suit brought against Licensee and either or both of ARCH
and the University using counsel reasonably acceptable to ARCH, and shall have
the sole right and authority to settle any such suit, PROVIDED that (i) ARCH and
the University, as applicable, shall have the right (but not the obligation) to
participate in such suit at their own cost and expense, and (ii) Licensee shall
not have any right to surrender any of ARCH's or the University's rights to the
Licensed Patent Rights or to grant to any person or entity any rights to the
Licensed Patent Rights other than a sublicense subject to the conditions which
would apply to the grant of any other sublicense hereunder. In those
circumstances where a third party asserts that its patent dominates the Licensed
Patent Rights and Licensee's right to practice such is at issue, Licensee shall
have the right to require ARCH's participation in any such suit, upon reasonable
prior written notice, but at Licensee's expense.
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ARTICLE VII
TERMINATION
7.1 ARCH RIGHT TO TERMINATE. ARCH shall have the right (without prejudice
to any of its other rights conferred on it by this Agreement) to terminate this
Agreement if Licensee (or, with respect to subsection (d) below, any of its
Affiliates):
(a) is in default in (i) payments specified in Section 3.1 above, (ii)
payments of any reimbursement obligations provided for in this Agreement, or
(iii) the making or giving of any reports or notices required to be made or
given under this Agreement, and Licensee fails to remedy any such default within
thirty (30) days after written notice thereof by ARCH;
(b) is in material breach of Sections 2.4, 3.3, 3.7, 4.3(c), 5.1, 5.4,
10.2(b) or 10.7 hereof, or Articles VIII or XI, and Licensee fails to remedy any
such default within ninety (90) days after written notice thereof by ARCH;
(c) knowingly or wilfully makes any materially false report; or
(d) shall commence a voluntary case as a debtor under the Bankruptcy Code
of the United States or any successor statute (the "Bankruptcy Code"), or if an
involuntary case shall be commenced against Licensee under the Bankruptcy Code
and the petition in such case is not dismissed within 30 days of the
commencement of the case, or if an order for relief shall be entered in such
case, or if the same or any similar circumstance shall occur under the laws of
any foreign jurisdiction.
7.2. LICENSEE RIGHT TO TERMINATE. Licensee may terminate this Agreement at
any time by written notice to ARCH, given at least ninety (90) days prior to the
termination date specified in the notice.
7.3. EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement for any reason,
whether by Licensee or ARCH, Licensee shall immediately cease and shall cause
each of its Affiliates to immediately cease (i) using, making and having made
the Inventions, the Technical Information and any Licensed Products or
Combination Products derived therefrom, and shall return to ARCH, or deliver as
ARCH directs, the Inventions and the Technical Information then in its
possession, and (ii) selling any Licensed Products or Combination Products out
of inventories accumulated by Licensee prior to the effective date of
termination within sixty (60) days of such date.
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CONFIDENTIAL TREATMENT REQUESTED
(b) Notwithstanding the termination of this Agreement, the following
provisions of this Agreement shall survive:
(i) Licensee's obligation to pay Royalties accrued or accruable;
(ii) Licensee's obligations under Articles III, IV and XI, Sections
5.1, 5.2, 5.4 and, to the extent proceedings have been initiated,
Section 6.2, and this Section 7.3(b); and
(iii) any cause of action or claim of Licensee or ARCH, accrued or to
accrue, because of any breach or default by the other party.
7.4. EXPIRATION OF PATENT RIGHTS. This Agreement shall terminate upon the
expiration of the last-to-expire patents of the Licensed Patent Rights, provided
that ARCH's and Licensee's obligations under Sections 4.2 and 5.4 shall survive
and continue in effect as provided in such Sections.
ARTICLE VIII
ADVERTISING
Each party agrees not to use (and Licensee agrees to prohibit its
Affiliates and sublicensees from using) the name of the other party (and, in
the case of Licensee, the names of the University and the inventors of the
Inventions) in any commercial activity, marketing, advertising or sales
brochures except with the prior written consent of the other party, which
such consent may be granted or withheld in such party's sole and complete
discretion, PROVIDED that, with the prior written consent of ARCH not
unreasonably withheld or delayed, Licensee may disclose (i) the names of
ARCH, the University and the inventors) of the Inventions to banks,
commercial finance institutions or prospective investors from which Licensee
may attempt to obtain debt or equity financing, (ii) the identities of ARCH,
the University and the inventor(s) of the Inventions and their respective
connections to, and ownership interests in, the Inventions and the Licensed
Patent Rights, and (iii) the identity of [ ] in advertising and sales
materials.
ARTICLE IX
LATER DEVELOPMENTS
9.1. ARCH hereby grants Licensee the right to negotiate to obtain, on the
terms set forth in this Article IX, a license on any Later Developments, which
license shall be on mutually agreeable terms.
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CONFIDENTIAL TREATMENT REQUESTED
9.2. ARCH shall notify Licensee of any Later Developments by a writing
referring to this provision within ninety (90) days of learning of such Later
Development, in sufficient detail to allow Licensee to evaluate the commercial
potential of such Later Development. Licensee shall then have ninety (90) days
after receipt of such disclosure to submit to ARCH a written offer to license
the subject Later Developments on the terms set forth in Licensee's written
offer. If Licensee shall fail to make such an offer within such period, its
rights to obtain such Later Development shall be void, and Licensee shall have
no interest in or right to such Later Development.
9.3. If Licensee makes the offer described in Section 9.2 above, ARCH
shall, within a period of ninety (90) days of the receipt of such offer, notify
Licensee in writing of either (i) ARCH's acceptance of such offer, or (ii)
ARCH's acceptance of a competing offer which is, taking into consideration the
overall economic benefit to ARCH of Licensee's offer and the competing offer,
deemed by ARCH to be materially more favorable to ARCH. If ARCH accepts
Licensee's offer to license the subject Later Development, the license shall be
on the terms set forth in the offer and otherwise on the terms and conditions
set forth in this Agreement to the extent not inconsistent with the offer. If
ARCH does not accept Licensee's offer, ARCH shall disclose to Licensee in said
notice the basis for its decision, including the disclosure of the terms of the
competing offer which ARCH deemed materially more favorable to ARCH.
ARTICLE X
MISCELLANEOUS
10.1. GOOD FAITH EFFORTS. [ ]
10.2. ASSIGNMENT. (a) This Agreement may, at any time and upon sixty (60)
days prior notice to Licensee, be assigned by ARCH without such assignment
operating to terminate, impair or in any way change the rights which ARCH
would have had, or any of the obligations or rights which Licensee would have
had, if such assignment had not occurred, PROVIDED, however, that in no event
shall ARCH assign this Agreement to any entity deemed by Licensee in the
exercise of its reasonable discretion to be (i) an operating or research and
development competitor of Licensee, or (ii) a financial investor entity
(excluding any Affiliate of ARCH or the University) which owns a controlling
interest in any entity described in (i) above. From and after the making of
such assignment, the assignee shall be substituted for ARCH as a party
hereto, and ARCH shall no longer be bound hereby, and shall have not further
obligations hereunder.
(b) This Agreement may be assigned by Licensee to an Affiliate of Licensee
upon at least thirty (30) days prior
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CONFIDENTIAL TREATMENT REQUESTED
written notice to ARCH, PROVIDED, that in no event shall such assignment relieve
Licensee of its liability for the performance of Licensee's obligations
hereunder, nor shall it deprive ARCH of its rights to terminate this Agreement
or enforce its rights against Licensee or Licensee's assignee as specifically
provided herein. This Agreement shall not be assigned by Licensee in any other
circumstances without the prior written consent of ARCH,
[ ]
10.3. ENTIRE AGREEMENT, AMENDMENT AND WAIVER. This Agreement (including
any schedules and exhibits attached) contains the entire understanding of the
parties with respect to the subject matter hereof. This Agreement may be
amended, modified or altered only by an instrument in writing duly executed
by the parties hereto. The waiver of a breach hereunder may be effected only
by a writing signed by the waiving party and shall not constitute a waiver of
any other breach.
10.4. NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be
in writing and shall be given by personal delivery or by United States
registered or certified mail, return receipt requested, addressed as follows:
If to ARCH: ARCH Development Corporation
1115-25 East 58th Street
Chicago, Illinois 60637
Attention: President
with a copy to:
Thomas M. Fitzpatrick, Esq.
Fitzpatrick Law Offices
20 North Wacker Drive
Chicago, Illinois 60606
If to Licensee: Vector Pharmaceuticals, Inc.
4009 Miranda Avenue, Suite 275
Palo Alto, CA 94304
Attention: President
with a copy to: Alan Mendelson, Esq.
Cooley, Godward, Castro, Huddleson &
Tatum
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
or to such other address of which the intended recipient shall have notified
the sender by a written notice given in accordance with the terms of this
Section. Any notice under this Agreement shall be effective when received.
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10.5. SEVERABILITY. In the event that any one or more of the provisions
of this Agreement should for any reason be held by any court or authority
having jurisdiction over this Agreement, or either of the parties hereto, to
be invalid, illegal or unenforceable, such provision or provisions shall be
reformed to approximate as nearly as possible the intent of the parties, and
the validity of the remaining provisions shall not be affected.
10.6. GOVERNING LAW. The interpretation and performance of this
Agreement shall be governed by the laws of the State of Illinois applicable
to contracts made and to be performed in that state.
10.7. MARKING. Licensee shall place in a conspicuous location on any
Licensed Product (or its packaging where appropriate) made or sold under this
Agreement, a patent notice in accordance with the laws concerning the marking
of patented articles.
10.8. IMPLEMENTATION. Each party shall, at the request of the other
party, execute any document reasonably necessary to implement the provision
of this Agreement.
10.9. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which when taken together shall constitute one and the
same instrument.
10.10 CAPTIONS. The captions used in this Agreement are for convenience
only, and are not intended by the parties to be used in the construction or
application of the terms hereof.
ARTICLE XI
EXPORT CONTROLS
Neither Licensee nor ARCH shall (i) knowingly transfer, directly or
indirectly, any controlled technical data obtained or to be obtained from the
other party hereto to a destination outside the United States, or (ii)
knowingly ship, directly or indirectly, any product produced using such
controlled technical data to any destination outside the United States, in
either case in violation of the U.S. Department of Commerce's Export
Administration Regulations.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives on the
date first above written.
ARCH: ARCH Development Corporation, an
Illinois not-for-profit corporation
By: /s/ S Tazauus
------------------------------------
Its President
-------------------------------
Licensee: Vector Pharmaceuticals, Inc., a
California corporation
By: /s/ L Reed
------------------------------------
Its President
-------------------------------
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Schedule I
PATENTS AND PATENT APPLICATIONS
1. [ ]
2. [ ]
3. [ ]
4. [ ]
5. [ ]
6. [ ]
7. [ ]
8. [ ]
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Schedule II
AGREEMENTS, ASSIGNMENTS, ENCUMBRANCES OR LICENSES
Those agreements, assignments, encumbrances, licenses and rights granted
to [ ] pursuant to an Assignment Agreement attached hereto as
Exhibit 1 anticipated to be entered into between the University [ ]promptly
following the execution of this Agreement.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1 TO
LICENSE AGREEMENT
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT dated as of this 26th day of June, 1992 between the
UNIVERSITY OF CHICAGO, an Illinois not for profit corporation ("University") and
[ ] formerly known as [ ]
PRELIMINARY STATEMENT.
The University and [ ] have previously entered into a Research
Agreement dated [ ] as amended ("Research Agreement"), pursuant
to which [ ] has funded certain University research.
Several patent applications have been filed in the name of [ ]
covering inventions resulting from the research conducted at the University
pursuant to the Research Agreement.
[ ] desires to assign the rights to such patent applications to the
University, and the University desires to be assigned the rights to such
patent applications.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the University and [ ]
agree as follows.
AGREEMENT
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
"PATENT RIGHTS" shall mean each and every (a) patent application listed in
Exhibit A attached hereto, together with any patents which issue from any
such patent application, and (b) patent applications which are divisions,
continuations, continuations-in-part, foreign counterparts, reissues,
renewals, re-examinations, substitutions, or extensions of or to any patent
applications or patents described in clause (a) of this sentence, together
with patents that issue from such patent applications.
"PATENT COSTS" shall mean the out of pocket expenses incurred by [ ] in
connection with the preparation, filing, prosecution and maintenance of the
patents under the Patent Rights, as documented in Exhibit B attached
hereto.
"START-UP COMPANY" shall mean a corporation with fewer than one hundred
employees or less than three years of operations.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
"ESTABLISHED CORPORATION" shall mean a corporation with one hundred or more
employees and at least three years of operations.
"VECTOR" shall mean the invention described as [ ] together with
any patents which issue from such patent application, and patent
applications which are divisions, continuations, continuations-in-part,
foreign counterparts, reissues, renewals, re-examinations, substitutions,
or extensions of or to such patent application or patents, together with
patents that issue from such patent applications.
"[ ]" shall mean the invention described
as [ ] and patent applications which are divisions,
continuations, continuations-in-part,. foreign counterparts, reissues,
renewals, re-examinations, substitutions, or extensions of or to such
patent, together with patents that issue from such patent applications.
2. ASSIGNMENT AND TERMINATION. [ ] hereby assigns to the
University all of [ ] right, title and interest in and to the
Patent Rights, and disclaims and terminates all of right, title and interest
in and to the Patent Rights.
3. CONTINGENCIES.
(a) If the University shall enter into a license agreement for any of
the Patent Rights with a third party, the University shall notify [ ] of
the name, address and contact name of the licensee under such license.
(b) If the University shall enter into a license agreement for any of
the Patent Rights with a Start-Up Company, the University shall include in
such license agreement the following conditions, one of which licensee shall
select prior to the date of first commercial sale of Licensed Products (as
that term shall be defined in the license agreement):
(i) that the licensee negotiate in good faith either a marketing or a
research collaboration agreement with [ ] with respect to such Licensed
Products;
(ii) that the licensee reimburse [ ] (through the University)
for [ ] Patent Costs with respect to the specific Patent Rights
covered by the license within ninety (90) days of licensee's first
commercial sale of any such Licensed Products.
(c) If the University shall enter into a license agreement for any of the
Patent Rights with an Established Corporation, the
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
University shall include in such license agreement the condition that, upon
execution of the license agreement, licensee reimburse [ ] (through the
University) for [ ] Patent Costs with respect to the specific Patent
Rights covered by the license.
(d) If the University executes a license agreement for the Vector, the
University shall include in such agreement the requirement that upon the grant
by such licensee of a nonexclusive sublicense of the Vector (which sublicense
does not pertain to a research or development collaboration) , licensee shall
offer [ ] a sublicense on substantially the same terms.
(e) If the University shall enter into a license agreement with respect
to [ ] the University shall pay to [ ]of any
fees or royalties that the University receives from the licensee under such
license agreement.
4. BOOKS AND RECORDS. The University shall keep accurate books and
records of its income and receipts, and all expenses and disbursements,
related to the Patent Rights. [ ] shall have the right to inspect only
the portions of such books and records which specifically relate to the
contingencies listed in Section 3 above, at reasonable times and intervals
and upon reasonable notice, at [ ] expense.
5. REPRESENTATIONS AND WARRANTIES.
(a) [ ] hereby represents and warrants to the University as follows:
(i) [ ] has the full power and right to execute this Agreement, and
this Agreement has been duly executed and delivered by [ ] and
constitutes the legal, valid and binding obligation of [ ]
enforceable against it in accordance with its terms, except to the
extent that such enforceability (A) may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors'
rights generally, and (B) as to equitable relief, is subject to the
discretion of the court before which any proceeding may be brought.
(ii) This Agreement assigns all of [ ] right, title and interest in
the Patent Rights to the University, and terminates all of [ ]
right to license the-Patent Rights, and, except for the interest of
[ ]created pursuant to this Agreement, [ ] has no other right,
claim or interest in any of the Patent Rights.
(iii) As of the date of this Agreement, none of the Patent Rights are
subject to any agreements, assignments, encumbrances or restrictions;
provided however, that
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CONFIDENTIAL TREATMENT REQUESTED
[ ] makes no representations as to persons or entities that may
have rights to or in the Patent Rights as inventors or arising through
the University.
(iv) [ ] makes no product or other warranty except as expressly
provided in this Agreement to the University of any kind, express or
implied, including any implied warranty of fitness for use or for a
particular purpose or for merchantability.
(b) The University hereby represents and warrants to [ ] that the
University has the full power and right to execute this Agreement, and this
Agreement has been duly executed and delivered by the University and constitutes
the legal, valid and binding obligation of the University, enforceable against
it in accordance with its terms, except to the extent that such enforceability
(A) may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally, and (B) as to equitable relief, is
subject to the discretion of the court before which any proceeding may be
brought.
6. FURTHER ASSURANCES. [ ] agrees that, up on the written request
of the University at any time and from time"to time, [ ] shall execute
and deliver such other documents and take such other acts as the University
shall reasonably request in order to effectuate, clarify or otherwise
implement the agreements set forth in this Agreement, including without
limitation, such documents and instruments of assignment or transfer as the
University may deem appropriate to effectuate the assignment contemplated by
this Agreement.
7. LICENSING DECISIONS. Without prejudice to Section 3 hereof, all
decisions as to the marketing and development of the Patent Rights, including
without limitation, decisions relating to the future licensing or assignment of
the Patent Rights, shall be made by the University in its sole and absolute
discretion.
8. ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the successors or assigns of the University and [ ] as
the case may be. [ ] acknowledges that the University shall have the
right to assign all of the Patent Rights, and all of its rights and
obligations under this Agreement, to ARCH Development Corporation ("ARCH"),
an affiliate controlled by the University, in which event all such rights and
obligations shall be rights and obligations of ARCH, and [ ]
shall look to ARCH, and not the University, for the performance thereof.
9. TERM. This Agreement shall be in effect until the last expiration
date of any of the Patent Rights provided that the University's obligations to
make the payments described in
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Section 3 hereof shall terminate as to any particular Patent Right(s) at such
time as such Patent Right(s) shall expire.
10. NONDISCLOSURE AND NON-USE. [ ] agrees not to publish or
disclose any information to any third persons about the Patent Rights, or any
rights relating thereto, except to inform such third persons that all
inquiries relating to such Patent Rights should be directed to ARCH.
[ ] further agrees not to use the Patent Rights without the prior
written consent of the University, provided that [ ] may use the
Patent Rights for non-commercial research purposes, or pursuant to Sections
3(b) - 3(d) of this Agreement.
11. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Illinois applicable to contracts
entered into between Illinois residents to be performed solely in Illinois.
12. NOTICE. Any payment, notice or other communication required or
desired to be made to either party hereunder shall be made or given to the
following address:
If to [ ] [
]
If to University: c/o ARCH Development Corporation
1115-25 East 58th Street
Chicago, Illinois 60637
Attention: President
Either party may change its address for notice by notice to the other
party in accordance with this Section 12. All notices shall be deemed
effective on the date received.
IN WITNESS WHEREOF, [ ] and the University have caused this
Agreement to be executed as of the day and year first above written.
THE UNIVERSITY OF CHICAGO
By: /s/ Fred Clifford
-------------------------------------
Its: Director of Special Payouts
-------------------------------
[
]
By: /s/
-------------------------------------
Its:
-------------------------------
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
[ ]
Foreign counterparts of the above applications are also included.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
TOTAL U.S. & INTERNATIONAL PATENT COSTS
[ ]
<PAGE>
EXHIBIT 10.2
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN DELETED, AS
MARKED BY BRACKETS, AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
TECHNOLOGY TRANSFER AGREEMENT
This Technology Transfer Agreement (the "Agreement") is made and entered into
as of February 9, 1993, by and between MOUNT SINAI SCHOOL OF MEDICINE OF THE
CITY UNIVERSITY OF NEW YORK, a corporation organized and existing under the laws
of New York ("MOUNT SINAI"), and VECTOR PHARMACEUTICALS, INC., a corporation
organized and existing under the laws of California ("VECTOR").
ARTICLE 1
BACKGROUND
1.1 VECTOR is in the business of developing preventative, therapeutic
and diagnostic products for humans, plants and animals.
1.2 MOUNT SINAI is a School of Medicine which engages in research and
teaching in the biomedical sciences and which is the assignee of certain
Property (as hereinafter defined) developed in the conduct of those activities.
1.3 MOUNT SINAI and VECTOR have entered into a Stock Issuance Agreement
on even date herewith, in the form attached hereto as Exhibit A, pursuant to
which MOUNT SINAI will be issued shares of VECTOR's common stock (the "Stock
Issuance Agreement").
1.4 VECTOR is desirous of obtaining, and MOUNT SINAI is willing to
assign, sell, transfer and convey in
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
consideration for the VECTOR common stock to be issued pursuant to the Stock
Issuance Agreement, all right, title and interest, on a worldwide basis, in and
to the Property (as defined below).
ARTICLE 2
DEFINITIONS
2.1 The term "AFFILIATE" shall mean, with respect to each party, any
entity which controls, is controlled by or is under common control with that
party.
2.2 The term "INVENTORS" shall mean [
]
2.3 The term "FDA" shall mean the United States Food and Drug
Administration.
2.4 The term "RELATED TECHNOLOGY" shall mean (i) all patentable
information, discoveries, inventions, and the like other than those claimed in
the Patent Rights or MOUNT SINAI Improvements, and any and all patent rights
relating thereto, the use of which pertains to [
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
] and
which are not otherwise subject to the rights or any third party, but only to
the extent such discovery, invention and the like shall have occurred or been
reduced to practice during the period extending from [
]
2.5 The term "PRODUCT" shall mean any substance, composition or article of
manufacture covered by a claim of one or more of the patents or patent
applications contained in the Patent Rights or the Mount Sinai Improvements, to
the extent acquired by VECTOR pursuant to Section 3.4.
2.6 The term "PATENT RIGHTS" shall mean all information, inventions or
discoveries covered by the patents and patent applications listed on Exhibit B
hereto ("Inventions"), and any and all patents issuing therefrom, owned by MOUNT
SINAI or any MOUNT SINAI Affiliate. "Patents" as used in this Agreement shall
include, without limitation, all substitutions, divisionals, reissues,
continuations, continuations-in-part that cover Inventions specifically
described in the
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CONFIDENTIAL TREATMENT REQUESTED
patents and applications listed in Exhibit B, inventors' certificates and all
foreign counterparts of the aforementioned which MOUNT SINAI now owns or
hereafter acquires and which MOUNT SINAI has the lawful right to assign and
disclose.
2.7 The term "MOUNT SINAI IMPROVEMENTS" shall mean all modifications,
revisions or improvements to the Inventions and any and all patent rights
relating thereto which are commercially necessary for the development,
manufacture, use or sale of the Inventions or Products, in which MOUNT SINAI in
the future acquires any interest and with regard to which MOUNT SINAI has the
lawful right to disclose and assign, but only to the extent such modification,
revision or improvement shall have occurred or been reduced to practice from the
date of filing of the patent applications listed, or the patent applications
underlying an issued patent listed, on Exhibit B hereto, up to and including the
one (1) year period following the effective date of this Agreement and only to
the extent such modification, revision or improvement was [ ]
2.8 The term "TECHNICAL INFORMATION" shall mean (i) all know-how, trade
secrets, data, processes, reagents, samples of assay components, media and/or
cell lines; and (ii) procedures and formulations for producing any such assay
components, models, procedures, devices,
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CONFIDENTIAL TREATMENT REQUESTED
methods, formulas, protocols; and (iii) information: (a) necessary for the
practice and commercial exploitation of the Inventions contained within the
Patent Rights, or to the extent VECTOR exercises its option in accordance with
the provisions of Section 3.4, any MOUNT SINAI Improvements; and (b) which are [
] owned or
acquired by MOUNT SINAI and which MOUNT SINAI has the lawful right to assign and
disclose; and (c) which [
] Technical
Information shall include, without limitation, all medical, pharmacological,
toxicological and other scientific data relating to any Product.
2.9 The term "PROPERTY" shall mean all Patent Rights and Technical
Information.
ARTICLE 3
ASSIGNMENT OF RIGHTS
3.1 ASSIGNMENT OF PROPERTY. In consideration of the issuance by VECTOR of
shares of its Common Stock and the Warrants, as further set forth in Article 5,
MOUNT SINAI hereby assigns to VECTOR, effective upon receipt by MOUNT SINAI of
the shares of Common Stock and Warrants, as provided in Article 5, all of its
rights, title and interest in and to the Property, and upon such request by
VECTOR, MOUNT SINAI agrees to promptly execute
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<PAGE>
assignment and other documents, testify and take other acts, at VECTOR's expense
and as reasonably requested by VECTOR, in order to apply for and obtain, in
VECTOR's name and for its benefit, patents, trade secrets, and all other
technology and intellectual property rights throughout the world related to any
of the Property and, to the extent VECTOR exercises its option in accordance
with the provisions of Section 3.4, any MOUNT SINAI Improvements, and to
transfer, effect, confirm, perfect, record, preserve, protect and enforce all
rights, title and interest transferred hereunder.
3.2 LIMITATIONS ON ASSIGNMENT. The rights and interests assigned under
Section 3.1 are subject to the following limitations:
(a) GOVERNMENT RIGHTS. VECTOR understands that the Property may have
been developed under a funding agreement with the Government of the United
States of America (the "Government") and, if so, that the Government may have
certain rights relative thereto, including, but not limited to those arising
under 35 U.S.C. Sections 200-212 and the regulations promulgated thereunder.
This Agreement is explicitly made subject to the Government's rights under any
such agreement and any applicable law or regulation. To the extent that there
is a conflict between any such agreement, applicable law or regulation and this
Agreement, the terms of such
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Government agreement, applicable law or regulation shall prevail.
(b) RIGHTS OF THIRD PARTY FUNDING SOURCES. VECTOR understands that portions
of the Property may have been developed and/or discovered by the Inventors
pursuant to funds supplied pursuant to contractual relationships between one or
more of the Inventors and third party, non-Governmental funding entities
("Funding Entities"), and if so, that such Funding Entities may have or may
believe themselves to have, certain rights relative thereto with respect to the
Property and VECTOR further acknowledges that in that event it shall have no
rights against MOUNT SINAI regarding any such technology.
(c) RETAINED RIGHTS. VECTOR hereby grants MOUNT SINAI a fully-paid,
royalty-free, irrevocable, non-exclusive license to make, have made and use the
Inventions contained within the Patent Rights, and the Technical Information,
for educational, research and other non-commercial purposes only, including the
right to publish the scientific findings from research related to the Property
in scholarly journals and publications and to make scientific presentations.
3.3 MOUNT SINAI AND THE INVENTORS. VECTOR understands that MOUNT SINAI's
ongoing obligations apply only to the extent that MOUNT SINAI has the lawful
right
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CONFIDENTIAL TREATMENT REQUESTED
to disclose and assign the Property. VECTOR further understands and agrees that
some Inventors are not currently, have never been, or may not in the future be
employed by MOUNT SINAI and are not subject to the conditions of employment with
MOUNT SINAI, including MOUNT SINAI's faculty rules. Further, VECTOR agrees that
MOUNT SINAI is not required to and has no obligation to VECTOR under this
Agreement or otherwise to make certain that the Inventors comply with the terms
of this Agreement or with the terms and conditions of MOUNT SINAI's policies or
its faculty rules.
3.4 MOUNT SINAI IMPROVEMENTS. MOUNT SINAI hereby grants to VECTOR an option
to acquire any MOUNT SINAI Improvements in accordance with the provisions of
this Section 3-4. MOUNT SINAI agrees to notify VECTOR in writing of any MOUNT
SINAI Improvements within [ ] business days of the filing of an
invention disclosure statement with MOUNT SINAI's Dean's office or its Office of
Science and Technology Development concerning such MOUNT SINAI Improvement,
pursuant to MOUNT SINAI's policies, by one or more of the Inventors. VECTOR
shall have a period of [ ] with a right to extend such period for an
additional [ ] with the prior written consent of MOUNT SINAI, not to
be withheld unreasonably, after receipt of such notice in which to notify MOUNT
SINAI in writing of its desire to exercise
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CONFIDENTIAL TREATMENT REQUESTED
its option with respect to such MOUNT SINAI Improvement. If VECTOR exercises
its option with respect to such MOUNT SINAI Improvement, such MOUNT SINAI
Improvement shall promptly thereafter be assigned as provided for in Section
3.1, and Exhibit B shall be amended accordingly. In the event VECTOR fails to
deliver to MOUNT SINAI a notice of election to exercise such option, or notifies
MOUNT SINAI that it elects not to exercise such option, VECTOR shall have no
further rights with respect to such MOUNT SINAI Improvement, and in such event,
MOUNT SINAI shall be free to license, assign or otherwise develop or dispose of
such MOUNT SINAI Improvement.
3.5 DELIVERY OF TANGIBLE PROPERTY. As soon as practicable after the
effective date of this Agreement or the effective date of VECTOR's exercise of
its option pursuant to Section 3.4, as the case may be, but in no event later
than [ ] after such effective date (unless otherwise requested by
VECTOR), MOUNT SINAI shall cause to be delivered to VECTOR, at VECTOR's expense,
any and all tangible manifestations of the Property which are produced by the
Inventors and which are in MOUNT SINAI's possession and control, including,
without limitation, [
]in its control which are necessary for the
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CONFIDENTIAL TREATMENT REQUESTED
preparation or practice of the Inventions covered by the Patent Rights, or, to
the extent VECTOR has exercised its option in accordance with the provisions of
Section 3.4., MOUNT SINAI Improvements. [ ] MOUNT SINAI
each retain the right to refrain from producing the above materials if, in their
respective opinion, such release would be inappropriate after taking into
consideration [
]
3.6 RELATED TECHNOLOGY. MOUNT SINAI shall notify VECTOR of any Related
Technology by a writing referring to this provision [ ] days of
learning of such Related Technology, in sufficient detail to the extent such
information is available to MOUNT SINAI [ ] Upon receipt of
such disclosure, VECTOR shall have the opportunity to negotiate exclusively with
MOUNT SINAI for the terms of a license or assignment to such Related Technology
provided VECTOR so notifies MOUNT SINAI in writing within [
] of receipt of such disclosure written notice of its intent to so
negotiate. In the event VECTOR decides not to exercise its right of first
negotiation, the remainder of this provision shall be of no further force and
effect as to that Related Technology. In the event VECTOR decides to exercise
its right of first negotiation, both parties will negotiate in good faith for a
period of 120
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<PAGE>
days to license or assign the technology. If no agreement is reached after the
expiration of the 120 day period, MOUNT SINAI shall be free to license, assign
or otherwise develop or dispose of such Related Technology. Notwithstanding the
foregoing sentence, MOUNT SINAI shall not license, assign or otherwise develop
or dispose of such Related Technology to a third party on terms substantially
less favorable to MOUNT SINAI than those last offered by VECTOR.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 OWNERSHIP OF THE PROPERTY. MOUNT SINAI represents and warrants that (i)
it has received an assignment of the rights of the Inventors in and to the
Patent Rights and has recorded each such Assignment with the United States
Patent and Trademark Office, (ii) except as otherwise provided herein, MOUNT
SINAI has not granted any license or made any assignment of the Patent Rights
and knows of no obligation to grant any such license or to make any such
assignment, (iii) MOUNT SINAI knows of no liens, encumbrances, agreements or
understandings of any kind, either written, oral or implied which would have a
material adverse effect on VECTOR's rights hereunder, except as set forth in
Exhibit C hereto, which Exhibit C sets forth all
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<PAGE>
information known to MOUNT SINAI, and (iv) the execution, delivery and
performance of this Agreement does not conflict with, constitute a breach of, or
in any way violate any arrangement, understanding or agreement of which MOUNT
SINAI has knowledge.
4.2 NO INFRINGEMENT BY MOUNT SINAI. MOUNT SINAI represents and warrants
that it has no knowledge that any individual or entity has asserted that MOUNT
SINAI, or any employee, agent, representative or other person affiliated with
MOUNT SINAI is infringing or has infringed any foreign or domestic patent or has
misappropriated or improperly used or disclosed any trade secret, confidential
information or know-how which relates in any manner to the subject matter of
this Agreement.
4.3 NO INFRINGEMENT. MOUNT SINAI represents and warrants that it has no
knowledge that any person or individual is infringing or has infringed any
Patent Rights or has misappropriated or improperly used or disclosed any trade
secret, confidential information, or know-how which relates in any manner to the
subject matter of this Agreement.
4.4 PATENT PROCEEDINGS. MOUNT SINAI represents and warrants that it has no
knowledge that any patent application within the Patent Rights is the subject of
any pending interference, opposition,
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<PAGE>
cancellation or other protest proceeding, except as otherwise set forth in
Exhibit C.
4.5 KNOWLEDGE OF THIRD PARTY PATENTS. MOUNT SINAI represents and warrants
that it has no knowledge of any foreign or domestic patent or patent application
which is reasonably expected by MOUNT SINAI to restrict VECTOR from
manufacturing, using or selling any Product or any portion of the Technical
Information.
4.6 WARRANTY DISCLAIMER. Notwithstanding the foregoing, nothing in this
Agreement is or shall be construed as:
(i) a warranty or representation by MOUNT SINAI as to the validity or
scope of any patent or patent application within the Patent Rights;
(ii) a warranty or representation that anything made, used, sold or
otherwise disposed of under any license granted in this Agreement is or will be
free from infringement of patents, copyrights and other rights of third parties;
(iii) a warranty or representation that the Inventors have not entered
into arrangements with third parties unbeknownst to MOUNT SINAI, other than
those set forth in Exhibit C hereto, which may be inconsistent with the
assignment of the entire rights of the Inventors in and to the Property.
4.7 NO WARRANTY OF MERCHANTABILITY OR FITNESS
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CONFIDENTIAL TREATMENT REQUESTED
FOR PARTICULAR PURPOSE. MOUNT SINAI MAKES NO REPRESENTATION AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. MOUNT SINAI FURTHER
AFFIRMATIVELY STATES THAT IT HAS NO INFORMATION WHATSOEVER REGARDING VECTOR'S
INTENDED USE OR DEVELOPMENT OF THE PRODUCTS.
4.8 MOUNT SINAI KNOWLEDGE. For the purpose of this Agreement, information,
data, knowledge or material available or in the possession of an Inventor,
regardless of whether the Inventor is an employee of MOUNT SINAI, is [
]
ARTICLE 5
CONSIDERATION FOR ASSIGNMENT
For the consideration as set forth herein, VECTOR will issue to MOUNT SINAI
no sooner than five days after execution of this Agreement:
5.1 One hundred seventy-five thousand (175,000) shares of VECTOR's Common
Stock pursuant to the Stock Issuance Agreement.
5.2 Three (3) warrants, in the forms and
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CONFIDENTIAL TREATMENT REQUESTED
pursuant to the terms attached hereto as Exhibits D-1, D-2 and D-3,
respectively, to purchase up to 225,000 shares of VECTOR'S Series A Preferred
Stock (individually, a "Warrant" and collectively, the "Warrants"), each
exercisable for a term of five (5) years, commencing upon the occurrence of the
following milestone events and with respect to the following amounts:
(a) the first Warrant to be exercisable with respect to [
] shares to be issued upon [
]
(b) the second Warrant to be exercisable with respect to [
] shares to be issued upon [
]
(c) the third Warrant to be exercisable with respect to [
] shares upon [
]
5.3 The Warrants shall be exercisable at such a price per share as set forth
in the Warrants under
-15-
<PAGE>
Paragraph 3, "Purchase Price."
ARTICLE 6
ASSUMPTION OF RISK, RELEASE,
INDEMNIFICATION AND INSURANCE
6.1 VECTOR assumes all risk for loss or damage arising out of a Product.
MOUNT SINAI and its representatives assume no responsibility for and are hereby
released from any losses or damages which may arise out of a Product (including,
without limitation, losses related to personal injury and property damage and
all general, direct, special, incidental, exemplary, punitive and/or
consequential damages), whether due to MOUNT SINAI's or its representatives'
sole, joint or several negligence (whether active or passive) or otherwise.
VECTOR agrees to defend, indemnify and save harmless MOUNT SINAI and its
representatives from and against all claims, liabilities, damages, lawsuits,
losses and expenses (including attorney's fees) alleged to be caused by or have
arisen out of a Product, whether due to MOUNT SINAI's or its representatives'
sole, joint or several negligence (whether active or passive) or otherwise.
6.2 INSURANCE. VECTOR shall obtain a commercially prudent amount of
insurance covering any personal injury or property damage that may arise out of
VECTOR's or its Transferee's use, sale or distribution of
-16-
<PAGE>
the Product and to add MOUNT SINAI as an additional insured on each such policy.
It is expressly agreed and understood that no insurance company, insurer or
bonding company or their successors or assigns shall have any rights of
subrogation or other rights against MOUNT SINAI or its representatives.
ARTICLE 7
CONFIDENTIAL INFORMATION
MOUNT SINAI and VECTOR each agree that all information contained in documents
marked "Confidential" ("Confidential Information") which are forwarded to one by
the other shall be received in strict confidence, used only for the purposes of
this Agreement, and not disclosed by the recipient party, its agents or
employees without the prior written consent of the other party, unless such
Confidential Information (i) was in the public domain at the time of disclosure,
(ii) later became part of the public domain through no act or omission of the
recipient party, its employees, agents, successors, or assigns, (iii) was
lawfully disclosed to the recipient party by a third party having the right to
disclose it, or (iv) was already known by the recipient at the time of
disclosure. Each party's obligation of confidence hereunder shall be fulfilled
by using the same degree of care with the other party's Confidential
-17-
<PAGE>
Information as it uses to protect its own Confidential Information. MOUNT SINAI
and VECTOR each further agree to treat as Confidential Information the terms and
provisions of this Agreement, except with respect to clause (ix) below and
except that MOUNT SINAI may, at its sole option, disclose the terms and
provisions of this Agreement to the Inventors provided that each Inventor
executes a confidentiality agreement substantially in the form attached hereto
as Exhibit E. Nothing contained herein shall prevent MOUNT SINAI or VECTOR or
their respective Transferees from disclosing information, except for
Confidential Information, to the extent such information is required to be
disclosed (v) in connection with the securing of necessary governmental
authorization for VECTOR or its Transferees' manufacture, use or sale of a
Product, (vi) for the purpose of VECTOR or its Transferees' compliance with
governmental regulations, or (vii) for the purpose of licensing or distribution
and sale of any Product, (viii) in connection with the development, manufacture,
use or sale of any Product, or (ix) in connection with VECTOR's financing
efforts.
-18-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE 8
PATENTS AND COSTS
VECTOR shall reimburse MOUNT SINAI for all out-of-pocket legal fees, costs
and expenses incurred in connection with the preparation, filing, prosecution
and maintenance of the patents and patent applications
reflected on Exhibit B (the "Patent Costs") incurred [
] In addition, VECTOR shall reimburse MOUNT SINAI for all Patent
Costs incurred [
] under the following circumstances and according to
the following schedule: [ ] of the Patent Costs attributable to [
] shall be payable by VECTOR on [
] The remaining
[ ] of such Patent Costs shall be payable by
VECTOR [
]
ARTICLE 9
INTELLECTUAL PROPERTY
9.1 DEFENSE OF THIRD PARTY INFRINGEMENT SUITS.
-19-
<PAGE>
In the event any Product manufactured or sold by VECTOR or its Transferee
becomes the subject of a claim for patent, trade secret or other proprietary
right infringement anywhere in the world, VECTOR shall promptly notify MOUNT
SINAI. MOUNT SINAI shall have the right, but not the obligation, at its sole
option and at its own expense, to participate in any suit which may be brought
by VECTOR.
9.2 SUITS AGAINST INFRINGING THIRD PARTIES. In the event either party
becomes aware of any actual or threatened infringement of the Property, that
party shall promptly notify the other. VECTOR or its Transferee shall be
entitled to prosecute any and all infringements of any proprietary rights in the
Property, at its own expense. All monetary compensation awarded in connection
with any infringement suit under this Section shall be paid to VECTOR or its
Transferee.
9.3. COOPERATION. MOUNT SINAI agrees to cooperate with and assist VECTOR, as
reasonably requested by VECTOR and at VECTOR's expense, in any claims or suits
undertaken by VECTOR pursuant to Sections 9.1 and 9.2, and VECTOR shall keep
MOUNT SINAI informed as to the status of the defense or prosecution of the same.
ARTICLE 10
MISCELLANEOUS
-20-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
10.1 PROMOTIONAL ADVERTISING. VECTOR agrees not to identify MOUNT SINAI in
any promotional advertising or other promotional materials to be disseminated to
the public or any portion thereof, or to use the name of any MOUNT SINAI
employee, former employee, or trademark, service mark, trade name, or symbol of
MOUNT SINAI, or that is associated with them, without MOUNT SINAI's or such
employee's, prior written consent, except materials used in connection with
VECTOR's financing efforts, which representation must be accurate and
appropriate. For example, VECTOR or its Transferees may not represent that
MOUNT SINAI endorses or approves any of its financing efforts.
Notwithstanding the foregoing, VECTOR may disclose the names of MOUNT SINAI and
the Inventors to prospective investors, lenders, or partners and may [
] (or any
subsequent title for purposes of identification) [
] in any VECTOR materials.
10.2 ENTIRE AGREEMENT. This Agreement, the Stock Issuance Agreement and the
Warrants contain the entire agreement and understanding between the parties with
respect to the subject matter hereof, and merge all prior discussions,
representations and negotiations, either written or oral, between the parties
with respect
-21-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
to the subject matter of this Agreement. Nothing herein is intended to limit,
expand, or otherwise affect the terms of the Stock Issuance Agreement.
10.3 ASSIGNMENT. This Agreement shall not be assignable by either party
except that VECTOR may assign this agreement to an Affiliate or to a corporation
with which it merges or which owns all or substantially all of VECTOR's stock.
In the event that this Agreement is properly assigned it shall be binding upon
and inure to the benefit of MOUNT SINAI, VECTOR and their respective assigns and
successors in interest. Any assignment which is not in accordance with this
Section 10.3 will be void. Nothing contained in this Agreement shall be
construed as limiting in any way VECTOR's right and ability to sell, license,
lease or otherwise transfer the Property.
10.4 HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
10.5 CONSULTING. MOUNT SINAI hereby agrees to grant, upon execution of this
Agreement, an exemption [ ] from the rules
governing the conduct of faculty of MOUNT SINAI, so as to allow [ ] to
consult with and for VECTOR, to enter into a consulting agreement with VECTOR
and, in the course of such engagement as a consultant, [
-22-
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]except that this will not include [
]
10.6 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
10.7 FORCE MAJEURE. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
effected, including but not limited to, acts of God, embargoes, governmental
restrictions, strikes or other concerted acts or workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrence shall immediately notify the other party and any time
for performance hereunder shall be extended by the actual time of delay caused
by the
-23-
<PAGE>
occurrence.
10.8 ADDRESSES. The reports to be made hereunder to MOUNT SINAI shall be
made by mailing the reports to MOUNT SINAI's address. Notices provided for
herein shall effectively be given by mailing the same by certified or registered
mail, properly addressed. For the purposes of making payments and giving
notices, the addresses of the parties hereto are as follows:
If to MOUNT SINAI: The Mount Sinai School of Medicine
One Gustave L. Levy Place
New York, NY 10029-6574
Attention: Director, Office of
Science and Technology
Development
If to VECTOR: Vector Pharmaceuticals, Inc.
1815 Old Country Road
Belmont, CA 94002
Attention: President
or to such subsequent addresses as either party may furnish the other by giving
notice thereof as provided in this Section 10-8.
10.9 INDEPENDENT CONTRACTORS. In making and performing this Agreement, MOUNT
SINAI and VECTOR act and shall act at all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between MOUNT SINAI
and VECTOR. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party except as specifically provided
herein.
-24-
<PAGE>
10.10 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
10.11 WAIVER. None of the terms, covenants, and conditions of this
Agreement can be waived except by the written consent of the party waiving
compliance.
10.12 APPLICABLE LAW. This Agreement shall be construed, interpreted,
and applied in accordance with the laws of the State of California as applied to
contracts entered into and performed entirely within California.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized officers or representatives.
MOUNT SINAI SCHOOL OF MEDICINE
By /s/ Nathan Kase
-----------------------------
Title Dean
---------------------------
VECTOR
By /s/ L. Read
-----------------------------
Title Chairman and CEO
---------------------------
-26-
<PAGE>
EXHIBIT A
COMMON STOCK ISSUANCE AGREEMENT
This Agreement is made as of the____ day of _______________, 1993, by and
between Vector Pharmaceuticals, Inc., a California corporation (the
"Corporation"), and Mount Sinai School of Medicine ("Mount Sinai").
WITNESSETH:
WHEREAS, the Corporation desires to issue, and Mount Sinai desires to
purchase Common Stock of the Corporation as herein described, on the terms and
conditions hereinafter set forth; and
WHEREAS, the issuance of Common Stock hereunder is in connection with and in
consideration of the assignment by Mount Sinai of certain technology to the
Corporation, as more fully set forth in that certain Technology Transfer
Agreement of even date herewith (the "Technology Agreement").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Mount Sinai hereby agrees to purchase from the Corporation and the
Corporation agrees to sell to Mount Sinai 175,000 shares of the Corporation's
Common Stock (the "Common Stock") at $.05 per share, for an aggregate purchase
price of Eight Thousand Seven Hundred and Fifty Dollars ($8,750.00). Payment of
the purchase price shall be made by the assignment to Mount Sinai of the
"Property," as defined in and pursuant to the Technology Agreement. The parties
agree that the value of the Property is equal to or greater than the aggregate
purchase price of the Common Stock.
2. Mount Sinai acknowledges that it is aware that the Common Stock to be
issued to it by the Corporation pursuant to this Agreement has not been
registered under the Act, and that the Common Stock is deemed to constitute
"restricted securities" under Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act"). In this connection, Mount Sinai warrants and
represents to the Corporation that Mount Sinai is purchasing the Common Stock
for Mount Sinai's own account and Mount Sinai has no present intention of
distributing or selling said stock except as permitted under the Act and Section
25102(f) of the California Corporations Code. Mount Sinai further warrants and
represents that Mount Sinai has either (i) preexisting personal or business
relationships with the Corporation or any of its officers, directors or
controlling persons, or (ii) the capacity to protect its own interests in
connection with the purchase of the Common Stock by virtue of the business or
financial expertise of any professional advisors to Mount Sinai who are
unaffiliated with and who are not compensated by the Corporation or any of its
affiliates, directly or indirectly. Mount Sinai further acknowledges that the
exemption from registration under Rule 144 will not be available for at least
three years from the date of sale of the Common Stock unless at least two years
from
1.
<PAGE>
the date of sale (i) a public trading market then exists for the Common Stock of
the Corporation, (ii) adequate information concerning the Corporation is then
available to the public, and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Common Stock may be made only in limited
amounts in accordance with such terms and conditions.
3. All certificates representing any shares of Common Stock subject to the
provisions of this Agreement shall have endorsed thereon the following legends:
(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS
PROVIDED IN THE BYLAWS OF THE CORPORATION.
(c) Any legend required to be placed thereon by appropriate Blue Sky
officials.
4. Without in any way limiting the foregoing, Mount Sinai further agrees
that it shall in no event make any disposition of all or any portion of the
Common Stock which it is purchasing unless and until:
(i) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(ii) (a) It shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, (b) it shall have
furnished the Corporation with an opinion of its own counsel to the effect that
such disposition will not require registration of such shares under the Act, and
(c) such opinion of its counsel shall have been concurred in by counsel for the
Corporation, such concurrence not to be unreasonably withheld, and the
Corporation shall have advised it of such concurrence.
5. Subject to the provisions of Sections 3 and 4, the shares of the
Corporation's Common Stock acquired hereunder are transferable, in whole or in
part, without charge to the holder hereof (except for transfer taxes), upon
surrender of the certificate representing such shares, properly endorsed;
PROVIDED, HOWEVER, that the Corporation's Bylaws provide for a right of first
refusal in favor of the Company with respect to all sales, assignments, pledges
or transfers of shares of stock of the Company or any interest therein. The
Company agrees, however, that transfers of the Common Stock acquired hereunder
to any person or entity listed on Schedule 1 (the "Permitted Transferees")
hereto shall not be subject to such right of first
2.
<PAGE>
refusal and hereby waives any such rights with respect thereto, provided that
any subsequent transfer by any of the Permitted Transferees shall nonetheless be
subject to such right of first refusal.
6. The Corporation shall not be required (i) to transfer on its books any
shares of Common Stock of the Corporation which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
7. Mount Sinai hereby agrees that for a period of not less than 90 days and
up to a maximum of 180 days following the effective date of the first
registration statement of the Corporation covering Common Stock (or other
securities) to be sold on its behalf in an underwritten public offering, it
shall not, to the extent requested by the Corporation and any underwriter, sell
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any Common Stock of the Corporation held by it at any time
during such period except Common Stock included in such registration; provided,
however, that all officers and directors of the Corporation who hold securities
of the Corporation or options to acquire securities of the Corporation enter
into similar agreements.
In order to enforce the foregoing covenant, the Corporation may impose stop-
transfer instructions with respect to the Common Stock held by Mount Sinai (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
8. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
9. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or delivery by express
courier, or four days after deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to the
other party hereto at its address hereinafter shown below its signature or at
such other address as such party may designate by ten days' advance written
notice to the other party hereto.
10. This Agreement shall be governed by the laws of the State of California
and interpreted and determined in accordance with the laws of the State of
California, as such laws are applied by California courts to contracts made and
to be performed entirely in California by residents of that state.
11. This Agreement shall inure to the benefit of the successors and assigns
of the Corporation and, subject to the restrictions on transfer herein set
forth, shall be binding upon Mount Sinai, its successors and assigns.
3.
<PAGE>
12. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
VECTOR PHARMACEUTICALS, INC.
By_______________________________
J. Leighton Read
Address: 1815 Old County Road
Belmont, CA 94002
MOUNT SINAI SCHOOL OF MEDICINE
By_______________________________
Address:_________________________
_________________________
4.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 1
PERMITTED TRANSFEREES
[
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
PATENTS AND PATENT APPLICATIONS
DESCRIPTION OF PROPERTY
1. [
]
2. [
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3. [
]
4. [
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
1. [
]
2. [
]
<PAGE>
[For the current versions of Exhibits D-1, D-2, and D-3
of the Mount Sinai Agreement, see Exhibits 4.3, 4.4, 4.5, and 4.6
to the Registration Statement on Form S-1 filed with the SEC
on behalf of Aviron on June 5, 1996.]
<PAGE>
EXHIBIT 10.3
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
MATERIALS TRANSFER AND INTELLECTUAL PROPERTY AGREEMENT
This is an Agreement, effective as of the 24th day of February, 1995 (the
"Effective Date"), between Aviron, a corporation incorporated in the
State of California, with offices located at 1450 Rollins Road,
Burlingame, California 94010 ("AVIRON"), and 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 ("MICHIGAN"). AVIRON
and MICHIGAN agree as follows:
1. BACKGROUND.
1.1 MICHIGAN possesses intellectual property and technology relating to a
cold-adapted influenza vaccine and MASTER STRAINS useful in the
production of PRODUCTS for vaccination against influenza, and potentially
for gene therapy and other uses.
1.2 AVIRON acknowledges that the MASTER STRAINS are the property of MICHIGAN,
held in confidence by and to be held in confidence for MICHIGAN.
1.3 AVIRON desires to obtain, and MICHIGAN, consistent with its mission of
education and research, desires to grant rights and make covenants to
allow AVIRON to develop, manufacture, use, and sell PRODUCTS produced
using the MASTER STRAINS and KNOW-HOW for a defined geographic TERRITORY.
2. DEFINITIONS.
2.1 "AFFILIATE(S)", shall mean any individual, corporation, partnership,
proprietorship or other entity controlled by,
1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
controlling, or under common control with AVIRON through equity
ownership, ability to elect directors, or by virtue of a majority of
overlapping directors, and shall include any individual, corporation,
partnership, proprietorship or other entity directly or indirectly
beneficially owning, owned by or under common ownership with AVIRON to
the extent of [ ] or more of the voting
securities of or voting interest in the owned entity.
2.2 "FIRST COMMERCIAL SALE" shall mean the first sale of any PRODUCT by
AVIRON or an AFFILIATE or SUBLICENSEE, other than for use in clinical
trials being conducted to obtain governmental approvals to market
PRODUCTS.
2.3 "IMPROVEMENTS" shall mean any patentable improvements or
know-how relating to [
] for PRODUCTS and
[ ] for the MASTER
STRAINS developed by MICHIGAN's JAPAN CONTRACTEE, AVIRON, AFFILIATES, or
SUBLICENSEES.
The term "IMPROVEMENTS" is not intended to include [
]
2.4 "JAPAN CONTRACTEE" shall mean the entity contracting with MICHIGAN for
the rights to make, use and sell PRODUCTS in Japan (including the current
contracting entity and any replacement or successor entity that may so
contract with MICHIGAN).
2.5 "KNOW-HOW" shall mean the production processes, information data, and
knowledge developed as of the Effective Date by MICHIGAN's faculty member
Dr. Maassab, or under his direction
2
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
at MICHIGAN, and necessary or useful for [
]
2.6 "MASTER STRAINS" shall mean donor strains of influenza viruses [
] developed by MICHIGAN's faculty
member Dr. Maassab, and provided by MICHIGAN hereunder, having the
characteristics of and significant homology to the following [
]
2.7 "NET SALES" shall mean the sum, over the term of this Agreement, of all
amounts actually received and all other consideration actually received
(or, when in a form other than cash or its equivalent, the fair market
value thereof when received) by AVIRON and its AFFILIATES and
SUBLICENSEES from persons or entities due to or by reason of the sale,
distribution or use of PRODUCTS, less the following deductions and
offsets, but only to the extent such sums are otherwise included in the
computation of NET SALES, or are paid by AVIRON and its AFFILIATES and
SUBLICENSEES and not otherwise reimbursed: refunds, rebates, replacements
or credits actually allowed and taken by purchasers for return of
PRODUCTS; government-mandated rebates or refunds given by AVIRON,
AFFILIATES and SUBLICENSEES for purchases of PRODUCTS; customary trade,
quantity and cash discounts actually allowed and taken; excise,
value-added, transportation, use and sales taxes actually paid by AVIRON
and its AFFILIATES and SUBLICENSEES for PRODUCTS; and
3
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
shipping and handling charges actually paid by AVIRON and its AFFILIATES
and SUBLICENSEES for PRODUCTS. Sales of PRODUCTS intended for resale to
third parties, made internally amongst AVIRON and its AFFILIATES and
SUBLICENSEES, shall not be deemed sales for purposes of calculating "NET
SALES" subject to royalty pursuant to Paragraph 5.3 of this Agreement
(note that the resale by the recipient shall be included in the
calculation of "NET SALES" and subject to royalty). Whenever the term
"PRODUCT" may apply to a property during various stages of manufacture,
use or sale, "NET SALES," as otherwise defined, shall be derived from the
sale, distribution or use of such PRODUCT by AVIRON or AFFILIATES or
SUBLICENSEES at the stage of its highest invoiced value to unrelated
third parties.
2.8 "PATENTS" means any patent applications or patents covering MASTER
STRAINS and KNOW-HOW, and also covering IMPROVEMENTS other than those
owned by AVIRON, AFFILIATES and SUBLICENSEES, under which and to the
extent that MICHIGAN has the right to grant rights and for which MICHIGAN
does not have to pay a royalty to a third party. PATENTS owned by
MICHIGAN shall be referred to herein as "MICHIGAN PATENTS."
2.9 "PARTIES", in singular or plural usage as required by the context, shall
mean AVIRON and/or MICHIGAN.
2.10 "PRIOR CONTRACTEE" shall mean [
] MICHIGAN's
former licensee in the TERRITORY to the MASTER STRAINS pursuant to a
terminated agreement.
2.11 "PRODUCTS" shall mean (i) [
] as well as (ii)
[
4
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]
2.12 "ROYALTY QUARTERS" shall mean the three-month periods ending on the last
day of March, June, September and December of each year.
2.13 "SUBLICENSEE(S)" shall mean any person or entity, except an AFFILIATE,
sublicensed by AVIRON under this Agreement to make, have made, use,
market or sell, PRODUCTS in the TERRITORY.
2.14 "TECHNOLOGICAL DATA" shall mean any technical data or information
relating to the MASTER STRAINS and to PRODUCTS which may be necessary or
useful to exercise the rights to MASTER STRAINS and KNOW-HOW granted
under this Agreement and to obtain regulatory approval of PRODUCTS in the
TERRITORY, and which are generated by AVIRON, its AFFILIATES and
SUBLICENSEES, or by[
] or by MICHIGAN's JAPAN CONTRACTEE or
PRIOR CONTRACTEE where such technical data or information is actually
provided to MICHIGAN. The term includes without limitation[
]
2.15 "TERRITORY" means all countries of the world except Japan.
5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
2.16 "VALID CLAIMS" means any claim(s) in an unexpired patent or pending in a
patent application included within MICHIGAN PATENTS which has not been
held unenforceable, unpatentable, or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been
admitted to be invalid or unenforceable through reissue or disclaimer.
If in any country there should be two or more such decisions conflicting
with respect to the validity of the same claim, the decision of the
higher or highest tribunal shall thereafter control; however, should the
tribunals be of equal rank, then the decision or decisions upholding the
claim shall prevail when the conflicting decisions are equal in number,
and the majority of decisions shall prevail when the conflicting
decisions are unequal in number.
3. GRANT OF RIGHTS; COVENANTS OF MICHIGAN.
3.1 MICHIGAN hereby grants to AVIRON the exclusive right, under any of
MICHIGAN's rights in the MASTER STRAINS, KNOW-HOW and TECHNOLOGICAL DATA,
to use MASTER STRAINS and to practice and use KNOW-HOW and TECHNOLOGICAL
DATA solely to make, have made, use, market and sell, PRODUCTS in the
TERRITORY; with the right to grant sublicenses to AFFILIATES and
SUBLICENSEES subject to the terms and provisions of Article 10 below.
3.2 MICHIGAN also hereby grants to AVIRON the exclusive license under
PATENTS, to make, have made, use, market, import, offer for sale and sell
PRODUCTS in the TERRITORY; with the right to grant sublicenses to
AFFILIATES and SUBLICENSEES subject to the terms and provisions of
Article 10 below. MICHIGAN reserves the right to practice any PATENTS
for internal research and education purposes within the TERRITORY, and to
license and practice any PATENTS for any purpose outside of the
TERRITORY.
6
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3.3 MICHIGAN further grants to AVIRON the exclusive option to extend the
definition of the term "TERRITORY" under this Agreement to include Japan,
should MICHIGAN's agreement with the current JAPAN CONTRACTEE expire or
terminate for any reason. MICHIGAN shall notify AVIRON of any such
expiration or termination, and AVIRON shall thereafter have [
] AVIRON may
exercise this option without payment of additional consideration other
than as provided under this Agreement.
3.4 During the term of this Agreement MICHIGAN covenants not to enter into
any agreement allowing any other party to use MASTER STRAINS or practice
KNOW-HOW, TECHNOLOGICAL DATA, or IMPROVEMENTS for the purpose of the
commercial manufacture or sale of PRODUCTS in the TERRITORY.
3.5 MICHIGAN further reserves the right to grant to the U.S. Government a
nonexclusive, irrevocable, royalty-free license or licenses, with the
right to sublicense, to any patents and patent applications covered by
this Agreement, to the extent that such grant of license(s) is or may be
required by research funding agreements between the University and the
U.S. Government.
4. PROVISION AND USE OF MASTER STRAINS; USE OF PRODUCTS.
4.1 Within thirty (30) days after the payment of the Agreement issue fee by
AVIRON as set forth in Paragraph 5.1 below, MICHIGAN shall provide to
AVIRON [
]
7
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
4.2 AVIRON, AFFILIATES and SUBLICENSEES shall use MASTER STRAINS
only for the development, manufacture and sale of PRODUCTS.
4.3 AVIRON, AFFILIATES and SUBLICENSEES may make new passages of the MASTER
STRAINS, [ ] All MASTER STRAIN samples, including
all passages made by AVIRON and AFFILIATES and SUBLICENSEES, shall be the
property of MICHIGAN.
4.4 AVIRON, AFFILIATES and SUBLICENSEES shall not provide MASTER STRAINS
including passages thereof to any third party.
4.5 AVIRON, AFFILIATES and SUBLICENSEES shall return or destroy at MICHIGAN's
option all [
] to
MICHIGAN upon any termination of this Agreement.
4.6 It is acknowledged that the MASTER STRAINS are confidential materials of
MICHIGAN, pursuant to Article 16 below, and that unauthorized disclosure
or transfer to third parties may result in financial detriment to
MICHIGAN. AVIRON agrees to use its best efforts to limit use of all
MASTER STRAINS for [
]to treat the
MASTER STRAINS as confidential pursuant to the terms of Article 16 below,
and to limit access to the MASTER STRAINS to those of AVIRON's and its
AFFILIATES' and SUBLICENSEES' employees reasonably requiring same for the
purpose of manufacturing and commercialization of PRODUCTS, who further
are obligated in writing to treat the MASTER STRAINS in a manner and to
an equivalent extent as provided herein with regard to confidentiality,
use and non-disclosure.
8
<PAGE>
4.7 AVIRON, AFFILIATES and SUBLICENSEES shall use their best efforts to
manufacture, analyze and store PRODUCTS and MASTER STRAINS in accordance
with all applicable government laws and regulatory agency requirements.
AVIRON, AFFILIATES and SUBLICENSEES shall be responsible for maintaining
the stability and viability of the MASTER STRAINS.
4.8 During the course of the Agreement, MICHIGAN shall have the right to
request, at reasonable intervals and quantities, such batch samples of
PRODUCTS from AVIRON, AFFILIATES and SUBLICENSEES as it may desire for
non-human research purposes only. PRODUCTS supplied to MICHIGAN prior to
the FIRST COMMERCIAL SALE shall be maintained in confidence by MICHIGAN
pursuant to the terms of Article 16 below and shall not be transferred to
any third party unless required by law.
