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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD TO .
COMMISSION FILE NUMBER: 0-20815
AVIRON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0309686
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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297 NORTH BERNARDO AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(650) 919-6500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sale price of $39.6875 on March 1, 2000, the aggregate
market value of the voting stock held by non-affiliates of the Registrant was
$551,770,193.
On March 1, 2000, there were outstanding 17,163,183 shares of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
(TO THE EXTENT INDICATED HEREIN)
Part III -- Portions of the Registrant's Definitive Proxy Statement for the
Registrant's Annual Meeting of Stockholders to be held June 1, 2000, which will
be filed with the Securities and Exchange Commission, are incorporated by
reference to the extent stated here.
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TABLE OF CONTENTS
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PART I.................................................................. 3
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 31
Item 3. Legal Proceedings........................................... 32
Item 4. Submission of Matters to a Vote of Security Holders......... 32
PART II................................................................. 33
Item 5. Market for the Registrant's Common Stock and Related Stock
Matters..................................................... 33
Item 6. Selected Financial Data..................................... 34
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 35
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 38
Item 8. Financial Statements and Supplementary Data................. 38
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 38
PART III................................................................ 39
Item 10. Directors and Executive Officers of the Registrant.......... 39
Item 11. Executive Compensation...................................... 39
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 39
Item 13. Certain Relationships and Related Transactions.............. 39
PART IV................................................................. 40
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 40
INDEX TO FINANCIAL STATEMENTS........................................... 40
SIGNATURES.............................................................. 41
POWER OF ATTORNEY....................................................... 41
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PART I.
ITEM 1. BUSINESS
The following section contains forward-looking statements that involve
risks and uncertainties. When used herein, the words "expects," "anticipates,"
"estimates," "intends," "plans" and similar expressions are intended to identify
such forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Business Risks' and elsewhere in this
Form 10-K.
OVERVIEW
We are a biopharmaceutical company focused on the prevention of disease
through innovative vaccine technology. We are currently focusing our product
development and commercialization efforts on our lead product candidate,
FluMist, an investigational live virus vaccine for influenza delivered as a
nasal spray. Our goal is to become a leader in the discovery, development,
manufacture and marketing of innovative vaccines which are safe, effective and
economical enough to merit their use in immunization programs targeting the
general population. Our vaccine programs are based both on techniques for
producing weakened live virus vaccines and on our proprietary genetic
engineering technologies. Live virus vaccines, including those for smallpox,
polio, measles, mumps, rubella and chicken pox, have had a long record of
preventing disease.
According to the Centers for Disease Control and Prevention, or CDC,
epidemics of influenza occur during the winter months nearly every year and are
responsible for an average of approximately 20,000 deaths per year in the United
States. Influenza viruses also can cause global epidemics of disease during
which rates of illness and death from influenza-related complications can
increase dramatically. Influenza viruses cause disease in all age groups. Rates
of infection are highest among children, but rates of serious illness and death
are highest among persons age 65 or older, and persons of any age who have
medical conditions that place them at high risk for complications from
influenza.
FluMist is designed to prevent influenza. We are developing and intend to
commercialize FluMist primarily in collaboration with our partner Wyeth Lederle
Vaccines, a business unit of the pharmaceutical division of American Home
Products Corporation, or AHP. FluMist has been shown to provide a high
protection rate against influenza in Phase 3 clinical trials in children and
healthy adults. In a separate trial conducted in healthy working adults,
reductions in days of illness, antibiotic use, health resource use and missed
work because of illness were observed across several illness definitions. Based
on our clinical data, we intend to submit a Biologics License Application, or
BLA, with the U.S. Food and Drug Administration, or FDA, during the fourth
quarter of 2000.
The FDA notified us in 1998 that, in order to support a BLA filing for
FluMist, we must demonstrate the clinical equivalence between FluMist produced
in our new manufacturing facility located in Pennsylvania and FluMist used in
our Phase 3 trials. We must also provide additional data on manufacturing
validation and stability. In June 1999, we reported the results of a clinical
trial that we believe demonstrated the required clinical equivalence. We are in
the process of completing the manufacturing validation exercises, stability
studies and documentation we believe necessary to support a BLA for FluMist,
which we intend to submit during the fourth quarter of 2000.