4.9 During the term of this Agreement, MICHIGAN shall not authorize the
transfer of any MASTER STRAINS samples to any third party other than the
JAPAN CONTRACTEE (subject to restrictions equivalent to those made under
MICHIGAN's contract with the current JAPAN CONTRACTEE), except: (i)
transfers required under any contractual obligations existing as of the
Effective Date, and transfers required (and only to the extent required)
under future research agreements between MICHIGAN and the Federal
Government; (ii) transfers required by the Federal Government or by law;
(iii) transfers, including publicly available deposits, of materials
incorporating derivatives of MASTER STRAINS (such as reassortants), in
support of academic publications and as consistent with generally
accepted publication policies, made under arrangements restricting the
use of such materials to uses for research purposes only; (iv) transfers
for research purposes only, and only when made on terms reasonably
acceptable to AVIRON; and (v) transfers as provided under Paragraph 11.2
or otherwise agreed upon in advance by AVIRON.
9
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
MICHIGAN acknowledges that this is a material obligation under this
Agreement.
Should MICHIGAN authorize a transfer in violation of this Paragraph 4.9
to a third party which thereafter develops a vaccine product produced
from a seed virus derived from the MASTER STRAINS so received, and that
vaccine product is distributed in competition with PRODUCTS manufactured,
marketed, distributed or sold by AVIRON, AFFILIATES or SUBLICENSEES,
then[
] This [
] This remedy is not exclusive.
4.10 Should any transfer of MASTER STRAINS occur directly from MICHIGAN to a
third party, excluding transfers from MICHIGAN permitted under Paragraph
4.9 or occurring prior to the Effective Date, and that third party
thereafter develops a vaccine product produced from a seed virus derived
from the MASTER STRAINS so received, and that vaccine product is
distributed in competition with PRODUCTS manufactured, marketed,
distributed or sold by AVIRON, AFFILIATES or SUBLICENSEES, then [
]
4.11 MICHIGAN represents that, to its knowledge, all third parties which have
received MASTER STRAINS directly from MICHIGAN prior to the Effective
Date are listed on the List of Known
10
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Recipients of MASTER STRAINS which is attached hereto and incorporated
herein as Exhibit B.
5. CONSIDERATION.
5.1 AVIRON shall pay to MICHIGAN a non-creditable, non-refundable
fee of [ ] upon execution
of this Agreement.
5.2 AVIRON shall also pay to MICHIGAN a further non-creditable,
non-refundable fee of [ ]
within thirty (30) days of [
] (AVIRON shall notify
MICHIGAN within thirty (30) days of [
] described in this Paragraph.)
5.3 AVIRON shall also pay MICHIGAN, with respect to each ROYALTY QUARTER, a
royalty equal to:
(i) [ ] of NET SALES of
AVIRON and AFFILIATES for all PRODUCTS defined under Subparagraph
2.11(i) above; and
(ii) [ ] of NET SALES of
AVIRON and AFFILIATES for all other PRODUCTS.
Where NET SALES are generated for PRODUCTS that are vaccines which
actually contain, in final form, more than one virus, then the royalty
rate otherwise payable upon those NET SALES under Subparagraph 5.3(i) or
(ii) above shall be multiplied by a fraction, the numerator of which
shall be [
] and the
11
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
denominator of which shall be [
]
5.5 AVIRON shall also transfer to MICHIGAN, upon execution of this Agreement,
shares of AVIRON stock and warrants to shares of AVIRON stock according
to the terms of the Stock Transfer Agreement which is attached hereto and
incorporated herein as Exhibit A. (Note: AVIRON's obligations under the
Stock Transfer Agreement are deemed by the Parties to be material
obligations of this Agreement, and MICHIGAN has certain termination
rights applicable to this Agreement pursuant to Section 1.2 of the Stock
Transfer Agreement.)
5.6 AVIRON and MICHIGAN shall execute, simultaneously with this Agreement, a
Research Agreement under which AVIRON shall support continued research
relating to the MASTER STRAINS by MICHIGAN for at least [ ]
with a support commitment by AVIRON of [ ].
5.7 The PARTIES acknowledge that the consideration to be received by MICHIGAN
herein is made by AVIRON in exchange for the rights granted hereunder
especially to MASTER STRAINS, and also to KNOW-HOW, PATENTS (if any,
including PATENTS covering IMPROVEMENTS), and TECHNOLOGICAL DATA. AVIRON
acknowledges that the provision of the physical MASTER STRAINS, KNOW-HOW
and TECHNOLOGICAL DATA by MICHIGAN, and AVIRON's and its AFFILIATES and
SUBLICENSEES access to MASTER STRAINS, KNOW-HOW and TECHNOLOGICAL DATA
thereby gained, is sufficient to create the obligations for consideration
agreed to herein.
6. REPORTS.
6.1 Within [ ] after the close of each ROYALTY
QUARTER during the term of this Agreement (including the close of any
ROYALTY QUARTER immediately following any termination of this Agreement),
AVIRON shall report to
12
<PAGE>
MICHIGAN all royalties accruing to MICHIGAN during such ROYALTY QUARTER.
Such quarterly reports shall indicate for each ROYALTY QUARTER the gross
sales and NET SALES of PRODUCTS by AVIRON, AFFILIATES and SUBLICENSEES;
as well as the various calculations used to arrive at said amounts,
including the quantity, description (nomenclature and type designation),
country of manufacture and country of sale of PRODUCTS. In case no
payment is due for any such period, AVIRON shall so report.
6.2 AVIRON covenants that it will promptly establish and consistently employ
a system of specific nomenclature and type designations for PRODUCTS so
that various types can be identified and segregated in the reports owed
under Paragraph 6.1, where necessary; AVIRON, AFFILIATES and SUBLICENSEES
shall consistently employ such system when rendering invoices thereon and
henceforth agree to inform MICHIGAN, or its auditors, when requested as
to the details concerning such nomenclature system as well as to all
additions thereto and changes therein.
6.3 AVIRON shall keep, and shall require its AFFILIATES and SUBLICENSEES to
keep, true and accurate records and books of account containing data
reasonably required for the computation and verification of payments to
be made as provided by this Agreement, which records and books shall be
open for inspection upon reasonable notice during business hours by
either MICHIGAN auditor(s) or an independent certified accountant
selected by MICHIGAN, for the purpose of verifying the amount of payments
due and payable. Without in any way foreshortening any applicable
statute of limitations, said right of inspection will exist for four (4)
years from the date of origination of any such record, and this
requirement and right of inspection shall survive any termination of this
Agreement. MICHIGAN shall be responsible for all expenses of such
inspection, except that if such
13
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
inspection reveals an underpayment of royalties to MICHIGAN in excess of
ten percent (10%), then said inspection shall be at AVIRON's expense and
such underpayment shall become immediately due and payable to MICHIGAN.
6.4 The reports provided for hereunder shall be certified by an authorized
representative of AVIRON to be correct to the best of AVIRON's knowledge
and information.
7. TIMES ANID CURRENCIES OF PAYMENTS.
7.1 All payments accrued during each ROYALTY QUARTER shall be due and payable
in Ann Arbor, Michigan on the date each quarterly report is due (as
provided in Paragraph 6.1), shall be included with such report and shall
be paid in United States dollars. AVIRON agrees to make all payments due
hereunder to MICHIGAN by check made payable to "The Regents of The
University of Michigan" and sent according to the instructions for
notices set forth in Article 23 herein.
7.2 On all amounts outstanding and payable to MICHIGAN, interest shall accrue
from the date such amounts are due and payable at [
] or at such lower rate as may be required by
law.
7.3 Where NET SALES are generated in foreign currency, such foreign currency
shall be converted into its equivalent in United States dollars at the
exchange rate of such currency as reported (or if erroneously reported,
as subsequently corrected) in the Wall Street Journal on the last
business day of the ROYALTY QUARTER during which such payments are
received by AVIRON, AFFILIATES or SUBLICENSEES (or if not reported on
that date, as quoted by the Chase Manhattan Bank, N.A., in New York City,
New York).
14
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
7.4 Except as provided in the definition of NET SALES, all royalty payments
to MICHIGAN under this Agreement shall be without deduction for sales,
use, excise, personal property or other similar taxes or other duties
imposed on such payments by the government of any country or any
political subdivision thereof; and any and all such taxes or duties shall
be assumed by and paid by AVIRON.
8. COMMERCIALIZATION.
8.1 As between MICHIGAN and AVIRON, it is understood that AVIRON has the
responsibility for obtaining any governmental approvals to manufacture
and/or sell PRODUCTS.
8.2 AVIRON agrees to [ ] (i) to develop PRODUCTS,
obtain any government approvals necessary, and manufacture and sell
PRODUCTS at the earliest possible date; (ii) to effectively exploit,
market and manufacture in sufficient quantities to meet anticipated
customer demand; and (iii) to make the benefits of the PRODUCTS
reasonably available to the public.
8.3 AVIRON shall [
] to commercialize (or have commercialized) PRODUCTS
designed and marketed for all commercially feasible fields of use.
8.4 Within thirty (30) days of the FIRST COMMERCIAL SALE, AVIRON shall resort
by written letter to MICHIGAN the date and general terms of that sale.
8.5 [
15
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]
9. TECHNOLOGICAL DATA: IMPROVEMENTS.
9.1 As soon as practical and not later than forty-five (45) days after the
Effective Date, each PARTY shall disclose to the other TECHNOLOGICAL DATA
in its possession (including TECHNOLOGICAL DATA received by MICHIGAN from
its PRIOR CONTRACTEE), to the extent not previously made available to
the other PARTY.
9.2 During the course of this Agreement, MICHIGAN shall provide AVIRON with
any additional TECHNOLOGICAL DATA as said TECHNOLOGICAL DATA is developed
[ ] or when said TECHNOLOGICAL DATA is received by
MICHIGAN if generated by MICHIGAN's JAPAN CONTRACTEE.
9.3 At least once every six (6) months, AVIRON shall submit to MICHIGAN (i)
copies of all reports relating to the TECHNOLOGICAL DATA which AVIRON,
including its AFFILIATES and SUBLICENSEES, has generated since the last
reporting period, and (ii) a report informing MICHIGAN of the status of
the developmental work respecting PRODUCTS.
9.4 All TECHNOLOGICAL DATA and IMPROVEMENTS developed or acquired by AVIRON,
AFFILIATES and SUBLICENSEES (other than TECHNOLOGICAL DATA acquired from
MICHIGAN), whether or not patented, shall be disclosed to MICHIGAN and an
irrevocable, royalty-free license, with the right to sublicense outside
the TERRITORY to the JAPAN CONTRACTEE, to utilize such TECHNOLOGICAL DATA
or IMPROVEMENTS only with regard to the manufacture, use, marketing or
sale of PRODUCTS shall be granted to MICHIGAN. Upon request by MICHIGAN,
AVIRON shall
16
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
file, prosecute and maintain patents on AVIRON's and its AFFILIATES' and
SUBLICENSEES' IMPROVEMENTS outside the TERRITORY (I.E., in Japan) using
patent counsel selected by AVIRON and MICHIGAN shall reimburse AVIRON for
its costs associated with such patent filing, prosecution and maintenance
outside the TERRITORY. AVIRON shall be responsible for prosecuting and
maintaining at its own expense all other patents and patent applications
on its IMPROVEMENTS.
10. SUBLICENSING.
10.1 AVIRON shall have the exclusive right to grant sublicenses to its rights
under Article 3 above to AFFILIATES and SUBLICENSEES, to make, have made,
use, market and sell, PRODUCTS in the TERRITORY.
10.2 AVIRON shall notify MICHIGAN of every sublicense agreement and each
amendment thereto, within thirty (30) days after their execution, and
indicate the name of the SUBLICENSEE or AFFILIATE, the territory of the
sublicense, and the scope of the sublicense.
10.3 Any sublicense granted by AVIRON under this Article 10 shall provide for
[
17
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]
10.4 All sublicenses shall be consistent with the terms and conditions of this
Agreement, and shall contain all terms as required by this Agreement,
including acknowledgement of MICHIGAN's disclaimer of warranty and the
limitation on MICHIGAN's liability, as described by Article 13; and also
including the following obligations and duties at least to the extent
described in the various noted sections herein, and to the extent
required so as to allow AVIRON to fulfill its obligations under the
various sections herein: obligations and restrictions relating to MASTER
STRAINS, PRODUCTS, and their ownership and use (Article 4); duties of use
of a nomenclature system (Paragraph 6.2); duties to keep records
(Paragraph 6.4); obligations regarding the periodic reporting, disclosure
and grant of rights to TECHNOLOGICAL DATA and IMPROVEMENTS (Article 9);
duties to avoid improper representations or responsibilities (Paragraph
13.4); obligations to defend, hold harmless, and indemnify MICHIGAN
(Article 14); obligations to obtain insurance (Paragraph 14.3);
obligations relating to the return and non-use of MASTER STRAINS and
TECHNOLOGICAL DATA and prohibitions on the manufacture of PRODUCTS after
termination of the Agreement (Paragraph 15.5); duties to provide rights
to MICHIGAN to TECHNOLOGICAL DATA and IMPROVEMENTS upon termination of
the Agreement (Paragraph 15.6); duties relating to Confidential
Information (Article 16) and to pre-publication disclosure (Article 17);
duties to control export (Article 20); and duties to restrict the use of
MICHIGAN's name (Article 22). With respect to SUBLICEENSEES sublicensed
solely to manufacture PRODUCTS for sale to AVIRON and AFFILIATES, duties
regarding use of a nomenclature system and recordkeeping may be
inapplicable.
18
<PAGE>
11. PATENT APPLICATIONS AND MAINTENANCE.
11.1 MICHIGAN shall control, subject to AVIRON's participation as provided in
Paragraph 11.2, all aspects of preparing, filing, prosecuting, and
maintaining MICHIGAN PATENTS in the TERRITORY, including foreign filings
and Patent Cooperation Treaty filings. AVIRON shall, at its own expense,
perform all actions and execute or cause to be executed all documents
necessary to support such filing, prosecution, or maintenance.
11.2 MICHIGAN shall notify AVIRON of all information received by MICHIGAN
relating to the preparation, filing, prosecution and maintenance of
MICHIGAN PATENTS, including any lapse, revocation, surrender,
invalidation or abandonment of any of the MICHIGAN PATENTS, in sufficient
time to allow AVIRON to review and comment upon such information. AVIRON
shall have the right to use its own patent counsel in making its review
and comment. MICHIGAN shall deposit or otherwise make available MASTER
STRAINS as part of the prosecution of any MICHIGAN PATENTS only after
notification of AVIRON, and only provided AVIRON does not reasonably
object.
11.3 MICHIGAN may in its sole discretion decide to refrain from or to cease
prosecuting or maintaining any of the MICHIGAN PATENTS in the TERRITORY,
including any foreign filing or any Patent Cooperation Treaty filing. In
the event that MICHIGAN makes such decision, MICHIGAN shall notify AVIRON
promptly and in sufficient time to permit AVIRON at its sole discretion
to continue such prosecution or maintenance at AVIRON's expense. If
AVIRON elects to continue such prosecution or maintenance, MICHIGAN shall
execute such documents and perform such acts at AVIRON's expense as may
be reasonably necessary for AVIRON to so continue such prosecution or
maintenance; however, in no circumstance may MASTER STRAINS samples be
provided to any entity for patent
19
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
purposes (e.g., registration of samples with a materials repository
agency for public access) without MICHIGAN's express consent.
11.4 AVIRON shall reimburse patent expenses paid by MICHIGAN as follows:
MICHIGAN shall provide notice to AVIRON of all reasonable and necessary
expenses paid by MICHIGAN, with sufficiently detailed documentation to
support such expenses in monitoring, drafting, filing, prosecuting and
maintaining the MICHIGAN PATENTS in the TERRITORY, and in maintaining or
asserting its inventorship or ownership interest in MICHIGAN PATENTS,
including [
] The first such notice of expenses provided by
MICHIGAN shall include [
] Within
thirty (30) days of the receipt of each such notice, AVIRON shall
reimburse MICHIGAN for all such reasonable and necessary expenses, except
that AVIRON shall not be required to reimburse [
] however, in any case where AVIRON fails to promptly
reimburse MICHIGAN for any above-described expenses (whether or not
related to filings requested by AVIRON), [
]
20
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
12. INFRINGEMENT.
12.1 During the term of this Agreement, AVIRON shall have the first option to
police MICHIGAN PATENTS against infringement by other parties in the
TERRITORY. This right to police includes defending any action for
declaratory judgment of noninfringement or invalidity; and prosecuting,
defending or settling all infringement and declaratory judgment actions
at its expense and through counsel of its selection, except that any such
settlement shall only be made with the advice and consent of MICHIGAN.
MICHIGAN shall provide reasonable assistance to AVIRON with respect to
such actions, provided AVIRON shall reimburse MICHIGAN for out-of-pocket
expenses incurred in connection with any such assistance rendered at
AVIRON's request or reasonably required by MICHIGAN. In the event AVIRON
elects to institute any such action or suit, MICHIGAN agrees to be named
as a nominal party therein. MICHIGAN retains the right to participate,
with counsel of its own choosing, in any action under this Paragraph
12.1.
12.2 In the event that AVIRON shall institute an action for infringement of
MICHIGAN PATENTS or defend a declaratory judgment or other action with
respect to MICHIGAN PATENTS, any portion of any resulting settlement
payments or damages awarded which is received by AVIRON, less [
] paid and unrecovered by
AVIRON, shall be paid[ ] to AVIRON and [ ] to MICHIGAN.
12.3 In the event that AVIRON fails to take action to abate any alleged
infringement of MICHIGAN PATENTS within[
] of a request by MICHIGAN to do so (or within such shorter
period which might be required to preserve the legal rights of MICHIGAN
under the laws of any relevant government or political subdivision
thereof), then MICHIGAN shall have
21
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
the right to take such action (including prosecution of a suit) at its
expense and AVIRON shall use reasonable efforts to cooperate in such
action, at AVIRON's expense. In the event MICHIGAN elects to institute
any such action or suit, AVIRON agrees to be named as a nominal party
therein. MICHIGAN shall have full authority to settle on such terms as
MICHIGAN shall determine, except that MICHIGAN shall not reach any
settlement whereby it licenses a third party under any MICHIGAN PATENTS
in the TERRITORY without the consent of AVIRON. Any portion of any
resulting settlement payments or damages awarded which is received by
MICHIGAN, less [
] paid and
unrecovered by MICHIGAN, shall be paid [ ] to MICHIGAN and [ ]to
AVIRON.
12.4 AVIRON shall promptly notify MICHIGAN in writing in detail of the
discovery of any allegation by a third party of infringement resulting
from the practice of PATENTS, and of the initiation of any legal action
by AVIRON or by any third party with regard to any alleged infringement
or noninfringement. AVIRON shall in a timely manner keep MICHIGAN
informed and provide copies to MICHIGAN of all documents regarding all
such proceedings or actions instituted by AVIRON.
13. NO WARRANTIES; LIMITATION ON MICHIGAN'S LIABILTTY.
13.1 MICHIGAN, including its fellows, officers, employees and agents, makes no
representations or warranties that any PATENTS are or will be held valid,
or that the manufacture, use, sale or other distribution of any PRODUCTS
will not infringe upon any patent or other rights not vested in MICHIGAN.
22
<PAGE>
13.2 MICHIGAN, INCLUDING ITS FELLOWS, OFFICERS, EMPLOYEES AND AGENTS, MAKES NO
REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO
RESPONSIBILITIES WHATEVER WITH RESPECT TO DESIGN, DEVELOPMENT,
MANUFACTURE, USE, SALE OR OTHER DISPOSITION BY AVIRON, AFFILIATES OR
SUBLICENSEES OF MASTER STRAINS OR PRODUCTS.
13.3 THE ENTIRE RISK AS TO PERFORMANCE OF PRODUCTS AND AS TO THE SAFE USE AND
HANDLING OF MASTER STRAINS AND PRODUCTS IS ASSUMED BY AVIRON, AFFILIATES
AND SUBLICENSEES. In no event shall MICHIGAN, including its fellows,
officers, employees and agents, be responsible or liable for any direct,
indirect, special, incidental, or consequential damages or lost profits
to AVIRON, AFFILIATES, SUBLICENSEES or any other individual or entity
regardless of legal theory. The above limitations on liability apply
even though MICHIGAN, its fellows, officers, employees or agents may have
been advised of the possibility of such damage. Regardless of any
testing which may have been done at MICHIGAN, MICHIGAN makes no
representations regarding the efficacy or safety of PRODUCTS.
13.4 AVIRON shall not, and shall require that its AFFILIATES and SUBLICENSEES
do not, make any statements, representations or warranties or accept any
liabilities or responsibilities whatsoever to or with regard to any
person or entity which are inconsistent with any disclaimer or limitation
included in this Article 12.
14. INDEMNITY; INSURANCE.
14.1 AVIRON shall defend, indemnify and hold harmless and shall require its
AFFILIATES and SUBLICENSEES to defend, indemnify and hold harmless
MICHIGAN, its fellows, officers, employees
23
<PAGE>
and agents, for and against any and all claims, demands, damages, losses,
and expenses of any nature (including attorneys, fees and other
litigation expenses), resulting from, but not limited to, death, personal
injury, illness, property damage, economic loss or products liability
arising from or in connection with, any of the following:
(1) Any manufacture, use, sale or other disposition by AVIRON,
AFFILIATES, SUBLICENSEES or transferees of MASTER STRAINS or
PRODUCTS;
(2) The direct or indirect use by any person of MASTER STRAINS or
PRODUCTS made, used, sold or otherwise distributed by AVIRON,
AFFILIATES or SUBLICENSEES;
(3) The use, handling, storage or disposal by AVIRON, AFFILIATES or
SUBLICENSEES of PRODUCTS, MASTER STRAINS, or any type of
derivative of MASTER STRAINS;
(4) The use by AVIRON, AFFILIATES or SUBLICENSEES of KNOW-HOW,
IMPROVEMENTS or TECHNOLOGICAL DATA.
No approval, review, inspection nor receipt by MICHIGAN of any
TECHNOLOGICAL DATA, IMPROVEMENTS, samples or otherwise or representations
made with respect thereto shall in any manner relieve AVIRON and its
AFFILIATES and SUBLICENSEES of the responsibilities under this Paragraph
14.1.
14.2 MICHIGAN shall be entitled to participate at its option and expense
through counsel of its own selection, and may join in any legal actions
related to any such claims, demands, damages, losses and expenses under
Paragraph 12.1 above, provided MICHIGAN reasonably cooperates with
AVIRON's handling of such action.
24
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
14.3 Prior to any clinical trials on humans, use in humans, or distribution of
any PRODUCT commercially or for any human use by AVIRON or an AFFILIATE,
AVIRON shall purchase and maintain in effect a policy of product
liability insurance. [
] Each such insurance policy
shall provide [
] AVIRON shall
furnish certificate(s) of such insurance to MICHIGAN, upon request.
15. TERM AND TERMINATION.
15.1 This Agreement will become effective on its Effective Date and, unless
terminated under another, specific provision of this Agreement, will
remain in effect until and terminate upon the latter of (i) the last to
expire of MICHIGAN PATENTS, or (ii) the twentieth anniversary date of the
date of the FIRST COMMERCIAL SALE; unless otherwise extended by written
agreement of the PARTIES. Upon expiration of this Agreement pursuant to
this Paragraph 15.1 (i) or (ii), AVIRON shall have the right to require
that MICHIGAN [
]
25
<PAGE>
15.2 Upon any termination of this Agreement, and except as provided herein to
the contrary, all rights and obligations of the PARTIES hereunder shall
cease, except as follows:
(1) Obligations to pay royalties and other sums accruing hereunder up
to the day of such termination;
(2) MICHIGAN's rights to inspect books and records as described in
Article 6, and AVIRON's obligations to keep such records for the
required time;
(3) Obligations to hold harmless, defend and indemnify MICHIGAN under
Article 14;
(4) Any cause of action or claim of AVIRON or MICHIGAN accrued or to
accrue because of any breach or default by the other PARTY
hereunder;
(5) The general rights, obligations, and understandings of Articles 2,
13, 20, 22, 30 and 31;
(6) Each PARTY's duty of confidentiality, to the extent set out in
Article 16;
(7) MICHIGAN's licenses to any IMPROVEMENTS and TECHNOLOGICAL DATA of
AVIRON, AFFILIATES and SUBLICENSEES, as provided in Paragraph 9.4
above and Paragraph 15.6 below;
(8) Solely upon termination by expiration according to Paragraph
15.1 (i) or (ii) , a non-exclusive right under MICHIGAN's rights
for AVIRON to practice and use KNOW-HOW, TECHNOLOGICAL DATA and
IMPROVEMENTS, as provided in Paragraph 3.1;
(9) The obligations of Paragraph 15.5 below; and
26
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(10) All other terms, provisions, representations, rights and
obligations contained in this Agreement that by their sense and
context are intended to survive until performance thereof by
either or both PARTIES.
15.3 If AVIRON shall at any time default in the payment of any royalty or the
making of any report hereunder, or shall make any false report, or if
either PARTY shall commit any material breach of any covenant or promise
herein contained, and shall fail to remedy any such default, breach or
report within thirty (30) days after written notice thereof by the other
PARTY specifying such default, then that other PARTY may, at its option,
terminate this Agreement and the rights granted herein by notice in
writing to such effect. Any such termination shall be without prejudice
to either PARTY's other legal rights for breach of this Agreement.
15.4 Subject to AVIRON's right to terminate pursuant to Paragraph 15.3 above,
AVIRON may terminate this Agreement by giving MICHIGAN a notice of
termination, which shall include a statement of the reasons, whatever
they may be, for such termination and the termination date established by
AVIRON, which date shall not be sooner than twelve (12) months after the
date of the notice. Such notice shall be deemed by the PARTIES to be
final and, immediately upon receipt of such notice of termination,
MICHIGAN shall have the right to enter into agreements with third parties
for the provision of MASTER STRAINS and KNOW-HOW for the manufacture,
sale, and/or use of PRODUCTS and this Agreement shall immediately
terminate upon execution by MICHIGAN of any such agreement with a third
party.
15.5 Upon any termination of this Agreement, AVIRON shall, and shall require
that its AFFILIATES and SUBLICENSEES shall:
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(1) Promptly return to MICHIGAN or destroy at MICHIGAN's option the
MASTER STRAINS and materials as required under Paragraph 4.5;
(2) Promptly return to MICHIGAN all TECHNOLOGICAL DATA disclosed to
AVIRON by MICHIGAN, its JAPAN CONTRACTEE and its PRIOR CONTRACTEE,
and except according to Subparagraph 15.2 (8), refrain from any
further use of such TECHNOLOGICAL DATA;
(3) Promptly provide to MICHIGAN all TECHNOLOGICAL DATA developed or
obtained by AVIRON, AFFILIATES and SUBLICENSEES not otherwise
previously disclosed to MICHIGAN; and
(4) Except according to Subparagraph 15.2 (8), refrain from all
further use of KNOW-HOW, PATENTS and TECHNOLOGICAL DATA made
available by MICHIGAN, or its JAPAN CONTRACTEE or PRIOR
CONTRACTEE, under this Agreement.
15.6 Upon any termination of this Agreement, MICHIGAN shall have an
irrevocable, royalty-free right, with the right to sublicense that right,
to use TECHNOLOGICAL DATA and IMPROVEMENTS of AVIRON, AFFILIATES and
SUBLICENSEES, only with regard to the manufacture, use or sale of
PRODUCTS.
16. CONFIDENTIAL INFORMATION.
16.1 All MASTER STRAINS, KNOW-HOW, TECHNOLOGICAL DATA, and information
comprising or relating to IMPROVEMENTS and PATENTS provided by one PARTY
to the other PARTY pursuant to the terms of this Agreement shall be
deemed "Confidential Information" if it is initially marked as
confidential when provided to the recipient PARTY, or, if orally
disclosed, if it is indicated as confidential at the time that it is
disclosed and is reduced to a writing marked as confidential
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CONFIDENTIAL TREATMENT REQUESTED
and provided to the recipient PARTY within one (1) month thereafter. (All
TECHNOLOGICAL DATA provided to AVIRON [by MICHIGAN or directly] from
MICHIGAN's JAPAN CONTRACTEE or PRIOR CONTRACTEE shall automatically be
deemed Confidential Information.)
16.2 For the duration of this Agreement, and for a period of [
] thereafter, such Confidential Information shall not be used
by the recipient PARTY for purposes other than those stated in this
Agreement and shall be protected from disclosure to third parties (except
as allowed by this Agreement) with the same degree of care as the
recipient PARTY would apply to its own confidential information (MICHIGAN
may release all Confidential Information covering TECHNOLOGICAL DATA and
IMPROVEMENTS to its JAPAN CONTRACTEE, and also pursuant to any sublicense
as authorized by Paragraphs 9.4 and 15.6). AVIRON shall require that its
AFFILIATES and SUBLICENSEES given access to Confidential Information are
bound to this obligation to the same extent as AVIRON. (Note that use of
MASTER STRAINS and PRODUCTS are also subject to the restrictions of
Article 4 and Paragraph 15.5.)
16.3 The obligations regarding non-disclosure and non-use set forth in
Paragraph 16.2 above shall not apply to any information or data which:
(1) Is or becomes published or otherwise publicly available other than
by acts of the recipient PARTY in contravention of this Agreement;
(2) Can be shown by written records to have been disclosed to the
recipient PARTY by a third party (not the JAPAN CONTRACTEE or
PRIOR CONTRACTEE) who is not under an obligation of
confidentiality to the other PARTY;
29
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(3) Can be shown by written records to have been known to the
recipient PARTY at the time of disclosure by the other PARTY
hereunder;
(4) Can be shown by written records to have been developed by the
recipient PARTY independent of disclosures by the other PARTY;
(5) Is required to be disclosed by law or court order, including
Michigan Freedom of Information Act requirements; or
(6) Is disclosed solely to the extent necessary to obtain governmental
approvals of PRODUCTS.
17. PUBLICATIQN.
This Agreement shall not be construed as to constrain or prohibit [
] or [ ]
from presenting at symposia, national, or regional professional meetings,
and from publishing in journals, theses or dissertations, or otherwise of
his own choosing, presentations and publications relating to the MASTER
STRAINS, KNOW-HOW and TECHNOLOGICAL DATA, provided, however, that AVIRON
shall have been furnished copies of any such proposed publication or
presentation at least thirty (30) days in advance of the submission of
the proposed publication or presentation to a journal, editor, or other
third party. AVIRON shall have thirty (30) days after receipt of said
copies, to object to the proposed publication or presentation, either
because it contains Confidential Information of AVIRON (as defined in
Article 16 above), or because it contains potentially patentable subject
matter of AVIRON, or to identify potentially patentable subject matter of
MICHIGAN, needing protection. In the event that AVIRON makes such
objection, then MICHIGAN shall refrain from making
30
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such publication or presentation until said Confidential Information of
AVIRON is removed, or, for a maximum of six (6) months after the receipt
of the objection, in order for AVIRON to file applications covering its
patentable subject matter (delays of a publication or presentation in
order to file applications covering patentable subject matter of MICHIGAN
shall be at MICHIGAN's discretion).
18. ASSIGNMENT.
Due to the unique relationship between the PARTIES, this Agreement shall
not be assignable by either PARTY without the prior written consent of
the other PARTY. Any attempt to assign this Agreement without such
consent shall be void from the beginning. MICHIGAN shall not withhold
consent for AVIRON to assign this Agreement to a purchaser of all or
substantially all of AVIRON's business. No assignment shall be effective
unless and until the intended assignee agrees in writing to accept all of
the terms and conditions of this Agreement. Further, AVIRON shall
refrain from pledging any of the license rights granted in this Agreement
as security for any creditor.
19. REGISTRATION AND RECORDATION.
19.1 If the terms of this Agreement, or any assignment or license under this
Agreement are or become such as to require that the Agreement or license
or any part thereof be registered with or reported to a national or
supranational agency of any area in which AVIRON, AFFILIATES or
SUBLICENSEES would do business, AVIRON will, at its expense, undertake
such registration or report. Prompt notice and appropriate verification
of the act of registration or report or any agency ruling resulting from
it will be supplied by AVIRON to MICHIGAN.
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19.2 Any formal recordation of this Agreement or any license herein granted
which is required by the law of any country, as a prerequisite to
enforceability of the Agreement or license in the courts of any such
country or for other reasons, shall also be carried out by AVIRON at its
expense, and appropriately verified proof of recordation shall be
promptly furnished to MICHIGAN.
20. LAWS AND REGULATIONS OF THE UNITED STATES; EXPORT.
20.1 This Agreement shall be subject to all United States laws and regulations
now or hereafter applicable to the subject matter of this Agreement.
20.2 AVIRON shall comply, and shall require its AFFILIATES and SUBLICENSEES to
comply, with all provisions of any applicable laws, regulations, rules
and orders relating to the rights and license herein granted and to the
testing, production, transportation, export, packaging, labeling, sale or
use of PRODUCTS, or otherwise applicable to AVIRON's or its AFFILIATES'
or SUBLICENSEES' activities hereunder. AVIRON shall obtain, and shall
require its AFFILIATES and SUBLICENSEES to obtain, such written
assurances regarding export and re-export of technical data (including
PRODUCTS made by use of technical data) as may be required by the Office
of Export Administration Regulations, and AVIRON hereby gives such
written assurances as may be required under those Regulations to
MICHIGAN.
21. BANKRUPTCY.
If during the term of this Agreement, AVIRON shall make an assignment for
the benefit of creditors, or if proceedings in voluntary or involuntary
bankruptcy shall be instituted on behalf of or against AVIRON, or if a
receiver or trustee shall be appointed for the property of AVIRON,
MICHIGAN may,
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at its option, terminate this Agreement and revoke all rights herein
granted by written notice to AVIRON, provided, however, that MICHIGAN may
not terminate this Agreement pursuant to this Article 21 so long as
AVIRON continues to perform its obligations under this Agreement.
22. USE OF MICHIGAN'S NAME.
AVIRON agrees to refrain from using and to require AFFILIATES and
SUBLICENSEES to refrain from using the name of MICHIGAN in publicity or
advertising without the prior written approval of MICHIGAN. Reports in
scientific literature and presentations of joint research and development
work are not considered publicity.
23 . NOTICES.
Any notice, request, report or payment required or permitted to be given
or made under this Agreement by either PARTY shall be given by sending
such notice by certified or registered mail, return receipt requested, to
the address set forth below or such other address as such PARTY shall
have specified by written notice given in conformity herewith. Any
notice not so given shall not be valid unless and until actually
received, and any notice given in accordance with the provisions of this
Paragraph shall be effective when mailed.
To MICHIGAN: The University of Michigan
Technology Management Office
Wolverine Tower, Room 2071
3003 South State Street
Ann Arbor, MI 48109-1280
Attn: File #257
33
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To AVIRON: Aviron
1450 Rollins Road
Burlingame, California 94010
Attn: CEO
with a copy to:
Cooley Godward
Five Palo Alto Square
4th Floor
Palo Alto, CA 94306-2155
Attn: Barbara Kosacz
24. INVALIDITY.
In the event that any term, provision, or covenant of this Agreement
shall be determined by a court of competent jurisdiction to be invalid,
illegal or unenforceable, that term will be curtailed, limited or
deleted, but only to the extent necessary to remove such invalidity,
illegality or unenforceability, and the remaining terms, provisions and
covenants shall not in any way be affected or impaired thereby.
25. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement contains the entire understanding of the PARTIES with
respect to the matter contained herein. The PARTIES may, from time to
time during the continuance of this Agreement, modify, vary or alter any
of the provisions of this Agreement, but only by an instrument duly
executed by authorized officials of both PARTIES hereto.
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<PAGE>
26. WAIVER.
No waiver by either PARTY of any breach of this Agreement, no matter how
long continuing or how often repeated, shall be deemed a waiver of any
subsequent breach thereof, nor shall any delay or omission on the part of
either PARTY to exercise any right, power, or privilege hereunder be
deemed a waiver of such right, power or privilege.
27. ARTICLE HEADINGS.
The Article headings herein are for purposes of convenient reference only
and shall not be used to construe or modify the terms written in the text
of this Agreement.
28. NO AGENCY RELATIONSHIP.
The relationship between the PARTIES is that of independent contractor
and contractee. Neither PARTY shall be deemed to be an agent of the
other in connection with the exercise of any rights hereunder, and
neither shall have any right or authority to assume or create any
obligation or responsibility on behalf of the other.
29. FORCE MAJEURE.
Neither PARTY hereto shall be deemed to be in default of any provision of
this Agreement, or for any failure in performance, resulting from acts or
events beyond the reasonable control of such PARTY, such as Acts of God,
acts of civil or military authority, civil disturbance, war, strikes,
fires, power failures, natural catastrophes or other "force majeure"
events.
35
<PAGE>
30. GOVERNING LAW.
This Agreement and the relationships between the PARTIES shall be
governed in all respects by the law of the State of Michigan
(notwithstanding any provisions governing conflict of laws under such
Michigan law to the contrary), except that questions affecting the
construction and effect of any patent shall be determined by the law of
the country in which the patent has been granted.
31. JURISDICTION AND FORUM.
The PARTIES hereby consent to the jurisdiction of the courts of the State
of Michigan over any dispute concerning this Agreement or the
relationship between the PARTIES. Should AVIRON bring any claim, demand
or other action against MICHIGAN, its fellows, officers, employees or
agents, arising out of this Agreement or the relationship between the
PARTIES, AVIRON agrees to bring said action only in the Michigan Court of
Claims.
IN WITNESS WHEREOF, the PARTIES hereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.
FOR AVIRON FOR THE REGENTS OF THE
UNIVERSITY OF MICHIGAN
By /s/ L. Read By /s/ Robert L. Robb
-------------------------- ------------------------------------
(authorized representative) (authorized representative)
Typed Name LEIGHTON READ Typed Name Robert L. Robb
------------------ ----------------------------
Title CEO Title Director, Technology Management
----------------------- Office
---------------------------------
Date March 9, 1995 Date 3-15-95
------------------------ ----------------------------------
MASTER STRAINS AGREEMENT-
AVIRON-03/07/95
36
<PAGE>
EXHIBIT A TO MATERIALS TRANSFER AND INTELLECTUAL PROPERTY
AGREEMENT BETWEEN AVIRON AND THE REGENTS OF THE UNIVERSITY OF
MICHIGAN, EFFECTIVE AS OF FEBRUARY 24, 1995.
STOCK TRANSFER AGREEMENT
37
<PAGE>
STOCK TRANSFER AGREEMENT
THIS AGREEMENT is made as of February 24, 1995, by and among AVIRON, a
California corporation (the "Company") and THE REGENTS OF THE UNIVERSITY OF
MICHIGAN, a Michigan constitutional corporation ("MICHIGAN").
WHEREAS, the Company and Michigan have entered into a Materials Transfer
and Intellectual Property Agreement (the "Technology Agreement") dated as of
February 24, 1995 (the "Execution Date").
WHEREAS, in connection with the granting to Aviron by Michigan of certain
rights under the Technology Agreement, the Company has agreed to issue to
Michigan shares of its Series B Preferred Stock and, under certain
circumstances, a Warrant to purchase certain shares of the Company's capital
stock, as more fully described below;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
ISSUANCE OF THE SHARES; AUTHORIZATION OF THE SHARES AND WARRANT
1.1 ISSUANCE OF THE SHARES. In reliance upon the representations and
agreements of Michigan contained herein, within thirty (30) days of the
Execution Date (the "Issue Date"), in partial consideration of the Technology
Agreement, the Company shall issue to Michigan 1,323,734 shares of its Series B
Preferred Stock (the "Shares"), having the rights, restrictions, privileges and
preferences set forth in the Amended and Restated Articles of Incorporation of
the Company, as amended by the Certificate of Amendment, both attached hereto as
Exhibit A (the "Articles").
1.2 AUTHORIZATION OF SHARES AND WARRANT. On or before the Issue Date,
the Company shall have (a) authorized the issuance of the Shares; (b) adopted
and filed the Articles with the Secretary of State of the State of California;
and (c) authorized, under the circumstances set forth in this Agreement, a
warrant to purchase shares of its common stock ("Common Stock") in the form
attached hereto as Exhibit B (the "Warrant"). Failure by the Company to meet
its obligations under this Section 1.2 by the Issue Date shall be a material
breach of this Agreement and the Technology Agreement. In addition to all other
legal rights which Michigan may have by reason of such breach, Michigan shall
have the right upon such breach to immediately terminate this Agreement and the
Technology Agreement, and to require specific performance by the Company of its
obligations upon termination of the Technology Agreement, including those set
forth in Sections 4.5 and 15.5 thereof. Upon the Issue Date the Company shall
deliver to Michigan copies of all requisite board and shareholder consents and a
file-
1
<PAGE>
stamped copy of the Articles, accompanied by a certificate signed by an officer
of the Company certifying that the Company's obligations under this Section 1.2
have been fulfilled.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Michigan as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California. The Company has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently and as
proposed to be conducted. The Company is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a material adverse effect on the
Company's business. The Company has no subsidiaries.
2.2 CORPORATE POWER. The Company has all requisite legal and
corporate power to execute and deliver this Agreement and any other agreement
contemplated hereby, to transfer and issue the Shares and to issue the Warrant,
and to carry out and perform its obligations under the terms of this Aareement.
2.3 ARTICLES. Upon the Issue Date, the Articles, in the form attached
hereto as Exhibit A, will be the true, correct and complete Articles of
Incorporation of the Company.
2.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists, or will
consist upon the Issue Date, of 35,000,000 shares of Common Stock, of which
3,484,270 shares are issued and outstanding, and 25,000,000 shares of Preferred
Stock; 5,225,000 shares of which have been designated Series A Preferred Stock,
of which 5,000,000 are issued and outstanding; 18,650,000 shares of which have
been designated Series B Preferred Stock, of which 16,666,667 are issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued, and are fully paid and nonassessable. The rights,
restrictions, privileges and preferences of the Series A Preferred Stock and
Series B Preferred Stock are as stated in the Articles. As of the Execution
Date, and taking into account the Shares to be issued under this Agreement, the
Shares represent five percent (5%) of the issued and outstanding shares of
capital stock of the Company.
(b) Excepting that certain Amended and Restated Investors Rights
Agreement, dated as of September 3, 1993, among the Company and the other
parties named therein, as amended to date (the "Rights Agreement" a copy of
which is attached hereto as Exhibit C), and except as set forth herein or on the
schedule attached hereto as Exhibit D or in the Articles, as of the Execution
Date there are no outstanding rights of first refusal, preemptive rights or
other
2.
<PAGE>
rights, options, warrants, conversion rights, or other agreements either
directly or indirectly for the purchase or acquisition from the Company of any
shares of its capital stock.
2.5 Authorization. All corporate action on the part of the Company,
its directors and shareholders necessary for the sale and issuance of the
Shares, and the Common Stock issuable upon conversion of the Shares (the
"Underlying Stock") and the performance of the Company's obligations hereunder
and under each of the other agreements contemplated hereby and the reservation
of the Underlying Stock has been taken or will be taken prior to the Issue Date.
The Shares (and the Underlying Stock), when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares (and the Underlying Stock) may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein.
2.6 Litigation. Neither the Company nor any of its property is
subject to any claim, action, suit, proceeding, arbitration or any investigation
before any court or other authority having jurisdiction and, to the best of the
Company's knowledge, none of the same is, or has been, threatened against the
Company or any of its property. The Company is not a party or subject to the
provision of any order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality. There is no action, suit or proceeding
by the Company currently pending or that the Company presently intends to
initiate.
2.7 Other Agreements. The execution and delivery of this Agreement by
the Company and the consummation of the transactions contemplated under the
Technology Agreement and this Agreement do not and will not, with either the
passage of time or the giving of notice, conflict with or result in the breach
of any condition or provision of, or constitute a default under, any contract,
mortgage, lien, lease, agreement, indenture or instrument to which the Company
is a party or any judgment to which it is subject.
2.8 Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, transfer, sale or issuance of the Shares and the Underlying Stock, and
the consummation of all other transactions contemplated by this Agreement shall
have been obtained and will be effective on the Issue Date, except for notices
required or permitted to be filed with certain state and federal securities
commissions after such date, which notices the Company shall file on a timely
basis.
2.9 Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 3 hereof, the offer, issue and
sale of the Shares is exempt from registration under the Securities Act of 1933,
as amended ("Securities Act"), and under the Uniform Securities Act of Michigan.
2.10 Absence of Material Adverse Liabilities. The Company has no
liabilities, current or contingent, nor are its properties subject to any claim
or lien, that currently materially and adversely affect the ability of the
Company to conduct its business as presently conducted.
3.
<PAGE>
2.11 Operating Rights. The Company has all material operating
authority, licenses, franchises, permits, certificates, consents, rights and
privileges as are necessary to the operation of its business as now conducted.
Section 3
REPRESENTATIONS AND WARRANTIES OF MICHIGAN
Michigan hereby represents and warrants only to the Company with respect
to the issuance of the Shares as follows:
3.1 Authorization. Michigan has all the requisite power and is duly
authorized to execute and deliver this Agreement and each other agreement
contemplated hereby and has taken all necessary action to consummate the
transactions contemplated hereby and thereby. This Agreement, the Technology
Agreement, and each other agreement contemplated hereby have been duly executed
and delivered by Michigan and constitute valid and binding obligations of
Michigan, enforceable in accordance with their respective terms subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors.
3.2 Accredited Investor. Michigan is an accredited investor within
the meaning of Regulation D, as promulgated under the Securities Act.
3.3 Experience. Michigan, alone or together with its advisors, is
experienced in evaluating and investing, in start-up biomedical research
companies such as the Company.
3.4 Investment. Michigan is acquiring the Shares for investment, for
its own account and not with a view to, or for resale in connection with, any
distribution thereof, and it has no present intention of selling or distributing
the Shares or the Underlying Stock. Michigan understands that the Shares and
the Underlying Stock have not been registered under the Securities Act by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent as expressed herein.
3.5 Rule 144 and Rule 144A. Michigan acknowledges that, because they
have not been registered under the Securities Act, the Shares and the Underlying
Stock must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. Michigan is
aware of the provisions of Rule 144 and Rule 144A promulgated under the
Securities Act, which rules permit limited resale of securities purchased in a
private placement subject to the satisfaction of certain conditions.
3.6 No Public Market. Michigan understands that no public market now
exists for any of the securities issued by the Company and that it is uncertain
whether a public market will ever exist for the Shares or the Underlying Stock.
4.
<PAGE>
3.7 Access to Data. Michigan has received and reviewed such
information that it deemed necessary to make an informed decision concerning its
receipt of the Shares and has had an opportunity to discuss the Company's
business, management and financial affairs with its management.
3.8 Restrictions on Transfer. Michigan further agrees not to make any
disposition of all or any part of the Shares in any event unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(b) Michigan shall have (i) notified the Company of the
proposed disposition, (ii) furnished the Company with a detailed statement
of the circumstances surrounding the proposed disposition, and (iii) furnished
the Company with an opinion of counsel for Michigan to the effect that such
disposition will not require registration of such shares under the Act, and such
opinion of counsel for Michigan shall have been concurred in by the Company's
counsel and the Company shall have advised Michigan of such concurrence.
3.9 Legends. Michigan understands and agrees that all certificates
evidencing the Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED."
Section 4
INVESTOR RIGHTS
4.1 Right of First Refusal on Company Issuances. The Company hereby
grants to Michigan, for so long as it holds not less than 1,000,000 shares of
the Company's Series B Preferred Stock (or Common Stock issued or issuable upon
conversion of the Series B Preferred Stock) the right of first refusal to
purchase, pro rata, all (or any part) of New Securities (as defined in this
Section 4.1) that the Company may, from time to time propose to sell and issue.
In the case where the price per share at which the New Securities are being
offered is indeterminable or is equal to or less than One Dollar ($1.00) (as
adjusted for stock splits, reclassification or otherwise), Michigan's pro rata
share, for purposes of this right of first refusal with respect to an offering
at such a price, is the ratio, the numerator of which is the number
5.
<PAGE>
of shares of Common Stock then owned by Michigan as a result of the conversion
of any Series B Preferred Stock of the Company and issuable upon conversion of
the Series B Preferred Stock of the Company then owned by Michigan, and the
denominator of which is the total number of shares of Common Stock then
outstanding as a result of the conversion of any Series A and Series B Preferred
Stock of the Company or issuable upon conversion of the Series A and Series B
Preferred Stock of the Company then outstanding. In the case where the price
per share at which the New Securities are being offered is greater than One
Dollar ($1.00) (as adjusted for stock splits, reclassifications or otherwise),
Michigan's pro rata share, for purposes of this right of first refusal with
respect to an offering at such a price, is the ratio, the numerator of which is
the number of shares of Common Stock then owned by Michigan as a result of the
conversion of any Series B Preferred Stock of the Company and issuable upon
conversion of the Series B Preferred Stock of the Company then owned by
Michigan, and the denominator of which is the total number of shares of Common
Stock outstanding immediately prior to the issuance of the New Securities,
assuming full conversion of all outstanding shares of Series A and Series B
Preferred Stock of the Company. This right of first refusal shall be subject to
the following provisions:
(a) "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
Securities" does not include (i) securities issuable upon conversion of or with
respect to Series A Preferred Stock or Series B Preferred Stock; (ii) the
Warrant Shares (as defined in Section 5.2 hereof) issuable under Section 5 of
this Agreement; (iii) securities issued pursuant to an acquisition by the
Company by merger, purchase of substantially all of the assets, or other
reorganization whereby the Company owns more than fifty percent (50%) of the
voting power of such entity; (iv) shares of the Company's Common Stock (or
related options) issued to employees, directors or consultants of the Company
pursuant to any employee stock offering, plan, or arrangement approved by the
Board of Directors; (v) shares of the Company's Common Stock or Series A or
Series B Preferred Stock issued in connection with any stock split, stock
dividend, or similar recapitalization by the Company; (vi) securities issued
pursuant to equipment or debt financing or leases which are approved by the
Company's Board of Directors; (vii) securities issued pursuant to any corporate
partnering, strategic alliance, joint venture or licensing arrangement between
the Company and a third party; or (viii) securities issued by the Company other
than for cash or cash equivalents. The Company agrees that it shall give
Michigan notice of the issuance of any of its securities under the circumstances
described in the foregoing clauses (vi), (vii) and (viii) not more than thirty
(30) days after the date of such issuance, which notice shall describe the
securities issued and the consideration received therefor.
(b) In the event that the Company proposes to undertake an
issuance of New Securities, it shall give Michigan, so long as it holds not less
than 1,000,000 shares of Common Stock of the Company issued or issuable upon
conversion of the Series B Preferred Stock, written notice of its intention,
describing the type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Michigan, as well as each
Investor (as defined under the Rights Agreement) who together with its
affiliates holds not less than
6.
<PAGE>
1,000,000 shares of Common Stock of the Company issued or issuable upon
conversion of the Series A or Series B Preferred Stock, shall have twenty (20)
days from the date of mailing of any such notice to agree to purchase up to its
full pro rata share of such New Securities for the price and upon the general
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased. Michigan, so
long as it holds not less than 1,000,000 shares of Common Stock of the Company
issued or issuable upon conversion of the Series B Preferred Stock, and each
Investor who together with its affiliates holds not less than 1,000,000 shares
of Common Stock of the Company issued or issuable upon conversion of the Series
A or Series B Preferred Stock, shall have a right of over allotment such that if
Michigan or any Investor fails to exercise its right to purchase its full pro
rata portion of New Securities, the Company shall so notify Michigan and the
other Investors and Michigan and such Investors (and their affiliates) who have
agreed to purchase all or any part of their pro rata share of New Securities may
purchase Michigan's or the nonpurchasing Investors' portions on a pro rata
basis, within ten days from the date of such notice.
(c) In the event that Michigan and the Investors (and their
affiliates) fail to exercise in full the right of first refusal within said
twenty (20) day period (plus the ten day overallotment period, if applicable)
the Company shall have sixty (60) days thereafter to sell or enter into an
agreement providing for the closing of the sale of the New Securities respecting
which Michigan's and the Investors' (and their affiliates') rights were not
exercised within thirty (30) days of such agreement at a price and upon general
terms no more favorable to the purchasers thereon than specified in the
Company's notice. In the event the Company has not sold the New Securities
within such sixty (60) day period, the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Investors
(and its affiliates) in the manner provided above.
(d) The right of first refusal granted under this Agreement
shall not apply to and shall expire upon the first closing of the first firmly
underwritten public offering of Common Stock of the Company that is pursuant to
a registration statement filed with, and declared effective by, the United
States Securities and Exchange Commission under the Securities Act.
(e) This right of first refusal is not assignable by Michigan.
4.2 Information Rights. The Company will furnish the following
information to Michigan, for so long as it holds not less than 1,000,000 shares
of Common Stock issued or issuable upon conversion of the Series B Preferred
Stock:
(i) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred and twenty (120) days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as at the end of such fiscal year, and consolidated statements of income
and consolidated statements of cash flows of the Company and its subsidiaries,
if any, for such year, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form and figures for the previous fiscal year, all in reasonable detail and
certified by independent public accountants of national stariding selected by
the Company.
7.
<PAGE>
(ii) As soon as practicable after the end of each of the first
three quarterly accounting periods in each fiscal year, and in any event within
forty-five (45) days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as at the end of such quarter, and consolidated
statements of income and consolidated statements of cash flows of the Company
and its subsidiaries, if any, for each quarter and for the current fiscal year
of the Company to date, prepared in accordance with generally accepted
accounting principles consistently applied, except that such financial
statements will not contain the notes normally required by generally accepted
accounting principles.
The Company agrees and acknowledges that information furnished to it
under this Section 4.2 may be subject to disclosure by law, including the
Michigan Freedom of Information Act ("FOIA"). Subject to such disclosure
requirements, Michigan agrees to make reasonable efforts not to disclose such
information to any third party. Michigan shall be under no obligation to seek
exemptions or exclusions of such information from the requirements of FOIA.
4.3 Registration Rights.
The Company hereby grants to Michigan the identical rights with respect
to the registration of the Shares, the Underlying Stock and the Warrant Shares
(as defined in Section 5.2 hereof) as are granted under Section 3.2 through 3.12
of the Rights Agreement to each Holder (as defined under the Rights Agreement),
as though (i) Michigan were a "Holder," (ii) the Shares and the Warrant Shares,
collectively, were "Shares," and (iii) the Warrant Shares were included within
the definition of "Registrable Securities," under the Rights Agreement.
Michigan understands and agrees that its rights under this Section 4.3 shall be
on parity with, and not superior to, the rights granted to the parties to the
Rights Agreement under Sections 3.2 through 3.12 of the Rights Agreement, as
though Michigan were a party thereto. In addition, Michigan agrees that it
shall be subject to any amendment or waiver of Sections 3.2 through 3.12 of the
Rights Agreement pursuant to the vote of a majority of the holders of the
outstanding Registrable Securities (as defined under the Rights Agreement) under
Section 6.8 of the Rights Agreement, provided such amendment or waiver applies
equally to both the holders of the majority and the holders of the minority of
such outstanding Registrable Securities.
Section 5
OBLIGATION TO ISSUE WARRANT
5.1 Conditions of Issuance. In partial consideration of the
Technology Agreement and subject to the remaining provisions of this Section 5,
the Company shall be obligated, upon the First Commercial Sale of any Product
(as such capitalized terms are defined under Sections 2.2 and 2.11 of the
Technology Agreement) (the "Warrant Issue Date"), to issue to Michigan a
warrant, in the form attached hereto as Exhibit B (the "Warrant"), on the terms
set forth below. The Company's obligations under this Section 5 shall terminate
immediately upon any termination of the Technology Aareement.
8.
<PAGE>
5.2 Shares Issuable upon Exercise of Warrant. Subject to the
provisions of Section 5.4 below, the Warrant shall be exercisable for a number
of shares of the Company Common Stock (the "Warrant Shares") equal to one and
twenty-five one-hundredths percent (1.25%) of the total number of issued and
outstanding shares of the Company Common Stock on the Issue Date (including, on
an as-converted basis, outstanding shares of Preferred Stock of the Company);
provided, however, that for purposes of calculating this percentage, "issued and
outstanding shares of the Company Common Stock" shall not include shares of the
Company Common Stock, or securities convertible into the Company Common Stock:
(i) issued in connection with an acquisition by the Company of
another entity by merger, purchase of substantially all of its assets, or other
reorganization whereby the Company acquires, directly or indirectly, more than
50% of the voting power of such entity;
(ii) issued in connection with any corporate partnering,
strategic alliance, joint venture or licensing arrangement between the Company
and a third party not involving or relating to the Technology or a Product (as
such capitalized terms are defined under Sections 2.2. and 2.11 of the
Technology Agreement);
(iii) issued by the Company other than for cash or cash
equivalents in transactions not involving or relating to the Technology or a
Product (as such capitalized terms are defined under Sections 2.2 and 2.11 of
the Technology Agreement); or
(iv) issued to employees, directors or consultants which are
subject to a right to repurchase at cost (i.e. "unvested" shares).
Notwithstanding the foregoing, if as of the Warrant Issue Date there
shall not have been an Initial Public Offering (as defined in 5.3 below), then
the Company may elect to make the Warrant exercisable for shares of the
Company's Preferred Stock convertible into the number of shares of the Company
Common Stock determined above, with rights and preferences substantially the
same as the rights and privileges of the most recent series of Preferred Stock
issued by the Company to outside investors (such Preferred Stock shall also
constitute "Warrant Shares," notwithstanding the definition of such term set
forth above). The rights granted Michigan under Section 4.3 hereof shall apply
to the Warrant Shares regardless of whether they consist of Common Stock or
Preferred Stock of the Company.
5.3 Warrant Exercise Price. The initial per share exercise price for
the Warrant (the "Exercise Price") shall be equal to one hundred twenty-five
percent (125%) of the price at which shares of the Company Common Stock are
first sold to the public pursuant to a firm commitment underwritten public
offering registered under the Securities Act, other than a registration relating
solely to a transaction under Rule 145 of the Securities Act (or any successor
thereto) or to an employee benefit plan of the Company (the "Initial Public
Offering"); or, if as of the Warrant Issue Date, there shall not have been an
Initial Public Offering, the Exercise Price shall be equal to one hundred
twenty-five percent (125%) of the per share price of the securities issued to
outside investors in the Company's most recent equity financing transaction
prior to the Warrant Issue Date in which it raised at least $2 million.
9.
<PAGE>
5.4 Acquisition of the Company Prior to Warrant Issue Date.
(a) Notwithstanding anything to the contrary in this Section
5, in the event that prior to the Warrant Issue Date there is any consolidation
of the Company with, or merger of the Company into, any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing, or surviving entity of such consolidation,
merger or reorganization, or any transaction or series of transactions by the
Company (other than financing transactions in which equity securities are issued
to multiple purchasers solely for cash) in which in excess of fifty percent
(50%) of the Company's voting power is transferred, or any sale or conveyance of
all or substantially all of the assets of the Company (any of the foregoing
events being hereafter referred to as an "Acquisition") the Company may, at its
sole option, by giving written notice of such election to Michigan prior to the
effective date of the Acquisition (the "Acquisition Date"), elect to cancel its
obligation to issue the Warrant under this Section 5, in which event the
royalties payable by the Company under Paragraphs 5.3(i) and (ii) of the
Technology Agreement shall each be doubled, without any need to amend such
agreement; provided, however, that in the event such doubled royalty rate is or
becomes thereafter unduly economically burdensome to the Company, due to, for
example but without limitation, the markets in which the Company intends to
market Products or the obligations of the Company to pay to any third party
royalties for additional rights or technology necessary for the
commercialization of the Products, then Michigan agrees to consider, in good
faith, an alternative consideration in lieu of such doubled royalty rate under
this Agreement, upon request of the Company.
(b) If the Company does not elect to cancel the Warrant under
Section 5.4(a) above, then following the Acquisition, the Company or its
successor shall remain obligated under this Section 5 to issue the Warrant on
the Warrant Issue Date. When and if issued after such an Acquisition, the
Warrant shall be exercisable for the amount and type of securities or other
consideration that would have been issuable in the Acquisition to a holder of
the number of shares of the Company's capital stock for which the Warrant would
have been exercisable under Section 5.2 above on the Acquisition Date, as if the
Acquisition Date were the same as the Warrant Issue Date. The Exercise Price of
the Warrant if issued after such an Acquisition shall be equal to one hundred
twenty-five percent (125%) of the Acquisition Price.
Section 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable
to contracts between California residents entered into and to be performed
entirely within the State of California.
6.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
10.
<PAGE>
6.3 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the final, complete and exclusive
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived, with the written consent
of Michigan and the Company.
6.4 Notices. All notices or other communications pursuant to this
Agreement shall be in writing and deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested) postage prepaid to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice) to the other party hereunder:
To the Company:
1450 Rollins Road
Burlingame, CA 94010
Attention: J. Leighton Read, M.D.,
Chairman and Chief Executive Officer
Telephone: (415) 696-9116
Fax: (415) 347-6274
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
Palo Alto, CA 94306
Attention: Robert J. Brigham, Esq.
Telephone: (415) 843-5000
Fax: (415) 857-0663
To Michigan:
University of Michigan
Treasurer's Office
5024 Fleming Administration Building
Ann Arbor, MI 48109-1340
Telephone: (313) 763-1299
Fax: (313) 747-1483
11
<PAGE>
with a copy to:
University of Michigan
Technology Management Office
3003 S. State Street
Wolverine Tower, Room 2071
Ann Arbor, MI 48109-1280
Attention: Robert L. Robb, Director
Telephone: (313) 763-0614
Fax: (313) 936-1330
Notwithstanding the foregoing, any payment of funds required hereunder
may be made by wire transfer in accordance with written instructions given by
the receiver to the sender.
6.5 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARITES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
The foregoing Stock Transfer Agreement is hereby executed as of the date
first above written.
AVIRON THE REGENTS OF THE
UNIVERSITY OF MICHIGAN
By: /s/ J. Leighton Read By: /s/ Robert L. Robb
------------------------- -----------------------------------
J. Leighton Read, M.D. Name: Robert L. Robb
---------------------------------
Chief Executive Officer Title: Director, Technology Management
Office
------------------------- --------------------------------
12.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
AVIRON
J. Leighton Read and Alan C. Mendelson certify that:
1. They are the Chief Executive Officer and the Secretary, respectively, of
Aviron, a California corporation.