The current formulation of FluMist requires freezer storage throughout
distribution. Because international markets do not have distribution channels
well suited to the sale of frozen vaccines, Wyeth Lederle has initiated a Phase
2 clinical trial outside of the United States for our second generation
refrigerator stable, or liquid, formulation of FluMist.
We also have a number of other vaccines in various stages of development:
- a parainfluenza virus type 3 vaccine to prevent the most common cause of
croup, a respiratory infection in children, for which we have completed a
successful Phase 2 clinical trial;
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- an Epstein-Barr virus vaccine to prevent infectious mononucleosis for
which our collaborative partner, SmithKline Beecham Biologicals S.A., has
completed a successful Phase 1 clinical trial; and
- a vaccine for cytomegalovirus, the leading infectious cause of birth
defects, for which we plan to start a Phase 1 clinical trial during 2000.
We are also using our proprietary vaccine design technologies to discover
new vaccines, including vaccine candidates for herpes simplex virus type 2, the
virus responsible for genital herpes, and respiratory syncytial virus, a virus
responsible for a severe lower respiratory infection in infants and young
children.
BACKGROUND
PREVENTION TECHNOLOGY IN THE ERA OF MANAGED CARE AND COST CONTAINMENT
Health care decision makers in the United States, such as managed care
organizations, clinical practice committees and government health authorities,
are becoming more interested in disease prevention that can be more cost
effective than treating a disease once it is present. In determining whether to
use a vaccine approved as safe and effective by the FDA, decision makers
consider whether it is cost effective and whether it has been recommended by the
ACIP, and by medical specialty societies, such as the Redbook Committee of the
AAP, and the American Academy of Family Physicians, or AAFP.
THE IMMUNE SYSTEM AND VACCINES
The body's own immune system provides protection against infection.
Infections occur when a disease-causing virus or bacterium invades the body and
begins to multiply. The human immune system responds in different ways to
contain and eliminate this threat. The process begins when specialized cells
recognize foreign molecules on the surface of an invading virus or bacterium,
called antigens. Immune responses to contain and eliminate the infection
include:
- Antibodies: Antigens stimulate the immune system to produce specific
molecules, or antibodies, which neutralize the virus or bacterium. These
antibodies circulate throughout the body.
- Cell-mediated response: An effective immune response typically also leads
to the creation of specific types of white blood cells, a cell-mediated
response, that deactivate the virus or bacterium or destroy infected
cells, which limits the spread of the virus or bacterium.
- Mucosal immunity: In addition to circulating antibodies and the
cell-mediated response, antibodies are also produced in the body's mucous
membranes, such as those which line the nose and throat. Mucosal immunity
is particularly important in protecting against viruses or bacteria which
enter the body through the nose and throat.
When a vaccine activates the immune system against a specific virus or
bacterium, the body remembers that response. This memory primes the immune
system to respond if the specific virus or bacterium is encountered again. This
memory may be achieved through vaccination with one of several techniques,
including introduction of a weakened live virus or bacterium, an antigen
fragment, also called a subunit, or with an inactivated, or killed, virus or
bacterium.
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. In the case of influenza viruses, since the
circulating strains change frequently, the body may not produce an immune
response if it has not been exposed to the specific influenza strain
circulating.
TYPES OF VACCINES
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
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of purification to concentrate surface proteins of the virus, called subunits,
most responsible for producing immunity. 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 combine with a person's genes.
The main disadvantage of inactivated and subunit vaccines for many viruses
has been a lack of success in triggering enough of an immune response to provide
protection against the naturally occurring, or wild-type, virus. Successfully
creating a subunit vaccine requires knowledge of which specific antigens are
responsible for providing protection. Subunit and inactivated vaccines can
produce antibodies in the bloodstream, but are less able to produce antibodies
in the mucous membranes where the wild-type virus enters the body.
Live Virus Vaccines
Live virus vaccines expose the immune system to a weakened form of the
virus which is infectious enough to trigger a lasting immune response to the
wild-type virus. All of the live virus vaccines in use today are strains
initially derived from natural infections of humans. The weakening of existing
live viruses, the basis of vaccines for polio, yellow fever, measles, mumps and
rubella, and chicken pox, is accomplished by multiplying these viruses
repeatedly in non-human cells. As a result of this process, these viruses
gradually change in a way that decreases the ability of the virus to cause
disease in humans. The changed virus strain is then tested in animal models, if
available, or directly in human subjects to see if it has been appropriately
weakened without losing its ability to trigger an immune response. Following
testing of safety and the ability to trigger an immune response, in a limited
number of human subjects, larger-scale trials are used to demonstrate that the
vaccine works in preventing naturally acquired infections.
When a person experiences a natural infection, the body activates an immune
response to that specific infection. The principal advantage of live virus
vaccines is their ability to activate the same protective mechanisms of the
immune system as a natural infection. This process results in a balanced immune
response activating all parts of the immune system, including antibodies at the
site of the infection as well as circulating antibodies and 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. Live virus vaccines may also be easier to
administer through their natural route of infection, such as through the nose or
mouth.
However, a weakened live virus vaccine could cause disease resembling a
wild-type virus infection in people with an immune system that is not working
properly because of a pre-existing disease, HIV infection or drug treatment for
cancer or organ transplantation.
Although beneficial and widely used, there are three theoretical risks with
live virus vaccines. First, live virus strains can change as they multiply in
human hosts, and it is theoretically possible that a vaccine virus could change
back to the wild-type virus. This potential is a small but recognized problem
for some of the current live virus vaccines, including polio. Second, a weakened
vaccine virus may exchange genetic information with wild-type strains after the
vaccine has been given to a person, with the resulting new strain having the
potential to cause disease similar to the wild-type strain. Third, the DNA of a
live virus vaccine could combine with the DNA of the person receiving the
vaccine and cause cancer or other problems in the future.
The live virus vaccines in widespread use rarely have been associated with
significant adverse events. However, the safety of a live virus vaccine can only
be finally determined after widespread use.
BUSINESS STRATEGY
Our objective is to discover, develop, manufacture and market innovative
vaccines that are effective, safe and sufficiently economical to merit their
widespread use. The key elements of our business strategy are to:
Apply Our Own Vaccine Design Technologies to a Range of Viruses. We believe
that our genetic engineering technologies may be used to create weakened live
virus vaccines for a wide range of viruses,
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including other airborne viruses related to influenza, chronic virus infections
related to herpes simplex virus, and potentially to create viruses that can be
used in gene therapy and the treatment of cancer. One potential advantage of our
vaccine design technology is that we believe engineered viruses, like FluMist,
are less likely to change back to wild-type viruses than vaccines created by
traditional methods.
Acquire Promising Products and Technologies. We intend to continue to
evaluate opportunities to in-license or otherwise acquire rights to promising
products and technologies and intend to add programs that complement our core
technologies and capabilities. For example, we obtained exclusive rights to the
cold adapted influenza vaccine technology which was used to develop FluMist from
the University of Michigan and the NIH, and to our parainfluenza virus 3 vaccine
from the NIH.
Select Programs and Market Vaccines Based on Pharmacoeconomic Data. In
setting our internal product development priorities, we will evaluate the
potential of each vaccine to protect health and will consider the costs of
implementing widespread vaccine programs in relation to potential cost savings
to governments and managed health care systems. We also intend to collect data
on effectiveness endpoints which allows careful cost effectiveness analyses of
our products.
Establish Collaborative Arrangements to Help Product Development
Efforts. We intend to continue to enter into collaborative arrangements to gain
access to specific technologies and skills that may speed up product development
and provide additional funding for our research and development and
commercialization efforts, particularly outside of the United States. We have
entered into a worldwide collaboration for the marketing of FluMist with Wyeth
Lederle Vaccines and CSL Limited. We also have an agreement with SmithKline
Beecham for the development of a vaccine against mononucleosis.
Establish Commercialization Capabilities. We have established worldwide
marketing collaborations for FluMist and will co-promote the vaccine in the
United States with our own dedicated sales force. We will also develop the
systems and infrastructure necessary to support the manufacturing and
commercialization of our products.
OUR TECHNOLOGY
Our vaccine programs are based both on classical techniques for producing
weakened live virus vaccines and on our own genetic engineering technologies.
COLD ADAPTED INFLUENZA TECHNOLOGY
We are applying our expertise in the biology of influenza to develop a live
virus vaccine discovered using classical cold-adaptation techniques. The cold
adapted influenza vaccine technology developed by Dr. H. F. Maassab at the
University of Michigan, created weakened influenza strains by growing the virus
in progressively colder conditions until the strains had lost the ability to
grow well at human body temperature. We have obtained worldwide exclusive rights
to this cold adapted influenza vaccine technology.