2. Article III.B of the Articles of Incorporation of this corporation is
amended to read in full as follows:
B. Five million two hundred twenty-five thousand (5,225,000)
of the authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock." Eighteen million six hundred and fifty thousand (18,650,000)
of the authorized shares of Preferred Stock are hereby designated "Series B
Preferred Stock." The Series A Preferred Stock and Series B Preferred Stock are
collectively referred to as the "Preferred Stock."
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The forgoing amendment has been duly approved by the required vote of the
shareholders of the Corporation in accordance with Sections 902 and 903
of the California Corporations Code. The total number of outstanding
shares of the Corporation is 3,484,270 shares of Common Stock, 5,000,000
shares of Series A Preferred Stock, and 16,666,667 shares of Series B
Preferred Stock. The number of shares voting in favor of the amendment
equated or exceeded the vote required. The percentage vote required was
more than 50% of the outstanding shares of the Series B Preferred Stock
and more than 50% of the outstanding shares of the Common Stock and the
Preferred Stock, voting together on an as-converted basis.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: , 1995
----------------
--------------------------------------
J. Leighton Read, Chief Executive
Officer
--------------------------------------
Alan C. Mendelson, Secretary
2.
<PAGE>
[Letterhead State of California Office of the Secretary of State]
I, TONY MILLER, ACTING SECRETARY OF STATE OF THE STATE OF
CALIFORNIA, HEREBY CERTIFY:
THAT THE ANNEXED TRANSCRIPT HAS BEEN COMPARED WITH THE RECORD OF
FILE IN THIS OFFICE, OF WHICH IT PURPORTS TO BE A COPY, AND THAT SAME IS
FULL, TRUE AND CORRECT
[Seal] IN WITNESS WHEREOF, I EXECUTE THIS
CERTIFICATE AND AFFIX THE GREAT SEAL
OF THE STATE OF CALIFORNIA
APR 18 1994
/s/ Tony Miller
ACTING SECRETARY OF STATE
<PAGE>
E N D O R S E D
F I L E D
In the office of the Secretary of State
of the State of California
APR 15 1994
TONY MILLER
Acting Secretary of State
CERTIFICATE OF AMENDMENT
OF RESTATED ARTICLES OF INCORPORATION OF
AVIRON
J. Leighton Read and Alan C. Mendelson certify that:
ONE: They are the Chairman of the Board and the Secretary,
respectively, of Aviron, a California corporation (the "Corporation").
TWO: Article III, Section B of the Restated Articles of Incorporation
of the Corporation is amended in its entirety to read as follows:
B. Five million two hundred twenty-five thousand (5,225,000)
of the authorized shares of Preferred Stock are hereby designated "Series
A Preferred Stock." Seventeen million two hundred seventy-five thousand
(17,275,000) of the authorized shares of Preferred Stock are hereby
designated as "Series B Preferred Stock." The Series A Preferred Stock
and Series B Preferred Stock are collectively referred to as the
"Preferred Stock."
THREE: The amendment herein set forth has been duly approved by the board
of directors.
FOUR: The foregoing amendment of the Corporation's Restated Articles of
Incorporation have been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the Corporations Code. The total number
of outstanding shares of the Corporation is 3,427,750 shares of Common Stock,
5,000,000 shares of Series A Preferred Stock and 16,666,667 shares of Series B
Preferred Stock. The number of shares voting in favor of the amendment equaled
or exceeded the vote required. The percentage vote required was more than 50%
of the Common Stock and Preferred Stock voting together on an as-converted
basis, 50% of the Preferred Stock voting together on an as-converted basis and
50% of the Series B Preferred Stock.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in the foregoing Certificate of
Amendment are true and correct of our own knowledge.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment on April 15, 1994.
/s/ J. Leighton Read
---------------------------------------
J. Leighton Read, Chairman of the Board
/s/ Alan C. Mendelson
---------------------------------------
Alan C. Mendelson, Secretary
<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION AND CERTIFICATE OF AMENDMENT
<PAGE>
[Letterhead of Secretary of State of California
CORPORATION DIVISION
I, MARCH FONG EU, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the corporate record
on file in this office, of which it purports to be a copy, and that same is
full, true and correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal
of the State of California this
SEP - 3 1993
[Seal]
/s/ March Fong Eu
SECRETARY OF STATE
<PAGE>
E N D O R S E D
F I L E D
In the office of the Secretary of State
of the State of California
AUG 31 1993
MARCH FONG EU, Secretary of State
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
AVIRON
J. Leighton Read and Alan C. Mendelson certify that:
1. They are the Chief Executive Officer and Secretary,
respectively, of Aviron, a California corporation (the "Corporation").
2. The Articles of Incorporation of this Corporation are amended
and restated as follows:
"I.
The name of this corporation is Aviron.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This corporation is authorized to issue two classes of stock
to be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Sixty Million
(60,000,000) shares. Thirty-Five Million (35,000,000) shares shall be Common
Stock. Twenty-Five Million (25,000,000) shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. Subject to the protective provisions set forth in Section 5 below, the
Board of Directors is hereby authorized, to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or prices, and the
liquidation preferences of any wholly unissued series of Preferred Stock, and
the number
1.
<PAGE>
of shares constituting any such series and the designation thereof, or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
that they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
B. Five million two hundred twenty-five thousand (5,225,000) of
the authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock." Seventeen million sixty-six thousand six hundred sixty-seven
(17,066,667) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock." The Series A Preferred Stock and Series B Preferred
Stock are collectively referred to as the "Preferred Stock."
C. The respective rights, preferences, privileges, restrictions
and other matters relating to the Series A Preferred Stock and Series B
Preferred Stock are as follows:
1. DIVIDENDS. The holders of the Preferred Stock shall be
entitled to receive, payable in preference and priority to the holders of Common
Stock, when and as declared by the Board of Directors, out of any assets at the
time legally available therefor, dividends at the rate of:
(a) with respect to the Series A Preferred Stock, $.05
per share per annum (as appropriately adjusted for any combination,
consolidation, stock distribution, stock dividend or similar event with respect
to such shares (a "Recapitalization")); and
(b) with respect to the Series B Preferred Stock, $.09
per share per annum (as adjusted for any Recapitalization).
Such dividends shall not be cumulative and no right to such dividends shall
accrue to holders of Series A Preferred Stock or Series B Preferred Stock unless
declared by the Board of Directors. No dividends shall be declared or paid with
respect to the Common Stock (other than a dividend payable solely in Common
Stock of the Corporation) unless a dividend of equal or greater amount per share
(on an as-if-converted to Common Stock basis) is first declared and paid with
respect to the Series A Preferred Stock and Series B Preferred Stock. Each
share of Preferred Stock shall rank on parity with every other share of
Preferred Stock, irrespective of series, with regard to dividends, and no
dividends shall be paid, declared or set apart for payment on the shares of any
series of Preferred Stock unless at the same time a dividend for the same
Percentage of the respective dividend rates shall also be paid, declared or set
apart for payment, as the case may be, on the shares of Preferred Stock or each
other series then outstanding.
2.
<PAGE>
So long as any shares of Preferred Stock shall be outstanding, no dividend,
whether in cash or property, shall be paid or declared, nor shall any other
distribution be made, on any Common Stock, nor shall any shares of any Common
Stock of the Corporation be purchased, redeemed, or otherwise acquired for value
by the Corporation (except for acquisitions of Common Stock by the Corporation
from the founders, directors, employees or consultants of the Corporation
pursuant to agreements which permit the Corporation to repurchase such shares
upon termination of employment or consulting relationship or in exercise of the
Corporation's right of first refusal upon a proposed transfer) until all accrued
but unpaid dividends on the Preferred Stock shall have been paid or declared and
set apart. In the event dividends are paid on any share of Common Stock, an
additional dividend shall be paid with respect to all outstanding shares of
Preferred Stock in an amount for each such share of Preferred Stock equal to the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Preferred Stock could then be converted. The provisions of
this Section 1(b) shall not, however, apply to (i) a dividend payable in Common
Stock, (ii) the acquisition of shares of any Common Stock in exchange for shares
of any other Common Stock, or (iii) any repurchase of any outstanding securities
of the Corporation that is approved by the Corporation's Board of Directors.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series A Preferred Stock and Series B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Common Stock by reason of
their ownership thereof, the amount of $.50 and $.90 per share, respectively
(appropriately adjusted for an Recapitalization), plus all declared but unpaid
dividends on such share for each share of Series A Preferred Stock or Series B
Preferred Stock then held by them. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock and Series B Preferred Stock shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amount, then the entire
assets and funds of the Corporation legally available for distribution shall be
distributed among the holders of the Series A Preferred Stock and Series B
Preferred Stock in proportion to the full amounts to which they would otherwise
be entitled and in proportion to the number of shares of Series A Preferred
Stock and Series B Preferred Stock then held by them.
(b) After payment to the holders of the Series A
Preferred Stock and Series B Preferred Stock of the amount set forth in
subparagraph (a) above, the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among the
holders of the Series A Preferred Stock, Series B Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by them
(assuming conversion of all Series A Preferred Stock and Series B Preferred
Stock).
3.
<PAGE>
(c) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, other transaction or series of related
transactions resulting in a change of voting control shall be deemed a
liquidation, dissolution or winding up within the meaning of this Section 2 if
(a) more than 50% of the outstanding securities of each class of the surviving
entity, or (b) an interest in equity securities representing at least 50% of the
voting power or at least 50% of the equity interest in the surviving entity, is
not owned by persons who were holders of capital stock or securities convertible
into capital stock of the Corporation immediately prior to such merger,
consolidation or sale; provided, however, that the sale of Preferred Stock to
private investors pursuant to a Preferred Stock Purchase Agreement shall not
constitute a liquidation, dissolution or winding up within the meaning of this
section.
3. VOTING RIGHTS. Except as otherwise expressly provided herein
or as required by law, the holder of each share of the Series A Preferred Stock
and Series B Preferred Stock shall be entitled to the number of votes equal to
the number of shares of Common Stock into which such share of Series A Preferred
Stock or Series B Preferred Stock could be converted on the record date for the
vote or the date of the solicitation of any written consent of shareholders and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating
all shares into which shares of Series A Preferred Stock or Series B Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
4. CONVERSION. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred
Stock and Series B Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for such stock. The number of
fully paid and nonassessable shares of Common Stock to which a holder of Series
A Preferred Stock shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred Stock being converted. The number of fully paid and nonassessable
shares of Common Stock to which a holder of Series B Preferred Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
"Series B Conversion Rate" then in effect (determined as provided in Section
4(c)) by the number of shares of Series B Preferred being converted.
4.
<PAGE>
(b) SERIES A CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series A Preferred Stock (the "Series A
Conversion Rate") shall be the quotient obtained by dividing $.50 by the "Series
A Conversion Price," calculated as provided in Section 4(d).
(c) SERIES B CONVERSION RATE. The conversion rate in
effect at any time for conversion of the Series B Preferred Stock (the "Series B
Conversion Rate") shall be the quotient obtained by dividing $.90 by the "Series
B Conversion Price," calculated as provided in Section 4(d).
(d) CONVERSION PRICE. The conversion price for the
Series A Preferred Stock shall initially be $.50 (the "Series A Conversion
Price"). The conversion price of the Series B Preferred Stock shall initially
be $.90 (the "Series B Conversion Price"). Such initial Series A Conversion
Price and Series B Conversion Price (the "Conversion Prices") shall be adjusted
from time to time in accordance with this Section 4. All references to the
Conversion Prices herein shall mean the Conversion Prices as so adjusted.
(e) AUTOMATIC CONVERSION. Each share of Series A
Preferred Stock and Series B Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Price immediately
upon (i) the closing of the sale of the Corporation's Common Stock in a firm
commitment, underwritten public offering registered under the Securities Act of
1933, as amended (other than a registration relating solely to a transaction
under Rule 145 under such Act (or any successor thereto) or to an employee
benefit plan of the Company), at a public offering price equal to or exceeding
$2.50 per share of Common Stock (appropriately adjusted for any
Recapitalization) and the aggregate net proceeds to the Corporation (before
deduction for underwriter commissions and expenses relating to the issuance,
including without limitation fees of the Corporation's counsel) of which equal
or exceed $10,000,000 or (ii) upon receipt by the Corporation of the affirmative
vote at a duly noticed shareholders meeting or pursuant to a duly solicited
written consent of approval of the holders of at least a majority of the then
outstanding shares of the Series A Preferred Stock and Series B Preferred Stock
voting together as a single class in favor of the conversion of all of the
shares of Series A Preferred Stock and Series B Preferred Stock into Common
Stock.
(f) MECHANICS OF CONVERSION. Before any holder of Series
A Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates thereof, duly endorsed, at the office of the Corporation or of any
transfer agent for such stock, and shall give written notice to the Corporation
at such office that he elects to convert the same and shall state therein the
name or names in which he wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, a certificate or
5.
<PAGE>
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series A Preferred Stock or Series B Preferred Stock to be converted,
except that in the case of an automatic conversion pursuant to Section 4(e)
hereof, such conversion shall be deemed to have been made (i) immediately prior
to the closing of the offering referred to in Section 4(e)(i) or (ii)
immediately upon the approval by vote or written consent referred to in Section
4(e)(ii) above, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(g) ADJUSTMENTS TO CONVERSION PRICE.
(i) SPECIAL DEFINITIONS. For purposes of this
Section 4(g) "ORIGINAL ISSUE DATE" shall mean the date on which a share of
Series B Preferred Stock was first issued.
(ii) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS
OF COMMON STOCK. In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, then the respective Conversion Prices of the Series A
Preferred Stock and Series B Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate.
(h) OTHER DISTRIBUTIONS. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of its
subsidiaries, then in each such event provision shall be made so that the
holders of Series A Preferred Stock and Series B Preferred Stock shall receive,
upon the conversion thereof, the securities of the Corporation or any of its
subsidiaries which they would have received had their stock been converted into
Common Stock on the date of such event.
(i) NO IMPAIRMENT. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or
6.
<PAGE>
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock and Series B Preferred Stock against impairment.
(j) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to each holder of Series A Preferred Stock and Series B Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock or Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of Series A Preferred Stock or
Series B Preferred Stock.
(k) NOTICES OF RECORD DATE. In the event of any taking
by the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive shares of
Common Stock, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Series A Preferred
Stock and Series B Preferred Stock at least 20 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, security or right, and the
amount and character of such dividend, distribution, security or right.
(1) ISSUE TAXES. The Corporation shall pay any and all
issue and other taxes, excluding federal, state or local income taxes, that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series A Preferred Stock or Series B Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any holder
in connection with any such conversion.
(m) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then
7.
<PAGE>
outstanding shares of the Series A Preferred Stock and Series B Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to this Articles of
Incorporation.
(n) CONSENT TO CERTAIN DISTRIBUTIONS. Each holder of
Series A Preferred Stock and Series B Preferred Stock shall be deemed to have
consented for purposes of Sections 502, 503 and 506 of the General Corporation
Law to distributions and payments made by the Corporation and approved by the
Board of Directors of the Corporation in connection with the repurchases of
shares of Common Stock issued or to held by directors, board advisors and
employees of, or consultants to, the Corporation upon termination of their
employment or services.
(o) FRACTIONAL SHARES. No fractional share shall be
issued upon the conversion of any share or shares of Series A Preferred Stock or
Series B Preferred Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Series A Preferred
Stock or Series B Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
(p) NOTICES. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series A Preferred Stock
and Series B Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at its
address appearing on the books of the Corporation. Nothwithstanding the above,
any notice or communication to an address outside the United States shall be
sent by telecopy and confirmed in writing sent by courier guaranteeing delivery
in no more than two (2) business days.
(q) ADJUSTMENTS. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Series A Preferred Stock and Series B
Preferred Stock shall thereafter be convertible into the number of shares of
stock or other securities or property (including cash) to which a holder of the
number of shares of Common Stock deliverable upon conversion of such share of
Series A Preferred Stock or Series B
8.
<PAGE>
Preferred Stock would have been entitled upon the record date of (or date of, if
no record date is fixed) such reorganization, reclassification, consolidation,
merger or conveyance; and, in any case, appropriate adjustment (as determined by
the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of such Series A Preferred Stock or Series B Preferred Stock, to the end
that the provisions set forth herein shall thereafter be applicable, as nearly
as equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Series A Preferred Stock or Series B Preferred
Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as at least 5,000,000
of the authorized shares of Preferred Stock remain outstanding, the Corporation
shall not, without the vote or written consent by the holders of majority of the
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting together as a single class on an as converted basis:
(a) Amend, repeal or waive any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action would
alter or change in an adverse manner the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Preferred Stock;
(b) Increase the total number of authorized shares of
Common Stock or Preferred Stock of the Corporation or the number of shares
designated as any series of Preferred Stock;
(c) Authorize or issue, or obligate itself to issue, any
other equity security senior to the Series A Preferred Stock or Series B
Preferred Stock as to dividend or redemption rights, liquidation preferences,
conversion rights, voting rights or otherwise, or create any obligation or
security convertible into or exchangeable for, or having any option rights to
purchase, any such equity security which is senior to the Series A Preferred
Stock or Series B Preferred Stock; provided, however, that an equity security
issued subsequent to the issuance of the Series A Preferred Stock or Series B
Preferred Stock for a share price and corresponding liquidation price higher
than that of the Series A Preferred Stock or Series B Preferred Stock shall not
be deemed senior to the Series A Preferred Stock or Series B Preferred Stock
solely by reason of such share price and liquidation price;
(d) Do any act or thing which would result in taxation of
the holders of shares of the Series A Preferred Stock or Series B Preferred
Stock under Section 305 of the Internal Revenue Code of 1968, as amended (the
"Code") (or any comparable provision of the Code as hereafter from time to time
amended);
9.
<PAGE>
(e) Effect any sale or other conveyance of all or
substantially all of the assets of the Corporation or any of its subsidiaries,
or any consolidation or merger involving the Corporation or any of its
subsidiaries with or into any other corporation, if more than 50% of the
surviving entity is not owned by persons who were holders of capital stock or
securities convertible into capital stock of the Corporation immediately prior
to such merger, consolidation or sale; or
(f) Set aside any amounts for or purchase, or declare or
pay any dividend or make any other distribution on, any shares of capital stock
other than the Series A Preferred Stock or Series B Preferred Stock except for
repurchases required by current agreements with directors, consultants or
employees.
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Series A Preferred Stock or Series B Preferred Stock acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be returned to the status of undesignated shares of
Preferred Stock.
IV.
A. The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the corporation and its shareholders through bylaw provisions
or through agreements with the agents, or through shareholder resolutions, or
otherwise, to the fullest extent permitted by California law.
C. Any repeal or modification of this Article shall only be
prospective and shall not affect the rights under this Article in effect at the
time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
3. The foregoing Amended and Restated Articles of Incorporation
has been duly approved by the board of directors.
4. The foregoing Amended and Restated Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Sections 902 and 903 of the Corporations Code. The total number of Outstanding
shares of the corporation is 3,419,000 shares of Common Stock and 5,000,000
shares of Series A Preferred Stock. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The percentage vote required
was more than 50% of the Common Stock and 66 2/3% of the Series A Preferred
Stock voting as a separate class.
10.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge
DATE: 8/30/93
/s/ J. Leighton Road
---------------------------------------
J. Leighton Read, Chief Executive
Officer
/s/ Alan C. Mendelson
---------------------------------------
Alan C. Mendelson, Secretary
11.
<PAGE>
EXHIBIT B
FORM OF WARRANT
<PAGE>
EXHIBIT B TO STOCK TRANSFER AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SHARES
OF
--------------
Company: AVIRON, a California corporation (the "Company"), and
any corporation that shall succeed to the obligations
of the Company under this Warrant.
Number of Shares: _______________
Class of Stock: _______________
Initial Exercise Price: _______________
Date of Grant: _______________
THIS CERTIFIES THAT, for value received, The Regents of the University of
Michigan ("Michigan") or any permitted transferee of its rights hereunder is
entitled to purchase the above number (as adjusted pursuant to Section 5 hereof)
of fully paid and nonassessable shares of the above Class of Stock of the
Company at the Initial Exercise Price above (as adjusted pursuant to Section 5
hereof), subject to the provisions and upon the terms and conditions set forth
herein. The Expiration Date of this Warrant shall be five years from the Date
of Grant.
I. Definitions.
In addition to the terms defined above, the following capitalized terms
shall have the following meanings, unless the context otherwise requires:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations thereunder, as shall be
in effect at the time.
(b) "Common Stock" shall mean shares of the authorized common stock
of the Company and any stock into which such common stock may hereafter be
exchanged.
(c) "Warrantholder" shall mean any person who shall at the time be
the holder of this Warrant.
1.
<PAGE>
(d) "Shares" shall mean the shares of the Class of Stock that the
Warrantholder is entitled to purchase upon exercise of this Warrant, as adjusted
pursuant to Section 5 hereof.
(e) "Warrant Price" shall mean the Initial Exercise Price at which
this Warrant may be exercised, as adjusted pursuant to Section 5 hereof.
2. Term.
The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time on or before the Expiration Date.
3. Method of Exercise; Payment; Issuance of New Warrant.
Subject to Section 2 hereof, the purchase right represented by this
Warrant may be exercised by the Warrantholder, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Appendix A duly executed) at the principal office of the Company and by the
payment to the Company, by check made payable to the Company drawn on a United
States bank and for United States funds of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased. In the event of any exercise of the purchase right represented by
this Section 3, certificates for the Shares so purchased shall be delivered to
the Warrantholder within thirty (30) days of receipt of such payment and, unless
this Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Warrantholder within such thirty
(30) day period.
4. Exercise Price.
The Warrant Price at which this Warrant may be exercised shall be the
Initial Exercise Price, as adjusted from time to time pursuant to Section 5
hereof.
5. Adjustment of Number and Kind of Shares and Adjustment of Warrant Price.
5.1 Certain Definitions. As used in this Section 5 the following
terms shall have the following respective meanings:
(a) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either shares of Common Stock or
Convertible Securities;
2.
<PAGE>
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
5.2 Adjustments. The number and kind of securities purchasable upon
the exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
(a) Reclassification, Reorganization, Consolidation or
Merger. In the case of any reclassification of the Class of Stock that the
Warrantholder is entitled to purchase upon exercise of this Warrant, or any
reorganization, consolidation or merger of the Company with or into another
corporation (other than a merger or reorganization with respect to which the
Company is the surviving corporation and which does not result in any
reclassification of such Class of Stock), the Company, or such successor
corporation, as the case may be, shall execute a new warrant, providing that the
Warrantholder shall have the right to exercise such new warrant and upon such
exercise to receive, in lieu of each share of the Class of Stock theretofore
issuable upon exercise of this Warrant, the kind of securities receivable upon
such reclassification, reorganization, consolidation or merger by a holder of
shares of the same Class of Stock of the Company. The Warrant Price and the
number of shares of such new securities to be received by the Warrancholder upon
exercise of the Warrant shall be adjusted so that the Warrantholder shall
receive upon exercise of the Warrant and payment of the same aggregate
consideration the number of shares of new securities which the Warrantholder
would have owned immediately following such reclassification, reorganization,
consolidation or merger if the Warrantholder had exercised the Warrant
immediately prior to such reclassifications, reorganization, consolidation or
merger. The provisions of this subsection (a) shall similarly apply to
successive reclassification, reorgranizations, consolidations or mergers.
(b) Split, Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and unexpired shall
split, subdivide or combine the Class of Stock for which this Warrant is then
exercisable, the Warrant Price shall be proportionately decreased in the case of
a split or subdivision or proportionately increased in the case of a
combination. Any adjustment under this subsection (b) shall become effective
when the split, subdivision or combination becomes effective.
(c) Stock Dividends. If the Company at any time while this
Warrant remains outstanding and unexpired shall pay a dividend with respect
to the Class of Stock for which this Warrant is then exercisable, payable in
shares of that Class of Stock, Options or Convertible Securities, the Warrant
Price shall be adjusted, from and after the date of determination of the
stockholders entitled to receive such dividend or distributions, to that
price determined by multiplying the Warrant Price in effect immediately prior
to such date of determination by a fraction (i) the numerator of which shall
be the total number of shares of that Class of Stock outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which
shall be the total number of shares of the same Class of Stock outstanding
immediately after such dividend or distribution (including shares of that
Class of Stock issuable upon exercise, conversion or exchange of any Options
or Convertible Securities issued as such dividend or
3.
<PAGE>
distribution). If the Options or Convertible Securities issued as such dividend
or distribution by their terms provide, with the passage of time or otherwise,
for any decrease in the consideration payable to the Company, or any increase in
the number of shares issuable upon exercise, conversion or exchange thereof (by
change of rate or otherwise), the Warrant Price shall, upon any such decrease or
increase becoming effective, be reduced to reflect such decrease or increase as
if such decrease or increase became effective immediately prior to the issuance
of the Options or Convertible Securities as the dividend or distribution. Any
adjustment under this subsection (c) shall become effective on the record date
set for such dividend or distribution.
(d) Adjustment Of Number of Shares. Upon each adjustment in
the Warrant Price pursuant to Section 5(b) or 5(c) above, the number of Shares
issuable upon exercise of this Warrant shall be adjusted to the product obtained
by multiplying the number of Shares issuable immediately prior to such
adjustment in the Warrant Price by a fraction (i) the numerator of which shall
be the Warrant Price immediately prior to such adjustment, and (ii) the
denominator of which shall be the Warrant Price immediately after such
adjustment.
6. Notice of Adjustments.
So long as this Warrant remains outstanding and unexpired, whenever the
Warrant Price shall be adjusted pursuant to Section 5 hereof, the Company shall
issue a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Warrant
Price after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (by first class mail, postage prepaid) to the
Warrantholder.
7. Right to Convert Warrant Into Stock.
7.1 Right to Convert. In addition to the rights granted under
Section 3 of this Warrant, the Warrantholder shall have the right to require the
Company to convert this Warrant (the "Conversion Right") into shares of the
Class of Stock for which the Warrant is then exercisable, as provided in this
Section 7. Upon exercise of the Conversion Right, the Company shall deliver to
the Warrantholder (without payment by the Warrantholder of any Warrant Price)
that number of shares of stock equal to the quotient obtained by dividing (x)
the value of this Warrant at the time the Conversion Right is exercised
(determined by subtracting the aggregate Warrant Price immediately prior to the
exercise of the Conversion Right from the aggregate fair market value of the
Shares issuable upon exercise of this Warrant immediately prior to the exercise
of the Conversion Right, as determined pursuant to Section 7.3 below) by (y) the
fair market value (as determined pursuant to Section 7.3 below) of one share of
that Class of Stock immediately prior to the exercise of the Conversion Right.
7.2 Method of Exercise. So long as the Warrant remains outstanding
and unexpired, the Conversion Right may be exercised at any time by the
Warrantholder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the Warrantholder
thereby intends to exercise the Conversion Right. Certificates of the shares of
stock issuable upon exercise of the Conversion Right shall be delivered to the
4.
<PAGE>
Warrantholder within thirty (30) days following the Company's receipt of this
Warrant together with the aforesaid written statement.
7.3 Valuation of Stock. For purposes of this Section 7, the fair
market value of one share of the Class of Stock issuable upon exercise of this
Warrant shall, mean:
(a) The product of (i) the average of the closing price or,
if no closing price is reported, the closing bid and asked prices of the Common
Stock, quoted in the Over-The-Counter Market Summary or the closing price quoted
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the ten (10)
trading days prior to the date of determination of fair market value, and (ii)
the number of shares of Common Stock into which each share of the Class of Stock
is then convertible, if applicable;
(b) If the Common Stock is not traded Over-The-Counter or on
an exchange, the fair market value of the Class of Stock per share shall be as
determined in good faith by the Company's Board of Directors; provided, however,
that if the Warrantholder disputes in writing the fair market value determined
by the Board of Directors within thirty (30) days of being informed of such fair
market value, the fair market value shall be determined by an independent
appraiser, appointed in good faith by the Company's Board of Directors.
8. Compliance With Act; Transferability of Warrant; Disposition of Shares.
8.1 Legends. This Warrant and the Shares issued upon exercise
thereof shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED."
8.2 Transferability of Warrant and Shares. This Warrant and the
Shares issued upon exercise thereof shall not be sold, transferred or assigned
in whole or in part without compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if reasonably requested by the Company).
Subject to the provisions of this Section 8.2, title to this Warrant may be
transferred in the same manner as a negotiable instrument transferable by
endorsement and delivery.
9. Rights of the Holder.
5.
<PAGE>
The Warrantholder 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
Warrantholder are limited to those expressed in this Warrant. Nothing contained
in this Warrant shall be construed as conferring upon the Warrantholder 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 Shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised in accordance with its terms.
10. Miscellaneous.
No fractional shares shall be issued in connection with any exercise
hereunder, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Warrant Price then in effect. The terms
and provisions of this Warrant shall inure to the benefit of, and be binding
upon, the Company and the Warrantholder and their respective successors and
assigns. This Warrant shall be governed by and construed under the laws of the
State of California as applied to contracts entered into between residents of
the State of California to be wholly performed in the State of California. The
titles of the sections and subsections of this Warrant are for convenience only
and are not to be considered in construing this Warrant. All pronouns used in
the Warrant shall be deemed to include masculine, feminine and neuter forms.
AVIRON, a California corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
6.
<PAGE>
APPENDIX A
NOTICE OF EXERCISE
TO: AVIRON
1. The undersigned hereby elects to purchase shares of the
stock of Aviron, a California corporation, pursuant to terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said
shares of the stock in the name of the undersigned or in such other name as is
specified below.
3. The undersigned represents it is acquiring the shares of
stock solely for its own account for investment and not as a nominee for any
other party and not with a view toward the resale or distribution thereof within
the meaning of the Securities Act of 1933, as amended.
--------------------------------------
(Name)
--------------------------------------
(Address)
--------------------------------------
(Taxpayer Identification Number)
- ----------------------------------------
(print name of Warrantholder)
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
7.
<PAGE>
EXHIBIT C
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
<PAGE>
AVIRON
Amended and Restated Investors Rights Agreement
September 3, 1993
1.
<PAGE>
TABLE OF CONTENTS
Page
----
1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
2. Transferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
2.1 Restrictions on Transferability . . . . . . . . . . . . . . . . . 3.
2.2 Restrictive Legend. . . . . . . . . . . . . . . . . . . . . . . . 3.
2.3 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . . . 3.
3. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
3.1 Requested Registration. . . . . . . . . . . . . . . . . . . . . . 4.
3.2 Company Registration. . . . . . . . . . . . . . . . . . . . . . . 6.
3.3 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . 7.
3.4 Registration Procedures . . . . . . . . . . . . . . . . . . . . . 8.
3.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 9.
3.6 Information by Holder . . . . . . . . . . . . . . . . . . . . . .10.
3.7 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . . . .10.
3.8 "Market Stand-off" Agreement. . . . . . . . . . . . . . . . . . .11.
3.9 Form S-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.
3.10 Transfer of Registration Rights . . . . . . . . . . . . . . . . .12.
3.11 Certain Limitations in Connection with Future Grants of
Registration Rights . . . . . . . . . . . . . . . . . . . . . . .12.
3.12 Termination of Registration Rights. . . . . . . . . . . . . . . .13.
4. Right of First Refusal on Company Issuances. . . . . . . . . . . . . . .13.
4.1 Right of First Refusal. . . . . . . . . . . . . . . . . . . . .13.
5. Information Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .15.
5.1 Financial Information . . . . . . . . . . . . . . . . . . . . . .15.
5.2 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . .15.
5.3 Assignment of Rights to Information . . . . . . . . . . . . . . .15.
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . .16.
6. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.
6.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .16.
6.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . .16.
6.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .16.
6.4 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . .16.
6.5 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . .17.
6.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .17.
6.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .17.
6.8 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . .17.
i.
<PAGE>
TABLE OF CONTENTS
(continued)
EXHIBITS
A. Schedule of Investors
B. Schedule of Series A Warrant Holders
C. Schedule of Series B Warrant Holders
ii.
<PAGE>
Aviron
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
This Amended and Restated Investors Rights Agreement (the "Agreement") is
entered into as of September 3, 1993, by and among Aviron, a California
corporation (the "Company"), the parties listed on Exhibit A hereto (the
"Investors"), the parties listed on Exhibit B hereto (the "Series A Warrant
Holders") and the parties listed on Exhibit C hereto (the "Series B Warrant
Holders").
RECITALS
A. The Investors are the purchasers of the Company's Series A
Preferred Stock pursuant to that certain Series A Preferred Stock Purchase
Agreement, dated as of June 19, 1992, by and among the Company and the
purchasers named therein (the "Series A Agreement") and the purchasers of the
Company's Series B Preferred Stock pursuant to that certain Series B Preferred
Stock Purchase Agreement, dated as of the date hereof, by and among the Company
and the Purchasers named therein (the "Series B Agreement").
B. The Series A Warrant Holders are the holders of either Series A
Preferred Stock or Warrants to purchase Series A Preferred Stock of the Company,
the Series B Warrant Holders are the holders of either Series B Preferred Stock
or Warrants to purchase Series B Preferred Stock of the Company, and the
Founders are Peter Palese, J. Leighton Read, Bernard Roizman and Richard J.
Whitley, in connection with which the Company desires to extend certain rights
herein, subject to the obligations provided for herein, in accordance with the
terms of this Agreement.
C. It is anticipated that future sales of securities of a similar
nature may occur.
D. In order to facilitate the grant by the Company of additional
rights, the Company, the Investors, the Series A Warrant Holders and the Series
B Warrant Holders desire to terminate the Investor Rights Agreement, dated as of
June 19, 1992 as amended January 8, 1993, among the Company and the parties
named therein (the "Original Investor Rights Agreement"), and set forth in a
single agreement the registration and information rights and right of first
refusal granted to the Investors, the Series A Warrant Holders, the Series B
Warrant Holders and the Founders.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants, and conditions set forth in this Agreement and in the
agreements pursuant to which the Investors acquired their securities in the
Company, the parties mutually aggree as follows:
1.
<PAGE>
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 2.2 hereof.
"Shares" shall mean the securities of the Company held by the Investors
and Founders as described on Exhibit A, the securities issuable upon exercise of
the Warrants to purchase Series A Preferred Stock held by the Series A Warrant
Holders as described on Exhibit B and the securities issuable upon exercise of
the Warrants to purchase Series B Preferred Stock held by the Series B Warrant
Holders as described on Exhibit C.
"Registrable Securities" means (i) shares of Common Stock issued or
issuable pursuant to the conversion or exercise of the Shares and (ii) shares of
Common Stock issued as a dividend or other distribution with respect to, or in
exchange or in replacement of, the Shares, excluding in all cases, however
(including exclusion from the calculation of the number of outstanding
Registrable Securities), any Registrable Securities sold by a person, (x) in a
transaction pursuant to Rule 144, or (y) pursuant to a registration statement
under this Agreement or (z) in a transaction in which his rights under this
Agreement are not transferred, including a transaction pursuant to a
registration statement under this Agreement.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 3.1, 3.2 and 3.9 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and disbursements of a single
special counsel for the Holders not to exceed $10,000, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Holder" shall mean any holder of outstanding Registrable Securities.
2.
<PAGE>
"Initiating Holders" shall mean any Holder or Holders of not less than
40% of the then outstanding Registrable Securities.
"Common Stock" shall mean shares of the Company's Common Stock, no par
value.
"Preferred Stock" shall mean shares of the Company's Series A Preferred
Stock and Series B Preferred Stock, no par value.
2. TRANSFERABILITY.
2.1 RESTRICTIONS ON TRANSFERABILITY. The Shares and any Preferred
Stock or Common Stock into which the Shares may be convertible or exercisable,
shall not be transferable except upon the conditions specified in this
Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act, or, in the case of Section 3.8 hereof, to
assist in an orderly distribution. Each Investor will cause any proposed
transferee of the Shares (or of the Preferred Stock or Common Stock into which
the Shares may be convertible or exercisable) held by an Investor to agree to
take and hold such securities subject to the provisions and upon the conditions
specified in this Agreement.
2.2 RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
or (ii) shares of the Company's Common Stock or Preferred Stock issued upon
conversion or exercise of the Shares and (iii) any securities issued in respect
of the Shares or such Common Stock or Preferred Stock, shall (unless otherwise
permitted by the provisions of Section 2.3 below) be stamped or otherwise
imprinted with a legend in substantially the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT UNDER AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT OR AN EXEMPTION THEREFROM OR IN CONTRAVENTION OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER.
COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT ITS PRINCIPAL OFFICE.
2.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall be accompanied (except in
the following cases, with respect to
3.
<PAGE>
which the requirements set forth in the balance of this sentence need not be
complied with: transactions in compliance with Rule 144 or Rule 144A so long as
the Company is furnished with evidence of compliance with such Rule;
transactions involving the distribution of Restricted Securities by any Investor
which is a general or limited partnership to any of its partners, or retired
partners, or to the estate of any of its partners or retired partners;
transactions involving the transfer of Restricted Securities by any holder who
is an individual to his family members or to a trust for the benefit of such
shareholder or his family members; or transfers not involving a change in
beneficial ownership) by (i) a written opinion of legal counsel who shall be
reasonably satisfactory to the Company addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, (ii) a "no action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, or (iii) such other showing that may
be reasonably satisfactory to legal counsel to the Company, whereupon the holder
of such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear the appropriate restrictive legend set forth in
Section 2.2 above, except that such certificate shall not bear such restrictive
legend if in the opinion of counsel for the Company such legend is not required
in order to establish compliance with any provisions of the Securities Act. All
Restricted Securities transferred as above that continue to bear the restrictive
legend set forth in Section 2.2 shall continue to be subject to the provisions
of this Section 2.3 in the same manner as before such transfer.
3. REGISTRATION RIGHTS.
3.1 REQUESTED REGISTRATION. Prior to such time as the Company has
effected two registrations pursuant to this Section 3.1 and such
registrations have been declared or ordered effective, if the Company shall
receive from Initiating Holders a written request that the Company effect any
registration (other than a registration on Form S-3 or any comparable form of
registration statement) with respect to Registrable Securities having an
anticipated aggregate offering price to the public of at least $7,500,000
(before deduction of underwriter commissions and expenses), the Company will:
(a) promptly give written notice of the proposed registration
to all other Holders; and
(b) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company;
4.
<PAGE>
provided that the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to this Section 3.1:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) Prior to the earlier to occur of (x) six months
following the effective date of the registration statement pertaining to the
first underwritten public offering of securities of the Company for its own
account and (y) August 31, 1997; or
(iii) If at the time of the request to register
Registrable Securities the Company gives notice within 30 days of such request
that it is engaged or has fixed plans to engage within 90 days of the time of
the request in an initial firmly underwritten registered public offering as to
which the Holders may include Registrable Securities pursuant to Sections 3.1 or
3.2.
Subject to the foregoing clauses (i) through (iii) and to Section
3.1(d), the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request of the Initiatin Holders.
(c) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 3.1 and the Company shall include such information in the
written notice referred to in Section 3.l(a). The right of any Holder to
registration pursuant to Section 3.1 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by a majority in interest of the Holders and such
Holder) to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders with the
approval of the Company, which approval shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 3.1, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten and so advises the Initiating Holders in writing, then the
Initiating Holders shall so advise all Holders (except those Holders who have
indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities owned by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
5.
<PAGE>
If any Holder disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used above in determining the
underwriter limitation; and, provided further that in the event that the
withdrawal of a Holder, and the subsequent inclusion of additional Registrable
Securities by other Holders, results in an anticipated aggregate offering price
to the public of less than $1,000,000 the Company shall no longer be required to
effect such registration pursuant to this Section 3.1.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account or
the account of others in such registration if the underwriter so agrees and if
the number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
(d) DELAY OF REGISTRATION. If the Company shall furnish to the
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed on or before the date
filing would be required and it is therefore essential to defer the filing of
such registration statement, then the Company may direct that such request for
registration be delayed for two periods not in excess of 90 days each in any
one-year period.
3.2 COMPANY REGISTRATION.
(a) If at any time or from time to time, the Company shall
determine to register any of its Common Stock, for its own account or for the
account of others (other than the Holders), other than a registration relating
solely to employee benefit plans or a registration relating solely to a
Commission Rule 145 transaction or a registration on any registration form which
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from the
Company, by any Holder or Holders.
6.
<PAGE>
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 3.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company with the approval of the Board of Directors. Notwithstanding any other
provision of this Section 3.2, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities and shares of Common
Stock to be included in the registration and underwriting. The Company shall so
advise all Holders (except those Holders who have indicated to the Company their
decision not to distribute any of their Registrable Securities or Common Stock
through such underwriting), and the number of shares of Registrable Securities
that may be included in the registration and underwriting, shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities owned by the Holders at the time of filing the
registration statement.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of any such underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The securities so withdrawn from such underwriting shall also be
withdrawn from such registration; provided, however, that, if by the withdrawal
of such securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used above
in determining the underwriter limitation.
3.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 3.1, Section 3.2 or Section 3.9 herein shall be borne by the Company.
All Selling Expenses incurred in connection with any registrations hereunder
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of shares so registered. The Company shall not, however, be
required to pay for expenses of any registration proceeding, begun pursuant to
Section 3.1, the request of which has been subsequently withdrawn by the
Initiating Holders (unless the withdrawal is based upon material information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or unless the Holders of a majority of Registrable
Securities agrees to forfeit their right to one requested registration pursuant
to Section 3.1 in which event such right shall be forfeited by all Holders), in
which case such expenses shall be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which registration was requested.
7.
<PAGE>
3.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 3,
the Company will keep each participating Holder advised in writing as to the
qualification and compliance and as to the completion thereof. At its expense
the Company will:
(a) Keep such registration, qualification or compliance
effective for a period of 90 days or until the Holder or Holders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs;
(b) Furnish such number of prospectuses and other documents
incident thereto in conformity with the requirements of the Act;
(c) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act;
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating, in such underwriting, shall also enter into and perform its
obligations under such an agreement;
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(i) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section, on the date that such Registrable
8.
<PAGE>
Securities are delivered to the underwriters for sale in connection with a
registration pursuant to this Section if such securities are being sold through
underwriters or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting, registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
3.5 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners and legal counsel, and each person controlling
such Holder, with respect to which registration, qualification or compliance has
been effected pursuant to this Section 3, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on (i)
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other similar document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, or (ii) any violation by the Company
of any federal, state or common law rule or regulation applicable to the Company
in connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors, partners and legal
counsel, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or furnished by the Holder to the Company in
response to a request by the Company stating specifically that such information
will be used by the Company therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each legal counsel and independent accountant of the
Company, each person who controls the Company within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors, and
partners and each person controlling such Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other similar document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the
9.
<PAGE>
circumstances under which they were made, and will reimburse the Company, such
Holders, such directors, officers, persons, or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as incurred, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders hereunder shall be limited to an amount equal to the proceeds to each
such Holder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
3.5 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if in the
opinion of counsel to the Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as provided
herein shall relieve the Indemnifying Party of its obligations under this
Section 3.5 only to the extent that such failure to give notice shall materially
adversely prejudice the Indemnifying Party in the defense of any such claim or
any such litigation. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
3.6 INFORMATION BY HOLDER. Each Holder including securities of the
Company in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 3.
3.7 Rule 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Use its best efforts to facilitate the sale of the
Restricted Securities to the public, without registration under the Securities
Act, pursuant to Rule 144 under the Securities Act, provided that this shall not
require the Company to file reports under the Securities Act and
10.
<PAGE>
the Exchange Act at anytime prior to the Company's being otherwise required to
file such reports.
(b) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act at all times
after 90 days after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(c) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (at any time after it has become subject to such reporting
requirements);
(d) So long as a Holder owns any Restricted Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
3.8 "MARKET STAND-OFF" AGREEMENT. Each Holder agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it for a period not to exceed 120 days following the effective
date of a registration statement of the Company filed under the Securities Act
if so requested by the Company and the underwriter of Common Stock (or other
securities of the Company), provided that:
(a) such agreement shall apply only to the first underwritten
registered public offering of the Company; and
(b) all officers and directors of the Company enter into
similar agreements and the Company uses its best efforts to cause all other
holders of at least 1% of the Company's voting securities enter into similar
agreements. The Company may impose stop-transfer instructions with respect to
the shares (or securities) subject to the foregoing restriction until the end of
such period.
3.9 Form S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 and to that end the Company shall register (whether or
not required by law to do so) its Common Stock under the Exchange Act within 12
months following the effective date of the first registration of any securities
of the Company on Form S-1. After the Company has qualified for the use of Form
S-3, in addition to the rights contained in the foregoing provisions of this
Section 3, the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 thereafter under this Section 3.9 (such requests shall
be in writing and shall state the number of shares of Registrable Securities to
be disposed of and the intended
11.
<PAGE>
method of disposition of such shares by such Holder or Holders), provided that
the Company shall not be required to effect a registration pursuant to this
Section 3.9 unless the Holder or Holders requesting registration propose to
dispose of shares of Registrable Securities which they reasonably anticipate
will have an aggregate disposition price (before deduction of underwriting
discounts and expenses of sale) of at least $1,000,000, and provided further
that the Company shall not be required to effect more than two registrations
pursuant to this Section 3.9 in any 12 month period.
The Company shall give notice to all Holders of Registrable Securities of
the receipt of a request for registration pursuant to this Section 3.9 and shall
provide a reasonable opportunity for other Holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Registrable Securities on
Form S-3, as the case may be, to the extent requested by the Holder or Holders
thereof for purposes of disposition.
3.10 TRANSFER OF REGISTRATION RIGHTS
(a) Except as otherwise provided herein, the rights contained
in this Section 3 may be assigned or otherwise conveyed to a transferee or
assignee of Registrable Securities held by the Investors, which transferee or
assignee shall be considered a "Holder" for purposes of this Section 3, provided
that (i) such transfer is effected in accordance with applicable federal and
state securities laws, (ii) such transferee or assignee becomes a party to this
Agreement or agrees in writing to be subject to the terms hereof to the same
extent as if he were an original purchaser hereunder and (iii) such transferee
or assignee (A) is a wholly owned subsidiary or constituent partner (including
limited partners and retired partners) or affiliate of the transferring Holder
if such Holder is a partnership, or (B) acquires a number of shares of
Registrable Securities originally held by the transferring Holder equal to at
least 1% of the then-outstanding capital stock of the Company, and, provided
further, that the Company is given written notice by such Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned.
(b) Except as otherwise provided herein, the rights contained
in Section 3, except for the rights contained in Section 3.1, may be assigned
or otherwise conveyed to a transferee or assignee of Registrable Securities held
by the Series A Warrant Holders, which transferee or assignee shall be
considered a "Holder" for purposes of this Section 3, provided that (i) such
transfer is effected in accordance with applicable federal and state securities
laws, (ii) such transferee or assignee becomes a party to this Agreement or
agrees in writing to be subject to the terms hereof to the same extent as if he
were an original purchaser hereunder and, provided further, that the Company is
given written notice by such Holder at the time of or within a reasonable time
after said transfer, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration rights
are being assigned.
3.11 CERTAIN LIMITATIONS IN CONNECTION WITH FUTURE GRANTS OF
REGISTRATION RIGHTS.
From and after the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into
12.
<PAGE>
any agreement with any person or persons providing for the granting to such
holder of registration rights superior to those granted to Holders pursuant to
this Section 3.
3.12 TERMINATION OF REGISTRATION RIGHTS. All rights and duties
provided for with respect to any Holder in this Section 3 shall terminate on the
later of (a) the date five (5) years from the date of a Qualified IPO (as
defined below in Section 4.1(d)), and (b) on which such Holder owns less than 1%
of the then-outstanding capital stock of the Company, except where such amount
is held by a Series A Warrant Holder.
4. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
4.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Investor (and its affiliates) who holds not less than 1,000,000 shares of
Preferred Stock (or Common Stock issued or issuable upon conversion of the
Preferred Stock) the right of first refusal to purchase, pro rata, all (or any
part) of New Securities (as defined in this Section 4.1) that the Company may,
from time to time propose to sell and issue. In the case where the price per
share at which the New Securities are being offered is indeterminable or is
equal to or less than $1 (as adjusted for stock splits, reclassification or
otherwise), such Investor's (and its affiliates') pro rata share, for purposes
of this right of first refusal with respect to an offering at such a price, is
the ratio, the numerator of which is the number of shares of Common Stock then
owned by such Investor (and its affiliates) as a result of the conversion of any
Preferred Stock of the Company and issuable upon conversion of the Preferred
Stock of the Company then owned by such Investor (and its affiliates), and the
denominator of which is the total number of shares of Common Stock then
outstanding as a result of the conversion of any Preferred Stock of the Company
or issuable upon conversion of the Preferred Stock of the Company then
outstanding. In the case where the price per share at which the New Securities
are being offered is greater than $1 (as adjusted for stock splits,
reclassifications or otherwise), such Investor's (and its affiliates') pro rata
share, for purposes of this right of first refusal with respect to an offering
at such a price, is the ratio, the numerator of which is the number of shares of
Common Stock then owned by such Investor (and its affiliates) as a result of the
conversion of any Preferred Stock of the Company and issuable upon conversion of
the Preferred Stock of the Company then owned by such Investor (and its
affiliates), and the denominator of which is the total number of shares of
Common Stock outstanding immediately prior to the issuance of the New
Securities, assuming full conversion of all outstanding shares of Preferred
Stock of the Company. This right of first refusal shall be subject to the
following provisions:
(a) "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
Securities" does not include (i) securities issued in any additional Closings
(as defined in the Series B Agreement); (ii) securities issuable upon conversion
of or with respect to Series A Preferred Stock or Series B Preferred Stock;
(iii) securities issued pursuant to an acquisition by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby the
Company owns more than 50% of the voting power of such entity; (iv) shares of
the Company's Common Stock (or related options) issued to employees, directors
or consultants of the Company pursuant to any employee stock offering, plan, or
arrangement
13.
<PAGE>
approved by the Board of Directors; (v) shares of the Company's Common Stock or
Preferred Stock issued in connection with any stock split, stock dividend, or
similar recapitalization by the Company; (vi) securities issued pursuant to
equipment or debt financing or leases which are approved by the Company's Board
of Directors; (vii) securities issued pursuant to any corporate partnering,
strategic alliance, joint venture or licensing arrangement between the Company
and a third party; or (viii) securities issued by the Company other than for
cash or cash equivalents.
(b) In the event that the Company proposes to undertake an
issuance of New Securities, it shall give each Investor who together with its
affiliates holds not less than 1,000,000 shares of Common Stock of the Company
issued or issuable upon conversion of Preferred Stock, written notice of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Investor who
together with its affiliates holds not less than 1,000,000 shares of Common
Stock of the Company, issued or issuable upon conversion of Preferred Stock,
shall have 20 days from the date of mailing of any such notice to agree to
purchase up to its full pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
Each Investor who together with its affiliates holds not less than 1,000,000
shares of Common Stock of the Company, issued or issuable upon conversion of
Preferred Stock, shall have a right of over allotment such that if any Investor
fails to exercise its right hereunder to purchase its full pro rata portion of
New Securities, the Company shall so notify the other Investors and such
Investors (and their affiliates) who have agreed to purchase all or any part of
their pro rata share of New Securities may purchase the nonpurchasing
Investors' portions on a pro rata basis, within ten days from the date of such
notice.
(c) In the event that Investors (and their affiliates) fail to
exercise in full the right of first refusal within said 20 day period (plus the
ten day overallotment period, if applicable) the Company shall have 60 days
thereafter to sell or enter into an agreement providing for the closing of the
sale of the New Securities respecting which the Investors' (and their
affiliates') rights were not exercised within 30 days of such agreement at a
price and upon general terms no more favorable to the purchasers thereon than
specified in the Company's notice. In the event the Company has not sold the
New Securities within such 60 day period, the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Investors (and its affiliates) in the manner provided above.
(d) The right of first refusal granted under this Agreement
shall not apply to and shall expire upon the first closing of the first firmly
underwritten public offering of Common Stock of the Company that is pursuant to
a registration statement filed with, and declared effective by, the Commission
under the Securities Act, covering the offer and sale of Common Stock to the
public at a per share price (prior to underwriter commissions and expenses) of
at least $2.50 (as adjusted for stock splits, dividends and similar events) and
at an aggregate offering price (before deduction for underwriter commissions and
expenses) of not less than $10,000,000 (a "Qualified IPO").
(e) This right of first refusal is assignable only to an
affiliate of a Holder or in connection with a sale or transfer of a number of
shares of Registrable Securities originally held
14.
<PAGE>
by the assigning Holder equal to at least 1% of the then-outstanding capital
stock of the Company.
5. INFORMATION RIGHTS.
5.1 FINANCIAL INFORMATION. (a) The Company will furnish the following
information to each Investor who holds together with its affiliates holds not
less than 1,000,000 of Common Stock issued or issuable upon conversion of
Preferred Stock:
(i) As soon as practicable after the end of each fiscal year of
the Company, and in any event within 120 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated statements of income and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form and figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of national standing selected by the Company.
(ii) As soon as practicable after the end of each of the first
three quarterly accounting periods in each fiscal year, and in any event within
45 days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such quarter, and consolidated statements
of income and consolidated statements of cash flows of the Company and its
subsidiaries, if any, for each quarter and for the current fiscal year of the
Company to date, prepared in accordance with generally accepted accounting
principles consistently applied, except that such financial statements will not
contain the notes normally required by generally accepted accounting principles.
(iii) As soon as practicable after the adoption thereof, and in
any event no later than 15 days prior to the commencement of its fiscal year, an
annual operating plan for the forthcoming fiscal year, prepared on a
consolidated basis, including projected statements of profit and loss, cash
flow and balance sheets for each calendar quarter of such year, and, promptly
after preparation thereof, any revisions to such annual operating plan and any
other budgets.
(b) The covenants provided in Sections 5.1 and 5.2 shall
terminate upon the closing of a Qualified IPO.
5.2 INSPECTION RIGHTS. The Company shall permit each Investor who
with its affiliates holds at least 1,000,000 shares of Preferred Stock of the
Company, its attorney, or its other representative to visit and inspect the
Company's properties, to examine the Company's books of account and other
records, to make copies or extracts therefrom and to discuss the Company's
affairs, finances and accounts with its officers, management employees and
independent accountants, all at such reasonable times and as often as such
Investor may reasonably request.
5.3 ASSIGNMENT OF RIGHTS TO INFORMATION. The rights granted pursuant
to Sections 5.1 and 5.2 may not be assigned or otherwise conveyed by an investor
or by any subsequent
15.
<PAGE>
transferee of any such rights without the written consent of the Company, which
consent shall not be unreasonably withheld; provided that the Company may refuse
such written consent if the proposed transferee is a competitor of the Company
as determined by the Company's Board of Directors; and provided further, that no
such written consent shall be required if the transfer is made to a party who is
not a competitor of the Company and who is a parent, subsidiary, affiliate,
partner or group member of any Investor.
5.4 CONFIDENTIAL. Each Investor agrees that it will keep confidential
and will not disclose or divulge any confidential, proprietary or secret
information which such Investor may obtain from the Company, and which the
Company has prominently marked "confidential", "proprietary" or "secret" or has
otherwise identified as being such, pursuant to financial statements, reports
and other materials submitted by the Company as required hereunder, or pursuant
to visitation or inspection rights granted hereunder unless such information is
or becomes known to the Investor from a source other than the Company or is or
becomes publicly known, or unless the Company gives its written consent to the
Investor's release of such information, except that no such written consent
shall be required (and the Investor shall be free to release such information to
such recipient) if such information is to be provided to an Investor's counsel
or accountant, or to an officer, director or partner of an Investor, provided
that the Investor shall inform the recipient of the confidential nature of such
information, and shall instruct the recipient to treat the information as
confidential.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 ENTIRE AGREEMENT. This Agreement, the Series A Agreement and the
Series B Agreement constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof. This
Agreement supersedes the Original Investors Rights Agreement which is hereby
terminated, effective upon the initial Closing under the Series B Agreement.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be effective five (5) days
after deposited by first-class mail, postage prepaid, with the United States
mail or delivery by hand or by messenger, if addressed (a) to an Investor, at
such Investor's address set forth on the attached Exhibit A, or at such other
address as such Investor shall have furnished to the Company in writing, or (b)
to any other holder of Registrable Securities, at such address as such holder
shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Registrable Securities who has so furnished an address to the
Company, or (c) to the Company, at the address set forth below the Company's
16.
<PAGE>
name on the signature page to this Agreement or such other address as the
Company shall have furnished to each Investor and each such other holder in
writing. Notwithstanding the above, any notice or communication to an address
outside the United States shall be sent by telecopy and confirmed in writing
sent by courier guaranteeing delivery in no more than two (2) business days.
6.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
6.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
6.7 SEVERABILITY. In the case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.8 AMENDMENTS. The provisions of this Agreement may be amended at
any time and from time to time, and particular provisions of this Agreement may
be waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of not less than a majority of the number of shares
of Registrable Securities outstanding as of the date of such amendment or
waiver. Each Investor and Series A Warrant Holder and Series B Warrant Holder
acknowledges that by the operation of this Section 6.8 the holders of a majority
of the outstanding Registrable Securities may have the right and power to
diminish or eliminate all rights of such investor, Series A Warrant Holder or
Series B Warrant Holder under this Agreement. Notwithstanding anything herein
to the contrary, the parties agree that the Company may amend this Agreement at
any time after the date hereof, without obtaining the consent of any Holder, to
add as parties to this Agreement any purchasers of the Company's Series B
Preferred Stock pursuant to Section 2 of that certain Series B Preferred Stock
Purchase Agreement between the Company and certain persons dated on or about the
date of this Agreement. Any persons added to this Agreement pursuant to this
subparagraph shall become "Holders" and "Investors" under this Agreement, and
shares of Common Stock issuable upon conversion of the Series B Preferred Stock
held by such persons shall be "Registrable Securities" under this Agreement.
17.
<PAGE>
The foregoing Investors Rights Agreement is hereby executed as of the
date first above written.
COMPANY INSTITUTIONAL VENTURE
PARTNERS V
AVIRON by its General Partner
Institutional Venture Management V
By: /s/ L. Read By: /s/ Reid W. Dennis
-------------------------------- -----------------------------------
J. Leighton Read, M.D. Reid W. Dennis
Chief Executive Officer General Partner
1450 Rollins Road 3000 Sand Hill Road
Burlingame, CA 94010 Building 2, Suite 290
Menlo Park, CA 94025
INSTITUTIONAL VENTURE
MANAGEMENT V
By: /s/ Reid W. Dennis
-----------------------------------
Reid W. Dennis
General Partner
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
/s/ L. Read
--------------------------------------
J. Leighton Read, M.D.
c/o Aviron
1450 Rollins Road
Burlingame, California 94010
/s/ Bernard Roizman
--------------------------------------
Bernard Roizman
5555 S. Everett, Apt. 11A
Chicago, Illinois 60637
/s/ Betty Roizman
--------------------------------------
Betty Roizman
5555 S. Everett, Apt. 11A
Chicago, Illinois 60637
18.
<PAGE>
ARCH Venture Fund Limited Partnership a
Delaware Limited Partnership
By: ARCH Development Corporation
By: /s/ S. Lazarus
-----------------------------------
Steven Lazarus, President
c/o ARCH Development Corporation
The University of Chicago
1101 East 58th Street
Walker 213
Chicago, Illinois 60637
/s/ Albert L. Zesiger
--------------------------------------
Albert L. Zesiger
75 Bluff Avenue
Rowayton, Connecticut 06853
/s/ Peter Palese
--------------------------------------
Peter Palese, Ph.D.
414 Highwood Avenue
Leonia, New Jersey 07605
--------------------------------------
John P. Curran
230 Park Avenue
Suite 1245
New York, New York 10169
--------------------------------------
Steven R. Frank
c/o Bear Stearns & Co.
245 Park Avenue, 3rd Floor
New York, NY 10169
--------------------------------------
David B. Musket
One Boston Place, 35th Floor
Boston, Massachusetts 02108
19.
<PAGE>
GC&H Investments
By: /s/ John L. Cardoza
---------------------------------
Name: John L. Cardoza
---------------------------------
Executive Partner
c/o Jeanne Meyer
Cooley Godward Castro
Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
/s/ Julian N. Stern
--------------------------------------
Julian N. Stern
84 Selby Lane
Atherton, California 94025
/s/ Richard Whitley
--------------------------------------
Richard Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
--------------------------------------
Sally B. Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
/s/ Bruce A. Hironaka
--------------------------------------
Bruce A. Hironaka
26 Lenox Road
Kensington, California 94707
/s/ Valerie L. Hironaka
--------------------------------------
Valerie Hironaka
26 Lenox Road
Kensington, California 94707
20.
<PAGE>
THE MOUNT SINAI SCHOOL
OF MEDICINE
By:
-----------------------------------
Frank R. Landsberger, Ph. D
One Gustave L. Levy Plaza
New York, NY 10029-6574
ACCEL IV L.P.
By: Accel IV Associates L.P.
Its: General Partner
By: /s/ Illegible
-----------------------------------
General Partner
1 Embarcadero Center
Suite 3820
San Francisco, CA 94111
ACCEL JAPAN L.P.
By: Accel Japan Associates L.P.
Its: General Partner
By: /s/ Illegible
-----------------------------------
General Partner
1 Embarcadero Center
Suite 3820
San Francisco, CA 94111
ABINGWORTH BIOVENTURES
By: /s/ Allen Latta
-----------------------------------
Allen J. Latta
Attorney-in-Fact
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg
21.
<PAGE>
with a copy to:
Dr. Stephen W. Bunting
Abingworth Management
Limited
26 St. James Street
London SW1A 1HA
England
FERRIS F. HAMILTON
FAMILY TRUST
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
MARY ANN HAMILTON
TRUST FOR SELF
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
TAB PRODUCTS CO. PENSION PLAN
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
22.
<PAGE>
THE JENIFER ALTMAN
FOUNDATION
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
AMERICAN MEDICAL INT'L.
PENSION PLAN
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
TEMPLE-INLAND MASTER TRUST
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
ARTHUR D. LITTLE
EMPLOYEE INVES. PLAN
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
23.
<PAGE>
THE DEAN WITTER FOUNDATION
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
ANDREW HEISKELL
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
ALFRED E. HELLER
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
ELIZABETH HELLER MANDELL
TRUST
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
24.
<PAGE>
DOMENIC MIZIO
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
--------------------------------
THE RAISER MARITAL TRUST
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
--------------------------------
MARY VAN SCHUYLER RAISER
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
--------------------------------
BARRIE RAMSAY ZESIGER
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
--------------------------------
25.
<PAGE>
BEA ASSOCIATES
PROFIT SHARING TRUST
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
--------------------------------
BRINSON PARTNERS, INC.
By:
-----------------------------------
Robert D. Blank
Partner
Brinson Partners, Inc.
209 South LaSalle Street
Suite 114
Chicago, IL 60604-1295
/s/ Alejandro Zaffaroni
--------------------------------------
Dr. Alejandro Zaffaroni, Ph.D.
c/o Interhealth Limited
4005 Miranda Avenue, Suite 180
Palo Alto, CA 94304
ARCH VENTURE FUND II, L.P.
a Delaware limited partnership
By: ARCH Management Partners II, L.P.
its general partner
By: ARCH Venture Partners, L.P.
its general partner
By: Lifework, Inc.
its general partner
By: /s/ Robert Nelsen
----------------------
Robert Nelsen
-----------------------,
Managing Director
26.
<PAGE>
/s/ Eugene Garfield
--------------------------------------
Eugene Garfield
Institute of Scientific Information
3501 Market Street
Philadelphia, PA 19104
/s/ H. R. Sheperd
--------------------------------------
Dr. H. R. Shepherd
Opportunities Unlimited
c/o Armstrong Pharmaceuticals
71 Elm Street
New Caanan, CT 06840
27.
<PAGE>
BRINSON VENTURE CAPITAL FUND III, L.P.
By: Brinson Partners, Inc.
its General Partner
By: /s/ Robert D. Blank
-----------------------------------
Robert D. Blank, Partner
BRINSON TRUST COMPANY AS TRUSTEE
OF THE BRINSON MAP VENTURE
CAPITAL FUND III
By: /s/ Robert D. Blank
-----------------------------------
Robert D. Blank,
Assistant Trust Officer
28.
<PAGE>
WELLS FAMMY TRUST
S/P JOEL W. SCHRECK
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
---------------------------------
A. CAREY ZESIGER REVOCABLE TRUST
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
---------------------------------
NICOLA L. ZESIGER
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
---------------------------------
ALEXA L. ZESIGER
BEA ASSOCIATES
ATTORNEY-IN-FACT
By: /s/ Albert L. Zesiger
-----------------------------------
Name: ALBERT L. ZESIGER
---------------------------------
Title: MANAGING DIRECTOR
---------------------------------
29.
<PAGE>
ALZA CORPORATION RETIREMENT PLAN
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
SHEANA BUTLER
Bea Associates
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Name: Albert L. Zesiger
---------------------------------
Title: Managing Director
--------------------------------
30.
<PAGE>
ROVENT Limited Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Charles Hsu
-----------------------------------
Charles Hsu, Vice President
ADVENTACT Limited Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Charles Hsu
-----------------------------------
Charles Hsu, Vice President
Golden Gate Development and Investment
Limited Partnership
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/ Charles Hsu
-----------------------------------
Charles Hsu, Vice President
31.
<PAGE>
Advent International Investors II
Limited Partnership
By: Advent International Corporation,
General Partner
By: /s/ Charles Hsu
-----------------------------------
Charles Hsu, Vice President
32.
<PAGE>
/s/ George Rupp
--------------------------------------
George Rupp
202 Low Library
Columbia University
60 Morningside Drive
New York, New York 10027
33.
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
AS OF SEPTEMBER 3, 1993
Name and Address Shares
- --------------------------------------------------------------------------------
Series A Preferred Stock:
Institutional Venture Partners V . . . . . . . . . . . . . . . . 2,955,000
Institutional Venture Management V . . . . . . . . . . . . . . . 45,000
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
J. Leighton Read, M.D. . . . . . . . . . . . . . . . . . . . . . 500,000
c/o Interhealth
4009 Miranda Avenue, Suite 275
Palo Alto, California 94304
Bernard Roizman, Sc.D. and Betty Roizman . . . . . . . . . . . . 100,000
5555 S. Everett, Apt. 11A
Chicago, Illinois 60637
Albert L. Zesiger. . . . . . . . . . . . . . . . . . . . . . . . 300,000
75 Bluff Avenue
Rowayton, Connecticut 06853
Peter Palese, Ph.D. . . . . . . . . . . . . . . . . . . . . . . 100,000
Professor and Chairman
Department of Microbiology
Mount Sinai Medical Center
New York, New York 10029
John P. Curran . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
230 Park Avenue
Suite 1245
New York, New York 10169
1.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Steven R. Frank. . . . . . . . . . . . . . . . . . . . . . . . . 50,000
c/o Bear Stearns & Co.
245 Park Avenue, 3rd Floor
New York, NY 10169
David B. Musket. . . . . . . . . . . . . . . . . . . . . . . . . 50,000
One Boston Place, 35th Floor
Boston, Massachusetts 02108
GC&H Investments . . . . . . . . . . . . . . . . . . . . . . . . 50,000
c/o Jeanne Meyer
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Julian N. Stem . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
84 Selby Lane
Atherton, California 94025
Richard Whitley. . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Sally B. Whitley
216 Shades Crest Circle
Birmingham, Alabama 35216
Bruce A. Hironaka. . . . . . . . . . . . . . . . . . . . . . . . 10,000
Valerie Hironaka
26 Lenox Road
Kensington, California 94707
ARCH VENTURE FUND. . . . . . . . . . . . . . . . . . . . . . . . 700,000
Limited Partnership
c/o ARCH Development Corporation
The University of Chicago
1101 East 58th Street
Walker 213
Chicago Illinois 60637
2.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
SERIES B PREFERRED STOCK:
Accel IV L.P.. . . . . . . . . . . . . . . . . . . . . . . . . . 2,811,111
Accel Japan L.P. . . . . . . . . . . . . . . . . . . . . . . . . 244,444
One Embarcadero Center
Suite 3820
San Francisco, CA 94111
Abingworth Bioventures . . . . . . . . . . . . . . . . . . . . . 2,777,778
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxembourg,
Attn: Karl U. Sanne
Telecopier: (352) 43 54 10
With a copy to:
Dr. Stephen W. Bunting
Abingworth Management Limited
26 St. James's Street
London SW1A 1HA
England
Telecopier: (44)(71) 930-1891
and to:
Allen J. Latta, Esq.
Buchalter, Nerner, Fields & Younger
601 S. Figueroa Street, 25th Floor
Los Angeles, CA 90017
Telecopier: (213) 896-0400
Brinson Venture Capital Fund III, L.P. . . . . . . . . . . . . . 1,910,624
Brinson Trust Company as Trustee of the. . . . . . . . . . . . . 311,598
:Brinson MAP Venture Capital Fund III
c/o Brinson Partners, Inc.
209 South LaSalle Street
Suite 114
Chicago IL 60604-1295
3.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Institutional Venture Partners V . . . . . . . . . . . . . . . . 2,695,500
Institutional Venture Management V . . . . . . . . . . . . . . . 61,100
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
ARCH VENTURE FUND II, L.P. . . . . . . . . . . . . . . . . . . . 277,778
c/o ARCH Development Corporation
The University of Chicago
1101 East 58th Street
Walker 213
Chicago, Illinois 60637
Ferris F. Hamilton Family Trust. . . . . . . . . . . . . . . . . 49,500
Mary Ann Hamilton Trust for Self . . . . . . . . . . . . . . . . 76,500
The Jenifer Altman Foundation. . . . . . . . . . . . . . . . . . 49,500
American Medical Int'l. Pension Plan . . . . . . . . . . . . . . 450,000
Temple-Inland Master Trust . . . . . . . . . . . . . . . . . . . 495,000
Arthur D. Little Employee Inves. Plan. . . . . . . . . . . . . . 405,000
The Dean Witter Foundation . . . . . . . . . . . . . . . . . . . 72,000
Andrew Heiskell. . . . . . . . . . . . . . . . . . . . . . . . . 76,500
Alfred E. Heller . . . . . . . . . . . . . . . . . . . . . . . . 49,500
Elizabeth Heller Mandell Trust . . . . . . . . . . . . . . . . . 49,500
Domenic Mizio. . . . . . . . . . . . . . . . . . . . . . . . . . 76,500
The Raiser Marital Trust . . . . . . . . . . . . . . . . . . . . 99,000
Mary Van Schuyler Raiser . . . . . . . . . . . . . . . . . . . . 27,000
Barrie Ramsay Zesiger. . . . . . . . . . . . . . . . . . . . . . 99,000
BEA Associates Profit Sharing Trust. . . . . . . . . . . . . . . 99,000
Wells Family Trust S/P Joel W. Schreck . . . . . . . . . . . . . 99,000
A. Carey Zesiger Revocable Trust . . . . . . . . . . . . . . . . 36,000
Nicola L. Zesiger. . . . . . . . . . . . . . . . . . . . . . . . 36,000
Alexa L. Zesiger . . . . . . . . . . . . . . . . . . . . . . . . 31,500
Alza Corporation Retirement Plan . . . . . . . . . . . . . . . . 49,500
Sheana Butler: . . . . . . . . . . . . . . . . . . . . . . . . . 27,000
c/o BEA Associates
153 E. 53rd Street, 58th Floor
New York, NY 10022
Dr. H.R. Shepherd. . . . . . . . . . . . . . . . . . . . . . . . 166,667
Opportunities Unlimited
c/o Armstrong Pharmaceuticals
71 Elm Street
New Caanan, CT 06840
4.
<PAGE>
Name and Address Shares
- --------------------------------------------------------------------------------
Dr. Alejandro Zaffaroni. . . . . . . . . . . . . . . . . . . . . 277,778
Attention: Gonzalo Silviera
c/o Interhealth Limited
4005 Miranda Avenue, Suite 180
Palo Alto, CA 94304
Eugene Garfield. . . . . . . . . . . . . . . . . . . . . . . . . 277,778
Institute of Scientific Information
3501 Market Street
Philadelphia, PA 19104
Peter Palese, Ph.D . . . . . . . . . . . . . . . . . . . . . . . 55,556
414 Highwood Avenue
Leonia, New Jersey 07605
GC&H Investments . . . . . . . . . . . . . . . . . . . . . . . . 40,000
c/o Jeanne Meyer
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Common Stock:
Peter Palese, Ph.D . . . . . . . . . . . . . . . . . . . . . . . 750,000
414 Highwood Avenue
Leonia, New Jersey 07605
J. Leighton Read, M.D. . . . . . . . . . . . . . . . . . . . . . 750,000
c/o Aviron
1450 Rollins Road
Burlingame, CA 94010
Bernard Roizman, Sc.D. . . . . . . . . . . . . . . . . . . . . . 750,000
5555 S. Everett, Apt. 11A
Chicago IL 60637
Richard J. Whitley . . . . . . . . . . . . . . . . . . . . . . . 750,000
216 Shades Crest Circle
Vestavia, AL 35216
5.
<PAGE>
EXHIBIT B
SCHEDULE OF SERIES A WARRANT HOLDERS
Name and Address No. of Shares Purchasable
- --------------------------------------------------------------------------------
Mount Sinai Medical Center . . . . . . . . . . . . . 225,000
One Gustave L. Levy Plaza
New York, New York 10029-6574
6.
<PAGE>
EXHIBIT C
SCHEDULE OF SERIES B WARRANT HOLDERS
Name and Address No. of Shares Purchasable
- --------------------------------------------------------------------------------
Institutional Venture Management V . . . . . . . . . 8,000
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
Institutional Venture Partners V . . . . . . . . . . 392,000
Building 2, Suite 290
3000 Sand Hill Road
Menlo Park, California 94025
7.
<PAGE>
EXHIBIT D
CAPITALIZATION SCHEDULE
Pursuant to the 1992 Stock Option Plan (the "Option Plan"), the Company has
reserved 3,860,000 shares of Common Stock for issuance upon exercise of options
granted under the Option Plan. As of September 3, 1993, options to purchase
1,912,034 shares (net of cancellations) have been granted to employees and
consultants of which 69,270 shares have been exercised.
On February 9, 1993, the Company entered into a Technology Transfer Agreement
with The Mount Sinai School of Medicine ("Mount Sinai") pursuant to which the
Company acquired certain technologies. In exchange, Aviron issued 175,000
shares of Common Stock and Warrants to purchase, in the aggregate, 225,000
shares of Series A Preferred Stock (the "Series A Warrants"). The Series A
Warrants become exercisable at various times upon the occurrence of certain
milestones.
On June 1, 1993, the Company entered into agreements with Institutional Venture
Partners ("IVP") and Institutional Venture Management ("IVM") to provide a
bridge loan to the Company. In consideration for the loan, IVP and IVM received
warrants to purchase a total of 400,000 shares of Series B Preferred Stock (the
"Series B Warrants"). The Series B Warrants expire at the earlier of (i) the
closing of an initial public offering of Common Stock pursuant to a registration
statement under the Securities Act of 1933, as amended or (ii) June 1, 1995.
On March 30, 1994, the Company issued to Lease Management Services, Inc. a
warrant to purchase 116,667 shares of Series B Preferred Stock in connection
with an equipment lease.
<PAGE>
EXHIBIT B TO MATERIALS TRANSFER AND INTELLECTUAL PROPERTY AGREEMENT BETWEEN
AVIRON AND THE REGENTS OF THE UNIVERSITY OF MICHIGAN, EFFECTIVE AS OF
February 24, 1995
LIST OF KNOWN RECIPIENTS OF MASTER STRAINS
38
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
LIST OF KNOWN RECIPIENTS OF MASTER STRAINS
[
]
Transfers to recipients noted on the following memo and the following letter:
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[The University of Michigan School of Public Health Letterhead]
November 7, 1994
J. Leighton Reed, M.D.
Chairman and C.E.O.
Aviron
1450 Rollins Road
Burlingame, California 94010
Dear Dr. Reed:
As requested, I am furnishing you with the names of the organizations that
furnished the two "Master" strains [
]
1. [
]
2. [
]
3. [
]
4. [
]
5. [
]
Sincerely,
[ ]
[ ]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[The University of Michigan School of Public Health Letterhead]
2/14/95
To: Mike Kope-J.D.-Attorney-TMO
From: [ ]
Re: Distribution of the Master-Strain
[
]
<PAGE>
STOCK TRANSFER AGREEMENT
THIS AGREEMENT is made as of February 24, 1995, by and among AVIRON, a
California corporation (the "Company") and THE REGENTS OF THE UNIVERSITY OF
MICHIGAN, a Michigan constitutional corporation ("Michigan").
WHEREAS, the Company and Michigan have entered into a Materials Transfer
and Intellectual Property Agreement (the "Technology Agreement") dated as of
February 24, 1995 (the "Execution Date").
WHEREAS, in connection with the granting to Aviron by Michigan of certain
rights under the Technology Agreement, the Company has agreed to issue to
Michigan shares of its Series B Preferred Stock and, under certain
circumstances, a Warrant to purchase certain shares of the Company's capital
stock, as more fully described below;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
SECTION 1
ISSUANCE OF THE SHARES; AUTHORIZATION OF THE SHARES AND WARRANT
1.1 ISSUANCE OF THE SHARES. In reliance upon the representations and
agreements of Michigan contained herein, within thirty (30) days of the
Execution Date (the "Issue Date"), in partial consideration of the Technology
Agreement, the Company shall issue to Michigan 1,323,734 shares of its Series B
Preferred Stock (the "Shares"), having the rights, restrictions, privileges and
preferences set forth in the Amended and Restated Articles of Incorporation of
the Company, as amended by the Certificate of Amendment, both attached hereto as
Exhibit A (the "Articles").
1.2 AUTHORIZATION OF SHARES AND WARRANT. On or before the Issue Date, the
Company shall have (a) authorized the issuance of the Shares; (b) adopted and
filed the Articles with the Secretary of State of the State of California; and
(c) authorized, under the circumstances set forth in this Agreement, a warrant
to purchase shares of its common stock ("Common Stock") in the form attached
hereto as Exhibit B (the "Warrant"). Failure by the Company to meet its
obligations under this Section 1.2 by the Issue Date shall be a material breach
of this Agreement and the Technology Agreement. In addition to all other legal
rights which Michigan may have by reason of such breach, Michigan shall have the
right upon such breach to immediately terminate this Agreement and the
Technology Agreement, and to require specific performance by the Company of its
obligations upon termination of the Technology Agreement, including those set
forth in Sections 4.5 and 15.5 thereof. Upon the Issue Date the Company shall
deliver to Michigan copies of all requisite board and shareholder consents and a
file-stamped copy of the
1.
<PAGE>
Articles, accompanied by a certificate signed by an officer of the Company
certifying that the Company's obligations under this Section 1.2 have been
fulfilled.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Michigan as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California. The Company has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently and as
proposed to be conducted. The Company is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a material adverse effect on the
Company's business. The Company has no subsidiaries.
2.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement and any other agreement contemplated
hereby, to transfer and issue the Shares and to issue the Warrant, and to carry
out and perform its obligations under the terms of this Agreement.
2.3 ARTICLES. Upon the Issue Date, the Articles, in the form attached
hereto as Exhibit A, will be the true, correct and complete Articles of
Incorporation of the Company.
2.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists, or will
consist upon the Issue Date, of 35,000,000 shares of Common Stock, of which
3,484,270 shares are issued and outstanding, and 25,000,000 shares of Preferred
Stock; 5,225,000 shares of which have been designated Series A Preferred Stock,
of which 5,000,000 are issued and outstanding; 18,650,000 shares of which have
been designated Series B Preferred Stock, of which 16,666,667 are issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly issued, and are fully paid and nonassessable. The rights,
restrictions, privileges and preferences of the Series A Preferred Stock and
Series B Preferred Stock are as stated in the Articles. As of the Execution
Date, and taking into account the Shares to be issued under this Agreement, the
Shares represent five percent (5%) of the issued and outstanding shares of
capital stock of the Company.
(b) Excepting that certain Amended and Restated Investors Rights
Agreement, dated as of September 3, 1993, among the Company and the other
parties named therein, as amended to date (the "Rights Agreement" a copy of
which is attached hereto as Exhibit C), and except as set forth herein or on the
schedule attached hereto as Exhibit D or in the Articles, as of
2.
<PAGE>
the Execution Date there are no outstanding rights of first refusal, preemptive
rights or other rights, options, warrants, conversion rights, or other
agreements either directly or indirectly for the purchase or acquisition from
the Company of any shares of its capital stock.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the sale and issuance of the Shares,
and the Common Stock issuable upon conversion of the Shares (the "Underlying
Stock") and the performance of the Company's obligations hereunder and under
each of the other agreements contemplated hereby and the reservation of the
Underlying Stock has been taken or will be taken prior to the Issue Date. The
Shares (and the Underlying Stock), when issued in compliance with the provisions
of this Agreement, will be validly issued and will be fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares (and the Underlying Stock) may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein.
2.6 LITIGATION. Neither the Company nor any of its property is subject to
any claim, action, suit, proceeding, arbitration or any investigation before any
court or other authority having jurisdiction and, to the best of the Company's
knowledge, none of the same is, or has been, threatened against the Company or
any of its property. The Company is not a party or subject to the provision of
any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality. There is no action, suit or proceeding by the
Company currently pending or that the Company presently intends to initiate.
2.7 OTHER AGREEMENTS. The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated under the
Technology Agreement and this Agreement do not and will not, with either the
passage of time or the giving of notice, conflict with or result in the breach
of any condition or provision of, or constitute a default under, any contract,
mortgage, lien, lease, agreement, indenture or instrument to which the Company
is a party or any judgment to which it is subject.
2.8 GOVERNMENTAL CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, transfer, sale or issuance of the Shares and the Underlying Stock, and
the consummation of all other transactions contemplated by this Agreement shall
have been obtained and will be effective on the Issue Date, except for notices
required or permitted to be filed with certain state and federal securities
commissions after such date, which notices the Company shall file on a timely
basis.
2.9 OFFERING. Assuming the accuracy of the representations and warranties
of the Purchaser contained in Section 3 hereof, the offer, issue and sale of the
Shares is exempt from registration under the Securities Act of 1933, as amended
("Securities Act"), and under the Uniform Securities Act of Michigan.
3.
<PAGE>
2.10 ABSENCE OF MATERIAL ADVERSE LIABILITIES. The Company has no
liabilities, current or contingent, nor are its properties subject to any claim
or lien, that currently materially and adversely affect the ability of the
Company to conduct its business as presently conducted.
2.11 OPERATING RIGHTS. The Company has all material operating authority,
licenses, franchises, permits, certificates, consents, rights and privileges as
are necessary to the operation of its business as now conducted.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF MICHIGAN
Michigan hereby represents and warrants only to the Company with respect to
the issuance of the Shares as follows:
3.1 AUTHORIZATION. Michigan has all the requisite power and is duly
authorized to execute and deliver this Agreement and each other agreement
contemplated hereby and has taken all necessary action to consummate the
transactions contemplated hereby and thereby. This Agreement, the Technology
Agreement, and each other agreement contemplated hereby have been duly executed
and delivered by Michigan and constitute valid and binding obligations of
Michigan, enforceable in accordance with their respective terms subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors.
3.2 ACCREDITED INVESTOR. Michigan is an accredited investor within the
meaning of Regulation D, as promulgated under the Securities Act.
3.3 EXPERIENCE. Michigan, alone or together with its advisors, is
experienced in evaluating and investing in start-up biomedical research
companies such as the Company.
3.4 INVESTMENT. Michigan is acquiring the Shares for investment, for its
own account and not with a view to, or for resale in connection with, any
distribution thereof, and it has no present intention of selling or distributing
the Shares or the Underlying Stock. Michigan understands that the Shares and
the Underlying Stock have not been registered under the Securities Act by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent as expressed herein.
3.5 RULE 144 AND RULE 144A. Michigan acknowledges that, because they have
not been registered under the Securities Act, the Shares and the Underlying
Stock must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. Michigan is
aware of the provisions of Rule 144 and Rule 144A promulgated under the
Securities Act, which rules permit limited resale of securities purchased in a
private placement subject to the satisfaction of certain conditions.
4.
<PAGE>
3.6 NO PUBLIC MARKET. Michigan understands that no public market now
exists for any of the securities issued by the Company and that it is uncertain
whether a public market will ever exist for the Shares or the Underlying Stock.
3.7 ACCESS TO DATA. Michigan has received and reviewed such information
that it deemed necessary to make an informed decision concerning its receipt of
the Shares and has had an opportunity to discuss the Company's business,
management and financial affairs with its management.
3.8 RESTRICTIONS ON TRANSFER. Michigan further agrees not to make any
disposition of all or any part of the Shares in any event unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(b) Michigan shall have (i) notified the Company of the proposed
disposition, (ii) furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (iii) furnished the
Company with an opinion of counsel for Michigan to the effect that such
disposition will not require registration of such shares under the Act, and such
opinion of counsel for Michigan shall have been concurred in by the Company's
counsel and the Company shall have advised Michigan of such concurrence.
3.9 LEGENDS. Michigan understands and agrees that all certificates
evidencing the Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
SECTION 4
INVESTOR RIGHTS
4.1 RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES. The Company hereby
grants to Michigan, for so long as it holds not less than 1,000,000 shares of
the Company's Series B Preferred Stock (or Common Stock issued or issuable upon
conversion of the Series B Preferred Stock) the right of first refusal to
purchase, pro rata, all (or any part) of New Securities (as
5.
<PAGE>
defined in this Section 4.1) that the Company may, from time to time propose to
sell and issue. In the case where the price per share at which the New
Securities are being offered is indeterminable or is equal to or less than One
Dollar ($1.00) (as adjusted for stock splits, reclassification or otherwise),
Michigan's pro rata share, for purposes of this right of first refusal with
respect to an offering at such a price, is the ratio, the numerator of which is
the number of shares of Common Stock then owned by Michigan as a result of the
conversion of any Series B Preferred Stock of the Company and issuable upon
conversion of the Series B Preferred Stock of the Company then owned by
Michigan, and the denominator of which is the total number of shares of Common
Stock then outstanding as a result of the conversion of any Series A and Series
B Preferred Stock of the Company or issuable upon conversion of the Series A and
Series B Preferred Stock of the Company then outstanding. In the case where the
price per share at which the New Securities are being offered is greater than
One Dollar ($1.00) (as adjusted for stock splits, reclassifications or
otherwise), Michigan's pro rata share, for purposes of this right of first
refusal with respect to an offering at such a price, is the ratio, the numerator
of which is the number of shares of Common Stock then owned by Michigan as a
result of the conversion of any Series B Preferred Stock of the Company and
issuable upon conversion of the Series B Preferred Stock of the Company then
owned by Michigan, and the denominator of which is the total number of shares of
Common Stock outstanding immediately prior to the issuance of the New
Securities, assuming full conversion of all outstanding shares of Series A and
Series B Preferred Stock of the Company. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options, or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock; provided, however, that "New Securities"
does not include (i) securities issuable upon conversion of or with respect to
Series A Preferred Stock or Series B Preferred Stock; (ii) the Warrant Shares
(as defined in Section 5.2 hereof) issuable under Section 5 of this Agreement;
(iii) securities issued pursuant to an acquisition by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby the
Company owns more than fifty percent (50%) of the voting power of such entity;
(iv) shares of the Company's Common Stock (or related options) issued to
employees, directors or consultants of the Company pursuant to any employee
stock offering, plan, or arrangement approved by the Board of Directors; (v)
shares of the Company's Common Stock or Series A or Series B Preferred Stock
issued in connection with any stock split, stock dividend, or similar
recapitalization by the Company; (vi) securities issued pursuant to equipment or
debt financing or leases which are approved by the Company's Board of Directors;
(vii) securities issued pursuant to any corporate partnering, strategic
alliance, joint venture or licensing arrangement between the Company and a third
party; or (viii) securities issued by the Company other than for cash or cash
equivalents. The Company agrees that it shall give Michigan notice of the
issuance of any of its securities under the circumstances described in the
foregoing clauses (vi), (vii) and (viii) not more than thirty (30) days after
the date of such issuance, which notice shall describe the securities issued and
the consideration received therefor.
(b) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give Michigan, so long as it holds not less than
1,000,000 shares of Common
6.
<PAGE>
Stock of the Company issued or issuable upon conversion of the Series B
Preferred Stock, written notice of its intention, describing the type of New
Securities, the price, and the general terms upon which the Company proposes to
issue the same. Michigan, as well as each Investor (as defined under the Rights
Agreement) who together with its affiliates holds not less than 1,000,000 shares
of Common Stock of the Company issued or issuable upon conversion of the Series
A or Series B Preferred Stock, shall have twenty (20) days from the date of
mailing of any such notice to agree to purchase up to its full pro rata share of
such New Securities for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased. Michigan, so long as it holds not less than
1,000,000 shares of Common Stock of the Company issued or issuable upon
conversion of the Series B Preferred Stock, and each Investor who together with
its affiliates holds not less than 1,000,000 shares of Common Stock of the
Company issued or issuable upon conversion of the Series A or Series B Preferred
Stock, shall have a right of over allotment such that if Michigan or any
Investor fails to exercise its right to purchase its full pro rata portion of
New Securities, the Company shall so notify Michigan and the other Investors and
Michigan and such Investors (and their affiliates) who have agreed to purchase
all or any part of their pro rata share of New Securities may purchase
Michigan's or the nonpurchasing Investors' portions on a pro rata basis, within
ten days from the date of such notice.
(c) In the event that Michigan and the Investors (and their
affiliates) fail to exercise in full the right of first refusal within said
twenty (20) day period (plus the ten day overallotment period, if applicable)
the Company shall have sixty (60) days thereafter to sell or enter into an
agreement providing for the closing of the sale of the New Securities respecting
which Michigan's and the Investors' (and their affiliates') rights were not
exercised within thirty (30) days of such agreement at a price and upon general
terms no more favorable to the purchasers thereon than specified in the
Company's notice. In the event the Company has not sold the New Securities
within such sixty (60) day period, the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Investors
(and its affiliates) in the manner provided above.
(d) The right of first refusal granted under this Agreement shall not
apply to and shall expire upon the first closing of the first firmly
underwritten public offering of Common Stock of the Company that is pursuant to
a registration statement filed with, and declared effective by, the United
States Securities and Exchange Commission under the Securities Act.
(e) This right of first refusal is not assignable by Michigan.
4.2 INFORMATION RIGHTS. The Company will furnish the following
information to Michigan, for so long as it holds not less than 1,000,000 shares
of Common Stock issued or issuable upon conversion of the Series B Preferred
Stock:
(i) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred and twenty (120) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated
7.
<PAGE>
statements of income and consolidated statements of cash flows of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form and figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of national
standing selected by the Company.
(ii) As soon as practicable after the end of each of the first three
quarterly accounting periods in each fiscal year, and in any event within forty-
five (45) days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such quarter, and consolidated statements
of income and consolidated statements of cash flows of the Company and its
subsidiaries, if any, for each quarter and for the current fiscal year of the
Company to date, prepared in accordance with generally accepted accounting
principles consistently applied, except that such financial statements will not
contain the notes normally required by generally accepted accounting principles.
The Company agrees and acknowledges that information furnished to it under
this Section 4.2 may be subject to disclosure by law, including the Michigan
Freedom of Information Act ("FOIA"). Subject to such disclosure requirements,
Michigan agrees to make reasonable efforts not to disclose such information to
any third party. Michigan shall be under no obligation to seek exemptions or
exclusions of such information from the requirements of FOIA.
4.3 REGISTRATION RIGHTS.
The Company hereby grants to Michigan the identical rights with respect to
the registration of the Shares, the Underlying Stock and the Warrant Shares (as
defined in Section 5.2 hereof) as are granted under Section 3.2 through 3.12 of
the Rights Agreement to each Holder (as defined under the Rights Agreement), as
though (i) Michigan were a "Holder," (ii) the Shares and the Warrant Shares,
collectively, were "Shares," and (iii) the Warrant Shares were included within
the definition of "Registrable Securities," under the Rights Agreement.
Michigan understands and agrees that its rights under this Section 4.3 shall be
on parity with, and not superior to, the rights granted to the parties to the
Rights Agreement under Sections 3.2 through 3.12 of the Rights Agreement, as
though Michigan were a party thereto. In addition, Michigan agrees that it
shall be subject to any amendment or waiver of Sections 3.2 through 3.12 of the
Rights Agreement pursuant to the vote of a majority of the holders of the
outstanding Registrable Securities (as defined under the Rights Agreement) under
Section 6.8 of the Rights Agreement, provided such amendment or waiver applies
equally to both the holders of the majority and the holders of the minority of
such outstanding Registrable Securities.
8.
<PAGE>
SECTION 5
OBLIGATION TO ISSUE WARRANT
5.1 CONDITIONS OF ISSUANCE. In partial consideration of the Technology
Agreement and subject to the remaining provisions of this Section 5, the Company
shall be obligated, upon the First Commercial Sale of any Product (as such
capitalized terms are defined under Sections 2.2 and 2.11 of the Technology
Agreement) (the "Warrant Issue Date"), to issue to Michigan a warrant, in the
form attached hereto as Exhibit B (the "Warrant"), on the terms set forth below.
The Company's obligations under this Section 5 shall terminate immediately upon
any termination of the Technology Agreement.
5.2 SHARES ISSUABLE UPON EXERCISE OF WARRANT. Subject to the provisions
of Section 5.4 below, the Warrant shall be exercisable for a number of shares of
the Company Common Stock (the "Warrant Shares") equal to one and twenty-five
one-hundredths percent (1.25%) of the total number of issued and outstanding
shares of the Company Common Stock on the Issue Date (including, on an
as-converted basis, outstanding shares of Preferred Stock of the Company);
PROVIDED, HOWEVER, that for purposes of calculating this percentage, "issued and
outstanding shares of the Company Common Stock" shall NOT include shares of the
Company Common Stock, or securities convertible into the Company Common Stock:
(i) issued in connection with an acquisition by the Company of
another entity by merger, purchase of substantially all of its assets, or other
reorganization whereby the Company acquires, directly or indirectly, more than
50% of the voting power of such entity;
(ii) issued in connection with any corporate partnering,
strategic alliance, joint venture or licensing arrangement between the Company
and a third party not involving or relating to the Technology or a Product (as
such capitalized terms are defined under Sections 2.2. and 2.11 of the
Technology Agreement);
(iii) issued by the Company other than for cash or cash
equivalents in transactions not involving or relating to the Technology or a
Product (as such capitalized terms are defined under Sections 2.2 and 2.11 of
the Technology Agreement); or
(iv) issued to employees, directors or consultants which are
subject to a right to repurchase at cost (i.e. "unvested" shares).
Notwithstanding the foregoing, if as of the Warrant Issue Date there shall
not have been an Initial Public Offering (as defined in 5.3 below), then the
Company may elect to make the Warrant exercisable for shares of the Company's
Preferred Stock convertible into the number of shares of the Company Common
Stock determined above, with rights and preferences substantially the same as
the rights and privileges of the most recent series of Preferred Stock issued by
the Company to outside investors (such Preferred Stock shall also constitute
"Warrant Shares," notwithstanding the definition of such term set forth above).
The rights granted
9.
<PAGE>
Michigan under Section 4.3 hereof shall apply to the Warrant Shares regardless
of whether they consist of Common Stock or Preferred Stock of the Company.
5.3 WARRANT EXERCISE PRICE. The initial per share exercise price for the
Warrant (the "Exercise Price") shall be equal to one hundred twenty-five percent
(125%) of the price at which shares of the Company Common Stock are first sold
to the public pursuant to a firm commitment underwritten public offering
registered under the Securities Act, other than a registration relating solely
to a transaction under Rule 145 of the Securities Act (or any successor thereto)
or to an employee benefit plan of the Company (the "Initial Public Offering");
or, if as of the Warrant Issue Date, there shall not have been an Initial Public
Offering, the Exercise Price shall be equal to one hundred twenty-five percent
(125%) of the per share price of the securities issued to outside investors in
the Company's most recent equity financing transaction prior to the Warrant
Issue Date in which it raised at least $2 million.
5.4 ACQUISITION OF THE COMPANY PRIOR TO WARRANT ISSUE DATE.
(a) Notwithstanding anything to the contrary in this Section 5, in
the event that prior to the Warrant Issue Date there is any consolidation of the
Company with, or merger of the Company into, any other corporation or other
entity or person, or any other corporate reorganization in which the Company
shall not be the continuing or surviving entity of such consolidation, merger or
reorganization, or any transaction or series of transactions by the Company
(other than financing transactions in which equity securities are issued to
multiple purchasers solely for cash) in which in excess of fifty percent (50%)
of the Company's voting power is transferred, or any sale or conveyance of all
or substantially all of the assets of the Company (any of the foregoing events
being hereafter referred to as an "Acquisition") the Company may, at its sole
option, by giving written notice of such election to Michigan prior to the
effective date of the Acquisition (the "Acquisition Date"), elect to cancel its
obligation to issue the Warrant under this Section 5, in which event the
royalties payable by the Company under Paragraphs 5.3(i) and (ii) of the
Technology Agreement shall each be doubled, without any need to amend such
agreement; PROVIDED, HOWEVER, that in the event such doubled royalty rate is or
becomes thereafter unduly economically burdensome to the Company, due to, for
example but without limitation, the markets in which the Company intends to
market Products or the obligations of the Company to pay to any third party
royalties for additional rights or technology necessary for the
commercialization of the Products, then Michigan agrees to consider, in good
faith, an alternative consideration in lieu of such doubled royalty rate under
this Agreement, upon request of the Company.
(b) If the Company does not elect to cancel the Warrant under Section
5.4(a) above, then following the Acquisition, the Company or its successor shall
remain obligated under this Section 5 to issue the Warrant on the Warrant Issue
Date. When and if issued after such an Acquisition, the Warrant shall be
exercisable for the amount and type of securities or other consideration that
would have been issuable in the Acquisition to a holder of the number of shares
of the Company's capital stock for which the Warrant would have been exercisable
under Section 5.2 above on the Acquisition Date, as if the Acquisition Date were
the same as the Warrant Issue
10.
<PAGE>
Date. The Exercise Price of the Warrant if issued after such an Acquisition
shall be equal to one hundred twenty-five percent (125%) of the Acquisition
Price.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the final, complete and exclusive
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived, with the written consent of
Michigan and the Company.
6.4 NOTICES. All notices or other communications pursuant to this
Agreement shall be in writing and deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested) postage prepaid to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice) to the other party hereunder:
To the Company:
1450 Rollins Road
Burlingame, CA 94010
Attention: J. Leighton Read, M.D.,
Chairman and Chief Executive Officer
Telephone: (415) 696-9116
Fax: (415) 347-6274
11.
<PAGE>
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
Palo Alto, CA 94306
Attention: Robert J. Brigham, Esq.
Telephone: (415) 843-5000
Fax: (415) 857-0663
To Michigan:
University of Michigan
Treasurer's Office
5024 Fleming Administration Building
Ann Arbor, MI 48109-1340
Telephone: (313) 763-1299
Fax: (313) 747-1483
with a copy to:
University of Michigan
Technology Management Office
3003 S. State Street
Wolverine Tower, Room 2071
Ann Arbor, MI 48109-1280
Attention: Robert L. Robb, Director
Telephone: (313) 763-0614
Fax: (313) 936-1330
Notwithstanding the foregoing, any payment of funds required hereunder may
be made by wire transfer in accordance with written instructions given by the
receiver to the sender.
6.5 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
12.
<PAGE>
6.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
The foregoing Stock Transfer Agreement is hereby executed as of the date
first above written.
AVIRON THE REGENTS OF THE
UNIVERSITY OF MICHIGAN
By: By:
---------------------------- ---------------------------------
J. Leighton Read, M.D. Name:
-------------------------------
Chief Executive Officer Title:
------------------------------
13.
<PAGE>
EXHIBIT A
ARTICLES OF INCORPORATION AND CERTIFICATE OF AMENDMENT
<PAGE>
EXHIBIT B
FORM OF WARRANT
<PAGE>
EXHIBIT B TO STOCK TRANSFER AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SHARES
OF
---------------
COMPANY: AVIRON, a California corporation (the "Company"), and
any corporation that shall succeed to the obligations
of the Company under this Warrant.
NUMBER OF SHARES:
----------
CLASS OF STOCK:
----------
INITIAL EXERCISE PRICE:
----------
DATE OF GRANT:
----------
THIS CERTIFIES THAT, for value received, The Regents of the University of
Michigan ("Michigan") or any permitted transferee of its rights hereunder is
entitled to purchase the above number (as adjusted pursuant to Section 5 hereof)
of fully paid and nonassessable shares of the above Class of Stock of the
Company at the Initial Exercise Price above (as adjusted pursuant to Section 5
hereof), subject to the provisions and upon the terms and conditions set forth
herein. The Expiration Date of this Warrant shall be five years from the Date
of Grant.
1. DEFINITIONS.
In addition to the terms defined above, the following capitalized terms
shall have the following meanings, unless the context otherwise requires:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations thereunder, as shall be
in effect at the time.
(b) "Common Stock" shall mean shares of the authorized common stock of the
Company and any stock into which such common stock may hereafter be exchanged.
(c) "Warrantholder" shall mean any person who shall at the time be the
holder of this Warrant.
1.
<PAGE>
(d) "Shares" shall mean the shares of the Class of Stock that the
Warrantholder is entitled to purchase upon exercise of this Warrant, as adjusted
pursuant to Section 5 hereof.
(e) "Warrant Price" shall mean the Initial Exercise Price at which this
Warrant may be exercised, as adjusted pursuant to Section 5 hereof.
2. TERM.
The purchase right represented by this Warrant is exercisable, in whole or
in part, at any time on or before the Expiration Date.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
Subject to Section 2 hereof, the purchase right represented by this Warrant
may be exercised by the Warrantholder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Appendix A
duly executed) at the principal office of the Company and by the payment to the
Company, by check made payable to the Company drawn on a United States bank and
for United States funds of an amount equal to the then applicable Warrant Price
per share multiplied by the number of Shares then being purchased. In the event
of any exercise of the purchase right represented by this Section 3,
certificates for the Shares so purchased shall be delivered to the Warrantholder
within thirty (30) days of receipt of such payment and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the Warrantholder within such thirty (30) day
period.
4. EXERCISE PRICE.
The Warrant Price at which this Warrant may be exercised shall be the
Initial Exercise Price, as adjusted from time to time pursuant to Section 5
hereof.
5. ADJUSTMENT OF NUMBER AND KIND OF SHARES AND ADJUSTMENT OF WARRANT PRICE.
5.1 CERTAIN DEFINITIONS. As used in this Section 5 the following terms
shall have the following respective meanings:
(a) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either shares of Common Stock or Convertible
Securities;
2.
<PAGE>
(b) "Convertible Securities" shall mean any evidences of
indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
5.2 ADJUSTMENTS. The number and kind of securities purchasable upon the
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:
(a) Reclassification, Reorganization, Consolidation or Merger. In
the case of any reclassification of the Class of Stock that the Warrantholder is
entitled to purchase upon exercise of this Warrant, or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
surviving corporation and which does not result in any reclassification of such
Class of Stock), the Company, or such successor corporation, as the case may be,
shall execute a new warrant, providing that the Warrantholder shall have the
right to exercise such new warrant and upon such exercise to receive, in lieu of
each share of the Class of Stock theretofore issuable upon exercise of this
Warrant, the kind of securities receivable upon such reclassification,
reorganization, consolidation or merger by a holder of shares of the same Class
of Stock of the Company. The Warrant Price and the number of shares of such new
securities to be received by the Warrantholder upon exercise of the Warrant
shall be adjusted so that the Warrantholder shall receive upon exercise of the
Warrant and payment of the same aggregate consideration the number of shares of
new securities which the Warrantholder would have owned immediately following
such reclassification, reorganization, consolidation or merger if the
Warrantholder had exercised the Warrant immediately prior to such
reclassifications, reorganization, consolidation or merger. The provisions of
this subsection (a) shall similarly apply to successive reclassification,
reorganizations, consolidations or mergers.
(b) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the Class of Stock for which this Warrant is then
exercisable, the Warrant Price shall be proportionately decreased in the case of
a split or subdivision or proportionately increased in the case of a
combination. Any adjustment under this subsection (b) shall become effective
when the split, subdivision or combination becomes effective.
(c) Stock Dividends. If the Company at any time while this Warrant
remains outstanding and unexpired shall pay a dividend with respect to the Class
of Stock for which this Warrant is then exercisable, payable in shares of that
Class of Stock, Options or Convertible Securities, the Warrant Price shall be
adjusted, from and after the date of determination of the stockholders entitled
to receive such dividend or distributions, to that price determined by
multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (i) the numerator of which shall be the total number
of shares of that Class of Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the same Class of Stock outstanding immediately after such dividend or
distribution (including shares of that Class of Stock issuable upon exercise,
conversion or exchange of any Options or Convertible Securities issued as such
dividend or
3.
<PAGE>
distribution). If the Options or Convertible Securities issued as such dividend
or distribution by their terms provide, with the passage of time or otherwise,
for any decrease in the consideration payable to the Company, or any increase in
the number of shares issuable upon exercise, conversion or exchange thereof (by
change of rate or otherwise), the Warrant Price shall, upon any such decrease or
increase becoming effective, be reduced to reflect such decrease or increase as
if such decrease or increase became effective immediately prior to the issuance
of the Options or Convertible Securities as the dividend or distribution. Any
adjustment under this subsection (c) shall become effective on the record date
set for such dividend or distribution.
(d) Adjustment Of Number of Shares. Upon each adjustment in the
Warrant Price pursuant to Section 5(b) or 5(c) above, the number of Shares
issuable upon exercise of this Warrant shall be adjusted to the product obtained
by multiplying the number of Shares issuable immediately prior to such
adjustment in the Warrant Price by a fraction (i) the numerator of which shall
be the Warrant Price immediately prior to such adjustment, and (ii) the
denominator of which shall be the Warrant Price immediately after such
adjustment.
6. NOTICE OF ADJUSTMENTS.
So long as this Warrant remains outstanding and unexpired, whenever the
Warrant Price shall be adjusted pursuant to Section 5 hereof, the Company shall
issue a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Warrant
Price after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (by first class mail, postage prepaid) to the
Warrantholder.
7. RIGHT TO CONVERT WARRANT INTO STOCK.
7.1 RIGHT TO CONVERT. In addition to the rights granted under Section 3
of this Warrant, the Warrantholder shall have the right to require the Company
to convert this Warrant (the "Conversion Right") into shares of the Class of
Stock for which the Warrant is then exercisable, as provided in this Section 7.
Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any Warrant Price) that
number of shares of stock equal to the quotient obtained by dividing (x) the
value of this Warrant at the time the Conversion Right is exercised (determined
by subtracting the aggregate Warrant Price immediately prior to the exercise of
the Conversion Right from the aggregate fair market value of the Shares issuable
upon exercise of this Warrant immediately prior to the exercise of the
Conversion Right, as determined pursuant to Section 7.3 below) by (y) the fair
market value (as determined pursuant to Section 7.3 below) of one share of that
Class of Stock immediately prior to the exercise of the Conversion Right.
7.2 METHOD OF EXERCISE. So long as the Warrant remains outstanding and
unexpired, the Conversion Right may be exercised at any time by the
Warrantholder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the Warrantholder
thereby intends to exercise the Conversion Right. Certificates of the shares of
stock issuable upon exercise of the Conversion Right shall be delivered to the
4.
<PAGE>
Warrantholder within thirty (30) days following the Company's receipt of this
Warrant together with the aforesaid written statement.
7.3 VALUATION OF STOCK. For purposes of this Section 7, the fair market
value of one share of the Class of Stock issuable upon exercise of this Warrant
shall mean:
(a) The product of (i) the average of the closing price or, if no
closing price is reported, the closing bid and asked prices of the Common Stock,
quoted in the Over-The-Counter Market Summary or the closing price quoted on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the ten (10)
trading days prior to the date of determination of fair market value, and (ii)
the number of shares of Common Stock into which each share of the Class of Stock
is then convertible, if applicable;
(b) If the Common Stock is not traded Over-The-Counter or on an
exchange, the fair market value of the Class of Stock per share shall be as
determined in good faith by the Company's Board of Directors; provided, however,
that if the Warrantholder disputes in writing the fair market value determined
by the Board of Directors within thirty (30) days of being informed of such fair
market value, the fair market value shall be determined by an independent
appraiser, appointed in good faith by the Company's Board of Directors.
8. COMPLIANCE WITH ACT; TRANSFERABILITY OF WARRANT; DISPOSITION OF SHARES.
8.1 LEGENDS. This Warrant and the Shares issued upon exercise thereof
shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
8.2 TRANSFERABILITY OF WARRANT AND SHARES. This Warrant and the Shares
issued upon exercise thereof shall not be sold, transferred or assigned in whole
or in part without compliance with applicable federal and state securities laws
by the transferor and the transferee (including, without limitation, the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if reasonably requested by the Company). Subject to
the provisions of this Section 8.2, title to this Warrant may be transferred in
the same manner as a negotiable instrument transferable by endorsement and
delivery.
9. RIGHTS OF THE HOLDER.
5.
<PAGE>
The Warrantholder 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
Warrantholder are limited to those expressed in this Warrant. Nothing contained
in this Warrant shall be construed as conferring upon the Warrantholder 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 Shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised in accordance with its terms.
10. MISCELLANEOUS.
No fractional shares shall be issued in connection with any exercise
hereunder, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Warrant Price then in effect. The terms
and provisions of this Warrant shall inure to the benefit of, and be binding
upon, the Company and the Warrantholder and their respective successors and
assigns. This Warrant shall be governed by and construed under the laws of the
State of California as applied to contracts entered into between residents of
the State of California to be wholly performed in the State of California. The
titles of the sections and subsections of this Warrant are for convenience only
and are not to be considered in construing this Warrant. All pronouns used in
the Warrant shall be deemed to include masculine, feminine and neuter forms.
AVIRON, A CALIFORNIA CORPORATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
6.
<PAGE>
APPENDIX A
NOTICE OF EXERCISE
TO: AVIRON
1. The undersigned hereby elects to purchase shares of the stock of
Aviron, a California corporation, pursuant to terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said
shares of the stock in the name of the undersigned or in such other name as is
specified below.
3. The undersigned represents it is acquiring the shares of stock
solely for its own account for investment and not as a nominee for any other
party and not with a view toward the resale or distribution thereof within the
meaning of the Securities Act of 1933, as amended.
----------------------------------------
(Name)
----------------------------------------
(Address)
----------------------------------------
(Taxpayer Identification Number)
- -----------------------------------
(print name of Warrantholder)
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
7.
<PAGE>
EXHIBIT C
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
CAPITALIZATION SCHEDULE
Pursuant to the 1992 Stock Option Plan (the "Option Plan"), the Company has
reserved 3,860,000 shares of Common Stock for issuance upon exercise of options
granted under the Option Plan. As of September 3, 1993, options to purchase
1,912,034 shares (net of cancellations) have been granted to employees and
consultants of which 69,270 shares have been exercised.
On February 9, 1993, the Company entered into a Technology Transfer Agreement
with The Mount Sinai School of Medicine ("Mount Sinai") pursuant to which the
Company acquired certain technologies. In exchange, Aviron issued 175,000
shares of Common Stock and Warrants to purchase, in the aggregate, 225,000
shares of Series A Preferred Stock (the "Series A Warrants"). The Series A
Warrants become exercisable at various times upon the occurrence of certain
milestones.
On June 1, 1993, the Company entered into agreements with Institutional Venture
Partners ("IVP") and Institutional Venture Management ("IVM") to provide a
bridge loan to the Company. In consideration for the loan, IVP and IVM received
warrants to purchase a total of 400,000 shares of Series B Preferred Stock (the
"Series B Warrants"). The Series B Warrants expire at the earlier of (i) the
closing of an initial public offering of Common Stock pursuant to a registration
statement under the Securities Act of 1933, as amended or (ii) June 1, 1995.
On March 30, 1994, the Company issued to Lease Management Services, Inc. a
warrant to purchase 116,667 shares of Series B Preferred Stock in connection
with an equipment lease.
<PAGE>
EXHIBIT 10.5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN DELETED AS
MARKED BY BRACKETS, AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT (the "AGREEMENT") is made as of the
3rd day of May, 1995 by and between AVIRON, a California corporation with its
principal place of business at 1450 Rollins Road, Burlingame, California, 94010,
U.S.A. ("AVIRON"), and SANG-A PHARM. Co., LTD., a Korean corporation with its
principal place of business at 640-9 Dueng Chon Dong, Kangseo-Ku, Seoul, South
Korea ("SANG-A").
RECITALS
WHEREAS, Aviron is a biopharmaceutical company engaged in the business of
developing vaccines for the prevention of various diseases in humans; and
WHEREAS, Sang-A is a Korean company interested in establishing vaccine
development and manufacturing capabilities; and
WHEREAS, the parties desire to collaborate in the clinical development,
manufacture, distribution, marketing and sale of certain vaccine and other human
therapeutic products, on a product-by-product basis;
NOW, THEREFORE, in consideration of the promises and covenants set forth
below, the parties hereby agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
The capitalized terms used herein but not separately defined shall have the
meanings set forth in Exhibit A hereto.
ARTICLE 2
DEVELOPMENT PROGRAM
2.1 COMMENCEMENT OF DEVELOPMENT PROGRAM. Following [
] for a particular Partner Product, such Product will be deemed available
for development in South and North Korea by Sang-A and Sang-A shall commence a
program of clinical development for such Partner Product, as further set forth
herein (the "DEVELOPMENT PROGRAM").
1.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
2.2 DEVELOPMENT OBLIGATIONS OF SANG-A.
2.2.1 SANG-A COMMITMENT. Sang-A hereby agrees to conduct at its own
expense all clinical development work necessary to obtain all Government
Approvals for the commercialization of each Partner Product in South and North
Korea.
2.2.2 DEVELOPMENT EFFORT. [
] Sang-A shall work
diligently, consistent with accepted business practices and legal requirements,
to develop each Partner Product, devoting the same degree of attention and
diligence to such development efforts as similar companies devote to development
activities for products of comparable market potential. Sang-A agrees to provide
scientific, technical, clinical and regulatory personnel, equipment, time and
resources to the development of each Partner Product sufficient to meet its
obligations hereunder.
2.2.3 DEVELOPMENT REPORTS; NOTICES. Sang-A will deliver to Aviron,
in English, a summary of any annual development plan prepared by or on behalf of
Sang-A for any Partner Product in a Development Program, and any other reports
or information reasonably requested by Aviron to enable it to comply with any
obligations to its licensors, as described in Section 3.3. Aviron will provide
Sang-A with an annual development plan and quarterly progress reports, in
English, upon the request of Sang-A.
2.2.4 VISIT OF FACILITIES. Representatives of either party may, upon
reasonable request and prior notice and at mutually agreed upon times and
intervals, (i) visit such party's facilities where the development of Partner
Products is being conducted, and (ii) consult informally with personnel of such
party conducting the Development Program during such visits, by telephone,
facsimile transmission or other manner as the parties shall agree. Aviron may
also visit any of Sang-A's sublicensees' facilities in which such development
activities are being conducted.
2.3 DEVELOPMENT OBLIGATIONS OF AVIRON.
2.3.1 ACCESS TO AVIRON DATA. Subject to the terms of this Agreement,
Sang-A shall be entitled access to Aviron Data for each Partner Product, as such
Data become available, for use in the Development Program. Sang-A shall be
permitted to use and reference all Aviron Data in any regulatory filings
necessary for Government Approval in South and North Korea. Notwithstanding the
foregoing, Sang-A agrees that it shall treat all Aviron Data as Confidential
Information, subject to the terms of Article 10 hereof.
2.3.2 ACCESS COSTS; POTENTIAL CORPORATE PARTNERS. Provided Aviron
and/or its Affiliates [
] Sang-A's access to the Aviron Data shall be [
] Sang-A expressly acknowledges and agrees, however, that
Aviron may enter into an arrangement with one or more corporate partners for the
development
2.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
of certain or all Partner Products in countries outside South and North Korea, [
] In the event Aviron
enters into such an agreement, and Aviron is unable, [
]Aviron
will pay an amount not to exceed [ ] for such right on
behalf of Sang-A, and Sang-A shall be responsible for the balance of any amount
required from such partner for access to Aviron Data.
2.3.3 SUPPLY OF CLINICAL MATERIALS. Aviron shall use [ ]
to supply, or cause to be supplied, such amounts of Clinical Materials
necessary to obtain Government Approval for Partner Products and necessary
for Sang-A's activities pursuant to the Development Program. Sang-A agrees
that it shall use such Clinical Materials only for purposes of pursuing IND
allowance of the relevant Partner Product and conducting the Development
Program, and that it shall not transfer any Clinical Materials to a third
party without the prior written approval of Aviron. As the need for a
continuous supply of Clinical Materials arises the parties shall negotiate
agreements, on a Product-by-Product basis, containing the terms upon which
such Clinical Materials will be supplied (the "Clinical Supply
Agreements"). With respect to the Cold Adapted Influenza Product, [
]
2.3.4 TECHNICAL ASSISTANCE. Aviron shall provide technical
assistance to Sang-A, as provided in Article 6 hereof.
2.3.5 AVIRON CLINICAL DEVELOPMENT. Notwithstanding the above, nothing
in this Agreement shall be construed to impose an obligation on Aviron to
conduct clinical or pre-clinical development for any given Partner Product.
2.4 COORDINATION OF THE DEVELOPMENT PROGRAM, To facilitate and coordinate
the relationship of Aviron and Sang-A with regard to the Development Program for
each Partner Product, Sang-A and Aviron shall establish a plan covering the
mechanisms for the exchange of technical, business and regulatory information
under this Agreement, including the appointment by each party of a "Project
Coordinator." [
]
3.
<PAGE>
2.5 REGULATORY MATTERS.
2.5.1 COMPLIANCE WITH REGULATIONS. Sang-A shall conduct its efforts
hereunder in compliance with all applicable regulatory requirements, including
without limitation, any equivalents in South and North Korea to the U.S. FDA
Good Clinical Practice, Good Laboratory Practice and Good Manufacturing Practice
regulations.
2.5.2 REGULATORY FILINGS. Sang-A shall, at its own expense, prepare,
file and shall be the owner and party of record sponsoring all filings with the
regulatory authorities with respect to the Partner Products in South and North
Korea (the "REGULATORY FILINGS"), and Sang-A shall be responsible for causing
such applications to progress through the approval process. Aviron shall have
rights of consultation with Sang-A personnel responsible for Regulatory Filings
with respect to the preparation and submission of such Regulatory Filings, and
Aviron shall cooperate with Sang-A in such manner as Sang-A may reasonably
request to assist in obtaining regulatory approval for such Partner Products or
Improvements. Sang-A shall promptly deliver to Aviron summaries, in English, of
all such Regulatory Filings and correspondence, at Sang-A's expense. Sang-A
shall deliver English language translations of all Regulatory Filings and
correspondence at Aviron's request.
2.5.3 MAINTENANCE OF RECORDS. Sang-A shall maintain records with
respect to activities conducted under the Development Program in sufficient
detail and in good scientific manner appropriate for Government Approval
purposes in South and North Korea and as will reflect all studies conducted,
results achieved and data obtained by Sang-A in the course of the Development
Program.
2.5.4 ADVERSE EVENT REPORTING. Each party agrees to report to the
other, immediately upon receipt of the information, any serious adverse event
which is reported to occur as a result of use of a Partner Product. Such events
must be reported in as much detail as possible, whether or not there is proof of
a causal connection between the events and use of a Partner Product. A serious
adverse event includes any experience relating to a Partner Product which is
reasonably regarded to be medically significant. Each party also agrees to
provide to the other copies of all reports that are made to governmental health
authorities concerning material safety, efficacy or quality matters with respect
to any Partner Product.
ARTICLE 3
GRANT OF RIGHTS
3.1 LICENSE. Subject to the terms of this Agreement, Aviron hereby grants
to Sang-A, and Sang-A hereby accepts, an exclusive (even as to Aviron) right and
license and/or sublicense, as the case may be (i) to practice and use the Aviron
Technology in South and North Korea for the purpose of conducting clinical
development of, manufacturing and marketing Partner Products for use in the
Licensed Field, and (ii) to make, use, sell, offer for sale and distribute such
Partner Products in South and North Korea.
4.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3.2 SANG-A RIGHT TO SUBLICENSE. Except for the right to manufacture
Partner Products, Sang-A shall have the right, in South and North Korea, to
sublicense the rights granted pursuant to Section 3.1 (but with no further right
to sublicense) to one or more third parties: PROVIDED, HOWEVER, [
]
3.3 LICENSE GRANT LIMITATIONS. Sang-A acknowledges and understands that
certain aspects of the Aviron Technology as well as certain of the Clinical
Materials related to one or more of the Partner Products are or may be licensed
or assigned to Aviron pursuant to agreements with one or more third parties,
which such agreements existing as of the Effective Date are set forth on
Schedule 2 (the "Prior License Agreements"). Sang-A further acknowledges that
its rights granted hereunder are subject to the terms and conditions of such
Prior License Agreements including, without limitation, those terms and
conditions contained in the Cold Adapted Influenza Agreement as further
discussed in Section 3.4 below. Sang-A further understands and agrees that in
no event shall the rights contained in this Agreement with respect to the Aviron
Technology be construed as conferring upon Sang-A any greater rights than are
conferred upon Aviron by such third party licensors under their respective
agreements with Aviron. Sang-A further understands and agrees that in no way
shall ARCH Development Corporation, as Aviron's licensor, be responsible for
Aviron's performance under this Agreement.
3.4 COLD ADAPTED INFLUENZA PRODUCT.
3.4.1 Sang-A understands and acknowledges that, with respect to the
Cold Adapted Influenza Product, the license granted under Section 3.1 is a
sublicense of rights received by Aviron from the University of Michigan and the
National Institutes of Health ("NIH"), and is subject to the terms and
conditions of the Cold Adapted Influenza Agreement attached hereto as Exhibit B
and the Cooperative Research and Development Agreement referred to in Schedule
2. For convenience only, attached hereto as Exhibit C hereto is a list of the
major terms and conditions contained in the Cold Adapted Influenza Agreement
that affect Sang-A's rights and obligations hereunder as a sublicensee of
Aviron's rights to the Cold Adapted Influenza Product, including in particular,
restrictions regarding the handling and use of the Master Seeds. Sang-A
explicitly acknowledges and understands that these terms and conditions, as more
fully reflected in the Cold Adapted Influenza Agreement itself, are incorporated
into this Agreement and have the same force and effect as if such terms were
included in the main text of this Agreement.
3.4.2 Any material breach by Sang-A of the applicable terms of the
Cold Adapted Influenza Agreement shall be deemed a breach hereunder, and shall
subject Sang-A to possible termination of this Agreement with respect to the
Cold Adapted Influenza Product.
5.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3.4.3 In the event the Cold Adapted Influenza Agreement is terminated
for any reason, [
]
ARTICLE 4
TECHNOLOGY ACCESS PAYMENTS; ROYALTIES
4.1 TECHNOLOGY ACCESS PAYMENTS. In consideration for access to the Aviron
Technology hereunder, Sang-A agrees that within forty-five (45) days after the
occurrence of the following milestone events for each Partner Product, Sang-A
shall pay to Aviron the nonrefundable milestone payments listed below in U.S.
dollars:
4.1.1 [
]and
4.1.2 [
]
4.2 ROYALTIES.
4.2.1 Except as provided in Section 4.2.2 below Sang-A shall pay to
Aviron, on a Product-by-Product basis, a royalty equal to [ ] of
Net Sales for each Partner Product sold by Sang-A, its Affiliates or permitted
sublicensees.
4.2.2 With respect to the Cold Adapted Influenza Product, Sang-A
shall pay to Aviron a royalty equal to [ ] of Net Sales for each such
Partner Product sold by Sang-A, its Affiliates or permitted sublicensees.
4.2.3 Sang-A shall pay royalties under Sections 4.2.l and 4.2.2 for
each Partner Product for a term of [ ] such Partner
Product in South or North Korea.