The cold adapted influenza vaccine technology includes the master donor
strains for influenza, 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 combining the master donor strains with current strains to obtain
viruses with the weakened properties of the cold adapted master donor strain and
the antigenic properties of the current wild-type strain, so that the vaccine
will be safe and will also trigger an immune response against the current
influenza virus. After cells are infected with two different strains of virus,
the resulting eight RNA genes of influenza mix at random in the cells. We select
two genes for the antigens of the current wild-type strain and the six remaining
genes from the cold adapted master donor strain to combine into the vaccine.
This process is called reassortment. We have received the technology for
updating the cold adapted master strains from the University of Michigan and
have extended this approach with our own techniques. One such technique, reverse
genetics, allows the direct combination of genes from the current wild-type
virus into the cold adapted master donor strains.
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PROPRIETARY VACCINE DESIGN
Since Aviron's founding, our core vaccine discovery strategy has been to
apply genetic engineering techniques to create weakened live virus vaccine
candidates for illnesses where traditional techniques for creating vaccines have
not worked. We believe that our vaccine design approach is more flexible and
systematic than traditional methods of live vaccine discovery and can be applied
to many illnesses and, potentially, to the creation of viruses that can be used
in gene therapy and the treatment of cancer. We also believe that our vaccine
design approach allows for the design of vaccines that are more genetically
stable than classically derived vaccines. Three ways of implementing this
approach are:
- Adding antigenic information from the vaccine virus. An example of this
strategy is our creation of a weakened live virus vaccine for CMV, which
begins with a vaccine candidate thought to be too weak to trigger the
necessary immune response. We discovered genes for certain antigen
structures present in wild-type CMV viruses. These genes are now being
engineered into the vaccine to create a vaccine with a better immune
response. We have identified several vaccine candidates using this
approach. We believe this technique of adding antigen structures may
someday allow us to create combination vaccines against more than one
virus in a single vaccine. The National Institute of Allergies and
Infectious Diseases, or NIAID, an institute of the NIH, has filed an
Investigational New Drug application, or IND, for the testing of our
initial vaccine candidates for CMV.
- Deleting or modifying specific parts of a virus which cause illness,
called virulence proteins. Virulence proteins are parts of a virus that
contribute to disease, but that are not required for the virus to
stimulate a strong immune response. We have a program based on this
strategy to create a live attenuated vaccine against the HSV-2 virus
which causes genital herpes. One of our founders, Dr. Bernard Roizman,
discovered a particular protein important in the ability of HSV-2 to grow
in nerve cells. Since nerve cells are the reservoir from which HSV-2
reactivates itself to cause painful skin sores, deletion of the gene for
this protein eliminates the virus' ability to cause infection. This is
the basis of our vaccine design program for development of a vaccine for
HSV-2.
- Changing the genetic information used by the virus in its own
multiplication. An example of this strategy is work by our scientists to
create weakened live virus vaccine candidates for RSV, and a future
generation vaccine for influenza in the elderly. Until recently, it was
impossible to genetically engineer influenza vaccine strains. Dr. Peter
Palese, one of our founders, discovered how to create genetically
engineered influenza viruses using reverse genetics. Our 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
virus has been shown to be weakened in animal models and has been
identified as a potential candidate for clinical trials in humans.
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VACCINE PRODUCTS UNDER DEVELOPMENT
The following table summarizes our most advanced potential products under
research and development.
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PROGRAM VACCINE TYPE STATUS COMMERCIAL RIGHTS
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Influenza
Frozen FluMist
Children Cold adapted live virus Pivotal Phase 3 clinical trial Aviron/CSL/Wyeth
completed, BLA planned Lederle
Adults Cold adapted live virus Challenge efficacy study Aviron/CSL/Wyeth
completed, Phase 3 safety and Lederle
effectiveness trial completed,
BLA planned
Elderly and High-risk Cold adapted live virus Clinical trial completed Aviron/CSL/Wyeth
Adults (co-administered with Lederle
inactivated vaccine)
Liquid FluMist Cold adapted live virus Phase 2 bridging study in Aviron/CSL/Wyeth
progress Lederle
Parainfluenza Virus Type 3 Bovine live virus Phase 2 clinical trial completed Aviron
Epstein-Barr Virus Recombinant subunit Phase 1 clinical trial completed SmithKline Beecham
Glycoprotein
Cytomegalovirus Genetically engineered Clinical trial planned Aviron
live virus
Herpes Simplex Virus Type Genetically engineered Preclinical Aviron
2 live virus
Respiratory Syncytial Genetically engineered Preclinical Aviron
Virus live virus
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"Pivotal Phase 3 clinical trial completed, BLA planned" means we have completed
a multi-center, double-blind, placebo-controlled clinical trial for safety and
effectiveness. Our goal is to submit a BLA during the fourth quarter of 2000.