ARTICLE 5
PAYMENT PROCEDURES; RECORDS; AUDITS
5.1 PAYMENT PERIOD; REPORTS. Sang-A shall pay to Aviron royalties as set
forth in Article 4 as follows: (i) within sixty (60) days after the end of each
calendar quarter if (a) Aviron has completed an initial public offering under
the Securities Act of 1933, (b) Aviron is a reporting company under the
Securities and Exchange Act of 1934, or (c) if Aviron has been acquired or
merged with a third party; or (ii) within one hundred and twenty (120) days
after each calendar year if none of the facts set forth in (a), (b) or (c) of
clause (i) apply. Each respective payment period will be referred to in this
Agreement as a "PAYMENT PERIOD". Such
6.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
payment shall be accompanied by a report identifying Net Sales of each Partner
Product, and the computation of the royalties payable to Aviron, and any other
additional information regarding the marketing and sales of Partner Products as
is necessary to allow Aviron to comply with its obligations under the Prior
License Agreements.
5.2 CURRENCY. Payments shall be in United States Dollars, remitted to
Aviron at its address specified herein. Any conversion from Korean currency
shall be made at the exchange rate utilized by the Exchange Bank of Korea
prevailing at the close of the last business day of that Payment Period.
5.3 RECORDS. During the term of this Agreement, Sang-A shall keep full
and accurate books and records setting forth, for each Partner Product on which
royalties are due, gross sales, all deductions allowed in arriving at Net Sales
and any other information sufficient in detail to allow the calculation of
royalties to be paid by Sang-A. During the term of this Agreement and for a
period of three (3) years thereafter, Sang-A shall permit Aviron, at Aviron's
expense, by independent certified public accountants employed by Aviron and
reasonably acceptable to Sang-A, to examine relevant books and records at any
reasonable time, within five (5) years of the payment of such royalties. If it
is determined that there was an underpayment of royalties due Aviron of five
percent (5%) or more, without prejudice to any other rights Aviron may have,
Sang-A shall promptly pay to Aviron the balance of the royalties due. Sang-A
shall also reimburse Aviron for the cost of such verification examination.
Where required, Sang-A shall also permit Aviron's licensors to examine its books
and records, at such licensors' expense, on terms consistent with Aviron's
rights to do the same.
5.4 WITHHOLDINGS. Payments to Aviron under Section 4.2 shall be made
without deduction other than such amount (if any) as Sang-A is required by law
to deduct or withhold in South or North Korea. Sang-A shall obtain a receipt
from the relevant taxing authorities for all withholding taxes paid and forward
such receipts to Aviron to enable Aviron to claim any and all tax credits for
which it may be eligible. Sang-A shall reasonably assist Aviron in claiming
exemption from such deductions or withholdings under any double taxation or
similar agreement or treaty from time to time in force. All payments made to
Aviron under Section 4.1 shall be made [
]
ARTICLE 6
DEVELOPMENT AND MANUFACTURING TECHNICAL ASSISTANCE
Aviron agrees to provide Sang-A with technical assistance in the
establishment of Sang-A's vaccine clinical development and manufacturing
capabilities in South and North Korea so as to enable it to perform its
obligations under this Agreement. Upon the reasonable request of Sang-A, Aviron
will do one or more of the following, as it deems appropriate under the
circumstances:
7.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(a) Hire outside consultants, such as GMP consultants, contract research
organizations or clinical trial consultants, to work on Sang-A's behalf in South
and North Korea and/or in the U.S., all at Sang-A's expense;
(b) [
]
(c) [
]
ARTICLE 7
PROMOTION AND MARKETING OBLIGATIONS
7.1 MARKETING EFFORTS. Sang-A agrees to use [ ]
to promote the sale, marketing and distribution of the Partner Products in South
and North Korea [
]
7.2 COMMERCIAL MANUFACTURING. Sang-A agrees that, at a minimum, it will
manufacture sufficient amounts of each Partner Product to satisfy demand for
such Partner Product in South and North Korea. Sang-A shall manufacture all
such Product in accordance with all applicable laws in South and North Korea.
7.3 SALES AND ADVERTISING ACTIVITIES. Sang-A will be responsible for
packaging the Partner Products for sale under this Agreement, including, without
limitation, designing and producing all packaging materials and product inserts,
all in forms to be approved in writing by Aviron prior to first use by Sang-A,
such approval not to be unreasonably withheld and to be provided within [
] after submission of materials to Aviron.
7.4 MARKETING PLANS. Sang-A will provide Aviron with English summaries of
any marketing and/or strategic plans it develops for its internal use with
respect to any Partner Product.
8.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
7.5 SALES REPORTS. Throughout the Royalty Term and the Aviron Licensor
Payment Term for each Partner Product, Sang-A shall submit to Aviron quarterly
sales reports detailing Sang-A's sales of the Partner Product in the preceding
quarter, which reports shall be submitted to Aviron within sixty (60) days after
the end of each quarter. In addition, during the Royalty Term, Sang-A shall
furnish Aviron with copies of any market research reports relating to Partner
Product sales and Partner Product competition which Sang-A commissions or
otherwise obtains, which reports shall be submitted to Aviron promptly after
receipt thereof by Sang-A.
7.6 EXPENSES. All expenses incurred by Sang-A in connection with its
obligations hereunder will be borne solely by Sang-A. Sang-A will be
responsible for appointing its own employees, agents and representatives, who
will be compensated by Sang-A.
7.7 TRADEMARKS. Sang-A agrees to consult with Aviron on the use of
trademarks for Partner Products and, where possible, to use trademarks now owned
by Aviron or acquired by Aviron during the term of this Agreement. Sang-A may
propose an alternate trademark for use in South and North Korea, which, if
approved by Aviron, shall be jointly owned by the parties.
ARTICLE 8
[ ]
During the term of this Agreement and upon Sang-A's written request, Aviron
will conduct, in collaboration with Sang-A, further research and development
with respect to Aviron's [ ] on terms and conditions to be
agreed upon by the parties, for Sang-A's use in South and North Korea.
ARTICLE 9
MANUFACTURING AGREEMENTS
9.1 RIGHT OF FIRST REFUSAL. Provided Sang-A satisfies the prerequisites
set forth in Section 9.2 below and subject to Sang-A's obligation in Section 9.3
below, Aviron grants a right of first refusal to supply up to [ ] of
Aviron's (and its Affiliates' and sublicensees') requirements for each Partner
Product, except the Epstein Barr Virus Vaccine, in each of the countries listed
in Schedule 3 hereto (the "MANUFACTURING TERRITORY"). Aviron shall promptly
notify Sang-A upon the allowance of the first IND for each Partner Product in
the Manufacturing Territory. Sang-A shall have until the earlier of (a) [
] or
(b) [ ] to
deliver written notice to Aviron that it intends to exercise its right of first
refusal to commercially manufacture such Product. At that time, Sang-A shall
specify which countries of the Manufacturing Territory, and the market
percentages of each such country (up to the maximum of [ ] it intends to
supply, and at what price. The parties shall then proceed to negotiate, in-good
faith, a commercial supply agreement containing the terms upon which such
9.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Partner Product will be supplied by Sang-A to Aviron or Aviron's Affiliates or
sublicensees; PROVIDED, HOWEVER, that if Sang-A cannot manufacture the product
at a price and within a timeline that is competitive with other commercial
suppliers, Aviron shall be free to refuse to enter into a supply arrangement
with Sang-A. The "competitive" price and timeline referred to in the foregoing
sentence shall be determined as follows: [
]
9.2 PREREQUISITES. Aviron may refuse to allow Sang-A to exercise its
right of first refusal with respect to the manufacture of any given Partner
Product in the event Sang-A cannot prove that it has satisfied, or will satisfy
within a timeframe acceptable to Aviron, the following prerequisites:
9.2.1 [
]
9.2.2 [
]
9.2.3 [
] and
9.2.4 [
]
9.3 AVIRON CORPORATE PARTNERS. Sang-A acknowledges and understands that
Aviron intends to enter into transactions with one or more corporate partners in
which such corporate partners will acquire marketing rights to some or all of
the Partner Products in some or all of the countries in the Manufacturing
Territory. In the event Sang-A has exercised its right of first refusal
pursuant to Section 9.1 above with respect to certain Partner Products in the
Manufacturing Territory, and any of Aviron's corporate partners so desires,
Sang-A agrees that, upon Aviron's request, [
10.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ARTICLE 10
CONFIDENTIALITY
10.1 CONFIDENTIALITY. During the term of this Agreement, and for [ ]
thereafter, each party hereto will maintain in confidence all Confidential
Information disclosed by the other party hereto, including without limitation
Confidential Information disclosed to Sang-A pursuant to Sang-A's information
rights under Article 15 of this Agreement. Neither party will use, disclose,
transfer or grant use of such Confidential Information except as expressly
authorized by this Agreement. To the extent that disclosure is authorized by
this Agreement, the disclosing party will obtain prior written agreement from
its employees, agents, consultants or clinical investigators to whom disclosure
is to be made to hold in confidence and not make use of such information for any
purpose other than those permitted by this Agreement. Each party will use at
least the same standard of care as it uses to protect its own trade secrets,
proprietary information or materials to ensure that such employees, agents,
consultants and clinical investigators do not disclose or make any unauthorized
use of such Confidential Information. Each party will promptly notify the other
upon discovery of any unauthorized use or disclosure of the Confidential
Information.
10.2 EXCEPTIONS. Confidential Information shall not include any
information which:
10.2.1 was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party as
evidenced by written records;
10.2.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other party;
10.2.3 became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
10.2.4 was disclosed to the receiving party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
other party not to disclose such information to others as evidenced by written
records;
10.2.5 is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such information
in confidence have been exhausted; or
11.
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CONFIDENTIAL TREATMENT REQUESTED
10.2.6 is subsequently and independently developed by employees,
consultants or agents of the disclosing party without reference to any
Confidential Information, as evidenced by written record.
10.3 AUTHORIZED DISCLOSURE. Each party may disclose the Confidential
Information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation or
complying with applicable governmental regulations, provided that if such party
is required to make any such disclosure of the Confidential Information it will
to the extent practicable give reasonable advance notice to the other party of
such disclosure requirement and, except to the extent inappropriate in the case
of patent applications, will use its best efforts to secure confidential
treatment of such information required to be disclosed. Sang-A may disclose
(subject to the confidentiality restrictions contained herein) Confidential
Information to third party contractors, investigators and regulatory
authorities, to the extent necessary to perform its obligations under this
Agreement, provided such third parties execute confidentiality agreements
containing terms no less strict than those contained herein.
10.4 AGREEMENT CONFIDENTIAL. The parties agree that the contents of this
Agreement shall constitute Confidential Information, and as such, will not be
disclosed by either party without the written consent of the other, except as
required by law or prior contractual obligation.
10.5 NON-USE OF AVIRON'S LICENSORS' NAMES. Sang-A agrees to refrain from
using the names of Mount Sinai School of Medicine, the University of Michigan or
ARCH Development Corporation in any publicity or advertising without the written
consent of Aviron and such entity.
ARTICLE 11
INTELLECTUAL PROPERTY; PATENT EXPENSES
11.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Aviron shall retain all of its
rights, title and interest in and to all Aviron Technology, Aviron Data,
Clinical Materials, copyrights, trade name, and all other industrial and
intellectual property embodied in or covering the Partner Products. Except as
otherwise expressly provided in this Agreement, Sang-A has no right, title or
interest in any industrial or intellectual property relating to the Aviron
Technology, the Clinical Materials or the Aviron Data.
11.2 PROSECUTION AND MAINTENANCE OF LICENSED PATENTS.
11.2.1 PROSECUTION AND MAINTENANCE. [
] In the event Sang-A elects not
to pursue prosecution of any National Application under this Section 11.2,
12.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Sang-A shall give Aviron not less than two (2) months' notice before any
relevant deadline and Aviron shall pursue, at its expense, prosecution of such
patent application. In such event Sang-A's license under Section 3.1 to
practice the inventions claimed in such application or patent will terminate.
Sang-A will have the option to reactivate such license within six (6) months
following such termination, in the event Aviron pursues such patent application
at its own expense, by delivery to Aviron of the following: (i) reimbursement
for all patent costs incurred by Aviron in the Prosecution of such patent
application, (ii) payment of interest on such patent costs at a rate of [
] per annum and (iii) a late fee of [
]
11.2.2 CREDITS. Sang-A shall have the right to credit against any
royalties owed pursuant to Section 4.2 [ ]
provided, that in no event shall Aviron be paid less than [ ] of such owed
royalties in any given Payment Period.
11.3 INVENTIONS. Each party acknowledges and agrees that any and all
Inventions that are made or discovered pursuant to this Agreement solely by its
employees or agents shall be owned solely by it (the "AVIRON INVENTIONS" or the
"SANG-A INVENTIONS" as the case may be), and that all Inventions made jointly by
employees or agents of each pursuant to this Agreement shall be jointly owned
("JOINT INVENTIONS"), all as determined in accordance with U.S. laws of
inventorship. Sang-A shall have the exclusive right to practice and use Joint
Inventions within South and North Korea pursuant to Section 3.1, and shall have
the right to file and control any patent applications on Joint Inventions in
South and North Korea. Aviron shall have the exclusive right, and Sang-A hereby
grants to Aviron such right, to practice and use all Joint Inventions outside
South and North Korea, and shall have the right to file and control any patent
applications on such Joint Inventions outside South and North Korea. With the
exception of Aviron Inventions that constitute Licensed Patents subject to
Section 11.2 above, each party shall bear the costs of prosecuting and
maintaining any patents on its own Inventions.
11.4 LICENSE TO SANG-A INVENTIONS. Sang-A agrees promptly to disclose to
Aviron in writing all Sang-A Inventions in sufficient detail to allow Aviron to
evaluate such Invention. Subject to the terms of this Agreement, Sang-A hereby
grants to Aviron a non-exclusive, royalty-free, perpetual license to practice
and use the Sang-A Inventions outside South and North Korea, with the right to
sublicense to Aviron's corporate partners (but with no further right to
sublicense) and to the University of Michigan, pursuant to the Cold Adapted
Influenza Agreement. In addition, Sang-A hereby grants to Aviron a first right
of negotiation for an exclusive, royalty-bearing license to commercially use any
Sang-A Inventions outside South and North Korea exercisable for a period of [
] from the date Sang-A discloses such Invention in writing to
Aviron. Any inventions made by Sang-A that are unrelated to either (i) Aviron
Technology or (ii) processes, methods, techniques and the like useful for the
manufacture of Partner Products shall not be covered by the license and option
granted in this Section 11.4.
13.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
11.5 THIRD PARTY PATENT INFRINGEMENT. In the event either Aviron or Sang-A
learns of any third party patents which may cover the manufacture, use or sale
of any Partner Product in South or North Korea, such party will notify the
other. The parties agree to confer in good faith regarding such potential
infringement risk and to explore reasonable alternatives for avoiding such risk.
If the parties cannot agree on the existence or extent of the risk, or on a
course of action for avoiding the agreed upon risk, and Sang-A continues to
believe in good faith that sale of the Partner Product would create an
unjustified risk of infringement liability, Sang-A may negotiate and enter into
a license for such third party patent, in which event Sang-A shall [
] and Sang-A may offset [ ] of
the cost of such royalties against royalties owed to Aviron under Section 4.2
for such Partner Product(s): PROVIDED, HOWEVER, that [
]
11.6 INFRINGEMENT OF AVIRON TECHNOLOGY. In the event Sang-A or Aviron
becomes aware of any actual or threatened infringement of any Aviron Technology
in South or North Korea, that party shall promptly notify the other. Aviron
shall have the first right to bring, at its own expense, any infringement action
against any person or entity infringing the Aviron Technology directly or
contributorily. Sang-A shall cooperate with Aviron as reasonably requested, at
Aviron's expense. If Sang-A so desires, it may join such infringement action at
its own expense. Any and all amounts recovered with respect to such an
infringement action shall be applied first to reimburse the parties for their
out-of-pocket expenses (including reasonable attorneys' fees) in prosecuting
such infringement. The remainder shall be shared [ ] Aviron and
[ ] Sang-A. In the event Aviron is unable or unwilling to
commence an action against the alleged infringer within one-hundred twenty (120)
days of the date of Aviron's becoming aware of such infringement, Sang-A may,
but shall not be required to, prosecute the alleged infringement or threatened
infringement. In such event Sang-A shall act in its own name and at its own
expense. Aviron shall cooperate with Sang-A as reasonably requested, at Sang-
A's expense. If Aviron so desires, it may join such action at a later date, at
its own expense. Any amounts recovered with respect to such an action shall be
applied first to reimburse the parties for their out-of-pocket expenses
(including reasonable attorneys' fees) in prosecution of such infringement. [
]
ARTICLE 12
TERM AND TERMINATION
12.1 TERM. Except as otherwise provided herein, the term of this
Agreement shall commence on the Effective Date and shall extend, on a Partner
Product-by-Partner Product basis, until ten (10) years from the date of First
Commercial Sale of such Partner Product.
12.2 EXTENSION TO TERM. Aviron hereby grants Sang-A an option to extend
this Agreement, and the licenses granted to Sang-A under Article 3, on a Partner
Product-by-Partner Product basis, for the longer of (i) an additional ten (10)
year period or (ii) the expiration of the Licensed Patent covering such Partner
Product on the same terms and conditions as are set forth
14.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
in this Agreement; EXCEPT THAT, with respect to the [
] the royalties owed with
respect to such Partner Products will be[
] and with respect to all other
Partner Products, no royalties shall be owed. Sang-A shall exercise its option
granted under this Section 12.2 by notifying Aviron in writing of such exercise
at least six (6) months prior to the expiration of the term of this Agreement.
12.3 MATERIAL BREACH BY SANG-A.
12.3.1 BREACH OF DEVELOPMENT EFFORTS. Sang-A shall be deemed in
breach of Section 2.2.2 with respect to a specific Partner Product under the
following circumstances:
(a) If, within [ ] following the date a Partner Product receives
[
] or
(b) If, within [ ] following the date Aviron, its Affiliate
and/or sublicensee [
]
12.3.2 BREACH OF MARKETING EFFORTS. If, within [
]
of a Partner Product in South or North Korea, [
]
12.3.3 PRODUCT-BY-PRODUCT TERMINATION. Following a material breach
by Sang-A of any provision of this Agreement with respect to any Partner
Product, including without limitation, Section 3.4.2 (Cold Adapted Influenza
Agreement), Section 4.1 (milestone payments), Section 4.2 or 4.3 (royalty
payments), Section 12.3.1 (development diligence) or Section 12.3.2 (marketing
diligence), Aviron shall have the right to terminate all rights and licenses
granted to Sang-A under this Agreement relating to such Partner Product if Sang-
A fails to cure such breach within thirty (30) days written notice thereof. For
purposes of a breach of Section 12.3.1 or Section 12.3.2, Sang-A may cure such
breach by either remedying the breach within the thirty (30) day period or by
delivering to Aviron a comprehensive plan to cure such breach, which plan is
reasonably acceptable to Aviron. Both parties acknowledge and agree that any
failure by Sang-A to comply with the terms of future commercial supply
agreements for any Partner Product shall in no way constitute a breach
hereunder, but shall be governed solely by such other agreements.
15.
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12.3.4 TERMINATION IN ENTIRETY. Notwithstanding any of the above,
in the event Sang-A breaches any provision of Article 10 (Confidentiality), its
obligations with respect to the use of Clinical Materials in Section 2.3.3, or
its obligations under Section 15.3.4 (purchase obligation) Aviron shall have the
right to terminate this Agreement in its entirety immediately upon written
notice.
12.4 EFFECT OF TERMINATION.
(a) Upon partial termination of this Agreement pursuant to Section
12.3.3:
(i) all rights and licenses granted to Sang-A with respect to
such Partner Product, and all sublicenses granted by Sang-A pursuant to Section
3.2 with respect to such Partner Product, shall terminate; and
(ii) Sang-A shall promptly (a) assign to Aviron all right, title
and interest in and to any Regulatory Filings in South and North Korea
pertaining to such Partner Product and (b) return to Aviron, or at Aviron's
request destroy, all Aviron Data, Clinical Materials and Confidential
Information relating to such Partner Product.
(b) Upon termination of this Agreement in its entirety pursuant to
Sections 12.3.4:
(i) all rights and licenses granted to Sang-A with respect to
all Partner Products, and all sublicenses granted by Sang-A pursuant to Section
3.2 with respect to all Partner Products, shall terminate; and
(ii) Sang-A shall promptly (a) assign to Aviron all right, title
and interest in and to all Regulatory Filings in South and North Korea
pertaining to all Partner Products and (b) return to Aviron, or at Aviron's
request destroy, all Aviron Data, Clinical Materials and Confidential
Information relating to any Partner Products.
(c) Notwithstanding any early termination or expiration of this
Agreement, the rights and obligations of the parties under Articles 10, 11 and
14 and Sang-A's surviving obligations under any of the Prior License Agreements
will survive such termination or expiration.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
13.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each party hereby represents
and warrants:
16.
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13.1.1 CORPORATE POWER. Such party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
13.1.2 DUE AUTHORIZATION. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
13.1.3 BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
ARTICLE 14
INDEMNIFICATION
14.1 INDEMNIFICATION BY SANG-A. Sang-A expressly and unequivocally agrees
to and hereby does indemnify, defend and hold Aviron harmless from and against
all claims, damages, losses, costs and expenses, including attorneys' fees,
arising in favor of any person, firm or corporation resulting from or arising
out of liability in any way relating to the Partner Products ("Claims"),
including without limitation, the development, manufacture, packaging, use, sale
or other distribution of Partner Products by Sang-A, the use by Sang-A of any
Aviron Data or the Aviron Technology, or any representation made or warranty
given by Sang-A with respect to any Partner Product, provided that Aviron (i)
gives Sang-A notice of such Claim, (ii) cooperates with Sang-A, at Sang-A's
expense, in the defense of such Claim, and (iii) gives Sang-A the right to
control the defense and settlement of any such Claim, except that Sang-A shall
not enter into any settlement that affects Aviron's rights or interest without
Aviron's prior written approval; PROVIDED, HOWEVER, that Sang-A shall not so
indemnify and hold Aviron harmless for any Claims arising from defects in any
Partner Product raw materials supplied by Aviron which are present at the time
of acceptance of such materials by Sang-A. Aviron shall have no authority to
settle any claim on behalf of Sang-A.
ARTICLE 15
INVESTMENT OBLIGATIONS AND INFORMATION RIGHTS
15.1 INVESTMENT LETTER. Sang-A agrees to sign the form of Investment
Letter appended hereto as Exhibit D simultaneously upon execution of this
Agreement.
15.2 INITIAL INVESTMENT. Within thirty (30) days of the execution of this
Agreement, but in no event prior to the date Aviron's amended articles of
incorporation, in
17.
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substantially the form attached as Exhibit E, have been approved by the State of
California, Sang-A hereby agrees to pay Aviron the amount of $3,971,515, in
exchange for 2,941,863 shares of Series C Preferred Stock of the Company. The
parties intend that the amended articles of incorporation will be filed within
two (2) weeks of the Effective Date.
15.3 FUTURE INVESTMENT. During the period set forth in Section 15.3.5,
Sang-A hereby agrees to purchase ten percent (10%) of any offering of New
Securities (as defined in this Section 15.3) that Aviron may, from time to time,
propose to sell and issue, at the offering price for such offering of New
Securities offered to all other offering participants. This purchase obligation
shall be subject to the following provisions:
15.3.1 "NEW SECURITIES" shall mean any capital stock of Aviron,
whether now authorized or not, and rights, options, or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock, whether publicly or privately offered;
PROVIDED, HOWEVER, THAT "NEW SECURITIES" DOES NOT INCLUDE (i) securities
issuable upon conversion of or with respect to Preferred Stock; (ii) the Warrant
Shares issuable under and defined in the Stock Transfer Agreement between Aviron
and the Regents of the University of Michigan dated February 24, 1995; (iii)
securities issued pursuant to an acquisition of an entity by Aviron by merger,
purchase of substantially all of the assets, or other reorganization whereby
Aviron owns more than fifty percent (50%) of the voting power of such entity;
(iii) shares of Aviron's Common Stock (or related options) issued to employees,
directors or consultants of Aviron pursuant to any employee stock offering,
plan, or arrangement approved by the Board of Directors; (iv) shares of Aviron's
Common Stock or Preferred Stock issued in connection with any stock split, stock
dividend, or similar recapitalization by Aviron; (v) securities issued pursuant
to equipment or debt financing or leases which are approved by Aviron's Board of
Directors; (vi) securities issued pursuant to any corporate partnering,
strategic alliance, joint venture or licensing arrangement between Aviron and a
third party; or (vii) securities issued by Aviron other than for cash or cash
equivalents.
15.3.2 In the event that Aviron proposes to undertake an issuance of
New Securities, Aviron shall, at its option, give Sang-A written notice of its
intention, describing the type of New Securities to be issued, the price, and
the general terms upon which Aviron proposes to issue the New Securities. If
Aviron does not provide Sang-A with such notice with respect to a particular
offering of New Securities, Sang-A will have no purchase obligation with regard
to such offering.
15.3.3 Once Aviron has given notice to Sang-A pursuant to the
preceding Section 15.3.2, Sang-A shall deliver payment for such New Securities
on the closing date of such offering of New Securities, provided that the date
of receipt of Aviron's notice is more than thirty (30) days prior to such
closing date. If Aviron fails to notify Sang-A within the periods specified in
this Section 15.3.3, Sang-A shall nonetheless be required to deliver such
payment, prior to lapse of such thirty (30) day period.
18.
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CONFIDENTIAL TREATMENT REQUESTED
15.3.4 In the event that Sang-A fails to meet its purchase obligation
under this Section 15.3, Aviron shall have the right to terminate Sang-A's
rights under this Agreement pursuant to Section 12.2.4.
15.3.5 Sang-A's purchase obligation shall expire on the earlier of
(a) [ ] following the payment date of Sang-A's initial investment,
pursuant to Section 15.2 of this Agreement, or (b) following the closing of the
first firmly underwritten public offering of Common Stock of Aviron pursuant to
a registration statement filed with, and declared effective by, the United
States Securities and Exchange Commission.
15.3.6 Sang-A's investment obligations under this Section 15.3 are not
assignable by Sang-A.
15.4 FINANCIAL INFORMATION.
15.4.1 Aviron will furnish the following information to Sang-A so
long as Sang-A, together with its Affiliates, holds at least 1,000,000 shares of
Aviron Common Stock issued or issuable upon conversion of any Aviron Preferred
Stock held by Sang-A:
(a) As soon as practicable after the end of each fiscal year of
Aviron, and in any event within 120 days thereafter, a consolidated balance
sheet of Aviron and its subsidiaries, if any, as at the end of such fiscal year,
and consolidated statements of income and consolidated statements of cash flows
of Aviron and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form and figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
national standing selected by the company.
(b) As soon as practicable after the end of each of the first
three quarterly accounting periods in each fiscal year, and in any event within
45 days thereafter, a consolidated balance sheet of Aviron and its subsidiaries,
if any, as at the end of such quarter, and consolidated statements of income and
consolidated statements of cash flows of Aviron and its subsidiaries, if any,
for each quarter and for the current fiscal year of Aviron to date, prepared in
accordance with generally accepted accounting principles consistently applied,
except that such financial statement will not contain the notes normally
required by generally accepted accounting principles.
(c) As soon as practicable after the adoption thereof, and in
any event no later than 15 days prior to the commencement of its fiscal year, an
annual operating plan for the forthcoming fiscal year, prepared on a
consolidated basis, including projected statements of profit and loss, cash flow
and balance sheets for each calendar quarter of such year, and, promptly after
preparation thereof, any revisions to such annual operating plan and any other
budgets.
19.
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15.4.2 The covenants provided in Sections 15.4.1(a) and (b) shall
terminate at the first firmly underwritten public offering of Common Stock of
Aviron pursuant to a registration statement filed with, and declared effective
by, the United States Securities and Exchange Commission.
15.5 INSPECTION RIGHTS. Aviron shall permit Sang-A, so long as Sang-A,
together with its affiliates, holds at least 1,000,000 shares of Preferred Stock
of Aviron, its attorney, or its other representative, to visit and inspect
Aviron's properties, to examine Aviron's books of account and other records, to
make copies or extracts therefrom and to discuss Aviron's affairs, finances and
accounts with its officers, management employees and independent accountants,
all at such reasonable times and as often as Sang-A may reasonably request.
15.6 ASSIGNMENT OF RIGHTS TO INFORMATION. The rights granted pursuant to
Sections 15.4 and 15.5 may not be assigned or otherwise conveyed by Sang-A or by
any subsequent transferee of Sang-A without the written consent of Aviron, which
consent shall not be unreasonably withheld, provided that Aviron may refuse such
written consent if the proposed transferee is a competitor of Aviron as
determined by Aviron's Board of Directors, and provided further that no such
written consent shall be required if the transfer is made to a party who is not
a competitor of Aviron and who is an affiliate of Sang-A.
ARTICLE 16
MISCELLANEOUS
16.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement sets forth the entire
agreement and understanding between the parties and supersedes all previous
agreements, promises, representations, understandings and negotiations, whether
written or oral, between the parties with respect to the subject matter hereof.
None of the terms of this Agreement shall be amended or modified except in
writing signed by the parties hereto.
16.2 AGREEMENT REGISTRATION. Sang-A shall pay all costs and legal fees in
connection with registration of this Agreement with the appropriate Korean
authorities, including without limitation all filings necessary to qualify this
agreement as a Technology Inducement Agreement under the Foreign Capital
Inducement Act (FCIA) of 1960. Prior to the Effective Date, Sang-A shall also
take all necessary steps, as expeditiously as possible, to secure the approval
of this Agreement by the Korean government.
16.3 ASSIGNMENT. Neither party may assign any right or obligation
hereunder without the prior written consent of the other party, except if such
assignment arises under a transaction in which the assigning party is selling
its entire business or a line of business to which this Agreement relates or
that party is being acquired by or merging with a third party. This Agreement
shall be binding upon and inure to the benefit of the parties' respective
successors and assigns. Any attempted assignment in violation of this provision
shall be void and of no effect.
20.
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16.4 SEVERABILITY. If, and solely to the extent that, any provision of
this Agreement shall be invalid or unenforceable, or shall render this entire
Agreement to be unenforceable or invalid, such offending provision shall be of
no effect and shall not affect the validity of the remainder of this Agreement
or any of its provisions; PROVIDED, HOWEVER, the parties shall use their
respective reasonable efforts to renegotiate the offending provisions to best
accomplish the original intentions of the parties.
16.5 WAIVERS. A waiver by either party of any term or condition of this
Agreement in any one instance shall not be deemed or construed to be a waiver of
such term or condition for any similar instance in the future or of any
subsequent breach hereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement shall be cumulative and none of them
shall be a limitation of any other remedy, right, undertaking, obligation or
agreement.
16.6 FURTHER DOCUMENTS. Each party hereto agrees to execute such further
documents and take such further steps as the other party reasonably determines
may be necessary or desirable to effectuate the purposes of this Agreement.
16.7 COMPLIANCE WITH LAW. Each party hereto shall comply with all
applicable laws, rules, ordinances, guidelines, consent decrees and regulations
of any federal, state or other governmental authority.
16.8 FORCE MAJEURE. No party shall be liable for failure to perform or
delay in performing obligations set forth in this Agreement, and no party shall
be deemed in breach or default of its obligations, if, to the extent and for so
long as, such failure, delay, breach or default is due to natural disasters or
any similar causes reasonably beyond the control of such party. The parties
agree that blocked currency shall not qualify as a Force Majeure. Any party
desiring to invoke the protection of Force Majeure shall promptly notify the
other party of such desire and shall use reasonable efforts to resume
performance of its obligations. In the event a delay covered by this Section
exceeds one (1) year, this Agreement shall be terminable upon written notice by
the aggrieved party.
16.9 DISPUTE RESOLUTION. In the event a dispute arises between the
parties relating to the validity, construction, enforceability or performance of
this Agreement or any alleged breach or the grounds for the termination thereof
(a "DISPUTE"), the aggrieved party shall notify the other party in writing of
such Dispute, and the parties shall attempt to resolve such dispute in good
faith. If, within thirty (30) days of such written notice, the parties have not
succeeded in resolving the Dispute, the matter shall be referred by the
aggrieved party for review and resolution by the Chief Executive Officers
("CEOS") of Aviron and Sang-A. The CEOs shall attempt in good faith to resolve
the Dispute for a period of thirty (30) days. If no successful resolution of
the Dispute has been mutually agreed to at the end of this period, either party
shall be free to seek legal or equitable relief under Section 16.10.
16.10 GOVERNING LAW; JURISDICTION. This Agreement is deemed to have been
entered into in the State of California, United States of America, and its
interpretation,
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construction, and the remedies for its enforcement or breach are to be applied
pursuant to and in accordance with the laws of the State of California. In any
legal action relating to this Agreement, each party agrees (a) to the exercise
of jurisdiction over it by a state or federal court in California, and (b) that
if such party brings an action it shall be instituted in one of the courts
specified in clause (a) above. Each party acknowledges and agrees that any
judgment rendered in any such legal action may be enforced against it through
the courts or other relevant authorities in any country or jurisdiction in which
it now or may in the future maintain a principal place of business, and each
party hereby irrevocably consents to all processes in connection with any such
enforcement.
16.11 OFFICIAL LANGUAGE. The official text of this Agreement and any
appendices, exhibits and schedules hereto, or any notice given or accounts or
statements required by this Agreement shall be in English. In the event of any
dispute concerning the construction or meaning of this Agreement, reference
shall be made only to this Agreement as written in English and not to any other
translation into any other language.
16.12 NOTICES. Any notice, consent or approval permitted or required
under this Agreement shall be in writing sent by registered or certified
airmail, postage pre-paid, or by overnight courier or by facsimile (confirmed by
mail) and addressed as follows:
If to Sang-A: SANG-A PHARM. CO., LTD.
640-9 Deung Chon Dong
Kangseo-Ku
Seoul
South Korea
Attention: Research and Development Department
with a copy to: HANBO GROUP
316, Daechi-Dong
Kangnam-Gu
C.P.O. Box 6226
Seoul
South Korea
Attention: International Legal Department
If to Aviron: AVIRON
1450 Rollins Road
Burlingame, California 94010
Attention: J. Leighton Read
with a copy to: COOLEY GODWARD CASTRO HUDDLESON & TATUM
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barbara A. Kosacz, Esq.
22.
<PAGE>
All notices shall be deemed to be effective on the date of mailing. In case any
party changes its address at which notices are to be received, written notice of
such change shall be given as soon as practicable to the other party.
16.13 HEADINGS. Headings in this Agreement are included for ease of
reference only and shall have no legal effect.
16.14 RELATIONSHIP OF THE PARTIES. Nothing hereunder shall be deemed to
authorize either party to act for, represent or bind the other except as
expressly provided in this Agreement.
16.15 PUBLICITY. Neither party shall issue any press release or other
publicity materials, or make any presentation with respect to the existence of
this Agreement or the terms and conditions hereof without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
This restriction shall not apply to disclosures required by law or regulation,
including as may be required in connection with any filings made with the
Securities and Exchange Commission or by the disclosure policies of a major
Stock Exchange.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their duly authorized officers.
AVIRON SANG-A PHARM. CO., LTD.
By: /s/ L. Read By: /s/ W. K Chung
-------------------------- --------------------------
J. Leighton Read Won Keun Chung
Title: Chairman of the Board Title: Vice Chairman
and Chief Executive Officer
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE 0F CALIFORNIA ) CAPACITY CLAIMED BY SIGNER
COUNTY OF SANTA CLARA ) Though statute does not
require the Notary to fill in
the data below, doing so may
prove invaluable to persons
relying on the document.
On May 3, 1995 before me, C. Cassandrea Miller / / Individual
personally appeared Won Keun Chung /X/ Corporate Officer(s)
Vice Chairman
/ / personally known to me / / Partner(s) / / Limited
-or- / / General
/X/ proved to me on the basis of / / Attorney-in-Fact
satisfactory evidence
to be the person(s) whose name(s) / / Trustee(s)
is/are subscribed to the within / / Guardian/Conservator
instrument and acknowledged to me / / Other:
that he/she/they executed the -----------------
same in his/her/their authorized -----------------------
capacity(ies), and that by his/
her/their signature(s) on the
instrument the person(s) or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
- --------------------------
OFFICIAL SEAL SIGNER IS REPRESENTING:
C. CASSANDREA MILLER Name of person(s) or
Notary Public - California entity(ies)
SANTA CLARA COUNTY Witness my hand and
My Commission Expires official seal. -----------------------
July 10, 1995
- -------------------------- -----------------------
/s/ C. Cassandrea Miller
------------------------
Signature of the Notary
- --------------------------------------------------------------------------------
This certificate must be Title or Type of Document: License Agreement
attached to the document Number of Pages: 83 Data of Document: 5/3/95
described at right:
Signer(s) other than named above:
---------------
*1993 National Notary Assocation. Canoga Park, CA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE 0F CALIFORNIA ) CAPACITY CLAIMED BY SIGNER
COUNTY OF SANTA CLARA ) Though statute does not
require the Notary to fill in
the data below, doing so may
prove invaluable to persons
relying on the document.
On May 3, 1995 before me, C. Cassandrea Miller / / Individual
personally appeared J. Leighton Read /X/ Corporate Officer(s)
Chairman & CEO
/ / personally known to me / / Partner(s) / / Limited
-or- / / General
/X/ proved to me on the basis of / / Attorney-in-Fact
satisfactory evidence
to be the person(s) whose name(s) / / Trustee(s)
is/are subscribed to the within / / Guardian/Conservator
instrument and acknowledged to me / / Other:
that he/she/they executed the -----------------
same in his/her/their authorized -----------------------
capacity(ies), and that by his/
her/their signature(s) on the
instrument the person(s) or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
- --------------------------
OFFICIAL SEAL SIGNER IS REPRESENTING:
C. CASSANDREA MILLER Name of person(s) or
Notary Public - California entity(ies)
SANTA CLARA COUNTY Witness my hand and
My Commission Expires official seal. -----------------------
July 10, 1995
- -------------------------- -----------------------
/s/ C. Cassandrea Miller
------------------------
Signature of the Notary
- --------------------------------------------------------------------------------
This certificate must be Title or Type of Document: License Agreement
attached to the document Number of Pages: 83 Data of Document: 5/3/95
described at right:
Signer(s) other than named above:
---------------
*1993 National Notary Assocation. Canoga Park, CA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Exhibit A
DEFINITIONS
"AFFILIATE" shall mean any entity that directly or indirectly Owns, is
Owned by or is under common Ownership with, a party to this Agreement, where
"Own" or "Ownership" means direct or indirect possession of at least
[ ] of the outstanding voting securities of a corporation or a
comparable equity interest in any other type of entity.
"ARCH AGREEMENT" shall mean License Agreement between ARCH Development
Corporation (University of Chicago) and Aviron dated as of July 1, 1992
"AVIRON DATA" shall mean all data arising out of all [
] all to the extent Aviron has the right to disclose and/or
license the use of such information to Sang-A.
"AVIRON TECHNOLOGY" shall mean Licensed Patents and Technical Information.
"CLINICAL MATERIALS" shall mean, with respect to each Partner Product, any
materials, including without limitation, [
] In specific, with respect to the Cold Adapted Influenza
Product, Clinical Materials shall be comprised of [ ]
"COLD ADAPTED INFLUENZA AGREEMENT"" shall mean that certain Materials
Transfer and Intellectual Property Agreement entered into by and between Aviron
and the University of Michigan, effective as of February 24, 1995, appended
hereto as Exhibit B.
"COLD ADAPTED INFLUENZA PRODUCT" means any vaccine product which (i) is
covered by a valid claim of a Patent, as defined in Section 2.8 of the Cold
Adapted Influenza Agreement or (ii) incorporates, or the manufacture, use or
sale of which utilizes, Master Strains or Know-How, as defined in Sections 2.6
and 2.5, respectively, of the Cold Adapted Influenza Agreement.
"CONFIDENTIAL INFORMATION" shall mean any confidential information, data,
and any other information relating to (i) any Aviron Technology, research
project, work in process, future development, scientific engineering,
manufacturing, marketing, business plan, financial or personnel matter relating
to either party, its present or future products, sales, suppliers, customers,
employees, investors or business, whether in oral, written, graphic or
electronic
A-1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
form, or (ii) any of Aviron's licensors' technology, know-how, improvements,
patents or biological materials. Confidential Information shall also include
any Clinical Materials transferred from Aviron to Sang-A during this Agreement
for use hereunder.
"EFFECTIVE DATE" shall mean the date this Agreement is deemed approved by
the Korean government, if such approval is necessary. Otherwise, the Effective
Date shall be the date this Agreement is signed.
"FIRST COMMERCIAL SALE" shall mean the first sale for use or consumption by
the general public of a Partner Product in South or North Korea, as the case may
be, after all required Government Approvals have been granted.
"GMP" shall mean the Good Manufacturing Practice regulations promulgated by
the U.S. Food and Drug Administration or its equivalent in another country.
"GOVERNMENT APPROVAL" shall mean any approvals, licenses, registrations or
authorizations of any federal, state or local regulatory agency, ministry,
department, bureau or other government entity necessary for the development,
use, marketing, sale or distribution of any Partner Products.
"IND" (OR, "INVESTIGATIONAL NEW DRUG APPLICATION") shall mean an
application to the U.S. Food and Drug Administration ("FDA") to commence human
clinical testing of a drug, or its equivalent in another country.
"INVENTIONS" shall mean any and all ideas, inventions or discoveries
relating to (i) the Aviron Technology, including without limitation any new uses
thereof, or (ii) processes, techniques, methods, or the like useful for the
manufacture of any Partner Product, which are made, created, conceived or
reduced to practice by or on behalf of Sang-A or by Aviron or acquired by
Aviron, during the term of this Agreement, and any and all patents, patent
applications and patent rights, and any substitutions, divisionals,
provisionals, continuations, continuations-in-part, renewals, reissues,
confirmations or registrations, and extensions thereof which are appurtenant to
such inventions or discoveries.
"LICENSED FIELD" means [
]
"LICENSED PATENTS" shall mean all patent applications (including
substitutions, continuations, continuations-in-part, divisionals and
provisionals) and patents (including renewals, reissues, confirmations or
registrations, and extensions thereof) in South and North Korea now owned or
licensed (with right to sublicense) or hereafter acquired or licensed during the
term of this Agreement (with right to sublicense), by or on behalf of Aviron or
any of its Affiliates, claiming inventions necessary or useful to the
development, manufacture, use or sale of a Partner Product.
A-2
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
"MANUFACTURING APPROVALS" shall mean all necessary regulatory approvals
related to the manufacture of a Partner Product for use in a given country.
"MASTER SEEDS" means [
]
"MASTER STRAIN" means [
] licensed to Aviron pursuant to the
Cold Adapted Influenza Agreement.
"NDA" (OR "NEW DRUG APPLICATION") shall mean an application to FDA to
commence commercial sale of a drug, or its equivalent in another country.
"NET SALES" shall mean the actual gross invoice price of each Partner
Product sold by Sang-A, its Affiliates or sublicensees to third parties less, to
the extent included therein, the total of (i) ordinary and customary trade
discounts, (ii) sales and excise taxes, and other similar taxes, customs, duty
and compulsory payments to governmental authorities (other than income taxes)
actually paid or deducted and related to the sale, and (iii) credits given to
customers for rejects or returns of the Partner Product, all as determined in
accordance with generally accepted accounting principles ("GAAP"), consistently
applied. For purposes of this definition, sales by Sang-A to an Affiliate do
not constitute third party sales and are not included in Net Sales.
"PARTNER PRODUCTS" shall mean each of the products listed on Schedule 1, as
amended from time to time, and any improvements thereto, all as and to the
extent developed by or on behalf of Aviron outside South and North Korea [
]
"TECHNICAL INFORMATION" shall mean all know-how, trade secrets, inventions,
data, technology and other information now owned or licensed (with right to
sublicense) by Aviron, or hereafter acquired or licensed (with right to
sublicense) by Aviron during the term of this Agreement which are necessary or
useful to the formulation, development, manufacture or sale of Partner Products
including, but not limited to, [
]
A-3
<PAGE>
EXHIBIT B
(See Exhibit 10.3 to the Registration Statement on Form S-1 filed
on behalf of Aviron with the SEC.)
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
PRIMARY RESTRICTIONS REGARDING COLD-ADAPTED INFLUENZA
All references to Section and Article numbers in this Exhibit are to the Cold
Adapted Influenza Agreement, appended to this Agreement as Exhibit B.
a. SECTION 4.3. All Master Seeds, including all derivatives made by Sang-
A, shall be the property of Michigan.
b. SECTIONS 4.4 AND 4.6. Sang-A shall not provide any Master Seeds or
derivatives thereof to any third party. Sang-A shall limit access to such
materials to those employees reasonably requiring such access [
] which employees are further obligated in writing to treat
those materials in a confidential manner and not to provide same to any third
party.
c. SECTION 4.6, Article 16. Sang-A must keep confidential, and not use
except as provided in the Cold Adapted Influenza Agreement, the Master Seeds,
and any know-how or technical data related thereto, for a period of [
] after termination of the Cold Adapted Influenza
Agreement. This undertaking is subject to the usual exceptions (publication,
disclosure by a third party, legally required to be disclosed, etc.).
d. SECTION 4.7. Sang-A will use its best efforts to manufacture and store
the Master Seeds and Cold Adapted Influenza Products in accordance with all
applicable government laws and regulations.
e. SECTION 4.8. Michigan shall have the right to request from Sang-A, at
reasonable intervals and quantities, such batch samples of vaccine products as
it may desire for non-human research purposes only.
f. SECTION 6.2-6.4. Sang-A shall consistently employ a system of specific
nomenclature and type designations for Cold Adapted Influenza Products so that
various types can be identified in reports owed to Aviron (and by Aviron to
Michigan) under Section 7.5 of this Agreement.
g. ARTICLE 9. At least once every (6) months Sang-A will report to Aviron
relating to any "Technological Data" (as defined in Section 2.14) and
"Improvements" (as defined in Section 2.3) generated by Sang-A during such
reporting period. This report will be forwarded to Michigan. Michigan retains
an irrevocable, royalty-free license to all Technological Data and Improvements
to use in the manufacture, use or sale of Cold Adapted Influenza Products.
h. ARTICLES 13 AND 14. Michigan makes no representations or warranties
regarding the Master Strains. In addition, Sang-A agrees not to make any
statements, representations or warranties inconsistent with such disclaimer.
Sang-A must defend, indemnify and hold harmless Michigan, its fellows, officers,
employees and agents for and against any and all claims,
C-1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
damages, losses, and expenses of any nature resulting from, but not limited to,
death, personal injury, illness, property damage, economic loss or products
liability arising from or in connection with (i) any manufacture, use or other
disposition by Sang-A of the Master Seeds or vaccine products, (ii) the direct
or indirect use by any person of Master Seeds or vaccine products made or used
by Sang-A, (iii) the use, handling, storage or disposal of Master Seeds, any
derivatives or products by Sang-A, and (iv) the use bv Sang-A of anv know-how or
technical data sublicensed from Michigan. Finally, [
] in accordance
with Section 14.3.
i. ARTICLE 15. SECTION 4.5. The sublicense to Sang-A of the Cold Adapted
Influenza Product must terminate upon termination of the Cold Adapted Influenza
Agreement. In such event, at Michigan's option, Sang-A must destroy or return
to Michigan (or to Aviron, for return to Michigan) [
] Further, in such event Sang-A must also provide to Michigan any
technical data or information relating to the manufacture of the Cold Adapted
Influenza Product generated by Sang-A, which Michigan shall have an irrevocable,
royalty-free right to use in the manufacture, use or sale of such Products.
j. ARTICLE 20. Sang-A must comply with all applicable laws regarding the
testing, production, transportation, export, packaging, labeling, sale or use of
Cold Adapted Influenza Products.
k. ARTICLE 22. Sang-A must refrain from using the name of Michigan in
publicity or advertising without the prior written consent of Michigan.
C-2
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
May__, 1995
J. Leighton Read, M.D.
Chief Executive Officer
Aviron
1450 Rollins Road
Burlingame, CA 94010
Dear Dr. Read:
The undersigned ("Purchaser") hereby makes the following certifications and
representations with respect to the two million nine hundred forty-one thousand
eight hundred sixty-three (2,941,863) shares (the "Shares") of Series C
Preferred, Stock of Aviron, a California corporation (the "Company"), which are
being acquired by the undersigned for a cash consideration of $3,971,515.
1. AUTHORIZATION. Purchaser has all the requisite power and is duly
authorized to execute and deliver the License and Development Agreement and each
other agreement contemplated thereby and has taken all necessary action to
consummate the transactions contemplated thereby. The License and Development
Agreement and each other agreement contemplated thereby have been duly executed
and delivered by Purchaser and constitute valid and binding obligations of
Purchaser, enforceable in accordance with their respective terms subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors.
2. ACCREDITED INVESTOR. Purchaser is an accredited investor within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act").
3. EXPERIENCE. Purchaser, alone or together with its advisors, is
experienced in evaluating and investing in start-up biomedical research
companies such as the Company.
4. INVESTMENT. Purchaser is acquiring the Shares for investment for its
own account and not with a view to, or for resale in connection with, any
distribution thereof, and it has no present intention of selling or distributing
the Shares or the Common Stock issuable upon conversion of the Shares (the
"Underlying Stock"). Purchaser understands that the Shares (and the Underlying
Stock) to be purchased by it have not been registered under the Securities Act
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein.
D-1
<PAGE>
5. RULE 144 AND RULE 144A. Purchaser acknowledges that, because they
have not been registered under the Securities Act, the Shares (and the
Underlying Stock) it is purchasing must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser is aware of the provisions of Rule 144 and Rule 144A
promulgated under the Securities Act, which rules permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions.
6. NO PUBLIC MARKET. Purchaser understands that no public market now
exists for any of the securities issued by the Company and that it is
uncertain whether a public market will ever exist for the Shares or the
Underlying Stock.
7. ACCESS TO DATA. Purchaser has received and reviewed such information
that such Purchaser deemed necessary to make an informed decision concerning the
purchase of the Shares and has had an opportunity to discuss the Company's
business, management and financial affairs with its management.
The Purchaser further agrees not to make any disposition of all or any part of
the Shares in any event unless and until:
a. The Company shall have received a letter secured by the Purchaser from
the Securities and Exchange Commission stating that no action will be
recommended to the Commission with respect to the proposed disposition; or
b. There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
c. (i) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, (ii) the Purchaser shall
have furnished the Company with an opinion of counsel for the Purchaser to the
effect that such disposition will not require registration of such shares under
the Act, and (iii) such opinion of counsel for the Purchaser shall have been
concurred in by the Company's counsel and the Company shall have advised the
Purchaser of such concurrence.
D-2
<PAGE>
The Purchaser understands and agrees that all certificates evidencing the shares
to be issued to the Purchaser may bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
SANG-A PHARM. CO., LTD.
By
---------------------------------
Won Keun Chung
Vice Chairman
D-3
<PAGE>
EXHIBIT E
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
AVIRON
J. Leighton Read and Alan C. Mendelson certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Aviron, a California corporation (the "Corporation").
2. The Articles of Incorporation of this Corporation are amended and
restated as follows:
"I.
The name of this corporation is Aviron.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Ninety-Six Million
(96,000,000) shares. Fifty-Three Million (53,000,000) shares shall be Common
Stock. Forty-Three Million (43,000,000) shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or more series.
Subject to the protective provisions set forth in Section 5 below, the Board of
Directors is hereby authorized to fix or alter the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or prices, and the
liquidation preferences of any wholly unissued series of Preferred Stock, and
the number
E-1
<PAGE>
of shares constituting any such series and the designation thereof, or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
that they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
B. Five million two hundred twenty-five thousand (5,225,000) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock." Eighteen million six hundred fifty thousand (18,650,000) of the
authorized shares of Preferred Stock are hereby designated "Series B Preferred
Stock," and eighteen million (18,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series C Preferred Stock." The Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock are collectively
referred to as the "Preferred Stock."
C. The respective rights, preferences, privileges, restrictions and other
matters relating to the Preferred Stock are as follows:
1. DIVIDENDS. The holders of the Preferred Stock shall be entitled to
receive, payable in preference and priority to the holders of Common Stock, when
and as declared by the Board of Directors, out of any assets at the time legally
available therefor, dividends at the rate of:
(a) with respect to the Series A Preferred Stock, $.05 per share per
annum (as appropriately adjusted for any combination, consolidation, stock
distribution, stock dividend, stock split or similar event with respect to such
shares (a "Recapitalization"));
(b) with respect to the Series B Preferred Stock, $.09 per share per
annum (as adjusted for any Recapitalization); and
(c) with respect to the Series C Preferred Stock, $.135 per share
per annum (as adjusted for any Recapitalization).
Such dividends shall not be cumulative and no right to such dividends shall
accrue to holders of Preferred Stock unless declared by the Board of Directors.
No dividends shall be declared or paid with respect to the Common Stock (other
than a dividend payable solely in Common Stock of the Corporation) unless a
dividend of equal or greater amount per share (on an as-if-converted to Common
Stock basis) is first declared and paid with respect to the Preferred Stock.
Each share of Preferred Stock shall rank on parity with every other share of
Preferred Stock, irrespective of series, with regard to dividends, and no
dividends shall be paid, declared or set apart for payment on the shares of any
series of Preferred Stock unless at the same time a
E-2
<PAGE>
dividend for the same percentage of the respective dividend rates shall also be
paid, declared or set apart for payment, as the case may be, on the shares of
Preferred Stock or each other series then outstanding.
So long as any shares of Preferred Stock shall be outstanding, no dividend,
whether in cash or property, shall be paid or declared, nor shall any other
distribution be made, on any Common Stock, nor shall any shares of the Common
Stock of the Corporation be purchased, redeemed, or otherwise acquired for value
by the Corporation (except for acquisitions of Common Stock by the Corporation
from the founders, directors, employees or consultants of the Corporation
pursuant to agreements which permit the Corporation to repurchase such shares
upon termination of an employment or consulting relationship or in exercise of
the Corporation's right of first refusal upon a proposed transfer) until all
accrued but unpaid dividends on the Preferred Stock shall have been paid or
declared and set apart. In the event dividends are paid on any share of Common
Stock, an additional dividend shall be paid with respect to all outstanding
shares of Preferred Stock in an amount for each such share of Preferred Stock
equal to the aggregate amount of such dividends for all shares of Common Stock
into which each such share of Preferred Stock could then be converted. The
provisions of this Section l(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Common Stock in
exchange for shares of any other Common Stock, or (iii) any repurchase of any
outstanding securities of the Corporation that is approved by the Corporation's
Board of Directors.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the Series A
Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Common Stock by
reason of their ownership thereof, the amount of S.50, $.90, and $1.35 per
share, respectively (appropriately adjusted for any Recapitalization), plus all
declared but unpaid dividends on such share for each share of Series A Preferred
Stock, Series B Preferred Stock, or Series C Preferred Stock then held by them.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among the holders of the Preferred Stock in proportion to
the full amounts to which they would otherwise be entitled and in proportion to
the number of shares of Preferred Stock then held by them.
(b) After payment to the holders of Preferred Stock of the amount set
forth in subparagraph (a) above, the entire remaining assets and funds of the
Corporation legally
E-3
<PAGE>
available for distribution, if any, shall be distributed among the holders of
the Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by them (assuming conversion of all Preferred Stock).
(c) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Corporation, other transaction or series of related transactions
resulting in a change of voting control shall be deemed a liquidation,
dissolution or winding up within the meaning of this Section 2 if (a) more than
50% of the outstanding securities of each class of the surviving entity, or (b)
an interest in equity securities representing at least 50% of the voting power
or at least 50% of the equity interest in the surviving entity, is not owned by
persons who were holders of capital stock or securities convertible into capital
stock of the Corporation immediately prior to such merger, consolidation or
sale; provided, however, that the sale of Preferred Stock to private investors
pursuant to a Preferred Stock Purchase Agreement shall not constitute a
liquidation, dissolution or winding up within the meaning of this section.
3. VOTING RIGHTS. Except as otherwise expressly provided herein or as
required by law, the holder of each share of Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
such share of Preferred Stock could be converted on the record date for the vote
or the date of the solicitation of any written consent of shareholders and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
4. CONVERSION. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock. The number of fully paid and nonassessable shares of Common
Stock to which a holder of Series A Preferred Stock shall be entitled upon
conversion shall be the product obtained by multiplying the "Series A Conversion
Rate" then in effect (determined as provided in Section 4(b)) by the number of
shares of Series A Preferred Stock being converted. The number of fully paid
and nonassessable shares of Common Stock to which a holder of Series B Preferred
Stock shall be entitled upon conversion shall be the product obtained by
multiplying the "Series B Conversion Rate" then in effect (determined as
provided in Section 4(c)) by the number of shares of Series B Preferred
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being converted. The number of fully paid and nonassessable shares of Common
Stock to which a holder of Series C Preferred Stock shall be entitled upon
conversion shall be the product obtained by multiplying the "Series C Conversion
Rate" then in effect (determined as provided in Section 4(d)) by the number of
shares of Series C Preferred being converted.
(b) SERIES A CONVERSION RATE. The conversion rate in effect at any
time for conversion of the Series A Preferred Stock (the "Series A Conversion
Rate") shall be the quotient obtained by dividing $.50 by the "Series A
Conversion Price," calculated as provided in Section 4(e).
(c) SERIES B CONVERSION RATE. The conversion rate in effect at any
time for conversion of the Series B Preferred Stock (the "Series B Conversion
Rate") shall be the quotient obtained by dividing $.90 by the "Series B
Conversion Price," calculated as provided in Section 4(e).
(d) SERIES C CONVERSION RATE. The conversion rate in effect at any
time for conversion of the Series C Preferred Stock (the "Series C Conversion
Rate") shall be the quotient obtained by dividing $1.35 by the "Series C
Conversion Price," calculated as provided in Section 4(e).
(e) CONVERSION PRICE. The conversion price for the Series A
Preferred Stock shall initially be $.50 (the "Series A Conversion Price"). The
conversion price of the Series B Preferred Stock shall initially be S.90 (the
"Series B Conversion Price"). The conversion price of the Series C Preferred
Stock shall initially be $1.35 (the "Series C Conversion Price"). Such initial
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price (the "Conversion Prices") shall be adjusted from time to time in
accordance with this Section 4. All references to the Conversion Prices
herein shall mean the Conversion Prices as so adjusted.
(f) AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price immediately upon (i) the closing of the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act of 1933, as amended (other than a
registration relating solely to a transaction under Rule 145 under such Act (or
any successor thereto) or to an employee benefit plan of the Company), at a
public offering price equal to or exceeding $2.50 per share of Common Stock
(appropriately adjusted for any Recapitalization) and the aggregate net proceeds
to the Corporation (before deduction for underwriter commissions and expenses
relating to the issuance, including without limitation fees of the Corporation's
counsel) of which equal or exceed $10,000,000 or (ii) upon receipt by the
Corporation of the affirmative vote at a duly noticed shareholders meeting or
pursuant to a duly
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solicited written consent of approval of the holders of at least a majority of
the then outstanding shares of the Series A Preferred Stock, the Series B
Preferred Stock, and the Series C Preferred Stock, voting together as a single
class in favor of the conversion of all of the shares of Preferred Stock into
Common Stock.
(g) MECHANICS OF CONVERSION. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, the holder
shall surrender the certificate or certificates thereof, duly endorsed, at the
office of the Corporation or of any transfer agent for such stock, and shall
give written notice to the Corporation at such office that he elects to convert
the same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Preferred Stock to be
converted, except that in the case of an automatic conversion pursuant to
Section 4(f) hereof, such conversion shall be deemed to have been made (i)
immediately prior to the closing of the offering referred to in Section 4(f)(i)
or (ii) immediately upon the approval by vote or written consent referred to in
Section 4(f)(ii) above, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(h) ADJUSTMENTS TO CONVERSION PRICE.
(i) SPECIAL DEFINITIONS. For purposes of this Section 4(h)
"ORIGINAL Issue Date" shall mean the date on which a share of Preferred Stock
was first issued.
(ii) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS OF COMMON
STOCK. In the event the Corporation at any time or from time to time after the
Original Issue Date shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise), or in
the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the respective Conversion Prices of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.
(i) OTHER DISTRIBUTIONS. In the event the Corporation shall at any
time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the
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Corporation or any of its subsidiaries, then in each such event provision shall
be made so that the holders of Preferred Stock shall receive, upon the
conversion thereof, the securities of the Corporation or any of its subsidiaries
which they would have received had their stock been converted into Common Stock
on the date of such event.
(j) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(k) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause independent public
accountants selected by the Corporation to verify such computation and prepare
and furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of Preferred Stock.
(l) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive shares of
Common Stock, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Preferred Stock at
least 20 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, security or right, and the amount and character of such dividend,
distribution, security or right.
(m) ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
shares of Preferred Stock pursuant
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hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to this Articles of
Incorporation.
(o) CONSENT TO CERTAIN DISTRIBUTIONS. Each holder of Preferred Stock
shall be deemed to have consented for purposes of Sections 502, 503 and 506 of
the General Corporation Law to distributions and payments made by the
Corporation and approved by the Board of Directors of the Corporation in
connection with the repurchases of shares of Common Stock issued or to held by
directors, board advisors and employees of, or consultants to, the Corporation
upon termination of their employment or services.
(p) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
(q) NOTICES. Any notice required by the provisions of this Section 4
to be given to the holders of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation.
Notwithstanding the above, any notice or communication to an address outside the
United States shall be sent by telecopy and confirmed in writing sent by courier
guaranteeing delivery in no more than two (2) business days.
(r) ADJUSTMENTS. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into
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another corporation or corporations, or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Preferred Stock shall thereafter be convertible into the number of shares of
stock or other securities or property (including cash) to which a holder of the
number of shares of Common Stock deliverable upon conversion of such share of
Preferred Stock would have been entitled upon the record date of (or date of, if
no record date is fixed) such reorganization, reclassification, consolidation,
merger or conveyance; and, in any case, appropriate adjustment (as determined by
the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of such Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Preferred
Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as at least 5,000,000 of the
authorized shares of Preferred Stock remain outstanding, the Corporation shall
not, without the vote or written consent by the holders of majority of the then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, and
Series C Preferred Stock, voting together as a single class on an as-converted
basis:
(a) Amend, repeal or waive any provision of, or add any provision to,
the Corporation's Articles of Incorporation if such action would alter or change
in an adverse manner the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Preferred Stock;
(b) Increase the total number of authorized shares of Common Stock or
Preferred Stock of the Corporation or the number of shares designated as any
series of Preferred Stock;
(c) Authorize or issue, or obligate itself to issue, any other equity
security senior to the Series A Preferred Stock Series B Preferred Stock or
Series C Preferred Stock as to dividend or redemption rights, liquidation
preferences, conversion rights, voting rights or otherwise, or create any
obligation or security convertible into or exchangeable for, or having any
option rights to purchase, any such equity security which is senior to the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
provided, however, that an equity security issued subsequent to the issuance of
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock for a share price and corresponding liquidation price higher than that of
the Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred
Stock shall not be deemed senior to the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock solely by reason of such share price
and liquidation price;
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(d) Do any act or thing which would result in taxation of the holders
of shares of the Preferred Stock under Section 305 of the Internal Revenue
Code of 1968, as amended (the "Code") (or any comparable provision of the Code
as hereafter from time to time amended);
(e) Effect any sale or other conveyance of all or substantially
all of the assets of the Corporation or any of its subsidiaries, or any
consolidation or merger involving the Corporation or any of its subsidiaries
with or into any other corporation, if more than 50% of the surviving entity
is not owned by persons who were holders of capital stock or securities
convertible into capital stock of the Corporation immediately prior to such
merger, consolidation or sale; or
(f) Set aside any amounts for or purchase, or declare or pay any
dividend or make any other distribution on, any shares of capital stock other
than the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, except for repurchases required by current agreements with
directors, consultants or employees.
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be returned to the
status of undesignated shares of Preferred Stock.
IV.
A. The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) for breach of
duty to the corporation and its shareholders through bylaw provisions or through
agreements with the agents, or through shareholder resolutions, or otherwise, to
the fullest extent permitted by California law.
C. Any repeal or modification of this Article shall only be prospective
and shall not affect the rights under this Article in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification."
3. The foregoing Amended and Restated Articles of Incorporation has been
duly approved by the board of directors.
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4. The foregoing Amended and Restated Articles of Incorporation has been
duly approved by the required vote of shareholders in accordance with Sections
902 and 903 of the Corporations Code. The total number of outstanding shares of
the corporation is 3,486,370 shares of Common Stock, 5,000,000 shares of Series
A Preferred Stock and 17,990,401 shares of Series B Preferred Stock. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50% of the Common Stock,
50% of the Series A Preferred Stock and Series B Preferred Stock voting together
as a separate class and more than 50% of the Common Stock and Preferred Stock
voting together on an as-converted basis.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
DATE:
--------------
----------------------------------------
J. Leighton Read, Chief Executive Officer
----------------------------------------
Alan C. Mendelson, Secretary
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CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 1
PARTNER PRODUCTS
1) Cold adapted influenza vaccine
2) Recombinant influenza vaccine
3) Respiratory syncytial virus vaccine
4) Herpes simplex virus vaccine
5) [ ]
6) Cytomegalovirus vaccine
7) Epstein-Barr virus vaccine
8) [ ]
9) [ ]
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<PAGE>
SCHEDULE 2
PRIOR LICENSE AGREEMENTS OF AVIRON
License Agreement between ARCH Development Corporation (University of Chicago)
and Aviron dated as of July 1, 1992
Technology Transfer Agreement between Mount Sinai School of Medicine of the City
University of New York and Aviron dated as of February 9, 1993
Cold Adapted Influenza Agreement between Aviron and the University of Michigan
dated as of February 24, 1995
Public Health Service Cooperative Research and Development Agreement between the
National Institutes of Health and Aviron
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CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 3
MANUFACTURING TERRITORY
1) United States of America
2) [ ]
3) [ ]
4) [ ]
5) [ ]
6) [ ]
7) [ ]
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<PAGE>
EXHIBIT 10.6
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN DELETED, AS
MARKED BY BRACKETS, AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
PUBLIC HEALTH SERVICE
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
This Cooperative Research and Development Agreement, hereinafter referred
to as the "CRADA," consists of this Cover Page, an attached Agreement, a
Signature Page, and various Appendices referenced in the Agreement. This
Cover Page serves to identify the Parties to this CRADA:
(1) the following Bureau(s), Institute(s), or Division(s) of the National
Institutes of Health: NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS
DISEASES, ("NIAID"), hereinafter singly or collectively referred to as the
"NIH;" and
(2) AVIRON, which has offices at 1450 Rollins Road, Burlingame, CA 94010,
hereinafter referred to as the "Collaborator."
Our proposal, including its attachments, contain confidential commercial
information. Pursuant to 45 C. F. R. Section 5.65, we have designated
those pages that include such confidential information with a stamp or in
the page footer. It is Aviron's position that such information is exempt
from disclosure under the Freedom of Information Act and we understand that
we will receive predisclosure notification of any request for information
we have designated as confidential which the Institute determines it is
required to disclose.
<PAGE>
NIH Patent Policy Board, April 24, 1989
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
Article 1. INTRODUCTION
This Cooperative Research and Development Agreement (CRADA) between NIH and
the Collaborator will be effective when signed by all parties. By signing this
CRADA, the Collaborator acknowledges that it has received and read a copy of the
Policy Statement on Cooperative Research and Development Agreements and
Intellectual Property Licensing which is attached as Appendix A. The research
and development project(s) which will be undertaken by each of the Parties in
the course of this CRADA are detailed in the Research Plan (RP) which is
attached as Appendix B. The funding and staffing commitments of the Parties are
set forth in Appendix C. Any exceptions or changes to the CRADA are set forth in
Appendix D.
Article 2. DEFINITIONS
As used in this CRADA, the following terms shall have the indicated
meanings:
2.1 "Cooperative Research and Development Agreement" or "CRADA" means
this agreement, entered into by NIH pursuant to the Federal Technology
Transfer Act of 1986 and Executive Order 12591 of October 10, 1987.
2.2 "Proprietary Information" means confidential scientific,
business, or financial information provided that such information:
2.2.1 is not publicly known or available from other sources who
are not under a confidentiality obligation to the source of
the information;
2.2.2 has not been made available by its owners to others without
a confidentiality obligation;
2.2.3 is not already known by or available to the receiving Party
without a confidentiality obligation; or
2.2.4 does not relate to potential hazards or cautionary warnings
associated with the production, handling, or use of the
subject matter of the Research Plan of this CRADA.
2.3 "Subject Data" means all recorded information first produced in
the performance of this CRADA.
2.4 "Research Results" means all tangible materials other than
Subject Data first produced in the performance of this CRADA.
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NIH Patent Policy Board, April 24, 1989
2.5 "Subject Invention" means any invention, conceived or reduced to
practice in the performance of research under this CRADA, that may be
patentable under 35 U.S.C. Section 101 or Section 161, protectable
under 7 U.S.D. Section 2321, or otherwise protectable by other types
of U.S. or foreign "Intellectual Property" ("IP") right.
2.6 "Government" means the U.S. Government and any of its agencies.
2.7 "Research Plan" or "RP" means the statement in Appendix B of the
respective research and development commitments of the Parties to this
CRADA.
2.8 "Principal Investigator" or "PI" means the persons designated
respectively by the Parties to this CRADA who will be responsible for
the scientific and technical conduct of the RP.
Article 3. COOPERATIVE RESEARCH
3.1 RESEARCH TEAM. The Parties agree to establish a joint research
and development team (hereinafter referred to as the "Team")
comprising at least the Principal Investigators designated pursuant to
Article 3.3 to conduct and monitor the research in accordance with the
RP. Although the members of the Team shall be considered as having
been delegated to the Team, they shall continue to remain employed by
their respective employers under their respective terms of employment.
3.2 REVIEW OF WORK. Periodic conferences shall be held by the Team to
review work progress. It is understood that the nature of this
cooperative research precludes a guarantee of its completion within
the specified period of performance or limits of allocated financial
or staffing support. Accordingly, research under this CRADA is to be
performed on a best efforts basis.
3.3 PRINCIPAL INVESTIGATORS. NIH research work under this CRADA will
be performed by the Laboratory identified in the RP, and the NIH
Principal Investigator (PI) designated in the RP will be responsible
for the scientific and technical conduct of this project on behalf of
NIH. Also designated in the RP is the Collaborator PI, who will be
responsible for the scientific and technical conduct of this project
on behalf of the Collaborator.
3.4 RESEARCH PLAN CHANGE. The RP may be modified by mutual written
consent of the Principal Investigators. Substantial changes in the
scope of the RP will be treated as amendments under Article 14.6.
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NIH Patent Policy Board, April 24, 1989
Article 4. REPORTS
4.1 INTERIM REPORTS. The Parties shall exchange formal written
interim progress reports on a schedule agreed to by the PIs, but at
least within six (6) months after this CRADA becomes effective and at
least within every six (6) months thereafter. Such reports shall set
forth the technical progress made, identifying such problems as may
have been encountered and establishing goals and objectives requiring
further effort.
4.2 FINAL REPORTS. The Parties shall exchange final reports of their
results within four (4) months after completing the projects described
in the RP or after the termination of this CRADA.
Article 5. FINANCIAL AND STAFFING OBLIGATIONS
5.1 NIH AND COLLABORATOR CONTRIBUTIONS. The NIH contribution to the
RP in the form of personnel, services, and property only is designated
in Appendix C. The Collaborator contribution to the RP in the form of
personnel, services, property, support for staffing and/or funding is
designated in Appendix C. Payment schedules, if applicable, are also
indicated in Appendix C.
5.2 INSUFFICIENT AND EXCESS FUNDS. NIH shall not be obligated to
perform any of the research specified herein or to take any other
action required by this CRADA if the funding is not provided as set
forth in Appendix C. NIH shall return excess funds to the Collaborator
when it sends its final fiscal report pursuant to Article 5.3, except
for staffing support pursuant to Article 11.3.
5.3 ACCOUNTING RECORDS. NIH shall maintain separate and distinct
current accounts, records, and other evidence supporting all its
obligations under this CRADA, and shall provide the Collaborator an
annual report reflecting the use of the Collaborator's funds and a
final such fiscal report at the time that final reports are exchanged
pursuant to Article 4.2.
Article 6. TITLE TO PROPERTY
6.1 CAPITAL EQUIPMENT. The purchase or use of capital equipment to
carry out this CRADA does not affect the ownership rights that would
otherwise apply. Equipment purchased by NIH with funds provided by
the Collaborator shall be the property of NIH. All capital equipment
provided under this CRADA by one party for the use of another Party
remains the property of the providing Party unless other disposition
is mutually agreed upon in writing by the PIs. If title to this
equipment remains with the providing Party, that Party is responsible
for maintenance of the equipment and the costs of its transportation
to and from the site where it will be used.
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NIH Patent Policy Board, April 24, 1989
Article 7. INTELLECTUAL PROPERTY RIGHTS AND APPLICATIONS
7.1 REPORTING. The Parties shall promptly report to each other in
writing each Subject Invention resulting from the research conducted
under this CRADA that is reported to them by their respective
employees. Such reports shall be treated in confidence by the
receiving Party until such time as a patent or other Intellectual
Property (IP) application, as appropriate, claiming that Subject
Invention has been filed. Because of the royalty sharing provisions
for Government inventors in the Federal Technology Transfer Act of
1986, and in view of Article 8.3 of this CRADA which grants the
Government only a research license on inventions made solely by the
Collaborator, the Collaborator acknowledges a special duty to report
all Subject Inventions to NIH so that NIH may determine whether or not
inventorship properly includes NIH investigators.
7.2 COLLABORATOR EMPLOYEE INVENTIONS. The Collaborator may elect to
retain IP rights to any Subject Invention made solely by a
Collaborator employee. The Collaborator shall notify NIH promptly
upon making this election. If the Collaborator does not elect to
retain its IP rights, the Collaborator shall offer to assign these IP
rights to the Subject Invention to NIH pursuant to Article 7.5. If NIH
declines such assignment, the Collaborator may release its IP rights
to employee inventors pursuant to Article 7.6.
7.3 NIH EMPLOYEE INVENTIONS. NIH, on behalf of the U.S. Government,
may elect to retain IP rights to each Subject Invention made solely by
NIH employees. If NIH does not elect to retain IP rights, NIH shall
offer to assign these IP rights to such Subject Invention to the
Collaborator pursuant to Article 7.5. If the Collaborator declines
such assignment, NIH may release IP rights in such Subject Invention
to its employee inventors pursuant to Article 7.6.
7.4 JOINT INVENTIONS. Each Subject Invention made jointly by NIH and
Collaborator employees shall be jointly owned by NIH and the
Collaborator. The Collaborator may elect to file the joint patent or
other IP application(s) thereon and shall notify NIH promptly upon
making this election. If the Collaborator decides to file such
applications, it shall do so in a timely manner and at its own
expense. If the Collaborator does not elect to file such
application(s), NIH, on behalf of the U.S. Government, shall have the
right to file the joint applications in a timely manner and at its own
expense. If either Party decides not to retain its IP rights to a
jointly owned Subject Invention, it shall offer to assign such rights
to the other Party pursuant to Article 7.5. If the other Party
declines such assignment, the offering Party may release its IP rights
to employee inventors pursuant to Article 7.6.
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NIH Patent Policy Board, April 24, 1989
7.5 FILING OF PATENT APPLICATIONS. With respect to Subject
Inventions made by the Collaborator as described in Article 7.2 or by
NIH as described in Article 7.3, a Party exercising its right to
retain IP rights to a Subject Invention agrees to file patent or other
IP applications in a timely manner and at its own expense. The Party
may elect not to file a patent or other IP application thereon in any
particular country or countries, provided it so advises the other
Party ninety (90) days prior to the expiration of any applicable
filing deadline, priority period, or statutory bar date, and hereby
agrees to assign its IP right, title, and interest in such country or
countries to the Subject Invention to the other Party and to cooperate
in the preparation and filing of a patent or other IP applications.
In any countries in which title to patent or other IP rights is
transferred to the Collaborator, the Collaborator agrees that NIH
inventors will share in any royalty distribution that the Collaborator
pays to its own inventors.
7.6 RELEASE TO INVENTORS. In the event neither of the Parties to the
CRADA elects to file a patent or other IP application on a Subject
Invention, either or both (if a joint invention) may release their IP
rights to their respective employee inventor(s) with a non-exclusive,
non-transferrable, royalty-free license being retained by each Party.
7.7 PATENT EXPENSES. The expenses attendant to the filing of patent
or other IP applications generally shall be paid by the Party filing
such application. If an exclusive license to any Subject Invention is
granted to the Collaborator, the Collaborator shall reimburse NIH for
the reasonable past and Collaborator-approved ongoing funds expended
worldwide for filing, prosecuting, and maintaining any applications
claiming such exclusively-licensed inventions and any patents or other
IP grants that may issue on such applications. The Collaborator may
waive its exclusive license rights on any application, patent, or
other IP grant at any time, and incur no subsequent compensation
obligation for that application, patent, or IP grant.
7.8 PROSECUTION OF INTELLECTUAL PROPERTY APPLICATIONS. Each Party
shall provide the other Party with copies of the applications it files
on any Subject Invention along with the power to inspect and make
copies of all documents retained in the patent or other IP application
files by the applicable patent or other IP office. The Parties agree
to consult with each other with respect to the prosecution of NIH
Subject Inventions described in Article 7.3 and joint Subject
Inventions described in Article 7.4. If the Collaborator elects to
file and prosecute IP applications on joint Subject Inventions
pursuant to Article 7.4, NIH will be granted an associate power of
attorney (or its equivalent) on such IP applications.
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Article 8. LICENSING
8.1 OPTION FOR EXCLUSIVE COMMERCIALIZATION LICENSE. With respect to
Government IP rights to any Subject Invention not made solely by the
Collaborator's employees for which a patent or other IP application is
filed, NIH hereby grants to the Collaborator[
]The license will specify the licensed fields of use,
breadth of exclusivity, and royalties. Royalty rates will be based on
product sales and the rates conventionally granted in the field
identified in the RP for inventions with reasonably similar commercial
potential. Royalty rates generally will not exceed a rate within the
range of 5 - 8% for exclusive commercialization licenses. Contingent
royalty schemes based on, e.g., patent issuance or non-issuance, and
provisions treating the stacking of royalties or packaging of other
licensed inventions developed under this CRADA may be provided.
Exclusive licensees will be expected to reimburse NIH for IP expenses
related to each licensed intellectual property, and may be permitted
to offset such reimbursement against future product royalties.
8.2 EXERCISE OF LICENSE OPTION. The option of Article 8.1 must be
exercised by written notice mailed within three (3) months after the
patent or other IP application is filed to the NIH Office of
Technology Transfer, 6011 Executive Boulevard, Suite 325, Rockville,
MD 20852. Exercise of this option by the Collaborator initiates a
negotiation period that expires nine (9) months after the patent or
other IP application filing date. If the last proposal by the
Collaborator has not been responded to in writing by the NIH within
this nine (9) month period, the negotiation period shall be extended
to expire one (1) month after NIH so responds, during which month the
Collaborator may accept in writing the final license proposal of NIH.
After that time, NIH will be free to license such IP rights to others.
8.3 GOVERNMENT INTELLECTUAL PROPERTY RIGHTS. For inventions developed
wholly by NIH investigators or jointly with a Collaborator under this
CRADA, NIH are required by the Federal Technology Transfer Act of 1986
(15 U.S.C. at Section 3710a[b](2]) to retain at least a nonexclusive,
irrevocable, paid-up license to practice the invention or to have the
invention practiced throughout the world by or on behalf of the U.S.
Government. For inventions developed wholly by the Collaborator under
this CRADA, the Collaborator agrees to grant a research license as
described in Article 8.4 to the Government.
8.4 RESEARCH LICENSES[
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]
8.5 JOINT INVENTIONS NOT EXCLUSIVELY LICENSED. In the event that the
Collaborator does not acquire an exclusive commercialization license
to IP rights in joint Subject Inventions described in Article 7.4,
then each Party shall have the right to use the joint Subject
Invention and to license its use to others. The Parties may agree to
a joint licensing approach for such IP rights.
Article 9. PROPRIETARY RIGHTS AND PUBLICATION
9.1 RIGHT OF ACCESS. NIH and the Collaborator agree to exchange all
Subject Data and Research Results produced in the course of research
under this CRADA, whether developed solely by NIH, jointly with the
Collaborator, or solely by the Collaborator. Tangible research
products developed under a CRADA will be shared equally by the Parties
to the CRADA unless other disposition is agreed to by the Principal
Investigators. All Parties to the CRADA will be free to utilize
Subject Data and Research Results for their own purposes, consistent
with their obligations under this CRADA.
9.2 OWNERSHIP OF SUBJECT DATA AND RESEARCH RESULTS. Subject to the
sharing requirements of Article 9.1, the producing Party will retain
ownership of and title to all Subject Inventions, all Subject Data,
and all Research Results produced solely by their investigators.
Jointly developed Subject Inventions, Subject Data, and Research
Results will be jointly owned; however, except as may be afforded
through IP rights that require public disclosure of the protected
subject matter (e.g., patents), NIH do not have statutory authority to
license (or agree with the Collaborator to limit dissemination of)
Subject Data or Research Results developed solely by NIH investigators
or jointly with the Collaborator. Accordingly, NIH will not agree to
exclude others from utilizing or commercializing such Subject Data or
Research Results.
9.3 PROPRIETARY AND CONFIDENTIAL INFORMATION. Each Party agrees to
limit its disclosure of Proprietary Information to the amount
necessary to carry out the Research Plan of this CRADA, and shall
place a confidentiality notice on all such information. Research
materials required for the RP may also be designated as Proprietary
Information. Each party receiving Proprietary Information agrees that
any information so designated shall be used by it only for the
purposes described in the attached Research Plan. Any party may
object to the designation of information as Proprietary Information by
another Party and may decline to accept such
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information. Data and research products developed solely by the
Collaborator may be designated as Proprietary Information when they
are wholly separable from the data and research products developed
jointly with NIH investigators, and advance designation of such data
and product categories is set forth in the RP. The exchange of
confidential information, e.g., patient data, should be similarly
limited and treated. Unless disclosure is otherwise mutually agreed
upon, all Parties to this CRADA agree to keep CRADA Subject Data and
Research Results confidential, to the extent permitted by law, until
they are published or corresponding patent or other IP application(s)
have been filed.
9.4 PROTECTION OF PROPRIETARY INFORMATION. Proprietary information
shall not be disclosed, copied, reproduced, or otherwise made
available to any other person or entity without the consent of the
owning Party except as required under court order or the Freedom of
Information Act (5 U.S.C. Section 552). Each Party agrees to use its
best efforts to maintain the confidentiality of Proprietary
Information. Each Party agrees that another Party is not liable for
the disclosure of Proprietary Information which, after notice to and
consultation with the concerned Party, another Party in possession of
the Proprietary Information determines may not lawfully be withheld,
provided the concerned Party has been given an opportunity to obtain
a court order to enjoin disclosure.
9.5 DURATION OF CONFIDENTIALITY OBLIGATION. The obligation to
maintain the confidentiality of Proprietary Information shall expire
at the earlier of the date when the information is no longer
Proprietary Information as defined in Article 2.2 or[
]after the expiration or termination date of this CRADA. The
Collaborator may request an extension to this term when necessary to
protect Proprietary Information relating to products not yet
commercialized.
9.6 PUBLICATION. The Parties are encouraged to make publicly
available the results of their research. Before either Party submits
a paper or abstract for publication or otherwise intends to publicly
disclose information about a Subject Invention, Subject Data, or
Research Results, the other Party shall be provided thirty (30) days
to review the proposed publication or disclosure to assure that
Proprietary Information is protected. The publication or other
disclosure shall be delayed for up to thirty (30) additional days upon
written request by any Party as necessary to preserve U.S. or foreign
patent or other IP rights.
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Article 10. REPRESENTATIONS AND WARRANTIES
10.1 REPRESENTATIONS AND WARRANTIES OF NIH. NIH hereby represents and
warrants to the Collaborator that the Official signing this CRADA has
authority to do so.
10.2 REPRESENTATIONS AND WARRANTIES OF THE COLLABORATOR. The
Collaborator hereby represents and warrants to NIH that the
Collaborator has the requisite power and authority to enter into this
CRADA and to perform according to its terms, and that the
Collaborator's Official signing this CRADA has authority to do so.
The Collaborator further represents that it is financially able to
satisfy any funding commitments made in Appendix C.
Article 11. TERMINATION
11.1 TERMINATION BY MUTUAL CONSENT. NIH and the Collaborator may
terminate this CRADA, or portions thereof, at any time by mutual
written consent. In such event, the Parties shall specify the
disposition of all property, inventions, patent or other IP
applications, and other results of work accomplished or in progress,
arising from or performed under this CRADA.
11.2 UNILATERAL TERMINATION. Either NIH or the Collaborator may
unilaterally terminate this entire CRADA at any time by giving written
notice at least thirty (30) days prior to the desired termination
date, and any rights accrued in property, patents, or other IP shall
be disposed of as in 11.1.
11.3 STAFFING. If this CRADA is mutually or unilaterally terminated
prior to its expiration, funds will nevertheless remain available to
NIH for continuing any staffing commitment made by the Collaborator
pursuant to Article 5.1 above and Appendix C, if applicable, for a
period of six (6) months after such termination. If there are
insufficient funds to cover this expense, the Collaborator agrees to
pay the difference.
11.4 NEW COMMITMENTS. No Party shall make new commitments related to
this CRADA after a mutual or unilateral termination and shall, to the
extent feasible, cancel all outstanding commitments and contracts by
the termination date.
11.5 TERMINATION COSTS. Concurrently with the exchange of final
reports pursuant to Articles 4.2 and 5.3, NIH shall submit to the
Collaborator for payment a statement of all costs incurred prior to
the date of termination and for all reasonable termination costs
including the cost of returning Collaborator property or removal of
abandoned property.
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Article 12. DISPUTES
12.1 SETTLEMENT. Any dispute arising under this CRADA which is not
disposed of by agreement of the Principal Investigators shall be
submitted jointly to the signatories of this CRADA. If the
signatories are unable to jointly resolve the dispute within thirty
(30) days after notification thereof, the Assistant Secretary of
Health (or his/her designee) shall propose a resolution. Nothing in
this section shall prevent any Party from pursuing any and all
administrative and/or judicial remedies which may be available.
12.2 CONTINUATION OF WORK. Pending the resolution of any dispute or
claim pursuant to this Article, the Parties agree that performance of
all obligations shall be pursued diligently in accordance with the
direction of the NIH signatory.
Article 13. LIABILITY
13.1 PROPERTY. The U.S. Government shall not be responsible for
damages to any property of the Collaborator provided to it or acquired
by it pursuant to this CRADA.
13.2 NO WARRANTIES. Except as specifically stated in Article 10, the
Parties make no express or implied warranty as to any matter
whatsoever, including the conditions of the research or any invention
or product, whether tangible or intangible, made, or developed under
this CRADA, or the ownership, merchantability, or fitness for a
particular purpose of the research or any invention or product.
13.3 INDEMNIFICATION. The Collaborator agrees to hold the U.S.
Government harmless and to indemnify the Government for all
liabilities, demands, damages, expenses, and losses arising out of the
use by the Collaborator for any purpose of the Subject Data, Research
Results, and/or Subject Inventions produced in whole or in part by NIH
employees under this CRADA, unless due to the negligence of NIH, its
employees or agents. The Collaborator shall be liable for any claims
or damages it incurs in connection with this CRADA. NIH have no
authority to indemnify the Collaborator.
13.4 FORCE MAJEURE. Neither Party shall be liable for any
unforeseeable event beyond its reasonable control not caused by the
fault or negligence of such Party, which causes such Party to be
unable to perform its obligations under this CRADA, and which it has
been unable to overcome by the exercise of due diligence. In the
event of the occurrence of such a force majeure event, the Party
unable to perform shall promptly notify the other Party. It shall
further use its best efforts to resume performance as quickly as
possible and shall suspend performance only for such period of time as
is necessary as a result of the force majeure event.
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Article 14. MISCELLANEOUS
14.1 GOVERNING LAW. The construction, validity, performance, and
effect of this CRADA shall be governed by Federal Law, as applied by
the Federal Courts in the District of Columbia. Federal law and
regulations will preempt any conflicting or inconsistent provisions in
this CRADA.
14.2 ENTIRE AGREEMENT. This CRADA constitutes the entire agreement
between the Parties concerning the subject matter of this CRADA and
supersedes any prior understanding or written or oral agreement.
14.3 HEADINGS. Titles and headings of the sections and subsections of
this CRADA are for the convenience of reference only, do not form a
part of this CRADA, and shall in no way affect its interpretation.
14.4 WAIVERS. None of the provisions of this CRADA shall be
considered waived by any Party hereto unless such waiver is given in
writing to the other Party. The failure of a Party to insist upon
strict performance of any of the terms and conditions hereof, or
failure or delay to exercise any rights provided herein or by law,
shall not be deemed a waiver of any rights of any Party.
14.5 SEVERABILITY. The illegality or invalidity of any provisions of
this CRADA shall not impair, affect, or invalidate the other
provisions of this CRADA.
14.6 AMENDMENTS. If either Party desires a modification to this
CRADA, the Parties shall, upon reasonable notice of the proposed
modification or extension by the Party desiring the change, confer in
good faith to determine the desirability of such modification or
extension. Such modification shall not be effective until a written
amendment is signed by the signatories to this CRADA or by their
representatives duly authorized to execute such amendment.
14.7 ASSIGNMENT. Neither this CRADA nor any rights or obligations of
any Party hereunder shall be assigned or otherwise transferred by
either Party without the prior written consent of the other Party.
14.8 NOTICES. All notices pertaining to or required by this CRADA
shall be in writing and shall be signed by an authorized
representative and shall be delivered by hand or sent by certified
mail, return receipt requested, with postage prepaid, to the addresses
indicated on the signature page for each Party. Notices regarding the
exercise of license options shall be made pursuant to Article 8.2. Any
Party may change such address by notice given to the other Party in
the manner set forth above.
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14.9 INDEPENDENT CONTRACTORS. The relationship of the Parties to this
CRADA is that of independent contractors and not as agents of each
other or as joint venturers or partners. Each party shall maintain
sole and exclusive control over its personnel and operations.
Collaborator employees who will be working at NIH facilities may be
asked to sign a Guest Researcher or Special Volunteer Agreement
appropriately modified in view of the terms of this CRADA.
14.10 USE OF NAME OR ENDORSEMENTS. By entering into this CRADA, NIH
does not directly or indirectly endorse any product or service
provided, or to be provided, whether directly or indirectly related to
either this CRADA or to any patent or other IP license or agreement
which implements this CRADA by its successors, assignees, or
licensees. The Collaborator shall not in any way state or imply that
this CRADA is an endorsement of any such product or service by the
U.S. Government or any of its organizational units or employees.
14.11 EXCEPTIONS TO THIS CRADA. Any exceptions or modifications to
this CRADA that are agreed to by the Parties prior to their execution
of this CRADA are set forth in Appendix D.
14.12 REASONABLE CONSENT. Whenever a Party's consent or permission is
required under this CRADA, such consent or permission shall not be
unreasonably withheld.
Article 15. DURATION OF AGREEMENT
15.1 DURATION. It is mutually recognized that the duration of this
project cannot be rigidly defined in advance, and that the
contemplated time periods for various phases of the RP are only good
faith guidelines subject to adjustment by mutual agreement to fit
circumstances as the RP proceeds. In no case will the term of this
CRADA extend beyond the term indicated in the RP unless it is revised
in accordance with Article 14.6.
15.2 SURVIVABILITY. The provisions of Articles 4.2, 5.2, 5.3, 6.1,
Articles 7 - 9, 11.3, 11.5, 12.1, 13.3, and 14.10 shall survive the
termination of this CRADA.
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APPENDIX A
NIH POLICY STATEMENT ON
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
AND INTELLECTUAL PROPERTY LICENSING
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NATIONAL INSTITUTES OF HEALTH
POLICY STATEMENT ON
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
AND INTELLECTUAL PROPERTY LICENSING
This statement sets forth the policies of the National Institutes of Health
(NIH) on various aspects of cooperative research and intellectual property
licensing. These policies apply to the negotiation of NIH Cooperative Research
and Development Agreements (CRADAs). License agreements for intellectual
property rights to inventions developed under a CRADA or through the NIH
intramural research programs, whether negotiated by NIH or the National
Technical Information Service on their behalf, will also incorporate these
policies. This statement may be revised from time to time as NIH consider
appropriate.*
To implement the Federal Technology Transfer Act of 1986 (FTTA, 15 U.S.C.
at Section 3710), Executive Order 12591 of April 10, 1987, orders Federal
laboratories to assist universities and the private sector in broadening our
national technology base by moving new knowledge from the research laboratory
into the development of new procedures and processes. While Federal patent law
(35 U.S.C. at Sections 200-212) authorizes the licensing of Government-owned
patent rights, the FTTA seeks to facilitate technological collaboration at
an earlier stage. Thus, the FTTA authorizes Federal laboratories to enter into
CRADAs and to agree to grant intellectual property rights in advance to
collaborators for inventions made in whole or part by Federal employees under
the CRADA. Besides assisting in the transfer of commercially useful
technologies from Federal laboratories to the marketplace, CRADAs make outside
resources more accessible to Federal laboratories.
NIH, an agency of the Public Health Service (PHS) within the Department of
Health and Human Services (DHHS), is among the world's preeminent biomedical
research organizations. Their general mission is to conduct biomedical and
behavioral research that will lead to the better health of the American people.
For the NIH investigator, this agency mission prescribes the exploration of
ideas, the communication of ideas and information to colleagues, and a
responsibility for the prompt and accurate publication of findings. Under the
FTTA (15 U.S.C. at Section 3710a[a][2]), technology transfer, consistent with
mission responsibilities, is also a responsibility of each laboratory science
and engineering professional.
- ---------------
Questions or comments about this Statement and requests for updated versions
should be directed to the NIH Office of Technology Transfer at (301) 496-0750.
This Statement is effective on an interim basis, and will be revised after
October 1, 1989.
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To support their mission, NIH have developed an interdisciplinary and
synergistic research environment that promotes the free exchange of ideas and
information. In order to safeguard the collegiality and integrity of, as well
as public confidence in, the NIH research programs, the following cooperative
research technology transfer policies have been adopted.
1. RESEARCH FREEDOM:
NIH investigators generally are free to choose the subject matter of their
research, consistent with the mission of their Institute and the research
programs of their Laboratories. No CRADAs or license agreement may contravene
this freedom.
2. RESEARCH POLICY:
NIH research results generally are disseminated freely through publication
in the scientific literature and presentations at public fora. Brief delays in
this dissemination of research results may be permitted under a CRADA as
necessary in order to file corresponding patent or other intellectual property
applications. NIH consider the filing of such applications to be an important
component of their research efforts.
3. COOPERATIVE RESEARCH AND DEVELOPMENT UNDER A CRADA:
As defined by the FTTA (15 U.S.C. at Section 3710a[d][1]), a CRADA means
any agreement, between one or more Federal Laboratories and one or more non-
Federal parties, under which the Government provides personnel, services,
facilities, equipment, or other resources (but not funds), and the non-Federal
parties provide funds, personnel, services, facilities, equipment, or other
resources toward the conduct of specified research or development efforts.
Cooperative research and development activities are intended to facilitate the
transfer of Federally-funded research and development for use by State and local
governments, universities, and the private sector, particularly small business.
4. NIH CRADAS:
As adopted by NIH, a CRADA is a standardized agreement intended to provide
an appropriate legal framework for, and to expedite the approval of, cooperative
research and development projects. The use of CRADAs is encouraged for
cooperative efforts because they permit NIH to accept, retain, and use funds,
personnel services, and property to collaborating parties. NIH may permit their
investigators to enter into CRADAs with collaborators who will make a
significant intellectual contribution to the research project undertaken or who
will contribute essential research materials or technical resources not
otherwise reasonably available. While NIH welcome contributions to their gift
funds for research purposes, they do not view CRADAs as a general funding source
or a mechanism for sponsored research. This approach to
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implementing the FTTA has been chosen in order to maintain the public's
confidence in NIH through maintaining an independence from reliance on industry
funding.
5. SELECTION OF COLLABORATORS UNDER A CRADA:
Collaborators under a CRADA may be suggested by potential Collaborators or
by NIH investigators. Generally, the decision to initiate the approval process
for a CRADA is made by the involved NIH investigator and laboratory chief based
on scientific considerations and the desire for the public to benefit from the
commercialization of particular NIH research. For some cooperative projects,
where the development and commercialization potential is more immediate relative
to the basic research aspects, NIH may seek a collaborator(s) which has both
scientific expertise and commercialization capabilities. In certain areas of
research, e.g., where the Government has the intellectual lead or where both
scientific and commercialization capabilities are deemed essential at the
outset, NIH may competitively seek a collaborator through Federal Register
notification. The PHS has also developed policy guidelines for ensuring
fairness of access to PHS laboratories such as NIH in the process of initiating
and developing CRADAs.
6. PROPRIETARY OR CONFIDENTIAL INFORMATION AND MATERIALS:
NIH recognize that an effective collaborative research program may require
the disclosure of proprietary information to NIH investigators. Although
agreements to maintain confidentiality are permitted under a CRADA,
collaborators should limit their disclosure of proprietary information to the
amount necessary to carry out the research plan of the CRADA. The mutual
exchange of confidential information, e.g., patient data, should be similarly
limited. NIH also recognize that cooperative research may require the exchange
of proprietary research materials. Such materials may be used only for the
purposes specified in the research plan set forth in the CRADA. All parties to
the CRADA will agree to keep CRADA research results confidential to the extent
permitted by law until they are published in the scientific literature or
presented at a public forum.
7. TREATMENT OF DATA AND RESEARCH
PRODUCTS PRODUCED UNDER A CRADA:
The NIH investigator and the collaborator will agree to exchange all data
and research products developed in the course of the research under a CRADA
whether developed solely by NIH, jointly with the collaborator, or solely by the
collaborator. In general, tangible research products developed under a CRADA
will be shared equally by the parties to the CRADA. All parties to a CRADA will
be free to utilize such data and research products for their own purposes. Data
and research products developed solely by the collaborator may be designated as
proprietary by the collaborator when they are wholly separable from the data and
research products developed jointly with NIH investigators; however, except as
may be afforded through intellectual property rights that require public
disclosure of the protected subject matter (e.g., patents), NIH will not agree
to exclude others from utilizing or commercializing the data or research
products developed
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solely by NIH investigators or jointly with the collaborator under a CRADA.
8. OWNERSHIP AND LICENSING OF NIH INTELLECTUAL PROPERTY RIGHTS:
Pursuant to the FTTA (15 U.S.C. at Section 3710a[b][2]), a Federal
laboratory is authorized to own and license patent rights to inventions made in
whole or part by its employees under a CRADA. The term "invention" is defined
at Section 3703(9) to mean any invention or discovery which is or may be
patentable or otherwise protected under Title 35, or any novel variety of plant
which is or may be protectable under the Plant Variety Protection Act (7 U.S.C.
Section 2321 et seq.). The patent law (35 U.S.C. at Section 207), authorizes the
ownership and licensing of intramural inventions. Executive Order 12591 at
Section l(b)(1)(B) further authorizes the transfer of Government intellectual
property rights. Although the FTTA speaks broadly of the transfer of
"technology," NIH do not have statutory authority to license (or to agree to
limit dissemination of) technology developed in whole or in part by their
investigators under a CRADA unless a patent, PVPA certificate, or other
intellectual property application has been filed for that technology. NIH will
retain the Government ownership interest in, but license rights to, all
intellectual property rights to inventions developed solely through intramural
research or developed in whole or in part by their investigators under a CRADA.
9. GENERAL LICENSING POLICY:
NIH recognize that under the FTTA and the patent licensing law to which
it refers, Congress and the President have chosen to utilize the patent
system as the primary mechanism for transferring Government inventions to the
private sector. The importance of patents to commercialization in the
biomedical field is further reflected by the Drug Price Competition and
Patent Term Restoration Act of 1984 (Pub. L. 98-419). A fundamental
principle of the patent system is that the owner of a patent have
time-limited "right to exclude others from making, using, or selling the
[patented] invention." The reason for such a period of exclusivity is to
encourage industry to invest the resources necessary to bring an invention
from the discovery stage through subsequent development, clinical trials,
regulatory approvals, and ultimately into commercial production. NIH
accordingly are willing to grant exclusive commercialization licenses under
their patent or other intellectual property rights in cases where substantial
additional risks, time, and costs must be undertaken by a licensee prior to
commercialization. Under a CRADA, NIH are also willing, to agree to grant
exclusive commercialization licenses in advance to collaborators. NIH will
attempt, however, to license their intramural inventions nonexclusively in
cases where an invention reflects a relatively more advanced stage in its
commercial development, e.g., when an NIH investigator invents a patentable
new therapeutic use for a known and FDA-approved compound.
Federal laboratories are authorized to negotiate license agreements for
Government-owned patent rights in intramural inventions pursuant to 35 U.S.C.
Section 207. Although Section 207 does
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not apply to intellectual property license agreements authorized by the FTTA for
inventions made under a CRADA, NIH have adopted the following approach of
Section 207 for all license agreements:
Each Federal Agency [may] ... grant nonexclusive, exclusive or
partially exclusive licenses under Federally owned patent
applications, patents, or other forms of protection ... on such
terms and conditions ... as determined appropriate in the public
interest.
NIH have determined it to be appropriate in the public interest to grant
nonexclusive research licenses and either exclusive or nonexclusive
commercialization licenses to DHHS-owned intellectual property.
10. GOVERNMENT INTELLECTUAL PROPERTY RIGHTS:
For inventions developed wholly by NIH investigators or jointly with a
collaborator under a CRADA, NIH are required by the FTTA at 15 U.S.C. Section
3710a(b)(2) to retain at least a nonexclusive, irrevocable, paid-up license to
practice the invention or to have the invention practiced throughout the world
by or on behalf of the U.S. Government. When granting exclusive or partially
exclusive licenses to NIH intramural inventions, 35 U.S.C. Section 208, as
implemented by 37 C.F.R. Section 404.7(2)(i), requires the reservation of
similar Government rights. NIH will not assert an ownership right in inventions
made solely by a collaborator under a CRADA, but will require the grant of a
research license, as described below, to the Government for inventions made
wholly by a collaborator under a CRADA.
11. RESEARCH LICENSES:
NIH will reserve the right under any CRADA and intellectual property
license to grant nonexclusive licenses to make and to use the invention for
purposes of research involving the invention itself, and not for purposes of
commercial manufacture of, or in lieu of purchase as a commercial product for
use in other research. The purpose of the research license is to facilitate
basic academic research. NIH intend to consult with any involved
commercialization licensee(s) before granting research licenses to commercial
entities.
12. COMMERCIALIZATION LICENSES:
NIH are willing to consider requests for nonexclusive or exclusive
commercialization licenses to intellectual property rights to inventions
developed under a CRADA or in the course of intramural research, pursuant to
applicable statutes and regulations. Under a CRADA, NIH generally will grant a
time-limited option to negotiate, in good faith, the terms of a license that
fairly reflects the relative contributions of the parties, the risks incurred by
the collaborator, and the costs of subsequent research and development needed to
bring the results of CRADA research to the marketplace. NIH contemplate the
drafting of a model invention license to serve as the
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starting point for license negotiations. It is contemplated further that such a
model will reduce negotiations essentially to matters of execution fees, royalty
rates, and minimum annual royalties. Royalty rates will be based on product
sales and the rates conventionally granted in the field identified in the
CRADA's research plan for inventions with reasonably similar commercial
potential. Royalty rates generally will not exceed a rate within the range of 5
- - 8 % for exclusive commercialization licenses. Contingent royalty schemes
based on, e.g., patent issuance or nonissuance, and clauses treating the
stacking of royalties or packaging of other inventions developed under the CRADA
may be provided. Exclusive licensees will be expected to reimburse NIH for
intellectual property-related expenses, and may be permitted to offset such
reimbursement against future product royalties.
13. NONEXCLUSIVE COMMERCIALIZATION LICENSES:
Unless a request for exclusive commercialization license is made under a
CRADA or submitted for an intramural invention, NIH will attempt to license
their inventions nonexclusively. Such nonexclusive licenses generally will
follow the guidelines of 37 C.F.R., Part 404.
14. EXCLUSIVE COMMERCIALIZATION LICENSES:
All NIH exclusive commercialization licenses will require the submission by
a prospective licensee of an acceptable development and commercialization plan
as described by 35 U.S.C. Section 209(a) and subsequent, periodic reports on
utilization of the invention as described by Section 209(f)(1). All such plans
and reports will be treated in confidence and as privileged from disclosure
under the Freedom of Information Act. Modification provisions as described by
Section 209(f)(2) - (4) may apply. In appropriate cases, NIH may also reserve
the right to grant separate exclusive commercialization licenses in various
fields of use. The remaining provisions of 35 U.S.C. Sections 200 - 212 will
also apply to licenses to NIH intramural inventions.
NIH also consider the following provisions for exclusive commercialization
licenses to be necessary and appropriate in the public interest:
(i) the exclusive licensee must pledge its reasonable best efforts to
commercialize a licensed invention, and the development and
commercialization plan mentioned above may serve as the measure of such
efforts;
(ii) NIH shall have the right, after notice and opportunity to cure, to
terminate or render nonexclusive any license granted: (1) if the licensee
is not reasonably engaged in research, development, clinical trials,
manufacturing, marketing, sublicensing, or other activities reasonably
necessary to the expeditious commercial dissemination of the licensed
inventions; or (2) when the licensee cannot reasonably satisfy unmet health
and safety needs;
(iii) in order to maximize the commercialization of the licensed invention
in other
7 -
<PAGE>
NIH Patent Policy Board March 27, 1989
fields of use not utilized by the exclusive licensee through ongoing
development, manufacturing, or sublicensing, NIH reserve the right to
require the licensee to grant sublicenses to responsible applicants, on
reasonable terms, in such other fields of use, unless the licensee can
reasonably demonstrate that such a sublicense would be contrary to sound
and reasonable business practice and the granting of the sublicense would
not materially increase the availability to the public of the licensed
invention; and
(iv) exclusive licenses to DHHS inventions, whether developed under a CRADA
or through intramural research, must agree to not unreasonably deny
requests for sublicense or cross license rights from future CRADA
collaborators when the possibility of acquiring such derivative rights is
necessary in order to permit a proposed cooperative research project with
NIH to go forward, and the exclusive licensee has been given a reasonable
opportunity to join as a party to the proposed CRADA.
15. COMPLIANCE UNDER A CRADA WITH OTHER POLICIES:
For research conducted pursuant to a CRADA, collaborators must agree to
comply with PHS and NIH policies and guidelines concerning, e.g., human subjects
research, the use of research animals including non-wild chimpanzees,
recombinant DNA, and other policy statements as may be promulgated from time to
time.
16. WAIVERS:
NIH will consider requests to modify any of the foregoing policies in
special cases where public health exigencies or commercial situations warrant
such a modification. Modifications dealing with business terms such as
royalties are not decided by the NIH investigators and should be discussed with
the appropriate NIH technology management personnel.
17. SPECIAL CONSIDERATION AND PREFERENCE UNDER A CRADA:
NIH will give special consideration to entering into CRADAs with small
business firms and consortia involving small business firms; and will give
preference to business units located in the United States which agree to
manufacture substantially in the United States products which embody inventions
developed in the course of research under CRADAs.
8 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
APPENDIX B
RESEARCH PLAN
TITLE OF CRADA: Development of a Live, Attenuated Cold-Adapted Influenza Vaccine
NIH/ADAMHA PRINCIPAL INVESTIGATOR: Carole A. Heilman, Ph.D.
------------------------
COLLABORATOR PRINCIPAL INVESTIGATOR: J. Leighton Read, M.D.
------------------------
TERM OF CRADA: (5) years.
-----------
CONFLICTS OF INTEREST INFORMATION: Describe any relevant past, present, or
contemplated relationships between the NIH/ADAMHA Principal Investigator and
his/her Laboratory and the Collaborator in sufficient detail to permit reviewers
of this CRADA to determine whether or not any conflicts of interest exist:
[
]
The Research Plan which follows this page should be concise but of sufficient
detail to permit reviewers of this CRADA to evaluate the scientific merit of the
proposed collaboration. The RP should explain the scientific importance of the
collaboration and the research goals of NIH/ADAMHA and the Collaborator. The
respective contributions in terms of expertise and/or research materials of
NIH/ADAMHA and Collaborator should be summarized. Initial and subsequent
projects contemplated under the RP, and the time periods estimated for their
completion, should be described, and pertinent methodological considerations
summarized. Pertinent literature references may be cited and additional
relevant information included. Include additional pages to identify the
Principal Investigators of all other Parties to this CRADA.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
1. GOAL OF THIS CRADA
This CRADA is being undertaken to advance the CA influenza vaccine system from
its current status to an FDA approved vaccine for use [
] To accomplish this goal, the NIH and Aviron must show that the
vaccine can be consistently manufactured and remain safe after transfer to a new
producer, and that [ ] envisioned here is
efficacious in the target populations.
Clinical trials will be conducted to enable FDA approval for [
] These trials as well as other studies will also be designed to
assess the cost-effectiveness of the vaccine system in order to support the
widest possible recommendations from the CDC's Advisory Committee on
Immunization Practices (ACIP) and the American Academy of Pediatrics (AAP) and
other recommending bodies.
2. DETAILED DESCRIPTION OF THE RESEARCH PLAN
This application describes a preliminary clinical program based on the review
of the data. It will be modified based on discussions with the FDA, as well as
the clinical investigators who will be participating in these trials and
investigators having extensive previous experience with this vaccine.
The specific studies proposed are:
1. [
]
[
]
2. [
AVIRON CONFIDENTIAL PAGE 1
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
]
3. [
]
4. [
]
5. [
]
[
]
AVIRON CONFIDENTIAL PAGE 2
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
[
]
AVIRON CONFIDENTIAL PAGE 3
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
3. RESPECTIVE CONTRIBUTIONS OF THE PARTIES
Contributions to the main elements of this program are listed below. Aviron and
the NIH intend to work collaboratively and in consultation with each other in
this program via joint committees involving the Principal Investigators and
other key contributors. As NIH scientists and their contractors have extensive
experience with the evaluation and manufacture of this vaccine, it is expected
that their reasonable assistance will be provided to transfer know-how to Aviron
as required in support of this project.
1. Development of Clinical Trial Plan [ ]
2 . Development of Clinical Protocol Design [ ]
3 . Enrollment of Subjects by DMID contractors [ ]
4. Enrollment of Subjects in non-NIH sponsored sites [ ]
5. Ops Manual, Investigators Brochure, Case Report Forms [ ]
6. IND preparation and filing [ ]
7. Supply of vaccine and placebo for trials defined here [ ]
8. Supply of challenge virus or inactivated vaccine [ ]
9. Development of a Data Safety and Monitoring Function [ ]
and the preparation of the relevant information
needed for safety evaluation in pediatric populations
10. Site Monitoring [ ]
11. Monitoring of VTEU sites for compliance with DHHS [ ]
regulations
12. Central Laboratory Facility and sample transport [ ]
13. Standardized Reagents [ ]
14. Data processing and statistical analysis [ ]
15. Data reports for regulatory filings [ ]
16. Publication of results [ ]
17. Manufacturing and Commercial Sale [ ]
18. Aviron travel, supplies, and personnel [ ]
19. Extra NIH travel, admin. support as delineated [ ]
in App. C
20. Supply of all vaccine for investigator proposed [ ]
trials
AVIRON CONFIDENTIAL PAGE 4
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
[
]
21. Special requirements of investigator proposed trials [ ]
22. Special Clinical Trials (i.e., in high risk [ ]
populations)
23. IND preparation and filing for product licensure in [ ]
high risk populations
AVIRON CONFIDENTIAL PAGE 5
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Cold Adapted Influenza Vaccine CRADA Appendix B
4. ABSTRACT OF THE PLAN FOR PUBLIC RELEASE
Influenza is a major health problem in the United States and all other countries
because annual epidemics typically cause several days of severe illness in
approximately one fifth of the population and many deaths occur in high risk
individuals. Existing vaccines are effective, but poorly utilized due to
misunderstanding about vaccine safety and efficacy, and the unpleasant route of
administration via injection. The individual components of an intranasally-
delivered live attenuated cold adapted influenza vaccine have been shown to be
safe and effective in testing over many seasons of influenza epidemics. This
CRADA is intended to provide the necessary data for FDA approval regarding
safety and efficacy of a [ ] this vaccine which could be used on
an annual basis to provide influenza prophylaxis [ ][
]
of the population will also be evaluated.
5. RELATED CRADAS
Aviron does not have any other CRADAs with the NIH.
6. - 8. Items for NIH Principal Investigator
6. RELATED MTAs
[
]
7. RELATED PATENT APPLICATIONS AND PATENTS
None
8. AVOIDANCE OF CONFLICT OF INTERESTS AND ASSURANCE OF FAIR ACCESS
See attached.
AVIRON CONFIDENTIAL PAGE 6
MAY 19, 1995
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[Logo]
- DRAFT CLINICAL TRIAL PLAN -
[ ]
Study Phase Age Group Number Year
----- ----- --- ----- ------ ----
(1) [ ]
(2) [ ]
(3) [ ]
(4) [ ]
(5) [ ]
AVIRON
<PAGE>
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- - [
[Logo]
]
AVIRON
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
APPENDIX C
FINANCIAL AND STAFFING CONTRIBUTIONS OF THE PARTIES
I. ANNUAL INSTITUTE (DMID, NIAID) CONTRIBUTIONS (INTERNAL):
A. Supply funds: [ ]
B. Equipment funds: [ ](photocopier and/or computer equipment)
C. Travel funds: [ ]
D. Time requirements of NIAID personnel: [ ] FTE Professional
[ ] FTE Administrative
E. Contract support: approx: [ ] VTEUs* YEAR 1**
[ [ [
]
*VTEUs=Vaccine Treatment and Evaluation Units
]
NON-VTEUs
[ ]
] Total
**exact amounts spent at any one VTEU site may vary but the total
expenditure per year for all VTEUs is expected to remain constant at
approx: [ ]
II. TO BE PROVIDED TO NIAID BY AVIRON ANNUALLY:
A. Supply funds: [ ]
B. Equipment funds: [ ]
C. Travel funds: [ ]
travel to VTEU sites
travel to scientific meetings
D. Personnel funds: [ ]
- --------------------------------------------------------------------------------
NIAID/CRADA:
Appendix C
Page 1 of 2
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CONFIDENTIAL TREATMENT REQUESTED
[
]
II. continued
E. Contract support: [ ]
F. Overhead: [ ]
NIAID has the discretion to transfer funds between categories if it is
appropriate to support objectives of the CRADA.
NIAID has the authority to carry over funds from one year to the next
throughout the CRADA as long as funding is used in direct support of the
CRADA, as outlined in Appendix C.
III. ANNUAL COMPANY CONTRIBUTIONS (INTERNAL): All dollars in Thousands ($000)
Year 1 Year 2 Year 3 Year 4 Year 5
------ ------ ------ ------ ------
A. Supply funds: $ [ ]
B. Equipment funds: $ [ ]
(see note 1)
C. Travel funds: $ [ ]
III. ANNUAL COMPANY CONTRIBUTIONS (INTERNAL) continued
All Dollars in Thousands (5000)
Year 1 Year 2 Year 3 Year 4 Year 5
------ ------ ------ ------ ------
D. Time requirements of $ [ ]
Company personnel
E. Contract support: $ [ ]
(See Note 2)
Notes:
(1) Equipment includes dedicated facility requirements.
(2) Contract support represents development and manufacturing to be performed
by a third party for Aviron, and research support to University of Michigan
and other clinical support.
- --------------------------------------------------------------------------------
NIAID/ CRADA:
Appendix C
Page 2 of 2
<PAGE>
APPENDIX D
EXCEPTIONS OR MODIFICATIONS TO THIS CRADA
- --------------------------------------------------------------------------------
NIAID/Aviron CRADA - #A1000062
Appendix D
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
NIH Patent Policy Board, April 24, 1989
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
Article 1. INTRODUCTION
This Cooperative Research and Development Agreement (CRADA) between NIH and
the Collaborator will be effective when signed by all parties. By signing this
CRADA, the Collaborator acknowledges that it has received and read a copy of the
Policy Statement on Cooperative Research and Development Agreements and
Intellectual Property Licensing which is attached as Appendix A. The research
and development project(s) which will be undertaken by each of the Parties in
the course of this CRADA are detailed in the Research Plan (RP) which is
attached as Appendix B. The funding and staffing commitments of the Parties are
set forth in Appendix C. Any exceptions or changes to the CRADA are set forth in
Appendix D.
Article 2. DEFINITIONS
As used in this CRADA, the following terms shall have the indicated
meanings:
2.1 "Cooperative Research and Development Agreement" or "CRADA"
means this agreement, entered into by NIH pursuant to the Federal
Technology Transfer Act of 1986 and Executive Order 12591 of October 10,
1987.
2.2 "Confidential Information": shall mean all technical,
scientific, product, manufacturing, production, business, and
financial information, [
] and disclosed by either Party to the other under this
CRADA, which are [
] provided that such information:
2.2.1 is not publicly known or available from other sources who
are not under a confidentiality obligation to the source of
the information;
2.2.2 has not been made available by the disclosing Party to
others without a confidentiality obligation;
2.2.3 is not already known by or available to the receiving Party
without a confidentiality obligation; or
2.2.4 cannot be demonstrated through adequate written
documentation as being independently developed or acquired
by the receiving Party without reference to or reliance upon
such Confidential Information.
[
Heilman/Aviron CRADA (AI#000062) Appendix D page 2
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CONFIDENTIAL TREATMENT REQUESTED
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] All information to be deemed confidential under this
Agreement [
] Notwithstanding the foregoing, the Parties may disclose any
information relating to potential hazards or cautionary warnings
associated with production, handling, or use of the subject matter
of the Research Plan of this CRADA to any governmental authority in
accordance with applicable laws and regulations.
2.3 "Subject Invention" means any invention, conceived or reduced to
practice in the performance of research under this CRADA, that may be
patentable under 35 U.S.C. Section 101 or Section 161, protectable
under 7 U.S.C. Section 2321, or otherwise protectable by other types
of U.S. or foreign "Intellectual Property" ("IP") right.
2.4 "Government" means the U.S. Government and any of its agencies.
2.5 "Research Plan" or "RP" means the statement in Appendix B of the
respective research and development commitments of the Parties to this
CRADA.
2.6 "Principal Investigator" or "PI" means the persons designated
respectively by the Parties to this CRADA who will be responsible for
the scientific and technical conduct of the RP.
2.7 "Clinical Data and Research Results" means all information, data,
tangible materials, and results[
]
2.8 "Raw Data" means the[
]
Article 3. COOPERATIVE RESEARCH
3.1 RESEARCH TEAM. The Parties agree to establish a joint research
and development team (hereinafter referred to as the "Team")
comprising at least the Principal Investigators designated pursuant to
Article 3.3 to conduct and monitor the research in accordance with the
RP. Although the members of the Team shall be
Heilman/Aviron CRADA (AI#000062) Appendix D page 3
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
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considered as having been delegated to the Team, they shall continue
to remain employed by their respective employers under their
respective terms of employment.
3.2 REVIEW OF WORK. Periodic conferences shall be held by the Team
to review work progress. It is understood that the nature of this
cooperative research precludes a guarantee of its completion within
the specified period of performance or limits of allocated financial
or staffing support. Accordingly, research under this CRADA is to be
performed on a best efforts basis.
3.3 PRINCIPAL INVESTIGATORS. NIH research work under this CRADA will
be performed by the Laboratory identified in the RP, and the NIH
Principal Investigator (PI) designated in the RP will be responsible
for the scientific and technical conduct of this project on behalf of
NIH. Also designated in the RP is the Collaborator PI, who will be
responsible for the scientific and technical conduct of this project
on behalf of the Collaborator.
3.4 RESEARCH PLAN CHANGE. The RP may be modified by mutual written
consent of the Principal Investigators. Substantial changes in the
scope of the RP will be treated as amendments under Article 14.6.
3.5 FILING OF INVESTIGATIONAL NEW DRUG APPLICATION (IND). The
Parties understand that Collaborator is to file and own any new IND
for the technology which is the subject of this CRADA. Collaborator
will supply all manufacturing information required by the U.S. Food
and Drug Administration ("FDA") in support of such IND.
[
] NIH grants Collaborator an exclusive right of
reference to[ ] and any new[
]shall be confidential and made
available exclusively to Collaborator for use in obtaining regulatory
approval for the commercialization and marketing of[
]NIH shall take appropriate precautions to
ensure that Collaborator may review, cross reference or, as
appropriate, otherwise use[ ]in conducting
critical trials within the scope of this CRADA, and in fulfilling all
the requirements necessary for obtaining FDA approval to market
products incorporating the technology which is the subject of this
CRADA.
Article 4. REPORTS
4.1 INTERIM REPORTS. The Parties shall exchange formal written
interim progress reports on a schedule agreed to by the PIs, but at
least within six (6) months after this
Heilman/Aviron CRADA (AI#000062) Appendix D page 4
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CONFIDENTIAL TREATMENT REQUESTED
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CRADA becomes effective and at least within every six (6) months
thereafter. Such reports shall set forth the technical progress made,
identifying such problems as may have been encountered and
establishing goals and objectives requiring further effort.
4.2 FINAL REPORTS. The Parties shall exchange final reports of their
results within four (4) months after completing the projects
described in the RP or after the termination of this CRADA.
Article 5. FINANCIAL AND STAFFING OBLIGATIONS
5.1 NIH AND COLLABORATOR CONTRIBUTIONS. The NIH contribution to the
RP in the form of[
]The
Collaborator contribution to the RP in the form of[
]
5.2 INSUFFICIENT AND EXCESS FUNDS. NIH shall not be obligated to
perform any of the research specified herein or to take any other
action required by this CRADA if the funding is not provided as set
forth in Appendix C. NIH shall return excess funds to the Collaborator
when it sends its final fiscal report pursuant to Article 5.3, except
for staffing support pursuant to Article 11.3.
5.3 ACCOUNTING RECORDS. NIH shall maintain separate and distinct
current accounts, records, and other evidence supporting all its
obligations under this CRADA, and shall provide the Collaborator an
annual report reflecting the use of the Collaborator's funds and a
final such fiscal report at the time that final reports are
exchanged pursuant to Article 4.2.
Article 6. TITLE TO PROPERTY
6.1 CAPITAL EQUIPMENT. The purchase or use of capital equipment to
carry out this CRADA does not affect the ownership rights that would
otherwise apply. Equipment purchased by NIH with funds provided by the
Collaborator shall be the property of NIH. All capital equipment
provided under this CRADA by one party for the use of another Party
remains the property of the providing Party unless other disposition
is mutually agreed upon in writing by the PIs. If title to this
equipment remains with the providing Party, that Party is responsible
for maintenance of the equipment and the costs of its transportation
to and from the site where it will be used.
Article 7. INTELLECTUAL PROPERTY RIGHTS AND APPLICATIONS
7.1 REPORTING. The Parties shall promptly report to each other in
writing each
Heilman/Aviron CRADA (AI#000062) Appendix D page 5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
NIH Patent Policy Board, April 24, 1989
Subject Invention resulting from the research conducted under this
CRADA that is reported to them by their respective employees. Such
reports shall be treated in confidence by the receiving Party until
such time as a patent or other Intellectual Property (IP) application,
as appropriate, claiming that Subject Invention has been filed.
Because of the royalty sharing provisions for Government inventors in
the Federal Technology Transfer Act of 1986, and in view of Article
8.2 of this CRADA which grants the Government only a research license
on inventions made solely by the Collaborator, the Collaborator
acknowledges a special duty to report all Subject Inventions to NIH so
that NIH may determine whether or not inventorship properly includes
NIH investigators.
7.2 COLLABORATOR EMPLOYEE INVENTIONS. The Collaborator may elect to
retain IP rights to any Subject Invention made solely by a
Collaborator employee. The Collaborator shall notify NIH promptly upon
making this election. If the Collaborator does not elect to retain its
IP rights, the Collaborator shall offer to assign these IP rights to
the Subject Invention to NIH pursuant to Article 7.5. If NIH declines
such assignment, the Collaborator may release its IP rights to
employee inventors pursuant to Article 7.6.
7.3 NIH EMPLOYEE INVENTIONS. NIH, on behalf of the U.S. Government,
may elect to retain IP rights to each Subject Invention made solely by
NIH employees. If NIH does not elect to retain IP rights, NIH shall
offer to assign these IP rights to such Subject Invention to the
Collaborator pursuant to Article 7.5. If the Collaborator declines
such assignment, NIH may release IP rights in such Subject Invention
to its employee inventors pursuant to Article 7.6.
7.4 JOINT INVENTIONS. Each Subject Invention made jointly by NIH and
Collaborator employees shall be jointly owned by NIH and the
Collaborator. The Collaborator may elect to file the joint patent or
other IP application(s) thereon and shall notify NIH promptly upon
making this election. If the Collaborator decides to file such
applications, it shall do so in a timely manner and at its own
expense. If the Collaborator does not elect to file such
application(s), NIH, on behalf of the U.S. Government, shall have the
right to file the joint applications in a timely manner and at its own
expense. If either Party decides not to retain its IP rights to a
jointly owned Subject Invention, it shall offer to assign such rights
to the other Party pursuant to Article 7.5. If the other Party
declines such assignment, the offering Party may release its IP rights
to employee inventors pursuant to Article 7.6.
7.5 FILING OF PATENT APPLICATIONS. With respect to Subject Inventions
made by the Collaborator as described in Article 7.2 or by NIH as
described in Article 7.3, a Party exercising its right to retain IP
rights to a Subject Invention agrees to file patent or other IP
applications in a timely manner and at its own expense. The Party may
elect not to file a patent or other IP application thereon in any
particular country or
Heilman/Aviron CRADA (AI#000062) Appendix D page 6
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CONFIDENTIAL TREATMENT REQUESTED
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countries, provided it so advises the other Party ninety (90) days
prior to the expiration of any applicable filing deadline, priority
period, or statutory bar date, and hereby agrees to assign its IP
right, title, and interest in such country or countries to the Subject
Invention to the other Party and to cooperate in the preparation and
filing of a patent or other IP applications. In any countries in
which title to patent or other IP rights is transferred to the
Collaborator, the Collaborator agrees that NIH inventors will share in
any royalty distribution that the Collaborator pays to its own
inventors.
7.6 RELEASE TO INVENTORS. In the event neither of the Parties to the
CRADA elects to file a patent or other IP application on a Subject
Invention, either or both (if a joint invention) may release their IP
rights to their respective employee inventor(s) with a non-exclusive,
non-transferrable, royalty-free license being retained by each Party.
7.7 PATENT EXPENSES. The expenses attendant to the filing of patent
or other IP applications generally shall be paid by the Party filing
such application. If an exclusive license to any Subject Invention is
granted to the Collaborator, the Collaborator shall reimburse NIH for
the reasonable past and Collaborator-approved ongoing funds expended
worldwide for filing, prosecuting, and maintaining any applications
claiming such exclusively-licensed inventions and any patents or other
IP grants that may issue on such applications. The Collaborator may
waive its exclusive license rights on any application, patent, or
other IP grant at any time, and incur no subsequent compensation
obligation for that application, patent, or IP grant.
7.8 PROSECUTION OF INTELLECTUAL PROPERTY APPLICATIONS. Each Party
shall provide the other Party with copies of the applications it files
on any Subject Invention along with the power to inspect and make
copies of all documents retained in the patent or other IP application
files by the applicable patent or other IP office. The Parties agree
to consult with each other with respect to the prosecution of NIH
Subject Inventions described in Article 7.3 and joint Subject
Inventions described in Article 7.4. If the Collaborator elects to
file and prosecute IP applications on joint Subject Inventions
pursuant to Article 7.4, NIH will be granted an associate power of
attorney (or its equivalent) on such IP applications.
Article 8. LICENSING
8.1 OPTION FOR EXCLUSIVE COMMERCIALIZATION LICENSE. With respect to
Government IP rights to any Subject Invention not made solely by the
Collaborator's employees for which a patent or other IP application is
filed. NIH hereby grants to the Collaborator[
]The license will specify the licensed
fields of use,
Heilman/Aviron CRADA (AI#000062) Appendix D page 7
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breadth of exclusivity, and royalties. Royalty rates will be based on
product sales and the rates conventionally granted in the field
identified in the RP for inventions with reasonably similar commercial
potential. Royalty rates generally will not exceed a rate within the
range of[ ] Contingent royalty schemes
based on, e.g., patent issuance or non-issuance, and provisions
treating the stacking of royalties or packaging of other licensed
inventions developed under this CRADA may be provided. Exclusive
licensees will be expected to reimburse NIH for IP expenses related to
each licensed intellectual property, and may be permitted to offset
such reimbursement against future product royalties.
8.2 EXERCISE OF LICENSE OPTION. The option of Article 8.1 must be
exercised by written notice mailed within three (3) months after the
patent or other IP application is filed to the NIH Office of
Technology Transfer, 6011 Executive Boulevard, Suite 325, Rockville,
MD 20852. NIH shall promptly advise Collaborator of the filing of
any patent or other IP application. Exercise of this option by the
Collaborator initiates a negotiation period that expires nine (9)
months after the patent or other IP application filing date. If the
last proposal by the Collaborator has not been responded to in writing
by the NIH within this nine (9) month period, the negotiation period
shall be extended to expire three (3) months after NIH so responds,
during which month the Collaborator may accept in writing the final
license proposal of NIH. After that time, NIH will be free to
license such IP rights to others. In the event that NIH and the
Collaborator do not enter into a license during this negotiation
period, NIH agrees not to make an offer on more favorable terms to a
third Party without first offering the Collaborator those more
favorable terms.
8.3 GOVERNMENT INTELLECTUAL PROPERTY RIGHTS. For inventions developed
wholly by NIH investigators or jointly with a Collaborator under this
CRADA, NIH is required by the Federal Technology Transfer Act of 1986
(15 U.S.C. Section 3710a[b](2)) to retain at least a nonexclusive,
irrevocable, paid-up license to practice the invention or to have the
invention practiced throughout the world by or on behalf of the U. S.
Government. For inventions developed wholly by the Collaborator under
this CRADA, the Collaborator agrees to grant a research license as
described in Article 8.4 to the Government. In the event the
Collaborator is granted one or more exclusive licenses to inventions
under Article 8.1 of this CRADA, NIH shall not grant to any third
Party any commercialization license with respect to any such invention
for the same field of use as granted to Collaborator. NIH shall be
free to grant commercialization licenses for any fields of use not
specified in an exclusive license to the Collaborator.
8.4 RESEARCH LICENSES.[
Heilman/Aviron CRADA (AI#000062) Appendix D page 8
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]
8.5 JOINT INVENTIONS NOT EXCLUSIVELY LICENSED. In the event that the
Collaborator does not acquire an exclusive commercialization license
to IP rights in joint Subject Inventions described in Article 7.4,
then each Party shall have the right to use the joint Subject
Invention and to license its use to others. The Parties may agree to
a joint licensing approach for such IP rights.
Article 9. PROPRIETARY RIGHTS AND PUBLICATION
9.1 RIGHT OF ACCESS. NIH and the Collaborator agree to exchange all
Clinical Data, Research Results and Raw Data produced in the course of
research under this CRADA, whether developed solely by NIH, jointly
with the Collaborator, or solely by the Collaborator. Tangible
research products developed under a CRADA will be shared equally by
the Parties to the CRADA unless other disposition is agreed to by the
Principal Investigators. All Parties to the CRADA will be free to
utilize Subject Data and Research Results for their own purposes,
consistent with their obligations under this CRADA.
[
Heilman/Aviron CRADA (AI#000062) Appendix D page 9
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
NIH Patent Policy Board, April 24, 1989
]
9.2 OWNERSHIP AND USE OF CLINICAL DATA AND RESEARCH RESULTS AND RAW
DATA. Subject to the sharing requirements of Article 9.1, all
Clinical Data and Research Results and all Raw Data, whether produced
solely by one party's investigators and other employees and personnel
or jointly by both parties' investigators and other employees and
personnel will be[
]
9.3 CONFIDENTIAL INFORMATION. Each Party agrees to limit its
disclosure of Proprietary Information to the amount necessary to carry
out the Research Plan of this CRADA, and shall place a confidentiality
notice on all such information. Materials required for the RP may
also be designated as Confidential Information from the party
receiving Confidential Information. Each party receiving Confidential
Information from the other Party agrees that any information so
designated shall be used by it only for the purposes described in the
attached Research Plan. Any party may object to the designation of
information as Confidential Information by another Party and may
decline to accept such information. In addition to all other
information identified as Confidential Information as set forth in
Section 2.2 above, data and research products developed solely by the
Collaborator may be designated as Confidential Information when they
are wholly separable from the data and research products developed
jointly with NIH investigators, and advance designation of such data
and product categories is set forth in the Research Plan. The
exchange of confidential information, e.g., patient data, should be
similarly limited and treated. Unless disclosure is otherwise
mutually agreed upon, all Parties to this CRADA agree to keep CRADA
Clinical Data, Research Results, and Raw Data confidential, to the
extent permitted by law, until they are published or corresponding
patent or other IP application(s) have been published. The use of
Confidential Information shall be governed by Sections 9.4 and 9.6
below. However, nothing contained herein shall be deemed to restrict
publication of summary clinical data consistent with NIH policy.
Information provided to one or more third parties pursuant to
Confidential Disclosure Agreements in connection with their
determination of the desirability of entering into a CRADA for cold
adapted
Heilman/Aviron CRADA (AI#000062) Appendix D page 10
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
NIH Patent Policy Board, April 24, 1989
influenza vaccine development shall be maintained as Confidential
Information.
9.4 PROTECTION OF CONFIDENTIAL INFORMATION. No Confidential
information obtained or disclosed in the conduct of research or as a
result of activities under this CRADA shall be disclosed, copied,
reproduced, or otherwise made available to any other person or entity
without the consent of the owning Party except as required under
court order or the Freedom of Information Act (5 U.S.C. Section 552).
Each Party agrees to use its best efforts to maintain the
confidentiality of Proprietary Information. Each Party agrees that
the other Party is not liable for the disclosure of Confidential
Information it determines may not lawfully be withheld, provided the
concerned Party has been given an opportunity to obtain a court order
to enjoin disclosure.
9.5 DURATION OF CONFIDENTIALITY OBLIGATION. Except as provided in
Section 9.6, the obligation to maintain the confidentiality of
Confidential Information shall expire at the earlier of the date when
the information is no longer Proprietary Information as defined in
Article 2.2 or [ ] after the expiration or termination date of
this CRADA; provided that upon the expiration of this [ ]
period, the Collaborator may request a [ ] extension period
to this term when necessary to protect Confidential Information
relating to products not yet commercialized. NIH may not unreasonably
deny such request and shall, upon such notice, refrain from disclosing
any such Confidential Information for said [ ] extension
period. If one or more third parties were provided access to certain
proprietary information pursuant to Confidential Disclosure Agreements
in connection with their determination of the desirability of entering
into a CRADA for cold adapted Influenza vaccine development, NIH shall
require such third party or parties to maintain the confidentiality of
such information for the term of this CRADA plus any extension granted
under this Article.
9.6 CONSISTENCY WITH POLICIES OF THE FOOD AND DRUG ADMINISTRATION
(FDA). Notwithstanding any other provisions of this Agreement, all
information submitted to FDA under this Agreement by Collaborator or
NIH shall be treated as Confidential Information by NIH; provided that
if FDA determines that certain information submitted to it is not
Confidential, NIH must treat such information as Confidential only if
such information is "Confidential Information" as defined in Article
2.2. If the information is submitted to FDA solely by Collaborator,
NIH's confidentiality obligations will not begin until Collaborator
has provided notice of the submission.
9.7 PUBLICATION. The Parties are encouraged to make publicly
available the results of their research. Before either Party submits
a paper or abstract for publication or
Heilman/Aviron CRADA (AI#000062) Appendix D page 11
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
NIH Patent Policy Board, April 24, 1989
otherwise intends to publicly disclose information about a Subject
Invention, [ ] the other Party shall be
provided thirty (30) days to review the proposed publication or
disclosure. Such publication or other disclosure shall be delayed for
up to sixty (60) additional days upon written request by any Party as
necessary to preserve U.S. or foreign patent, trade secret, or other IP
rights.
Article 10. REPRESENTATIONS AND WARRANTIES
10.1 REPRESENTATIONS AND WARRANTIES OF NIH. NIH hereby represents and
warrants to the Collaborator that the Official signing this CRADA has
authority to do so.
10.2 REPRESENTATIONS AND WARRANTIES OF THE COLLABORATOR. The
Collaborator hereby represents and warrants to NIH that the
Collaborator has the requisite power and authority to enter into this
CRADA and to perform according to its terms, and that the
Collaborator's Official signing this CRADA has authority to do so.
The Collaborator further represents that it is financially able to
satisfy any funding commitments made in Appendix C.
Article 11. TERMINATION
11.1 TERMINATION BY MUTUAL CONSENT. NIH and the Collaborator may
terminate this CRADA, or portions thereof, at any time by mutual
written consent. In such event, the Parties shall specify the
disposition of all property, inventions, patent or other IP
applications, and other results of work accomplished or in progress,
arising from or performed under this CRADA.
11.2 MATERIAL BREACH. Either NIH or the Collaborator may propose
termination of this CRADA by giving written notice of a material
breach of the other party's obligations as specified herein. Any such
notice shall specify the obligation or obligations believed to be
breached and actions that may be taken to cure such breach. After
receipt of such notice, the parties agree to negotiate in good faith in
an effort to achieve resolution and avoid termination. Termination
may not become effective until at least ninety (90) days following
receipt of such notice in order to provide the notified party
opportunity to respond. For purposes of this Article, material breach
shall mean substantial failure by or inability of either party to
fulfill obligations under the CRADA.
11.3 STAFFING. If this CRADA is mutually or unilaterally terminated
prior to its
Heilman/Aviron CRADA (AI#000062) Appendix D page 12
<PAGE>
NIH Patent Policy Board, April 24, 1989
expiration, funds will nevertheless remain available to NIH for
continuing any staffing commitment made by the Collaborator pursuant
to Article 5.1 above and Appendix C, if applicable, for a period of
six (6) months after such termination. If there are insufficient funds
to cover this expense, the Collaborator agrees to pay the difference.
11.4 NEW COMMITMENTS. No Party shall make new commitments related to
this CRADA after a mutual or unilateral termination and shall, to the
extent feasible, cancel all outstanding commitments and contracts by
the termination date.
11.5 TERMINATION COSTS. Concurrently with the exchange of final
reports pursuant to Articles 4.2 and 5.3, NIH shall submit to the
Collaborator for payment a statement of all costs incurred prior to
the date of termination which Collaborator has agreed to pay pursuant
to Appendix C, if applicable, and for all reasonable termination costs
including the cost of returning Collaborator property or removal of
abandoned property.
Article 12. DISPUTES
12.1 SETTLEMENT. Any dispute arising under this CRADA which is not
disposed of by agreement of the Principal Investigators shall be
submitted jointly to the signatories of this CRADA. If the signatories
are unable to jointly resolve the dispute within thirty (30) days
after notification thereof, the Assistant Secretary of Health (or
his/her designee) shall propose a resolution. Nothing in this section
shall prevent any Party from pursuing any and all administrative
and/or judicial remedies which may be available.
12.2 CONTINUATION OF WORK. Pending the resolution of any dispute or
claim pursuant to this Article, the Parties agree that performance of
all obligations shall be pursued diligently in accordance with the
direction of the NIH signatory.
Article 13. LIABILITY
13.1 PROPERTY. The U.S. Government shall not be responsible for
damages to any property of the Collaborator provided to it or acquired
by it pursuant to this CRADA.
13.2 NO WARRANTIES. Except as specifically stated in Article 10, the
Parties make no express or implied warranty as to any matter
whatsoever, including the conditions of the research or any invention
or product, whether tangible or intangible, made, or developed under
this CRADA, or the ownership, merchantability, or fitness for a
particular purpose of the research or any invention or product.
Heilman/Aviron CRADA (AI#000062) Appendix D page 13
<PAGE>
NIH Patent Policy Board, April 24, 1989
13.3 INDEMNIFICATION. The Collaborator agrees to hold the U.S.
Government harmless and to indemnify the Government for all
liabilities, demands, damages, expenses, and losses arising out of the
use by the Collaborator for any purpose of the Subject Data, Research
Results, and/or Subject Inventions produced in whole or in part by NIH
employees under this CRADA, unless due to the negligence of NIH, its
employees or agents. The Collaborator shall be liable for any claims
or damages it incurs in connection with this CRADA. NIH has no
authority to indemnify the Collaborator.
13.4 FORCE MAJEURE. Neither Party shall be liable for any
unforeseeable event beyond its reasonable control not caused by the
fault or negligence of such Party, which causes such Party to be
unable to perform its obligations under this CRADA, and which it has
been unable to overcome by the exercise of due diligence. In the event
of the occurrence of such a force majeure event, the Party unable to
perform shall promptly notify the other Party. It shall further use
its best efforts to resume performance as quickly as possible and
shall suspend performance only for such period of time as is necessary
as a result of the force majeure event.
Article 14. MISCELLANEOUS
14.1 GOVERNING LAW. The construction, validity, performance, and
effect of this CRADA shall be governed by Federal Law, as applied by
the Federal Courts in the District of Columbia. Federal law and
regulations will preempt any conflicting or inconsistent provisions in
this CRADA.
14.2 ENTIRE AGREEMENT. This CRADA constitutes the entire agreement
between the Parties concerning the subject matter of this CRADA and
supersedes any prior understanding or written or oral agreement.
14.3 HEADINGS. Titles and headings of the sections and subsections of
this CRADA are for the convenience of reference only, do not form a
part of this CRADA, and shall in no way affect its interpretation.
14.4 WAIVERS. None of the provisions of this CRADA shall be considered
waived by any Party hereto unless such waiver is given in writing to
the other Party. The failure of a Party to insist upon strict
performance of any of the terms and conditions hereof, or failure or
delay to exercise any rights provided herein or by law, shall not
be deemed a waiver of any rights of any Party.
14.5 SEVERABILITY. The illegality or invalidity of any provisions of
this CRADA shall not impair, affect, or invalidate the other
provisions of this CRADA.
Heilman/Aviron CRADA (AI#000062) page 14
<PAGE>
NIH Patent Policy Board, April 24, 1989
14.6 AMENDMENTS. If either Party desires a modification to this
CRADA, the Parties shall, upon reasonable notice of the proposed
modification or extension by the Party desiring the change, confer in
good faith to determine the desirability of such modification or
extension. Such modification shall not be effective until a written
amendment is signed by the signatories to this CRADA or by their
representatives duly authorized to execute such amendment.
14.7 ASSIGNMENT. Neither this CRADA nor any rights or obligations of
any Party hereunder shall be assigned or otherwise transferred by
either Party without the prior written consent of the other Party.
14.8 NOTICES. All notices pertaining to or required by this CRADA
shall be in writing and shall be signed by an authorized
representative and shall be delivered by hand or sent by certified
mail, return receipt requested, with postage prepaid, to the addresses
indicated on the signature page for each Party. Notices regarding the
exercise of license options shall be made pursuant to Article 8.2. Any
Party may change such address by notice given to the other Party in
the manner set forth above.
14.9 INDEPENDENT CONTRACTORS. The relationship of the Parties to this
CRADA is that of independent contractors and not as agents of each
other or as joint venturers or partners. Each party shall maintain
sole and exclusive control over its personnel and operations.
Collaborator employees who will be working at NIH facilities may be
asked to sign a Guest Researcher or Special Volunteer Agreement
appropriately modified in view of the terms of this CRADA.
14.10 USE OF NAME OR ENDORSEMENTS. By entering into this CRADA, NIH
does not directly or indirectly endorse any product or service
provided, or to be provided, whether directly or indirectly related to
either this CRADA or to any patent or other IP license or agreement
which implements this CRADA by its successors, assignees, or
licensees. The Collaborator shall not in any way state or imply that
this CRADA is an endorsement of any such product or service by the
U.S. Government or any of its organizational units or employees.
14.11 EXCEPTIONS TO THIS CRADA. Any exceptions or modifications to this
CRADA that are agreed to by the Parties prior to their execution of
this CRADA are set forth in Appendix D.
14.12 REASONABLE CONSENT. Whenever a Party's consent or permission is
required under this CRADA, such consent or permission shall not be
unreasonably withheld.
Article 15. DURATION OF AGREEMENT
Heilman/Aviron CRADA (AI#000062) page 15
<PAGE>
NIH Patent Policy Board, April 24, 1989
15.1 DURATION. It is mutually recognized that the duration of this
project cannot be rigidly defined in advance, and that the
contemplated time periods for various phases of the RP are only good
faith guidelines subject to adjustment by mutual agreement to fit
circumstances as the RP proceeds. In no case will the term of this
CRADA extend beyond the term indicated in the RP unless it is revised
in accordance with Article 14.6.
15.2 SURVIVABILITY. The provisions of Articles 4.2, 5.2, 5.3, 6.1,
Articles 7 - 9, 11.3, 11.5, 12.1, 13.3, and 14.10 shall survive the
termination of this CRADA.
Heilman/Aviron CRADA (AI#000062) page 16
<PAGE>
NIH Patent Policy Board, April 24, 1989
CRADA SIGNATURE PAGE
FOR NIH:
/s/ Anthony S. Fauci 6/18/95
- ------------------------- ----------
Anthony S. Fauci, M.D. Date
Director NIAID
Mailing Address for Notices:
Technology Transfer Branch
National Institute of Allergy & Infectious Diseases
9000 Rockville Pike
Bldg. 31, Rm. 7A32
Bethesda, MD 20892
FOR THE COLLABORATOR: (The undersigned expressly certifies or affirms that
the contents of any statements made or reflected in this document are truthful
and accurate.
/s/ J. Leighton Read, M.D. 28 Feb., 1995
- ------------------------------ ---------------
J. Leighton Read, M.D. Date
Chairman and CEO, Aviron
Mailing Address for Notices:
Aviron
- ------------------------------
1450 Rollins Road
- ------------------------------
Burlingame, CA 94010
- ------------------------------
[Include additional signature and address blocks as necessary for all Parties to
this CRADA]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
TRADE SECRETS AND/OR
CONFIDENTIAL COMMERCIAL
/FINANCIAL INFORMATION
EXEMPT FROM THE
F0IA DISCLOSURE
[5 U.S.C. 552(b) (4)]
ASSIGNMENT OF CRADA
THIS ASSIGNMENT OF CRADA [
] is by Wyeth-Ayerst Laboratories (Wyeth-Ayerst), which has offices at 145
King of Prussia Road, Radnor, PA 19087 (hereinafter "Assignor"), a division of
American Home Products Corporation, a corporation of the State of Delaware,
U.S.A., having its principal place of business at Five Giralda Farms, Madison,
New Jersey 07940-0874, U.S.A.
WHEREAS, Assignor and the National Institute of Allergy and Infectious
Diseases (NIAID) are parties to a Cooperative Research and Development
Agreement ("CRADA") [ ] and
WHEREAS, Assignor is desirous of assigning certain of its rights and
obligations under the CRADA to Aviron ("Assignee") having its principal place of
business at 1450 Rollins Road, Burlingame, California 94010, as provided for in
Article 14.7 of said CRADA, which Article requires prior written consent of the
parties; and
WHEREAS, NIAID has given its written consent to this assignment by
Assignor, as provided for in Article 14.7 of said CRADA; and
WHEREAS, in satisfaction of its sole remaining financial obligation to
NIAID under CRADA [ ] Assignor
shall pay said sum to NIAID subsequent to the consummation of the present
Assignment; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Assignor does hereby bargain, sell, assign, transfer, convey
and deliver to Assignee and its successors and assigns all of Assignor's right,
title and interest in, to and under the CRADA. However, the provisions of
paragraphs 6.1, 12.1, 13.2, 13.3 (but only to the extent that Collaborator under
CRADA is Wyeth-Ayerst), 14.10 and Article 9 shall remain in effect as between
NIAID and Assignor.
<PAGE>
Assignor does hereby agree, from and after the date hereof upon request of
Assignee, to execute such other documents, to take such actions, and to make
such filings, as Assignee may request in order to obtain the full benefit of
this Assignment of CRADA and Assignor's rights and obligations hereunder.
IN WITNESS WHEREOF, Assignor has caused this Assignment of CRADA to be
executed as of the day and year first above written.
ASSIGNOR:
National Institute of Allergy WYETH-AYERST LABORATORIES
and Infectious Diseases
By: /s/ Anthony S. Fauci By: /s/ Robert Essner
-------------------------------- ------------------------------------
Name: Name: Robert Essner
Title: Title: President
Date: 6/8/95 Date: May 30, 1995
------------------------------ ----------------------------------
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.8
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT HAS
BEEN DELETED, AS NOTED BY BRACKETS, AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406
OF THE SECURITIES ACT OF 1933, AS AMENDED.
DATED 7th November 1995
------------------------
EVANS MEDICAL LIMITED
and
AVIRON
------------------------------
MANUFACTURING AND
DEVELOPMENT AGREEMENT
------------------------------
Stringer Saul
Marcol House
293 Regent Street
London W1R 7PD
<PAGE>
THIS AGREEMENT is made the 7th day of November 1995
BETWEEN
EVANS MEDICAL LIMITED of Evans House, Regent Park,
Kingston Road, Leatherhead, Surrey, KT22 7PQ, United
Kingdom
(hereinafter called "Evans")
- and -
AVIRON a corporation incorporated in the State of
California, located at 1450 Rollins Road, Burlingame,
California, 94010, United States of America
(hereinafter called "Aviron")
WHEREAS
A. Aviron is the exclusive licensee of Michigan, the legal and beneficial
owner, of all the commercial rights to the Master Strain and the
rights to the technology associated with and required for the
production of the Virus Seed from the Master Strain.
B. Evans has experience in the production of influenza vaccines.
C. The parties wish to enter arrangements with regard to the Development
and thereafter the manufacture by Evans of the Vaccine.
IT IS AGREED as follows:
DEFINITIONS
In this Agreement the following words and phrases shall have the
following meanings:-
"Approved named senior personnel of Aviron (who
Personnel" individually shall previously have signed Evans' usual form
of confidentiality agreement covering such situations)
notified to Evans
"Change of means in respect of either party if greater
Control" than fifty per cent. (50%) of its assets or voting shares
become vested in or subject to the direction of a person,
firm, corporation or other instrument, other than the
parties in which presently vested such that there is
- 1 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
an effective change of control of that party
"Clinical [
Trials"
] to be conducted in accordance with this
Agreement in respect of the Vaccine as may be necessary to
obtain Regulatory Approval
"Commencement 1 November 1994
Date"
"Commercial production of the Vaccine for all purposes other
Production" than the Trials Production, and whether or not as a
consequence of Aviron obtaining the Regulatory Approval.
Such Commercial Production, if conducted by Evans, will be
conducted in a facility licensed by the relevant regulatory
authority for such purpose
"Early Phase III those clinical field trials conducted by or
Trials" on behalf of Aviron using material manufactured by Evans[
][
]
"Development" the development of a manufacturing process for Production of
the Vaccine
"Evans' those costs incurred by Evans[
Production
Costs" ]
"the Further the rights to[
Rights"
]
"Late Phase III those clinical trials conducted by or on
Trials" behalf of Aviron using materials, if Evans is the
manufacturer, manufactured by Evans in a facility licensed
by the relevant regulatory authority for the manufacture of
the Vaccine for commercial sale.[
]
"the Evans' Manufacturing Licence No[ ]
Manufacturing granted pursuant to the Medicines Act 1968 permitting
Licence" Evans to manufacture and/or assemble the Vaccine, among
other things
"Manufacturing the exclusive right to carry out the manufacture of
Rights" [ ] the Vaccine insofar as is
required for the Commercial Production for Aviron or any
other party to whom Aviron may grant,
- 2 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
license or allow rights in respect of the Working Seed or
the Vaccine
"Master Strain" live attenuated influenza vaccine seeds as are further
defined in the Michigan Agreement
"Michigan" 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
"Michigan a certain Materials Transfer and Intellectual Property
Agreement" Agreement between Aviron and Michigan dated 24 February
1995, attached as Schedule 4
"Price" that amount calculated in accordance with clause 9 herein
"Production" the Trials Production and the Commercial Production or
either of them, as the context requires
"Regulatory all such marketing authorisations and/or
Approval" product licences and any other approvals from the relevant
regulatory authority responsible for such matters as are
necessary to enable Evans to manufacture, distribute and
sell the Vaccine
[ ] [ ]
"Restricted all technical information relating to the Master Seeds,
Information" the Virus Seeds and the manufacture of the Vaccine disclosed
in confidence to Evans by Aviron excluding any such
information which:
(a) is or was already known to Evans at the time of
disclosure or communication by Aviron;
(b) was at the time of such disclosure or communication by
Aviron or thereafter becomes or became published
accessible to the public or otherwise in the public
domain other than through any breach of this Agreement
by Evans;
(c) must be disclosed to Government Inspectors in the
discharge of statutory obligations provided that before
disclosure Evans shall use
- 3 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
reasonable endeavors as it would in respect of its own
restricted information to obtain from such government
inspectors any assurances as regards confidentiality as
may be afforded to such information in the
circumstances;
(d) is disclosed by Evans to the relevant regulatory
authority in there course of applying for, obtaining or
maintaining Regulatory Approval;
(e) is hereafter disclosed to Evans without any obligations
of confidence by a third party who has not derived it
directly or indirectly from Aviron;
(f) is required to be disclosed by law
"the the requirements and specifications attached hereto as
Specification" Schedule 1, whether formulated before or after the
Development, as the same, may be amended from time to time by
agreement between the parties
"the Test" the testing protocol[
]
"Trials production of the Vaccine in sufficient quantities to
Production" enable Aviron to conduct the Clinical Trials
"Vaccine" cold-adapted influenza vaccine[
]
"VAT" United Kingdom value added tax or any other tax levied in
substitution therefor
"Virus Seed" [
]
"Working Seed" [
]
- 4 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
PART I
1. TRIALS PRODUCTION
1.1 Aviron requires the performance of the Trials Production to enable it
to conduct the Clinical Trials. Subject to Aviron providing
sufficient Virus Seeds suitable for the purpose, Evans hereby agrees
to perform the Development and thereafter the Trials Production of the
Vaccine for Aviron at the Price and otherwise on the terms set out in
Part II hereof.
1.2 Aviron shall notify Evans of the trial programme in accordance with
which Aviron shall conduct the Clinical Trials. Should the Clinical
Trials or any of them involve any product produced or supplied by
Evans (other than the Vaccine) Aviron shall promptly and fully notify
Evans of the trial programme, the manner in which such Clinical Trials
are to be conducted, and the results thereof. [
] Accordingly, in respect of the Trials Production of the
Vaccine for any particular Influenza season[
]
1.3 Aviron shall keep Evans fully and regularly informed of the progress
of the Clinical Trials.
1.4 Aviron shall inform Evans of the results of the Clinical Trials no
later than or, where practicable, earlier than the said results are
released or allowed to be released to any third party.
1.5 Promptly after the execution of this Agreement, and in no event later
than 45 days thereafter, the parties will work together in good faith
and agree upon the Specification, the Test and the required Product
Recall Procedures. Aviron agrees and acknowledges that Evans shall
not be obliged to manufacture Vaccine under this Agreement in
accordance with a specification to which it has not agreed.
2. COMMERCIAL PRODUCTION
It is the agreed intention of the parties that Evans shall carry out
the Development associated with the Commercial Production. Further,
it is the agreed intention of the parties that Evans shall have the
Manufacturing Rights for at least[ ] of Aviron's
requirements of Commercial Production for Europe. In accordance with
that intention should Aviron intend to offer for exploitation the
Manufacturing Rights
- 5 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
it shall enter good faith negotiations with Evans with a view to Evans
undertaking the Commercial Production in respect of at least the said
[ ] proportion of Aviron's requirements for such
countries. Should those negotiations not result within a reasonable
time in agreement between the parties then Aviron may offer the
Manufacturing Rights and the conduct of the Commercial Production to
any third party[
] For the avoidance of doubt it is acknowledged and
agreed that the Manufacturing Rights are independent of the Further
Rights. Aviron shall[
]
3. MICHIGAN LICENCE
Evans acknowledges the existence of Aviron's licence under the
Michigan Agreement (attached hereto as Schedule 4) and acknowledges
and accepts that Aviron may only grant to Evans such rights as Aviron
is permitted to grant pursuant to the Michigan Agreement. In that
regard Evans accepts:
3.1 [
]
3.2 Evans shall not provide any[
]Evans shall limit access to the[
]supplied by Aviron to those employees reasonably
requiring such access for the purpose of the Development and
Production of the Vaccine, which employees are governed by Evans'
customary confidentiality obligations.
3.3 Evans must keep confidential and must not use except as provided in
this Agreement, the[ ]and any know-how or technical data
related thereto for a period of ten years after termination of the
Michigan Agreement. The terms of this subclause 3.3 will in all
events apply to the [ ] but shall not apply to any [
]know-how or technical data which:
3.3.1 is or becomes public knowledge through no act or default of
Evans;
- 6 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3.3.2 was known to Evans prior to its supply or disclosure to it
by Aviron;
3.3.3 is disclosed to Evans by a third party with no obligations
of confidentiality attached; or
3.3.4 is required to be disclosed by law.
3.4 Aviron shall:
3.4.1 use every reasonable effort to honour and observe its
obligations under the Michigan Agreement and shall not act
or fail to act in any way which might jeopardise or cause to
be terminated the Michigan Agreement; and,
3.4.2 promptly notify Evans of any amendment to the Michigan
Agreement; and,
3.4.3 make every reasonable effort to notify Evans in writing of
the expiry or termination of the Michigan Agreement at least
six weeks prior to either event.
3.5 Evans will[ ]to manufacture
and store the Virus Seeds, the Working Seeds and Vaccine in accordance
with all applicable government laws and regulations.
3.6 Aviron, on Michigan's behalf, may request from Evans at reasonable
times and in reasonable quantities at a price equal to[
]such batch samples of Vaccine as it may desire for
non-human research purposes only, PROVIDED THAT Evans shall be under
no obligation under this sub-clause or otherwise[
]
3.7 Evans 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,
Evans 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.
3.8 Evans will indemnify Michigan, its fellows, officers, employees and
agents for and against any and all claims, damages, losses and
expenses of any nature resulting from, but not limited to, death,
personal injury,
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
illness, or property damage, arising from or in connection with:
3.8.1 any manufacture, use or other disposition by Evans of the
Working Seeds or Vaccine;
3.8.2 the direct or indirect use by any person of Working Seeds or
Vaccine made or used by Evans;
3.8.3 the use, handling, storage or disposal of Working Seeds, any
derivatives or Vaccine by Evans; or
3.8.4 the unauthorized and negligent use by Evans of any know-how,
technical data, sub-licensed to Aviron from Michigan, or
developed by Evans pursuant to the Development,
where but only where such claims, damages, losses and expenses are a
direct consequence of the negligence of Evans, its agents or
employees.
3.9 Evans shall not use the name of Michigan in publicity or advertising
concerning the Vaccine, the Working Seed or the Virus Seed 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.
3.10 Aviron may request from Evans at reasonable times and in reasonable
quantities, at a Price equal to[
]such batch samples of Working Seed as Aviron may require
PROVIDED THAT Evans shall be under no obligation under this sub-clause
or otherwise to produce extra batches of Working Seed solely or
substantially to meet such requirements.
4. MANUFACTURING LICENCE
Performance by Evans of Production shall at all times be conditional
upon the maintenance of the whole, or appropriate section, of the
Manufacturing Licence. Evans will maintain the Manufacturing Licence
in full force and effect throughout the term of this Agreement.
Should for any reason other than the default or negligence of Aviron
the Manufacturing Licence expire lapse or be revoked Evans shall
forthwith notify Aviron of such occurrence and shall make every
reasonable effort to restore, renew or replace the Manufacturing
Licence. Should within[ ]the Manufacturing
Licence not be restored, renewed or replaced, or if no authorisation
to manufacture is granted to Evans in
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
substitution therefor, Aviron may by written notice to Evans,
terminate this Agreement.
5. GRANT OF FURTHER RIGHTS
Should Aviron intend to exploit the Further Rights, it shall keep
Evans fully and promptly informed of its intentions in regard thereto
and shall consider[
]
6. PROCESS TECHNOLOGY
6.1 Evans acknowledges and agrees that process technology specific solely
to the Vaccine and developed by Evans in the course of the Development
shall be[
]Aviron shall
be responsible for the[
] All other process technology developed by Evans
pursuant to this Agreement shall be [
]
6.2 In respect of process technology developed by Evans pursuant to this
Agreement which is the property of Evans,[
]
6.3 Evans shall notify Aviron should it be approached by any third party
wishing to exploit any process technology developed by Evans pursuant
to this Agreement which is the property of Evans in respect of[ ]
and upon receipt of such notification, Aviron may request the parties
enter negotiations for a licence in respect thereof prior to any
rights being licensed exclusively to such a third party.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
PART II
7. PRODUCTION, ASSEMBLY, STORAGE AND QUALITY CONTROL
7.1 Evans shall perform all Production of the Vaccine in accordance with
the Specification. For the avoidance of doubt the Specification may
not be amended or modified by Aviron without Evans's prior written
agreement which shall not be unreasonably withheld.
7.2 The method of supply, storage and handling of materials, components
and the Vaccine; the specifications for the materials, components and
the finished products; the methods of manufacture and/or assembly of
the Vaccine; the Quality Control and Quality Assurance methods and
procedures to be employed for the Vaccine; and the Health and Safety
precautions that need to be observed in the handling, storage,
processing or quality control of the materials, components and Vaccine
shall be as specified or referred to in the Specification.
7.3 Evans shall not deviate from such mutually agreed methods and
procedures without prior written approval from Aviron except insofar
as is required by the relevant regulatory authority or applicable laws
or as is required for the maintenance of the Manufacturing Licence.
Evans shall promptly notify Aviron of such requirements and any
deviation in accordance therewith.
7.4 Evans shall be entitled to purchase and instal all such new or
replacement tooling or parts as may be required exclusively for the
Production of the Vaccine [
]
7.5 Should Evans and Aviron agree that it is necessary or desirable for
the effective and efficient undertaking of the Development and the
Production, [
] and Aviron acknowledges and
- 10 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
agrees that [
] as described in
clause 9 herein.
7.6 Any amount payable under sub-clauses 7.4 and 7.5 herein shall be made
in accordance with clause 9 herein.
8. SUPPLY OF VIRUS SEED
8.1 Pursuant to the Michigan Agreement, Aviron shall acquire from Michigan
the Master Strain which Aviron shall [
] Aviron shall supply the Virus Seed to
Evans [
] Evans warrants and undertakes that it shall [
] then in that event Evans shall indemnify Aviron
against any and all claims, damages, losses and expenses of any nature
(excluding economic loss or loss of profits or consequential loss of
whatever nature) arising from or in connection with Evans' failure to
[ ] other than in
accordance with its required procedures. For the avoidance of doubt,
should Evans have [
]
8.2 Aviron shall supply to Evans at all times throughout the existence of
this Agreement the Virus Seed in sufficient quantities and in good
time to enable Evans to perform [
]
8.3 Aviron shall ensure that all of the Virus Seed supplied to Evans at
any time shall comply with in all respects [
] any Regulatory Approval and all applicable rules
and regulations regarding the same.
8.4 Evans shall have no responsibility regarding testing of the Virus Seed
upon receiving the same from Aviron [
- 11 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]
8. 5 Evans shall be responsible for the importation of the Virus Seed into
the United Kingdom and for export of the Vaccine from the United
Kingdom to Aviron [
]
9. THE PRICE AND OTHER PAYMENTS
9.1 The Price of the [
] shall be in respect of the Trials Production either:
9.1.1 where Evans undertakes both the Trials Production and the
Commercial Production an amount equal to [
];
or,
9.1.2 where Evans undertakes the Trials Production only and [
] an amount equal to [
]; and,
9.1.3 where Evans undertakes the Trials Production only and [
]Aviron either:
9.1.3.1 [
] or,
9.1.3.2 [
]
then in addition to any amount paid or payable in accordance
with clause 9.1.2, an amount equal to [
] such amount payable in respect of
sub-clause 9.1.3.2 or sub-clause 9.1.3.2 upon [
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
]
9.2 Evans may [
] the Price shall be subject to [
] variation with effect from the [ ]
of the Commencement Date and with effect from each anniversary
thereof. Any Price variation [
]
Any variation in the Price shall reflect actual variations in [
]
9.3 Evans will invoice Aviron for Vaccine despatched and Aviron shall pay
the invoice not later than thirty (30) days from the date of the
invoice. In respect of any invoice rendered for Trials Production in
accordance with sub-clause 9.1.1, should it transpire that the Vaccine
should have been invoiced in accordance with sub-clause 9.1.2 then any
payment made shall be deemed to have been a part payment in respect of
the amount due and Evans shall invoice Aviron for the balance which
shall be payable in accordance with this clause. In respect of any
invoice rendered for Trials Production in accordance with sub-clause
9.1.1, should it transpire that the Vaccine should have been invoiced
in accordance with sub-clause 9.1.3 then any payment made shall be
deemed to have been a part payment in respect of the amount due and
Evans shall invoice Aviron for the balance which shall be payable
immediately. Where settlement of any amount payable hereunder is not
made by the due date Evans (without prejudice to its other rights) may
charge interest at a rate of [ ] or part thereof on the
amount outstanding. In the event of non-payment of any invoice or
part thereof by Aviron, Evans (without prejudice to its other rights
and remedies) [
]
9.4 In respect of any amount payable pursuant to sub-clauses 7.4 and 7.5
herein and for any[
]
9.5 Upon termination of this Agreement, Aviron shall have the option
either: (i) to purchase from Evans, at the Price, or (ii) to direct
Evans to destroy, in which event Evans shall nonetheless be paid the
Price, [
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
] are reasonable given Aviron's requirements
for the Vaccine prior to termination together with all of Evans' [
] Notwithstanding the foregoing, in the
event of termination of this Agreement due to breach by Evans, Aviron
shall not be obliged to pay Evans the Price, but shall instead pay [
]
9.6 Evans shall give Aviron such assistance as is reasonable to allow
Aviron to conduct its affairs in the most advantageous manner in
respect of VAT. Any costs to Evans associated with such assistance
shall be met by Aviron.
10. SUPPLIES AND ORDERS
10.1 Evans shall use all reasonable efforts to supply the Vaccine whether
pursuant to the Trials Production or the Commercial Production in
accordance with the forecasts supplied by Aviron pursuant to this
Clause.
10.2 Within [ ] following the date of execution
hereof the parties shall mutually agree upon a production schedule for
the first year of the Trials Production [ ] thereafter
the parties shall mutually agree upon a production schedule for the
second and third years of the Trials Production. Thereafter, the
parties shall mutually agree upon as necessary a production schedule
for any remaining period prior to obtaining Regulatory Approval for
the Vaccine.
10.3 All orders submitted by Aviron to Evans must be in writing and shall
be accepted or rejected by Evans in a timely manner in writing, and no
order shall be binding upon either party until such time as it has
been accepted by Evans in accordance herewith.
10.4 Other than the Virus Seed or the syringes, which shall be supplied by
Aviron, Evans shall provide all materials and/or components required
for Trials Production of the Vaccine.
10.5 If the Virus Seed and/or purchase orders to be supplied by Aviron or
on its behalf do not reach Evans by any agreed date, Evans and Aviron
shall agree new delivery dates for the Vaccine which are commensurate
with the actual dates of supply to Evans but subject to clause 10.7
herein.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
10. 6 It is accepted that whilst Evans will [
]
10.7 Evans will at the request of Aviron deliver the Vaccine to Aviron at
any address as Aviron may specify but all Prices are [
]
10.8 If Aviron fails to pay for any Vaccine in accordance with the
provisions hereof within the stated periods for payment Evans, in
addition to its rights under clause 9.3 herein, may:
10.8.1 sell or otherwise dispose of to Michigan or its designee any
of the Vaccine the subject of any order made by Aviron and
accepted by Evans but not yet delivered; and
10.8.2 suspend or cancel any further supplies or deliveries of the
Vaccine hereunder.
10.9 [
]
property in and title to any batch of the Vaccine or any part thereof
shall remain with Evans unless and until Aviron shall have paid the
Price in full for that batch of the Vaccine.
10.10 All Vaccine will be supplied on the terms and conditions herein
contained and in the event of any order for Vaccine being made by
Aviron on its Standard Conditions of Purchase or being accepted by
Evans on its Standard Conditions of Sale it is hereby agreed that any
such Standard Conditions shall be of no effect and that the terms and
conditions set forth in this Agreement shall prevail.
10.11 In the event that Evans is unable to deliver any Vaccine against the
agreed delivery date for that Vaccine, Evans shall immediately advise
Aviron to this effect, explain the reason for the delay, and agree a
revised delivery date with Aviron. Evans shall make every reasonable
effort to ensure that Aviron is not unduly inconvenienced by delay in
the delivery of the Vaccine.
10.12 Should Evans fail to deliver any Vaccine in accordance with an agreed
order within [ ] of an agreed delivery day then Aviron
may give to Evans [ ] written notice requiring Evans to
remedy its default and should Evans fail to remedy its default on or
before the expiry of the said [ ] period,
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Aviron may terminate this Agreement unless any failure to supply by
Evans is due to:
10.12.1 Aviron's failure to supply the Virus Seed;
10.12.2 [
] or
10.12.3 [
]
11. INVENTORY
11.1 Evans shall submit to Aviron a statement on the status of all orders
placed by Aviron which have not been fulfilled at that date.
11.2 At the end of a Production campaign Evans shall list and inform Aviron
of all unused Virus Seed that has been supplied by Aviron. By return
Aviron may request Evans to destroy all such Virus Seed, or may
request Evans to return them to Aviron at Aviron's expense.
12. [ ] TECHNOLOGY
Upon Evans' request the parties shall enter into good faith
negotiations with respect to Aviron granting to Evans an exclusive
licence in respect of Aviron's [ ] technology
for use in Europe. Such licence shall be on terms to be agreed but
shall include payment by Evans of a royalty based upon [
]
13. ACCESS BY AVIRON
Subject to receiving reasonable prior notice from Aviron, Evans shall
allow Approved Personnel access to that part of the Evans premises
dedicated to the Production at any time during normal business hours
to inspect and/or reconcile virus Seeds, Working Seeds, materials,
components and Vaccine held at Evans premises on behalf of Aviron, and
to audit any manufacturing and/or assembly processes (including the
related Quality Assurance and Quality Control operations) being
performed by Evans for Aviron under this Agreement. Evans shall
inform Aviron of any findings of any regulatory inspection or audit
insofar as those findings may affect the Production contemplated under
this Agreement, together with any corrective action required and/or
taken. Evans shall
- 16 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
provide to Aviron copies of all correspondence between Evans and the
relevant regulatory authorities with respect to such audit, subject to
Evans' right to withhold or excise any information which Evans
considers to be confidential or commercially sensitive. Evans shall
grant to Aviron access to those records in the possession of Evans
regarding the manufacture of the Vaccine as may be necessary in
compiling submissions to the US Food and Drug Administration ("FDA")
or responding to any enquiries from the FDA. [
]
14. WARRANTY
14.1 Aviron shall, within a period of [
] inform Evans of any
failure of the Vaccine to meet the Specification. Should Aviron fail
to inform Evans within the said period of [
] Aviron shall be deemed to have accepted the Vaccine.
14.2 Evans shall make no charge hereunder in respect of any batch where
the failure to meet the Specification arises from any act or omission
on its part. Subject to the written agreement of Aviron, Evans shall
at its expense either correct or cause to be corrected the deficiency
in that batch of the Vaccine or if the defect cannot be corrected
Evans shall indemnify Aviron against all reasonable costs and expenses
of replacing the relevant batch and Evans shall destroy the batch or
return it to Aviron (as may be agreed) for destruction. Subject to
either party's obligations at law to act other than in compliance with
this provision each party shall give to the other reasonable
assistance with any recall of the Vaccine (which shall be conducted in
accordance with Evans' Product Recall Procedure which is attached
hereto as Schedule 2) including provision of relevant information and
the list of customers to whom the recall products have been supplied
and the issue of notices, warnings and information as reasonably
requested by the relevant party to enable that party to comply with
its recall procedures.
14.3 If notwithstanding the above Vaccine is released for distribution and
is subsequently found to be faulty or defective and is not in
compliance with the Specification then Evans shall indemnify Aviron
against all costs, claims and expenses arising directly or indirectly
from the replacement of such vaccine and its recall for destruction
unless the fault or defect arises from any act or omission on Aviron's
part or was otherwise caused by the negligence of Aviron, its agents
or [
- 17 -
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
] For the avoidance of doubt the aforesaid indemnity shall
not be operative and Evans shall not be liable thereunder should the
Vaccine be in accordance with the Specification.
14.4 Subject to clause 14.3 Aviron shall be solely responsible for the
recall of Vaccine sold in Aviron's livery in accordance with the
Regulatory Approval granted to Aviron.
15. LIABILITY FOR LOSS AND CLAIMS
15.1 Liability for third party claims against either party or any loss or
damage suffered resulting from the supply of any Vaccine manufactured
and/or assembled under this Agreement will be subject to the following
provisions:
15.1.1 Evans shall be liable for and shall indemnify Aviron [
]
15.1.2 Aviron shall be liable for and shall indemnify Evans [
]
15.1.3 Without prejudice to the right to be indemnified pursuant to
15.1.1 and 15.1.2 neither party limits liability for death
or personal injury arising out of that party's negligence.
15.2 Evans shall be liable for any loss of or damage to Aviron materials,
components or Vaccine arising from Evans's negligence whilst at Evans
premises, [
]
15.3 Other than as specified in Clause 15.2, Evans shall not be liable for
any loss of or damage to [
] In respect of all such losses or damages Aviron hereby:
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
15.3.1 [
] and;
15.3.2 [
]
16. CONFIDENTIALITY
16.1 Evans acknowledges that much of the Restricted Information disclosed
to it hereunder will be deemed to be confidential information under
the Michigan Agreement and so subject to clause 3.3. Accordingly,
Evans undertakes that during the period of this Agreement and for a
period of [ ]
it will treat as confidential all Restricted Information and shall
not disclose such information to any third party except with the prior
written agreement of Aviron.
16.2 Evans shall be entitled to use such Restricted Information and may
disclose such Restricted Information to its own personnel, under
obligations of secrecy, only to the extent necessary for Evans to
perform its obligations to Aviron under this Agreement.
16.3 In the event of any inconsistency or conflict between the provisions
of the Michigan Agreement in respect of Restricted Information and any
provision of this Agreement, the provisions of the Michigan Agreement
shall prevail, but only insofar as: (a) such provision is an
obligation of Aviron which has been assumed by Evans under this
Agreement and, (b) the performance of this Agreement would be rendered
impossible by the application of both of the conflicting or
inconsistent provisions.
16.4 On the expiry or termination of this Agreement, Evans will return to
Aviron all Restricted Information in its possession and Evans shall
not make any further use of that information.
16.5 In this Clause references to Evans or Aviron shall be deemed to
include any Affiliate of that party.
16.6 Aviron undertakes to keep confidential all information received by it
directly or indirectly from Evans or obtained by it pursuant to the
performance of this Agreement which relates in any way to Evans's
business including but not limited to Evans's technical know-how in
relation to the Development and to the Production of the Vaccine
provided however that this obligation of confidentiality shall not
apply to such information:
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
16.6.1 which is or was already known to Aviron at the time it was
received or obtained from Evans;
16.6.2 which was at the time that it was received or obtained from
Evans by Aviron or thereafter becomes or became published,
accessible to the public or otherwise in the public domain
other than through any breach of this Agreement by Aviron;
16.6.3 which must be disclosed to government inspectors in the
discharge of statutory obligations;
16.6.4 which is hereafter disclosed to Aviron without any
obligations of confidence by a third party who has not
derived it directly or indirectly from Evans.
17. ASSIGNMENT
17.1 [
]
17.2 Notwithstanding clause 17.1 Evans may without Aviron's consent procure
the performance of any of its obligations by any Affiliate of Evans
but Evans shall not thereby be relieved of responsibility for the
performance of such obligations, and the provisions of clause 17.1
shall not apply.
17.3 [
]
18. FORCE MAJEURE
18.1 If the performance of any part of this Agreement by either party is
prevented, hindered or delayed by any act, events, non-happenings,
omissions or accidents beyond the control of that party (force
majeure) then that party shall (subject to compliance with Clause
18.2) be excused from such performance to the extent that such party
is necessarily prevented, hindered or delayed thereby during the
continuance of the matter constituting "force majeure" and this
Agreement shall be deemed suspended so long as and to the extent that
any such cause prevents, hinders or delays its performance.
18.2 The party affected by force majeure shall give notice to the other
party as soon as practical after the matter
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<PAGE>
CONFIDENTIAL TREATMENT REQEUSTED
constituting force majeure has arisen or occurred giving the other
party full particulars of the nature and extent of such matter. The
affected party shall additionally at its own cost and expense take all
reasonable steps as may be necessary to overcome the force majeure and
to minimize its effects.
18.3 If the duration of any force majeure occurrence exceeds two months the
parties shall consult with a view to determining what steps they may
agree to take, appropriate to the force majeure circumstances, in
relation to this Agreement.
19. TERM
Performance of this Agreement shall commence from the Commencement
Date and subject to termination in accordance with any other right of
termination specified herein this Agreement shall continue in force
until terminated by either party giving not less than six (6) months
notice in writing to the other party which notice may be given at any
time after 31 December 1996.
20. TERMINATION
20.1 Either party may terminate this Agreement:
20.1.1 forthwith if the other party has committed any breach of any
of the terms of this Agreement, and in the case of any such
breach which is capable of remedy has not remedied that
breach within [ ] of being required by written notice
from the other party so to do; or
20.1.2 by [ ] prior written notice if the
other party becomes bankrupt, goes into liquidation (either
voluntary or compulsory, unless as part of a bona fide
scheme of reconstruction, re-organization or amalgamation),
makes a general assignment for the benefit of its creditors
(whether voluntary or compulsory) or has a receiver
appointed for its property or imposes suffers or incurs any
process or occurrence having similar effect; or
20.1.3 by[
]
but without prejudice to any right of either party to sue
for any antecedent breach of this Agreement.
20.2 This Agreement shall, unless expiring or terminating earlier in
accordance with any other provision herein,
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<PAGE>
terminate upon termination of the Michigan Agreement. In such event,
at Michigan's option as notified to Evans by Aviron, Evans shall, at
Aviron's cost, [
] Evans shall provide [
]
20.3 Any termination of this Agreement (however occasioned) shall not
affect any accrued rights or liabilities of either of the parties nor
shall it affect the coming into force or the continuance in force of
any provision hereof which is expressly intended to come into or
continue in force on or after such termination, including (but not
limited to) clauses 2, 3, 9, 12, 14, 15 and 16.
21. NOTICE
Any notice or other communication required or permitted to be given
under this Agreement by either party shall be deemed to be
sufficiently served if sent to the other party by pre paid airmail
post or fax addressed to that party at the address set out in this
Agreement or to any other address so designated in writing by that
party.
Any such notice shall in the case of a notice sent by post be deemed
to have been served ten (10) days after the date on which it is
mailed.
In the case of a notice or communication by fax, the fax must be
confirmed by sending a copy of the same by pre paid airmail post
within seven (7) days, in which event the date of service shall be the
date of transmission of the fax.
22. MISCELLANEOUS
22.1 This Agreement shall be governed and construed in accordance with the
laws of England.
22.2 No amendment or modification of this Agreement shall be valid or
binding upon either party unless made in writing and signed by an
authorized representative of that party.
22.3 Evans and Aviron represent to each other that the respective officer
or officers of each company who have signed this Agreement are duly
authorized to do so.
22.4 Any waiver by either party of a breach of any provision of this
Agreement shall not be considered as a waiver of
- 22 -
<PAGE>
any continued or subsequent breach of the same or any other provision
thereof.
22.5 Nothing in this Agreement shall create, or be deemed to create, a
partnership or the relationship of principal and agent or employer and
employee between the parties.
22.6 This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof, supersedes all previous
agreements understandings or letters of intent between the parties
with respect thereto.
22.7 If any provision of this Agreement is held by any court or other
competent authority to be void or unenforceable in whole or part, this
Agreement shall continue to be valid as to the other provisions
thereof and the remainder of the affected provision.
22.8 The clause and paragraph headings in this Agreement are for ease of
reference only and are not to be taken into account in the
construction or interpretation of any covenant condition or proviso to
which they refer.
22.9 Unless the context otherwise requires, references:
22.9.1 to numbered clauses and Schedules are references to the
relevant clause in or Schedule to this Agreement; and
22.9.2 in any Schedule to a numbered paragraph are references to
the relevant paragraph in that Schedule
22.10 Words in this Agreement importing the singular meaning, where the
context so allows, include the plural meaning and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
the year first above written.
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<PAGE>
For and on behalf of
EVANS MEDICAL LIMITED
Full Name
and Title: M.J. HARVEY (UK OPERATIONS DIRECTOR)
. . . . . . . . . . . . . . . . . . . .
Signature: /s/ M. J. Harvey
. . . . . . . . . . . . . . . . . . . .
In the presence of: S. R. PARISH
. . . . . . . . . . . . . . . . . . . .
Witness's signature:/s/ S. R. Parish
. . . . . . . . . . . . . . . . . . . .
Address: EVANS MEDICAL
. . . . . . . . . . . . . . . . . . . .
CASICILL ROAD, LIVERPOOL
. . . . . . . . . . . . . . . . . . . .
Occupation: S. R. PARISH
. . . . . . . . . . . . . . . . . . . .
For and on behalf of
AVIRON
Full Name
and Title: LEIGHTON READ (CEO)
. . . . . . . . . . . . . . . . . . . .
Signature: /s/ L. Read
. . . . . . . . . . . . . . . . . . . .
In the presence of: Julie C. Neumann
. . . . . . . . . . . . . . . . . . . .
Witness's signature:/s/ Julie C. Neumann
. . . . . . . . . . . . . . . . . . . .
Address: 297 N. Bernardo Avenue
. . . . . . . . . . . . . . . . . . . .
Mountain View, CA 94043
. . . . . . . . . . . . . . . . . . . .
Occupation: Controller
. . . . . . . . . . . . . . . . . . . .
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<PAGE>
SCHEDULE I
THE SPECIFICATION
[Not Completed in Original Document]
<PAGE>
SCHEDULE 2
PRODUCT RECALL PROCEDURES
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 2
ADVERSE EXPERIENCE REPORTING
AND PROVISION OF MEDICAL INFORMATION
1. ADVERSE EXPERIENCE REPORTING
[
]
1.2 [
]
1.3 [
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
2. PROVISION OF MEDICAL INFORMATION
2.1 [
]
2.2 [
]
2.3 [
]
3. PRODUCT COMPLAINTS
3.1 [
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SPONTANEOUS ADVERSE EVENT (ADE) REPORTING PROCEDURE - INDIVIDUAL CASE
REPORTS
[
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[ ]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[ ]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[ ]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
PRODUCT RECALL PROCEDURE
INITIATING PRODUCT RECALL
[
]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 3
THE TEST
[Not Completed in Original Document]
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 4
MICHIGAN AGREEMENT
[See Exhibit 10.3 to the Registration Statement on Form S-1 filed
on behalf of Aviron with the SEC ]
<PAGE>
AVIRON
1996 EQUITY INCENTIVE PLAN
ADOPTED MARCH 6, 1996
APPROVED BY STOCKHOLDERS ________, 1996
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, (iv) rights to purchase restricted stock, and (v)
stock appreciation rights, all as defined below. The Plan is successor to, and
restatement of, the Company's 1992 Stock Option Plan.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants, to secure and retain the
services of new Employees and Consultants, and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
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(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Aviron, a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "DISINTERESTED PERSON" means a Director: who either: (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any Affiliate entitling the participants therein to acquire equity securities
of the Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or
(ii) is otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.
(l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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(n) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market, the Fair Market Value of a share of common
stock shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in common stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(2) If the common stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations
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promulgated under Section 162(m) of the Code), is not a former employee of the
Company or an "affiliated corporation" receiving compensation for prior services
(other than benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time, and is not currently
receiving direct or indirect remuneration from the Company or an "affiliated
corporation" for services in any capacity other than as a Director, or (ii) is
otherwise considered an "outside director" for purposes of Section 162(m) of the
Code.
(w) "PLAN" means this Aviron 1996 Equity Incentive Plan.
(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(y) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(aa) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(bb) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
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(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
14.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of the
Board the authority to grant Stock Awards to eligible persons who (1) are not
then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to avoid the application of Section
162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply if the Board or the Committee expressly declares that
such requirement shall not apply. Any Disinterested Person shall otherwise
comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate one million seven hundred fifty thousand (1,750,000)
shares of the Company's common stock (after giving effect to the one-for-five
reverse split of the Company's Common Stock approved in March, 1996). If any
Stock Award shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan. Shares subject to Stock Appreciation Rights exercised in accordance with
Section 8 of the Plan shall not be available for subsequent issuance under the
Plan.
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(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees or Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time of grant the Director is also an Employee or Consultant.
(c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the Fair Market Value
of such stock at the date of grant.
(d) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than one hundred fifty thousand (150,000)
(after giving effect to the one-for-five reverse split of the Company's Common
Stock approved in March, 1996) shares of the Company's common stock in any
calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of a
Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted
6.
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pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and any administrative interpretations or pronouncements thereunder
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only
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within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such
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longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the Re-
Load Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(d) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
9.
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Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order satisfying
the requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
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(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees and Consultants. To exercise any outstanding Stock
Appreciation Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the Stock Award Agreement
evidencing such right. If a Stock Appreciation Right is granted to an
individual who is at the time subject to Section 16(b) of the Exchange Act (a
"Section 16(b) Insider"), the Stock Award Agreement of grant shall incorporate
all the terms and conditions at the time necessary to assure that the subsequent
exercise of such right shall qualify for the safe-harbor exemption from
short-swing profit liability provided by Rule 16b-3 promulgated under the
Exchange Act (or any successor rule or regulation). Except as provided in
subsection 5(d), no limitation shall exist on the aggregate amount of cash
payments the Company may make under the Plan in connection with the exercise of
a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on
an exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8,
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be subject to the same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. They shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (B) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of any adversely affected holders of Options and/or Stock Appreciation Rights,
the cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than:
eighty-five percent (85%) of the Fair Market Value for a Nonstatutory Stock
Option, one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of an Incentive Stock Option held by a
10% stockholder (as described in subsection 5(c)), not less than one hundred ten
percent (110%) of the Fair Market Value per share of stock on the new grant
date. Notwithstanding the foregoing, the Board or the Committee may grant an
Option and/or Stock Appreciation Right with an exercise price lower than that
set forth above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(d) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Right; in the event of such repricing, both the original and
the substituted Options and Stock Appreciation Rights shall be counted against
the maximum awards of Options and Stock Appreciation Rights permitted to be
granted pursuant to subsection 5(d) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
12.
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(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(b) Neither an Employee, a Consultant nor any person to whom a Stock
Award is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate or to continue acting as a Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
13.
<PAGE>
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(d), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
14.
<PAGE>
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such Stock Awards shall
continue in full force and effect. In the event any surviving corporation and
its Affiliates refuse to assume or continue such Stock Awards, or to substitute
similar options for those outstanding under the Plan, then, with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants, the time during which such Stock Awards may be exercised shall be
accelerated and the Stock Awards terminated if not exercised prior to such
event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will modify the Plan in any way that would
require stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3
(e.g., increases in the number of shares available for awards or changes to
eligibility for Awards).
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of performance-
based compensation from the limit on corporate deductibility of compensation
paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
or Consultants with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award
15.
<PAGE>
shall not be impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Stock Award was granted and (ii) such person
consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
16.
<PAGE>
AVIRON
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED MARCH 6, 1996
APPROVED BY STOCKHOLDERS ______________, 1996
1. PURPOSE.
(a) The purpose of the Aviron 1995 Non-Employee Directors' Stock Option
Plan (the "Plan") is to provide a means by which each director of Aviron, a
Delaware corporation (the "Company") who is not otherwise an employee of the
Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
1.
<PAGE>
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate two hundred thousand (200,000) shares
of the Company's common stock (after giving effect to the one-for-five reverse
split of the Company's Common Stock approved in March, 1996). If any option
granted under the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased under such option
shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, after the Effective Date, elected for the first
time to be a Non-Employee Director automatically shall, upon the date of initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase fifteen
2.
<PAGE>
thousand (15,000) shares of common stock of the Company (after giving effect to
the one-for-five reverse split of the Company's Common Stock approved in March,
1996) on the terms and conditions set forth herein.
(b) On December 31st of each year, commencing with December 31, 1996, (i)
each person who is then a Non-Employee Director and continuously has been a
Non-Employee Director since December 31st of the immediately preceding year
automatically shall be granted an option to purchase three thousand (3,000)
shares of common stock of the Company (after giving effect to the one-for-five
reverse split of the Company's Common Stock approved in March, 1996) on the
terms and conditions set forth herein, and (ii) each other person who is then a
Non-Employee Director automatically shall be granted an option to purchase, on
the terms and conditions set forth herein, the number of shares of common stock
of the Company (rounded up to the nearest whole share) determined by multiplying
three thousand (3,000) shares (after giving effect to the one-for-five reverse
split of the Company's Common Stock approved in March, 1996) by a fraction, the
numerator of which is the number of days the person continuously has been a
Non-Employee Director as of the date of such grant and the denominator of which
is 365.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date
3.
<PAGE>
of termination of all such service; PROVIDED, HOWEVER, that if such termination
of service is due to the optionee's death, the option shall terminate on the
earlier of the Expiration Date or eighteen (18) months following the date of the
optionee's death. In any and all circumstances, an option may be exercised
following termination of the optionee's service as a Non-Employee Director or
employee of or consultant to the Company or any Affiliate only as to that number
of shares as to which it was exercisable on the date of termination of such
service under the provisions of subparagraph 6(e).
(b) The exercise price of each option shall be one hundred percent (100%)
of the fair market value of the stock subject to such option on the date such
option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than 1,000 shares. However, when the number of shares being purchased
upon an exercise is 1,000 or more shares, the optionee may elect to make payment
of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash or by check at
the time of exercise; or
(ii) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
4.
<PAGE>
(iii) Payment by a combination of the methods of payment specified
in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 under the Securities Exchange Act of
1934 ("Rule 16b-3") and shall be exercisable during the lifetime of the person
to whom the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order. Notwithstanding the
foregoing, the optionee may, by delivering written notice to the Company in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.
(e) The option shall become exercisable in installments over a period of
three (3) years from the date of grant commencing on the date one (1) year after
the date of grant of the option, with thirty-three percent (33%) becoming
exercisable one (1) year after the date of the grant, thirty-four percent (34%)
becoming exercisable two (2) years after the date of grant and the remaining
thirty-three percent (33%) becoming exercisable three (3) years after the date
of grant; provided that the optionee has, during the entire period prior to such
vesting date, continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate
5.
<PAGE>
of the Company, whereupon such option shall become fully exercisable in
accordance with its terms with respect to that portion of the shares represented
by that installment.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then-applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
(h) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that any optionee
not sell or otherwise transfer or dispose of any shares of common stock or other
securities of the Company during such period (not to exceed one hundred eighty
6.
<PAGE>
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED, HOWEVER, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder
7.
<PAGE>
with respect to, any shares subject to such option unless and until such person
has satisfied all requirements for exercise of the option pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(d) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other
8.
<PAGE>
withholding tax required to be withheld with respect to such sale or transfer,
or such removal or lapse, is made available to the Company for timely payment of
such tax.
(f) As used in this Plan, "fair market value" means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market of
The Nasdaq Stock Market , the Fair Market Value of a share of common stock shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(ii) If the common stock is quoted on The Nasdaq Stock Market (but not
on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
9.
<PAGE>
Notwithstanding the foregoing, the Fair Market Value of the common stock for an
option granted on the Effective Date shall be the price per share at which
shares of common stock are first sold to the public in the Company's initial
public offering.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding options.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) any other capital reorganization (including a sale of
stock of the Company to a single purchaser or single group of affiliated
purchasers) after which less than fifty percent (50%) of the outstanding voting
shares of the new or continuing corporation are owned by shareholders of the
Company immediately before such transaction, the time during which options
outstanding under the Plan may be exercised shall be accelerated to permit the
optionee to exercise all such
10.
<PAGE>
options in full prior to such event, and the options shall terminate if not
exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
PROVIDED, HOWEVER, that the Board shall not amend the plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or applicable regulations or
rulings thereunder. Except as provided in paragraph 10 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will modify the Plan in any way
if such modification requires stockholder approval in order for the Plan to
comply with the requirements of Rule 16b-3 or Section 162(m) of the Internal
Revenue Code.
(b) Rights and obligations under any option granted before any amendment
of the Plan shall not be impaired by such amendment unless (i) the Company
requests the consent of the person to whom the option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
11.
<PAGE>
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon the Effective Date, subject to
the condition that the Plan is approved by the stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
12.
<PAGE>
AVIRON
1996 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED MARCH 6, 1996
APPROVED BY STOCKHOLDERS _____________, 1996
1. PURPOSE.
(a) The purpose of the 1996 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Aviron, a Delaware corporation (the
"Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
1.
<PAGE>
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate two hundred fifty thousand
(250,000) shares of the Company's common stock (the "Common Stock") (after
giving effect to the one-for-five reverse split of the Company's Common Stock
approved in March, 1996). If any right granted under the Plan shall for any
reason terminate without having been exercised, the Common Stock not purchased
under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same
2.
<PAGE>
rights and privileges. The terms and conditions of an Offering shall be
incorporated by reference into the Plan and treated as part of the Plan. The
provisions of separate Offerings need not be identical, but each Offering shall
include (through incorporation of the provisions of this Plan by reference in
the document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent
3.
<PAGE>
(5%) or more of the total combined voting power or value of all classes of stock
of the Company or of any Affiliate. For purposes of this subparagraph 5(c), the
rules of Section 424(d) of the Code shall apply in determining the stock
ownership of any employee, and stock which such employee may purchase under all
outstanding rights and options shall be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
4.
<PAGE>
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(h) or
Section 403(b) of the Code or that provides non-qualified deferred
compensation), which shall include overtime pay, but shall exclude bonuses,
commissions, incentive pay, profit sharing, other remuneration paid directly to
the employee, the cost of employee benefits paid for by the Company or an
Affiliate, education or tuition reimbursements, imputed income arising under any
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock options,
contributions made by the Company or an Affiliate under any employee benefit
plan, and similar items of compensation, or such other set of inclusions or
exclusions as may be determined by the Board or the Committee. The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility
5.
<PAGE>
to participate in any other Offerings under the Plan but such participant will
be required to deliver a new participation agreement in order to participate in
subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee) under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date
6.
<PAGE>
of any Offering hereunder, as delayed to the maximum extent permissible, the
Plan is not registered and in such compliance, no rights granted under the Plan
or any Offering shall be exercised and all payroll deductions accumulated during
the Offering (reduced to the extent, if any, such deductions have been used to
acquire stock) shall be distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the
7.
<PAGE>
Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to comply
with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
8.
<PAGE>
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at
any time. No rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under
9.
<PAGE>
the Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted by the Board or the Committee, which date may be prior to
the Effective Date.
10.
<PAGE>
AVIRON
VANNI BUSINESS PARK INDUSTRIAL LEASE
ARTICLE I
PARTIES
THIS Lease, dated, for reference purposes only, August 29, 1995, is made by
and between the Vanni Business Park General) Partnership ("Lessor") and Aviron,
a California corporation. ("Lessee")
ARTICLE II
PREMISES
Lessor hereby leases to Lessee and Lessee leases from Lessor for the term,
at the rental, and upon all of the conditions set forth herein, that certain
real property situated in the County of Santa Clara, State of California,
commonly known as 297 North Bernardo Avenue, Mountain View, California 94043,
and more particularly described in the site plan prepared by Dennis Kobza &
Associates, A.I.A., marked Exhibit "A" which is attached hereto and incorporated
herein. Said real property, including the land and all improvements therein, is
called "the Premises".
ARTICLE III
TERM
SECTION 3.01. TERM. The team of this lease shall be for ten (10) years,
commencing on November 1, 1995 ("Commencement Date").
SECTION 3.02. OPTION TO EXTEND.
(a) Lessee is given two (2) options to extend the Lease Term for five (5)
year periods each (the "Extended Terms), following expiration of the initial
Lease Term, which options may be exercised only by written notice (the "Option
Notice") from Lessee to Lessor given not less than one hundred eighty (180) days
prior to the end of the initial Lease Term, or not less than one hundred eighty
(180) days prior to the end of the then expiring Extended Term; provided,
however, if Lessee is in material default on the date of giving the Option
Notice, the Option Notice shall be totally ineffective, or if Lessee is in
material default on the date an Extended Term is to commence, such Extended Term
shall not commence and this Lease shall expire at the end of the initial Lease
Term or at the end of the then expiring Extended Term. In the event of an
Extended Term, the Extended Term shall be subject to all the terms and
conditions of this Lease excepting rent which shall be at ninety-five percent
(95%) of the then fair market rental value of the Premises, as determined under
subparagraph (b) below, but in no event less than the monthly rent prevailing on
the last month of the then expiring initial Lease Term or Extended Term.
(b) The parties shall agree on the fair market rental value of the
Premises for each respective Extended Term, including fair market periodic
adjustments thereto, during the first thirty (30) days after the exercise by
Lessee of an option to extend the Lease Tenn. The fair market rental
determination shall not take into account the improvements to the Premises
installed or constructed at Lessee's sole expense. If the parties are able to
agree on the fair market rental value for the Extended Term, (including periodic
Adjustments thereto), then such agreed value shall be the fair market rental
value for purposes of determining the rent for the Extended Term.
In the event the parties are unable to agree on the fair market rental
value for the Premises (including periodic adjustments) within that time, then
at Lessee's written request, within ten (10) days of the expiration of that
thirty (30) day period, each party shall separately designate an appraiser to
make this determination. Within five (5) business days of their appointment,
the two designated appraisers shall jointly designate a third appraiser. The
failure of either party to appoint an appraiser within the time allowed shall be
deemed equivalent to appointing the appraiser appointed by the other party. No
person shall be appointed or designated an appraiser unless he or she is then a
member
1
<PAGE>
of MAI. Appraisal shall be on the basis of the Premises "as is" except for
improvements and fixtures which were constructed at Lessee expense, or are the
sole property of Lessee. If, within ten (10) business days after the appointment
of all appraisers, a majority of the appraisers concur on the value of the then
current fair market rental value for the Premises, including fair market
periodic adjustments thereto, that appraisal shall be the accepted fair market
rental value. If a majority of the appraisers do not concur within that period,
the determination of the appraiser whose appraisal is neither highest nor lowest
shall be the accepted fair market rental value. The parties shall share the
appraisal expenses equally.
SECTION 3.03. DELAY IN ACCESS. The parties agree that if for any reason
Lessor cannot deliver access to the Premises to Lessee for the purpose of
commencing the Tenant Improvements on or before November 1, 1995, such failure
shall not constitute a breach of this agreement by Lessor. Lessee shall not be
obligated to pay rent, nor shall the Lease Term commence until access to the
Premises is tendered to Lessee.
SECTION 3.04. EARLY POSSESSION. If Lessee occupies the Premises prior
to the Commencement Date, such occupancy shall be subject to all provisions
hereof, and Lessee shall pay rent for such period at the initial monthly rates
set forth below; provided, however, that Lessee may enter the Premises thirty
(30) days prior to the Commencement Date solely for the purpose of installing
fixtures or laboratory equipment or constructing tenant improvements without
being required to pay rent.
ARTICLE IV
RENT: SPECIAL NET LEASE
SECTION 4.01. RENT. The first month's rent shall be due and payable
upon execution of this Lease by Lessee. From and after the Commencement Date,
Lessee shall pay to Lessor rent for Premises in advance, on the first day of
each month based on the following schedule of rents:
Rent Per Square Monthly
Months Square Foot Footage Base Rent
------ ----------- ------- ---------
01-12 1.35 "NNN" 42,800 sq. ft. $57,780.00
13-24 1.35 "NNN" 52,800 sq. ft. $71,280.00
25-48 1.45 "NNN" 52,800 sq. ft. $76,560.00
49-72 1.50 "NNN" 52,800 sq. ft. $79,200.00
73-96 1.60 "NNN" 52,800 sq. ft. $84,480.00
97-120 1.65 "NNN" 52,800 sq. ft. $87,120.00
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Rent shall be payable
in lawful money of the United States to Lessor at the address stated herein or
to such other persons or at such other places as Lessor may designate in
writing.
SECTION 4.02. SPECIAL NET LEASE. This Lease is what is commonly called
a "Net, Net, Net Lease", it being understood that the Lessor shall receive the
rent set forth in Section 4.01 free and clear of any and all other impositions,
taxes, liens, charges or expenses of any nature except as otherwise provided in
this agreement. In addition to the rent reserved by Section 4.01, Lessee shall
pay to the parties respectively entitled thereto all insurance premiums, taxes,
assessments, operating charges, management fees, maintenance charges, and any
other charges, costs and expenses which arise or may be contemplated under any
provisions of this Lease for the entire Premises during the term hereof. All of
such charges, costs and expenses shall constitute additional rent, and upon the
failure of Lessee to pay any of such costs, charges or expenses, Lessor shall
have the same rights and remedies as otherwise provided in this Lease for the
failure of Lessee to pay rent. It is the intention of the parties hereto that
this Lease shall not be terminable for any reason by the Lessee, and that Lessee
shall in no event be entitled to any abatement of or reduction in rent payable
under this Lease, except as herein expressly provided. Any present or future
law to the contrary shall not alter this agreement of the parties.
ARTICLE V
2
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<PAGE>
SECURITY DEPOSIT
Lessee shall deposit with Lessor, upon execution of this Lease, $87,120.00 as
security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may, after the
expiration of any applicable period of curing such default as set forth herein,
without waiving or releasing Lessee from any obligation under this Lease, and
without waiving Lessor's right to treat such failure as a default hereof, use,
apply, or retain all or any portion of said deposit for the payment of any rent
or other charge in default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to compensate Lessor for
any loss or damage which Lessor may suffer thereby. If Lessor so uses or
applies all or any portion of said deposit, Lessee shall within ten (10) days
after written demand therefor deposit cash with Lessor in an amount sufficient
to restore said deposit to the full amount hereinabove stated and Lessee's
failure to do so shall be a material breach of this Lease. If Lessee performs
all of Lessee's obligations hereunder, said deposit shall be returned to Lessee
(or, at Lessee's option, to the last assignee, if any, of Lessee's interest
hereunder) at the expiration of the term hereof, including extension, and after
Lessee has vacated the Premises.
No trust relationship is created herein between Lessor and Lessee with
respect to said security deposit, and Lessor may commingle it, use it in
ordinary business, transfer or assign it, or use it in any combination of those
ways. In the event of termination of Lessor's interest in this Lease, Lessor
shall transfer said deposit to Lessor's successor in interest, whereupon if such
successor acknowledges receipt thereof and assumes all of Lessor's obligations
under this Lease, Lessee agrees to release Lessor from all liability for the
return of such deposit or the accounting therefor.
ARTICLE VI
USE
SECTION 6.01. USE. The Premises shall be used and occupied for offices,
warehouse, biomedical laboratory research and development, assembly, wholesale
sales, and any other legal use which is otherwise in compliance with the
reasonable rules and regulations that may be imposed by Lessor from time to time
on the business park. Lessor represents, but does not warrant, that these
general uses are allowable, but that Lessee should consult and confirm with any
and all applicable governmental agencies that any specific use of the Premises
is allowable. Lessee shall not use nor permit the use of the Premises in any
manner that will create waste or a nuisance or unreasonably disturb any other
tenants. This Lease does not grant to Lessee any exclusive-use rights that
would prevent other tenants or lessees from conducting businesses or operations
within the business park similar to the business or operations of Lessee.
SECTION 6.02. COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in its state existing on
the Commencement Date, does not violate any laws, or permits, licenses, or
covenants or restrictions of record, or any applicable building code, regulation
or ordinance in effect on such Commencement Date.
(b) Except as provided in paragraph 6.02(a) or elsewhere in this Lease,
Lessee shall, at Lessee's expense, comply promptly with all applicable statutes,
ordinances, rules, regulations, orders, covenants, and restrictions of record in
effect during the term or any part of the term hereof, regulating the use by
Lessee of the Premises. Any Americans with Disabilities Act (ADA) requirements
resulting from the Lessee's use of the Premises shall be the responsibility of
Lessee.
SECTION 6.03. CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee, for the purpose of
constructing Lessee's tenant improvements, in an "as is" condition on the Lease
Commencement Date, except that the Premises shall be clean and free of debris
and toxic and radioactive materials. Prior to the Commencement Date, Lessor
shall release to Lessee certain previously prepared reports, as requested by
Lessee, relating to the Premises, including a copy of the certified closure
report from
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the City of Mountain View Fire Department. Such report shall include a
statement confirming that radioactive materials previously existing on the
premises, if any, have been removed to the extent that the Premises conforms, as
of the date of the report, to California state and City regulatory requirements
governing the allowable amounts of such materials on the Premises.
All existing laboratory fixtures attached to the Premises, including cold
rooms, casework, vented fume hoods, and DI RO water system, shall remain in
place on the Premises, but shall not become the property of Lessee. Lessor
further warrants to Lessee that, to the best of Lessor's knowledge, all HVAC,
electrical, roof, and plumbing systems are in good and working condition, and
that the Premises are free from any outstanding litigation, environmental
contamination, and code violations. In the event that it is determined that any
of these warranties have been violated as of the Commencement Date, then it
shall be the obligation of Lessor, after receipt of written notice from Lessee
setting forth with specificity the nature of the violation, to promptly, at
Lessor's sole cost, rectify such violation. Lessee's failure to give such
written notice to Lessor within ninety (90) days of the Lease Commencement Date,
shall cause the conclusive presumption that Lessor has complied with all of
Lessor's obligations hereunder.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises in their condition existing as of the Lease Commencement Date, subject
to all laws governing and regulating the use of the Premises, and accepts this
Lease subject thereto. Lessee acknowledges that, except as expressly set forth
herein, neither Lessor nor Lessor's agent has made any representation or
warranty as to the present or future suitability of the Premises for the conduct
of Lessee's business.
ARTICLE VII
HAZARDOUS OR TOXIC MATERIALS
Lessee shall not emit, dump, dispose, or release on the Premises any Toxic
Materials, and Lessee shall not allow or permit any agent, vendor, or other
entity acting on Lessee's behalf to emit, dump, dispose, or release on the
Premises, any Toxic Materials. Lessee shall not bring, use, or store on the
Premises, or emit, dump, dispose, or release from the Premises, any Toxic
Materials in violation of any laws, regulations, ordinances, or statutes which
are now in existence or which may be enacted in the future. Lessee shall remain
in full and complete compliance with all laws, regulations, ordinances, and
statutes with respect to Toxic Materials, and Lessee shall install and keep in
good working order any monitoring devices that are necessary to insure Lessee's
full and complete compliance therewith.
Lessee shall indemnify and hold Lessor harmless from any claims,
liabilities, costs, or expenses incurred or suffered by Lessor arising from
Lessee's bringing, using, emitting, dumping, disposing, or releasing upon the
Premises, or generating or creating at or emitting, dumping, disposing, or
releasing from the Premises, any Toxic Materials, or arising from the bringing,
using, emitting, dumping, disposing, or releasing upon the Premises, or
generating or creating at or emitting, dumping, disposing, or releasing from the
Premises, any Toxic Materials by any agent, vendor, or other entity acting on
Lessee's behalf. Lessee's indemnification and hold harmless obligations as set
forth in this Article VII above include, without limitation, all of the
following: (i) claims, liabilities, costs or expenses resulting from or based
upon administrative, judicial (civil or criminal), or other action, legal or
equitable, brought by any private or public person under common law or any
Federal, State, County or Municipal law, ordinance or regulation, (ii) claims,
liabilities, costs, or expenses pertaining to the cleanup or containment of
Toxic Materials, the identification of the pollutants in the Toxic Materials,
the identification of the scope of any environmental contamination, the removal
of pollutants from soils, the provision of an alternative public drinking water
source, or the long term monitoring of ground water and surface waters, and
(iii) all costs of defending such claims. Lessee shall comply, at its sole
cost, with all laws pertaining to such Toxic Materials. Lessee's hold harmless
and indemnity obligations hereunder shall survive the expiration or termination
of this Lease.
For the purposes of this Article VII, "Toxic Materials" includes, without
limitation, any toxic or hazardous gaseous, liquid, or solid materials or waste,
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or any material or substance having characteristics of ignitability,
corrosivity, reactivity, or extraction procedure toxicity or substances or
materials which are listed on any of the Environmental Protection Agency's lists
of hazardous wastes or which are identified in Sections 66680 through 66685 of
Title 22 of the California Code of Regulations as the same may be amended from
time to time.
Except as may be disclosed in the hazardous materials report delivered to
Lessee by Lessor, to the best knowledge of Lessor, there are no Toxic Materials
present on or about the Premises and no action, proceeding, or claim is pending
or threatened concerning the Premises concerning any Toxic Material or pursuant
to any environmental law.
Lessor shall indemnify Lessee and hold Lessee harmless from any claims,
liabilities, costs, or expenses incurred or suffered by Lessee arising from the
existence of Toxic Materials on the Premises prior to or on the Commencement
Date.
ARTICLE VIII
MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 8.01. MAINTENANCE - PREMISES. Throughout the term, Lessee agrees
to keep and maintain all improvements and appurtenances in or serving the
Premises, including all sewer connections, plumbing, heating and cooling
appliances, and wiring, in the same order, condition and repair as they are in
on the Commencement Date, or may be put in during the term, reasonable use and
wear excepted. Lessee hereby expressly waives the provisions of any law
permitting repairs by a tenant at the expense of a landlord, including, without
limitation, all rights of Lessee under Sections 1941 and 1942 of the California
Civil Code. Lessee agrees to keep the Premises clean and in sanitary condition
as required by the health, sanitary and police ordinances and regulations of any
political subdivision having jurisdiction. Lessee further agrees to keep the
interior of the Premises, such as the windows, floors, walls, doors, showcases
and fixtures clean and neat in appearance and to remove all trash and debris
which may be found in or around the Premises. If Lessee refuses or neglects to
commence such repairs and/or maintenance required under this agreement or does
not diligently prosecute same to completion within thirty (30) days of written
notice thereof, then Lessor may enter the Premises and cause such repairs and/or
maintenance to be made. Lessee agrees that upon demand, it shall pay to Lessor
the cost of any such repairs, together with accrued interest from the date of
payment at the prime commercial lending rate then in effect at Bank of America.
Notwithstanding anything to the contrary above, if Lessee fails to maintain the
Premises according to the Lease terms, Lessor may elect to enter into a
maintenance contract with a third party for the provision of all or a part of
Lessee's maintenance obligations as set forth in this Paragraph. Upon such
election, Lessee shall be relieved from its obligations to perform only those
maintenance obligations covered by the maintenance contract, and Lessee shall
bear its pro rata share, as set forth in Paragraph 8.02 below, of the costs of
such maintenance contract which shall be paid in advance on a monthly basis with
Lessee's rent payments.
SECTION 8.02. MAINTENANCE - COMMON AREAS. Lessor shall be responsible for
maintaining in a safe, good, and clean condition, the common areas, structure
and roof of the Premises and the common areas of the business park as a whole.
Lessee shall have the obligation to notify Lessor, in writing, of any repairs or
maintenance to the common areas, structure, or roof which may be required, and
Lessor shall have a reasonable time to make such repairs, provided that Lessor
promptly commences such repairs and diligently prosecutes the same to
completion.
Lessee shall pay to Lessor, as additional rent, in the manner and at the
time provided below, Lessee's proportionate share, as defined below, of all
costs and expenses incurred by Lessor in the operation and maintenance of the
common areas of the business park during the term of this Lease. Such costs and
expenses shall include, without limiting the generality of the foregoing, all
maintenance, pest control, security, gardening, landscaping, cost of public
liability, property damage, vandalism and malicious mischief, earthquake, and
other insurance deemed necessary by the Landlord, real property taxes, property
management costs, including a management fee equal to three percent (3%) of the
monthly rent, painting, lighting, cleaning, trash removal, depreciation of
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equipment, fireprotection, and similar items.
Lessee's proportionate share of such common area expenses shall be 21.7%
which is based upon the square footage of 52,800 square feet for the Premises
and the total square footage of the business park which is 243,364 square feet.
Lessor shall bill Lessee monthly for Lessee's proportionate share of such
common area costs, which proportionate share shall be based upon the previous
month's actual costs and expenses. Lessee shall pay such proportionate share
within 15 days of receipt of said billing statement from Lessor. Lessor agrees
to make its books and records pertaining to the common area costs available for
Lessee's inspection upon request.
If any of Lessee's repair obligations under section 8.01 or reimbursement
obligations under section 8.02 would require Lessee to pay all or any portion of
any charge which should be treated as a capital improvement under generally
accepted accounting principles, then Lessee shall pay that portion of the cost,
or if pursuant to this Section 8.02 then Lessee's proportionate share of that
portion of the cost, of such capital improvement determined by multiplying such
cost by a fraction, the numerator of which is the number of years and/or
fractions of years remaining in the lease term, including extensions, at the
time the capital improvement project commences, and the denominator of which is
the useful life of such capital improvement. If Lessee does not exercise its
option to extend the lease term under Section 3.02, then the numerator used to
determine Lessee's proportionate share shall be deemed changed retroactively to
reflect only the lease term without extensions and Lessor shall refund to Lessee
the amount called for by such adjustment.
SECTION 8.03. ALTERATIONS AND ADDITIONS. No alterations or additions shall
be made to the Premises by Lessee without the prior written consent of Lessor
which Lessor will not unreasonably withhold. Lessee may make nonstructural
alterations not exceeding Twenty-Five Thousand Dollars ($25,000.00) without the
approval of Lessor if such alterations meet all applicable codes, laws, and
ordinances.
As a condition to giving its consent, Lessor may require that Lessee agree
to remove any such alterations or improvements at the expiration of the term.
All structural changes, alterations, or additions to be made to the Premises
shall be under the supervision of a competent architect or competent licensed
structural engineer and made in accordance with plans and specifications which
have been furnished to and approved by Lessor prior to commencement of work,
which approval shall not be unreasonably withheld. If the written consent of
Lessor to any proposed alterations by Lessee shall have been obtained, Lessee
agrees to advise Lessor in writing of the date upon which such alterations will
commence in order to permit Lessor to post a notice of non-responsibility. All
such alterations, changes and additions shall be constructed in good and
workmanlike manner in accordance with all ordinances and laws relating thereto.
Upon request, Lessor shall advise Lessee in writing whether Lessor reserves the
right to require Lessee to remove any alterations to the Premises upon
termination of the Lease. Except for alterations that cannot be removed without
structural injury to the Premises, at any time Lessee may remove any alterations
or fixtures installed by Lessee from the Premises provided that Lessee repairs
all damages occasioned by such removal.
SECTION 8.04. NO TENANT IMPROVEMENT ALLOWANCE.
Lessor shall not provide any tenant improvement allowance under this Lease.
SECTION 8.05. PLUMBING. Lessee shall not use the plumbing facilities for
any purpose other than that for which they were constructed. The expense of any
breakage, stoppage or other damage relating to the plumbing and resulting from
the introduction by Lessee, its agents, employees, or invitees of foreign
substances into the plumbing facilities shall be borne by Lessee.
ARTICLE IX
INSURANCE
SECTION 9.01. PROPERTY/RENTAL INSURANCE-- PREMISES. During the term,
Lessor shall keep the Premises insured against loss or damage by fire and those
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risks normally included in the term "all risk" including (a) flood coverage, (b)
earthquake coverage at the election of Lessor, (c) coverage for loss of rents
(provided that notwithstanding anything set forth herein to the contrary rent
shall abate at least to the extent of any rent insurance received by Lessor) and
(d) boiler and machinery coverage if the Lessor reasonably deems such coverage
necessary. Any deductibles shall be paid by Lessor if the deductible arises
from damage solely to the Premises. The amount of such insurance shall be not
less than one hundred percent (100%) of the replacement value of the Premises.
Any recovery received from said insurance policy shall be paid to Lessor.
Lessee, in addition to the rent and other charges provided herein, agrees
to pay to Lessor its pro rata share of the premiums for all such insurance,
which pro rata share is identical to that provided in Section 8.02, above. The
insurance premiums shall be paid in accordance with Article IV, within thirty
(30) days of Lessee's receipt of a copy of Lessor's statement therefor.
SECTION 9.02. PROPERTY INSURANCE--FIXTURES AND INVENTORY. During the
term, Lessee shall, at its sole expense, maintain insurance with "all risk"
coverage on any fixtures, leasehold improvements, furnishings, merchandise,
equipment, or personal property in or on the Premises, whether in place as of
the date hereof or installed hereafter, for the full replacement value
thereof, and Lessor shall not have any responsibility nor pay any costs for
maintaining any types of such insurance. Any deductibles shall be paid by
Lessee.
SECTION 9.03. LESSOR'S LIABILITY INSURANCE. During the term, Lessor may
maintain a policy or policies of comprehensive general liability insurance
insuring Lessor and Lessee (and such others as designated by Lessor) against
liability for bodily injury, death and property damage on or about the Premises
or the common area of the business park, with combined single limit coverage of
not less than Two Million Dollars ($2,000,000).
Lessee, in addition to the rent and other charges provided herein, agrees
to pay to Lessor its pro rata share of the premiums for all such insurance,
which pro rata share is identical to that provided in Section 8.02, above. The
insurance premiums shall be paid in accordance with Article IV, within thirty
(30) days of Lessee's receipt of a copy of Lessor's statement therefor.
SECTION 9.04. LESSEE'S LIABILITY INSURANCE. During the term, Lessee shall,
at its sole expense, maintain for the mutual benefit of Lessor and Lessee,
comprehensive general liability and property damage insurance against claims for
bodily injury, death or property damage occurring in or about the Premises or
arising out of the use or occupancy of the Premises, with combined single limit
coverage of not less than Two Million Dollars ($2,000,000). The limits of such
insurance shall not limit the liability of Lessee. Lessee shall furnish to
Lessor prior to the Commencement Date, and at least thirty (30) days prior to
the expiration date of any policy, certificates indicating that the liability
insurance required by Lessee above is in full force and effect; that Lessor has
been named as an additional insured; and that all such policies will not be
cancelled unless thirty (30) days' prior written notice of the proposed
cancellation has been given to Lessor. The insurance shall be with insurers
approved by Lessor and with policies in form satisfactory to Lessor, provided
however, that such approval shall not be unreasonably withheld. Said policies
shall provide that Lessor, although an additional insured, may recover for loss
covered by such insurance suffered by Lessor by reason of Lessee's negligence
and shall include a broad form liability endorsement.
SECTION 9.05. WAIVER OF SUBROGATION. Lessor hereby releases Lessee, and
Lessee hereby releases Lessor, and their respective officers, agents, employees
and servants, from any and all claims or demands of damages, loss, expense, or
injury to the Premises, or to the furnishings and fixtures and equipment, or
inventory or other property of either Lessor or Lessee in, or about or upon the
Premises, or claims for bodily injury or death which is caused by or results
from perils, events or happenings which are the subject of insurance and carried
by the respective parties and in force or required to be in force pursuant to
this Article IX at the time of any such loss; provided, however, that such
waiver shall be effective only to the extent permitted by the insurance covering
such loss and to the extent such insurance is not prejudiced thereby. Each
party shall cause each insurance policy obtained by it to provide that the
insurance company waives all right of recovery by way of subrogation against
either party in connection with any damage covered by any policy.
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SECTION 9.06. INDEMNIFICATION. Except in the case of Lessor's own acts or
omission, Lessee will indemnify Lessor and save it harmless from and against any
and all claims, actions, damages, liability and expense in connection with loss
of life, personal injury and/or damage to property arising from or out of any
occurrence in, upon or at the Premises (other than those arising from the
construction of the Premises or Building), or the occupancy or use by Lessee of
the Premises or any part hereof, or caused wholly or in part by acts or
omissions of Lessee, its agents, contractors, employees, servants, licensees, or
concessionaires or by anyone permitted to be on the Premises by Lessee. In case
Lessor shall be made a party to any such litigation commenced by or against
Lessee, then Lessee shall protect and hold Lessor harmless from all claims,
liabilities, costs and expenses, and shall pay all costs, expenses and
reasonable legal fees incurred by Lessor in connection with such litigation.
SECTION 9.07. PLATE GLASS REPLACEMENT. Lessee shall replace at its sole
expense, any and all plate glass and other glass in and about the Premises which
is damaged or broken by vandalism. If any plate glass or other glass in and
about the Premises is damaged or broken by causes other than vandalism, then
Lessor shall replace the same and Lessee shall reimburse Lessor an amount equal
to Lessor's cost of replacement, provided that such amount shall not exceed the
deductible then in effect on Lessor's insurance policy, if any, covering the
damaged glass. Nothing herein shall be construed to require Lessor to carry
plate glass insurance.
SECTION 9.08. WORKER'S COMPENSATION INSURANCE. Lessee shall, at its sole
expense, maintain and keep in force during the term a policy or policies of
Worker's Compensation insurance or any other employee benefit insurance
sufficient to comply with all applicable laws, statutes, ordinances and
governmental rules, regulations or requirements.
ARTICLE X
DAMAGE OR DESTRUCTION
SECTION 10.01. RIGHT TO TERMINATE ON DESTRUCTION OF PREMISES. Lessor and
Lessee shall have the right to terminate this Lease if, during the term, the
Premises are damaged to an extent exceeding fifty percent (50%) of the then
reconstruction cost of the Premises as a whole. Lessor and Lessee shall also
have the right to terminate this Lease if any portion of the Premises is damaged
by a peril not required to be insured hereunder. In either case, Lessor and
Lessee may elect to terminate as provided above by written notice to Lessee or
Lessor delivered within thirty (30) days of the happening of such damage.
SECTION 10.02. REPAIRS BY LESSOR. If Lessor and Lessee shall not elect to
terminate this Lease pursuant to Section 10.01, Lessor shall, immediately upon
receipt of insurance proceeds paid in connection with such casualty, but in no
event later than one hundred twenty (120) days after such damage has occurred,
proceed to repair or rebuild the Premises, on the same plan and design as
existed immediately before such damage or destruction occurred and will proceed
expeditiously to complete such restoration, subject to such delays as may be
reasonably attributable to governmental restrictions or failure to obtain
materials or labor, or other causes beyond the control of Lessor. Lessee shall
be liable for the repair and replacement of all fixtures, leasehold
improvements, furnishings, merchandise, equipment and personal property as
provided in Section 9.02.
SECTION 10.03. REDUCTION OF RENT DURING REPAIRS. In the event Lessee is
able to continue to conduct its business during the making of repairs, the rent
then prevailing will be equitably reduced in the proportion that the square
footage of the unusable part of the Premises bears to the square footage of the
whole thereof for the period that repairs are being made. No rent shall be
payable while the Premises are wholly unusable due to casualty damage.
SECTION 10.04. ARBITRATION. Any controversy or claim arising out of or
relating to this Article shall be settled by arbitration in accordance with the
rules of the American Arbitration Association as then in effect, and judgment
upon the award rendered by the arbitration may be entered in any court having
jurisdiction. The expenses of arbitration shall be borne by the parties as
allocated by the arbitrators. The party desiring arbitration shall serve notice
upon the other party, together with designation of the first party's arbitrator.
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SECTION 10.05. LESSOR'S OVERRIDING RIGHT TO TERMINATE. Notwithstanding
anything to the contrary herein, during the last twelve (12) months of the Lease
Term and during the last 12 months of an Extended Term, if any, if the
discounted present value of the rent due hereunder for the balance of the term,
using as the discount rate the prime commercial lending rate in effect at the
Bank of America as of the date Lessor is to commence repairs pursuant to Section
10.02 hereof, is less than the cost of repairing the damage to the Premises,
Lessor may at its option terminate this lease upon thirty (30) days' written
notice.
ARTICLE XI
REAL PROPERTY TAXES
SECTION 11.01. PAYMENT OF TAXES. Lessee shall pay the real property tax,
as defined in Section 11.02, applicable to the Premises during the term of this
Lease. All such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. If any such taxes paid by Lessee shall cover
any period of time prior to or after the expiration of the term hereof, Lessor
shall pay such taxes and Lessee shall reimburse Lessor therefor. Lessee's share
of such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such taxes, Lessor shall have the right to pay the same, in which case
Lessee shall repay such amount to Lessor with Lessee's next rent installment
together with interest at the prime commercial lending rate then in effect at
the Bank of America.
SECTION 11.02. DEFINITION OF "REAL PROPERTY TAX". As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, supplemental, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income, corporate, franchise or estate taxes) imposed on
the Premises by any authority having the direct or indirect power to tax,
including any improvement district thereof, as against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, as against Lessor's right to rent or other income therefrom, and as
against Lessor's business of leasing the Premises.
SECTION 11.03. JOINT ASSESSMENT. If the Premises are not separately
assessed, Lessee's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor in accordance with
Lessee's proportionate share of the total square footage of the business park.
Lessee shall reimburse Lessor said proportionate amount at least ten (10) days
prior to the delinquency date of the real property tax.
SECTION 11.04. PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
(c) If Lessee shall fail to pay any such taxes, Lessor shall have the
right to pay the same, in which case Lessee shall repay such amount to Lessor
with Lessee's next rent installment together with interest at the prime
commercial lending rate then charged by the Bank of America.
ARTICLE XII
UTILITIES AND JANITORIAL
Lessee shall pay prior to delinquency throughout the term the cost of
water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
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conditioning and ventilation, janitorial service, and all other materials and
utilities supplied to the Premises. If any such services are not separately
metered to Lessee, Lessee shall pay its proportionate share of all charges which
are jointly metered, the determination to be made by Lessor in good faith, and
payment to be made by Lessee within fifteen (15) days of receipt of the
statement for such charges.
ARTICLE XIII
ASSIGNMENT AND SUBLETTING
SECTION 13.01. LESSOR'S CONSENT REQUIRED. Except as provided in Section
13.02, below, Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of
Lessee's interest in this lease or in the Promises, without Lessor's prior
written consent which Lessor shall not unreasonably withhold. Lessee must make
such request to Lessor in writing and by certified mail. Lessor shall respond
to Lessee's request for consent hereunder within twenty (20) days after Lessee's
request and any attempted assignment, transfer, mortgage, encumbrance, or
subletting without such consent shall be void, and shall constitute a breach of
this lease. If Lessor does not respond within such twenty (20) days, Lessee's
request shall be deemed approved.
SECTION 13.02. LESSEE AFFILIATE. Lessee may assign or sublet the
Premises, or any portion thereof, to any corporation which controls, is
controlled by, or is under common control with Lessee, or to any corporation
resulting from the merger or consolidation with Lessee, or to any person or
entity which acquires all, or substantially all of the assets of Lessee as a
going concern of the business that is being conducted on the Premises, without
the consent of Lessor, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease.
SECTION 13.03. NO RELEASE OF LESSEE. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting remedies
against said assignee.
SECTION 13.04. ATTORNEYS' FEES. In the event Lessee shall assign or sublet
the Premises or request the consent of Lessor to any assignment or subletting
or if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable attorneys' fees incurred in
connection therewith.
SECTION 13.05. EXCESS RENT. In the event Lessor shall consent to a
sublease or an assignment under the lease, Lessee shall pay to Lessor with its
regularly scheduled rent payments fifty percent (50%) of all sums collected by
Lessee from a sublessee or assignee which are in excess of (i) the rent then
owing pursuant to Article IV above for such space, (ii) the present market
rental premium, if any, for all tenant improvements for such space paid by
Lessee, and (iii) all leasing commissions, reasonable attorneys' fees and other
costs, reasonable expenses and liabilities incurred by Lessee in connection with
the sublet or assignment. Lessor shall not share compensation received by
Lessee for the sale of its trade fixtures, goodwill, stock, or property other
than the Lease.
SECTION 13.06. NO IMPAIRMENT OF SECURITY. Lessee's written request to
Lessor for consent to an assignment or subletting shall be accompanied by (a)
the name and legal composition of the proposed sublessee; (b) the nature of
the proposed sublessee's business to be carried on in the Premises; (c) the
terms and provisions of the proposed sublease; and (d) such financial and
other reasonable information as Lessor may request concerning the proposed
sublessee. Lessor's consent shall not be deemed unreasonably withheld if
consent is denied because the prospective sublessee or assignee will impair
Lessor's security.
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ARTICLE XIV
DEFAULTS; REMEDIES
SECTION 14.01. DEFAULTS. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Lessee:
(a) The abandonment of the Premises by Lessee;
(b) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of five (5) days after written notice hereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay
Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or Quit shall also constitute the notice required by this Section;
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall continue
for a period of 10 days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
10 days are reasonably required for its cure, then Lessee shall not be deemed to
be in default if Lessee commences such cure within said 10 day period and
thereafter diligently prosecutes such cure to completion;
(d) (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C.
Section 101 or any successor statute thereto; (iii) the taking or suffering of
any action by Lessee under any insolvency or bankruptcy act; (iv) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
or (v) the attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease. Provided, however, in the event that any provisions of this Section
14.01(d) is contrary to any applicable law, such provision shall be of no force
or effect;
(e) The discovery by Lessor that any financial statement given to Lessor
by Lessee, any assignee of Lessee, any successor in interest of Lessee or any
guarantor of Lessee's obligation hereunder, and any of them, was materially
false.
SECTION 14.02. REMEDIES. In the event of any such material default or
breach by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises and reasonable attorney's fees related thereto; the
worth at the time of award determined by the court having jurisdiction thereof
of the amount by which the unpaid rent for the balance of the term after the
time of such award exceeds the amount of such rental loss for the same period
that Lessee proves could be reasonably avoided.
(b) Maintain Lessee's right to possession in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the State of California. Unpaid installments of
rent and other unpaid monetary obligations of Lessee under the terms of this
Lease shall bear interest from the date due at the prime rate then charged by
Bank of America.
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SECTION 14.03. DEFAULT BY LESSOR. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable time,
but in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion. In the event Lessor does not
commence performance within the thirty (30) day period provided herein, or does
not diligently prosecute the same to completion, Lessee may perform such
obligation and will be reimbursed for its expenses by Lessor together with
interest thereon at the prime commercial lending rate then charged by the Bank
of America, provided, however, that if the parties are in dispute as to what
constitutes Lessor's obligations under this agreement, any such dispute shall be
resolved by arbitration in a manner identical to that provided in Section 10.04
above.
Nothing herein shall be deemed applicable in the event of Lessor's delay in
delivery of the Premises. In that situation, all rights and remedies shall be
determined under Section 3.03 above.
SECTION 14.04. LATE CHARGES. Lessee hereby acknowledges that late payment
by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain, Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designated agent within three (3) business
days after Lessee's receipt of written notice, by first class mail, that such
amount is due and owing, Lessee shall pay to Lessor a late charge equal to 10%
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of any such late charge by Lessor
shall in no event constitute a waiver of Lessee's default with respect to such
overdue amount, nor prevent Lessor from exercising any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
rent, then rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding section 4.01 or any other provision of this
Lease to the contrary.
SECTION 14.05. IMPOUNDS. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) installments of rent or any
other monetary obligation of Lessee under the terms of this Lease within a
twelve (12) month period, Lessee shall pay to Lessor, if Lessor shall so
request, in addition to any other payments required under this Lease, a monthly
advance installment, payable at the same time as the monthly rent, as estimated
by Lessor, for real property tax and insurance expenses on the Premises which
are payable by Lessee under the terms of this Lease. Such fund shall be
established to insure payment when due, before delinquency, of any or all such
real property taxes and insurance premiums. If the amounts paid to Lessor by
Lessee under the provisions of this paragraph are insufficient to discharge the
obligations of Lessee to pay such real property taxes and insurance premiums as
the same become due, Lessee shall pay to Lessor, within three (3) business days
after Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
ARTICLE XV
CONDEMNATION OF PREMISES.
SECTION 15.01. TOTAL CONDEMNATION. If the entire Premises, whether by
exercise of governmental power or the sale or transfer by Lessor to any
condemnor
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under threat of condemnation or while proceedings for condemnation are pending,
at any time during the term, shall be taken by condemnation such that there does
not remain a portion suitable for occupation, this Lease shall then terminate as
of the date transfer of possession is required. Upon such condemnation, all
rent shall be paid up to the date transfer of possession is required, and Lessee
shall have no claim against Lessor for the value of the unexpired term of this
Lease.
SECTION 15.02. PARTIAL CONDEMNATION. If any portion of the Premises is
taken by condemnation during the term, whether by exercise of governmental power
or the sale or transfer by Lessor to a condemnor under threat of condemnation or
while proceedings for condemnation are pending, this Lease shall remain in full
force and effect except that in the event a partial taking leaves the Premises
unfit for normal and proper conduct of the business of Lessee, as reasonably
determined by Lessee, then Lessee shall have the right to terminate this Lease
effective upon the date transfer of possession is required. Moreover, Lessor
and Lessee shall have the right to terminate this Lease effective on the date
transfer of possession in required if more than thirty-three percent (33%) of
the total square footage of the Premises is taken by condemnation. Lessee and
Lessor may elect to exercise their respective rights to terminate this Lease
pursuant to this Section by serving written notice to the other within one
hundred twenty (120) days of their receipt of notice of condemnation. All rent
shall be paid up to the date of termination, and Lessee shall have no claim
against Lessor for the Lease value of any unexpired term of this Lease. If this
Lease shall not be cancelled, the rent after such partial taking shall be that
percentage of the adjusted base rent specified herein, equal to the percentage
which the square footage of the untaken part of the Premises, immediately after
the taking, bears to the square footage of the entire Premises immediately
before the taking. Any sums owing hereunder which are calculated on the basis
of Lessee's pro rata share (as set forth in Section 8.02) shall also be adjusted
to reflect the decreased square footage of the Premises due to the condemnation.
During the last twelve (12) months of the Lease Term and during the last 12
months of the Extended Term, if any, if Lessee's continued use of the Premises
requires alterations and repair by reason of a partial taking, all such
alterations and repair shall be made by Lessee at Lessee's expense.
SECTION 15.03. AWARD TO LESSEE. In the event of any condemnation, whether
total or partial, Lessee shall have the right to claim and recover from the
condemning authority such compensation as may be separately awarded or
recoverable by Lessee for loss of its business fixtures, or equipment belonging
to Lessee immediately prior to the condemnation or for the interruption of
Lessee's business, or its moving costs. The balance of any condemnation award
shall belong to Lessor and Lessee shall have no further right to recover from
Lessor or the condemning authority for any additional claims arising out of such
taking.
ARTICLE XVI
ENTRY BY LESSOR
Lessee shall permit Lessor and its agent to enter the Premises at all
reasonable times for any of the following purposes: to inspect the Premises; to
maintain the building in which the Premises are located; to make such repairs,
alterations, and additions to the Premises as Lessor is obligated to make or may
make as a result of normal maintenance and repair; to show the Premises and post
"To Lease" signs for the purposes of reletting during the last ninety (90) days
of the term; to show the Premises as part of a prospective sale by Lessor or to
post notices of non-responsibility. Lessor shall give Lessee twenty-four hours
prior notice before entering the Premises, except in the case of an emergency,
where no notice is required. Lessor shall have such right of entry without any
rebate of rent to Lessee for any loss of occupancy or quiet enjoyment of the
Premises thereby occasioned.
ARTICLE XVII
ESTOPPEL CERTIFICATE
(a) Lessee shall at any time upon not less than fifteen (15) days' prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to
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which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance; or such failure may be considered by
Lessor as a default by Lessee under this Lease.
ARTICLE XVIII
LESSOR'S LIABILITY
The term "Lessor" as used herein shall mean only the owner or owners at the
time in question of the fee title or a Lessee's interest in a ground lease of
the Premises. In the event of any transfer of such title or interest, and
provided such successor assumes all obligations of Lessor hereunder, Lessor
herein named (and in case of any subsequent transfers then the grantor) shall be
relieved from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in the
hands of Lessor or the then grantor at the time of such transfer, in which
Lessee has an interest, shall be delivered to the grantee. The obligations
contained in this Lease to be performed by Lessor shall, subject as aforesaid,
be binding on Lessor's successors and assigns, only during their respective
periods of ownership. Notwithstanding any such transfer of ownership, the Lease
shall remain in full force and effect unless terminated as otherwise provided in
this Lease.
ARTICLE XIX
EXPIRATION ON TERMINATION
SECTION 19.01. SURRENDER OF POSSESSION. Lessee agrees to deliver up and
surrender to Lessor possession of the Premises and all improvements thereon, in
as good order and condition as when possession was taken by Lessee, excepting
only ordinary wear and tear or any permitted alterations. Upon termination of
this Lease, Lessor may reenter the Premises and remove all persons and property
therefrom. If Lessee shall fail to remove any effects which it is entitled to
remove from the Premises upon the termination of this Lease, for any cause
whatsoever, Lessor, at its option, may remove the same and store or dispose of
them, and Lessee agrees to pay to Lessor on demand any and all reasonable
expenses incurred in such removal and in making the Premises free from all dirt,
litter, and debris, including all storage and insurance charges. If the
Premises are not surrendered at the end of the Term, Lessee shall indemnify
Lessor against loss or liability resulting from delay by Lessee in so
surrendering the Premises, including, without limitation, actual damages for
lost rents.
SECTION 19.02. HOLDING OVER. If Lessee, with or without Lessor's consent,
remains in possession of the Premises after expiration of the term and if Lessor
and Lessee have not executed an express written agreement as to such holding
over, then such occupancy shall be a tenancy from month to month, at a monthly
rental equivalent to 200% of the monthly rental in effect immediately prior to
such expiration if the remainder in possession is without Lessor's consent, and
at a monthly rental equivalent to 125% of the monthly rental in effect
immediately prior to such expiration if the remainder in possession is with
Lessor's consent, such payments to be made as herein provided. In the event of
such holding over all of the terms of this Lease including the payment of all
charges owing hereunder other than rent shall remain in force and effect on said
month to month basis.
ARTICLE XX
RIGHT OF FIRST NOTICE
While this Lease is in full force and effect with no default by the Lessee,
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and subject to any prior rights granted to any other party, Lessee shall have
the right to first notice of the availability of any space located in the
buildings at 319 and 329 North Bernardo Avenue, Mountain View, California, if
such space becomes vacant at any time or from time to time during the Lease
Term. In the event that such space becomes available for lease, Lessor shall
notify Lessee of such availability. If Lessee, within five (5) business days
after receipt of Lessor's notice, indicates in writing Lessee's agreement to
lease such space on the same terms and conditions as set forth in this Lease,
and Lessee agrees to timely commence rental payments for such space, then Lessor
shall lease such space to Lessee on the same terms stated in this Lease. If
Lessee does not indicate its agreement in writing within five (5) business days
of receipt of the notice from Lessor, then Lessor shall have the right to lease
the space or any part thereof to any third party, and Lessee shall have no other
rights in or to said space.
ARTICLE XXI
MISCELLANEOUS PROVISIONS
SECTION 21.01. SEVERABILITY. The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
SECTION 21.02. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly
herein provided, any amount due to either Lessor or Lessee not paid when due
shall bear interest at the prime commercial lending rate then in effect at Bank
of America. Payment of such interest shall not excuse or cure any default by
either Lessor or Lessee under this Lease.
SECTION 21.03. TIME OF ESSENCE. Time is of the essence in the performance
of all obligations under this Lease.
SECTION 21.04. ADDITIONAL RENT. Any monetary obligations of Lessee to
Lessor under the terms of this Lease shall be deemed to be rent.
SECTION 21.05. INCORPORATION OF PRIOR AGREEMENTS: AMENDMENTS. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter shall
be effective. This Lease may be modified in writing only, signed by the parties
in interest at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the Lessor nor any employees or
agents of the Lessor has made any oral or written warranties or representations
to Lessee relative to the condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility regarding the Occupational
Safety Health Act, the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during the
term of this Lease except as otherwise specifically stated in this Lease.
SECTION 21.06. NOTICES. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or by
facsimile, Federal Express, or certified mail, and if given personally or by
mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at
the address noted below the signature of the respective parties, as the case
may be. Either party may by notice to the other specify a different address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee. Notice shall be considered effective either 72 hours after mailing or
upon actual receipt, whichever is earlier.
SECTION 21.07. WAIVERS. No waiver by Lessor of any provision hereof shall
be deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provisions. Lessor's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of
any provision hereof, other than the failure of Lessee to pay the particular
rent so accepted, regardless of Lessor's knowledge of such preceding breach at
the time of acceptance of such rent.
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SECTION 21.08. RECORDING. Either Lessor or Lessee shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
SECTION 21.09. CUMULATIVE REMEDIES. No remedy or election hereunder shall
be deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
SECTION 21.10. COVENANTS AND CONDITIONS. Each provision of this Lease
performable by Lessee or Lessor shall be deemed both a covenant and a condition.
SECTION 21.11. BINDING EFFECT, CHOICE OF LAW: VENUE. Subject to any
provisions hereof restricting assignment or subletting by Lessee and subject to
the provisions of Article XVIII, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be governed
by the laws of the State of California. Venue for any action or proceeding
brought to enforce or defend this agreement, and for any other purpose
hereunder, shall be Santa Clara County.
SECTION 21.12. SUBORDINATION OF LEASEHOLD. Lessee agrees that this Lease
is and shall be, at all times, subject and subordinate to the lien of any
mortgage or other encumbrances which Lessor may create against the Premises
including all renewals, replacements and extensions thereof; provided, however,
that regardless of any default under any such mortgage or encumbrance or any
sale of the Premises under such mortgage, so long as Lessee performs all
covenants and conditions of this Lease and continues to make all payments
hereunder, this Lease and Lessee's possession and rights hereunder shall not be
disturbed by the mortgagee or anyone claiming under or through such mortgagee.
Any future subordination to which this Lease is subject shall be accompanied by
a nondisturbance agreement in favor of Lessee which recognizes the terms and
conditions of the Lease. Lessor agrees to request from the current lender a
nondisturbance agreement in favor of Lessee.
SECTION 21.13. ATTORNEYS' FEES. If either party herein brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to reasonable attorneys'
fees to be paid by the losing party as fixed by the Court.
SECTION 21.14. AUCTIONS. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
SECTION 21.15. SIGNS. Lessee shall not place any sign upon the Premises
without Lessor's prior written consent, which consent shall not be unreasonably
withheld.
SECTION 21.16. VOLUNTARY SURRENDER OR MERGER. The voluntary or other
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such subtenancies.
SECTION 21.17. GUARANTOR. In the event that there is a guarantor of this
Lease, said guarantor shall have the same obligations as Lessee under this
Lease.
SECTION 21.18. QUIET POSSESSION. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease, The individuals executing this Lease on behalf
of Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
SECTION 21.19. RULES AND REGULATIONS. Lessee agrees that it will abide
by, keep and observe all reasonable rules and regulations which Lessor may
make from time to time for the management, safety, care and cleanliness of the
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building and grounds, the parking of vehicles and the preservation of good
order therein as well as for the convenience of other occupants and tenants
of the building. Lessor shall give Lessee fifteen (15) days' notice to cure
Lessee's violations of such rules and regulations of Lessor, and the
continued violations of any such rules and regulations shall be deemed a
material breach of this Lease. Lessee, however, shall not be bound by any
future rules or regulations, unless it shall approve same, which approval
shall not be unreasonably withheld.
SECTION 21.20. EASEMENTS. Lessor reserves to itself the right, from time
to time, at Lessor's sole cost to grant such easements, rights and
dedications that Lessor deems necessary or desirable, and to cause the
recordation of Parcel Maps and restrictions, so long as such easements,
rights, dedications, Maps and restrictions do not unreasonably interfere with
the use of the Premises by Lessee nor increase Lessee's obligations hereunder
nor decrease Lessee's rights hereunder. Lessee shall sign any of the
aforementioned documents upon fifteen (15) days written notice of Lessor and
failure to do so shall constitute a material breach of this Lease.
SECTION 21.21. CORPORATE AUTHORITY. Each individual executing this Lease
on behalf of a corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation in accordance with a
duly adopted resolution of the Board of Directors of the corporation, and that
this Lease is binding upon said corporation in accordance with its terms.
SECTION 21.22. DELAYS FOR CAUSE. In any case where either party hereto is
required to do any act, delays caused by or resulting from Acts of God, war,
civil commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or "a reasonable time", and such time
shall be deemed to be extended by the period of such delay.
SECTION 21.23. SQUARE FOOTAGE. The parties agree that the leased
Premise is approximately 52,800 square feet, said square footage being
measured from the face of the outside (concrete) walls and includes the
covered docks and entry ways.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
The Parties hereto have executed this Lease at the place and on the date
specified below.
Executed at Watsonville, California, on September 15, 1995.
Lessor: Address:
VANNI BUSINESS PARK GENERAL c/o Jay Paul Company
PARTNERSHIP 1093 South Green Valley Road
Watsonville, CA 95076
By: /s/ Jay Paul
---------------------------
Jay Paul, General Partner
Lessee:
AVIRON, 1450 Rollins Road
a California Corporation ---------------------------
Burlingame, CA 94010
---------------------------
BY: /s/ Francis R. Cano
---------------------------
Francis R. Cano, President
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EXHIBIT 11.1
STATEMENT OF COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net loss....................................... $ (3,772,000) $ (6,502,000) $ (11,403,000) $ (3,757,000) $ (3,736,000)
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
Weighted average shares of Common Stock
outstanding: 673,007 687,474 697,288 696,645 697,520
Shares related to staff accounting bulletin
topic 4D:
Stock options and warrants................... 270,351 270,351 270,351 270,351 270,351
Common Stock................................. 421,503 421,503 421,503 421,503 421,503
Convertible Preferred Stock (Series C)....... 3,235,579 3,235,579 3,235,579 3,235,579 3,235,579
------------ ------------ ------------- ------------ ------------
Shares used in computing net loss per share.... 4,600,440 4,614,907 4,624,721 4,624,078 4,624,953
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
Net loss per share............................. $ (0.82) $ (1.41) $ (2.47) $ (0.81) $ (0.81)
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
Calculation of shares outstanding for computing
pro forma net loss per share:
Shares used in computing net loss
per share................................... 4,600,440 4,614,907 4,624,721 4,624,078 4,624,953
Adjusted to reflect the effect of the assumed
conversion of Preferred Stock from the date
of issuance (1)............................. 2,096,014 4,333,333 4,557,921 4,437,447 4,598,080
------------ ------------ ------------- ------------ ------------
Shares used in computing pro forma net loss per
share......................................... 6,696,454 8,948,240 9,182,642 9,061,525 9,223,033
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
Pro forma net loss per share................... $ (0.56) $ (0.73) $ (1.24) $ (0.41) $ (0.41)
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
</TABLE>
- ---------------------
(1) Series A and B shares
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 26,
1996 (except as to the first paragraph of Note 1 and Note 10 as to which the
date is May 30, 1996), in the Registration Statement (Form S-1) and related
Prospectus of Aviron for the registration of 3,450,000 shares of its Common
Stock.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Palo Alto, California
June 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 11,532 10,000
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 18,498 15,367
<PP&E> 1,987 2,638
<DEPRECIATION> 712 822
<TOTAL-ASSETS> 19,878 17,275
<CURRENT-LIABILITIES> 1,723 2,563
<BONDS> 0 0
0 0
39,844 40,028
<COMMON> 317 1,579
<OTHER-SE> (22,624) (27,440)
<TOTAL-LIABILITY-AND-EQUITY> 19,878 17,275
<SALES> 0 0
<TOTAL-REVENUES> 1,707 188
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 13,472 4,107
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 158 37
<INCOME-PRETAX> (11,403) (3,736)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,403) (3,736)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,403) (3,736)
<EPS-PRIMARY> (1.24) (0.41)
<EPS-DILUTED> (1.24) (0.41)
</TABLE>