"Challenge efficacy study completed" means we have completed vaccination of
patients in a multi-center, double-blind, placebo-controlled clinical trial for
safety, immunogenicity and effectiveness.
"Phase 3 safety and effectiveness trial completed, BLA Planned" means we have
completed a multi-center, double-blind, placebo-controlled clinical trial in
healthy working adults for effectiveness endpoints such as days of respiratory
illness, absence from work and medication use.
"Clinical trial completed" indicates that clinical trials have been completed
and the data are either being analyzed or the data remain blinded while the
analytical plan is under review.
"Phase 2 bridging study in progress" indicates that there is a study measuring
clinical equivalence of frozen and liquid FluMist.
"Phase 2 clinical trial completed" means that we are analyzing data from a
double-blind placebo-controlled clinical trial for safety and efficacy in
infants.
"Phase 1 clinical trial completed" indicates that a Phase 1 clinical trial in
healthy adults has been conducted by SmithKline Beecham.
"Clinical trial planned" indicates that we have or are preparing a final
regulatory filing prior to initiation of a clinical trial.
"Preclinical" includes assessment of specific vaccine candidates for growth
properties in cell culture and for attenuation or immunogenicity in animal
models.
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INFLUENZA
Influenza is a widespread and potentially devastating disease. Influenza
symptoms usually last for approximately one week, result in an average of
approximately three days of lost work or missed school, and cause approximately
20,000 deaths each year in the United States. Children are a major factor in
spreading influenza to others, including those at high risk of developing
serious complications from the disease. According to the CDC, more than 80
percent of influenza-related deaths occur in people over age 65. Children under
age five and women in the last three months of pregnancy are also at higher risk
for serious complications. Several times during the 1900's, influenza caused
serious disease in a much larger percentage of the population, called a
pandemic. Major pandemics occur when the influenza virus undergoes "antigenic
shift," which happens when one influenza strain is replaced by a different
strain that the population has not experienced before and against which
antibodies have not been developed.
The variability of the influenza virus requires that the influenza vaccine
be changed each year to match the most common current strains. The CDC and the
World Health Organization, or WHO, maintain a global network which monitors the
occurrence of annual outbreaks. Based on these data, the FDA and the CDC choose
the influenza strains to be included in the following season's influenza vaccine
in the United States. A similar process is undertaken in Europe by the WHO and
various national authorities. Influenza vaccines contain three strains of
influenza virus. Typically one or sometimes two of the strains in these vaccines
are updated each year. According to the CDC, current vaccines are 70 percent to
90 percent effective in preventing illness, pneumonia, hospitalization, and
death due to complications from influenza in healthy persons under age 65, and
considerably less effective in the elderly.
The ACIP has identified the main target groups for the current influenza
vaccine as those at increased risk for influenza-related complications,
including persons age 65 or older, residents of long-term care facilities,
adults and children with chronic lung or heart disease, chronic metabolic
diseases such as diabetes, immunosuppression, children and teenagers receiving
long-term aspirin therapy and therefore at risk of developing Reye syndrome, and
pregnant women. The next level of priority for vaccination identified by the
ACIP includes people that may transmit influenza to high-risk persons,
including, health care workers and family members of such persons. Furthermore,
the ACIP recommends the influenza vaccine for any person who wishes to reduce
the chance of becoming ill with influenza. The AAFP has recently extended its
recommendations to include healthy adults aged 50 years and older compared to
aged 65 and older in its previous recommendations.
The FDA estimates that approximately 80 to 90 million influenza vaccine
doses were manufactured for use in the United States in 1999. According to the
CDC, 65 percent of the 34 million Americans over age 65 received the influenza
vaccine during 1997, up from less than 25 percent a few years earlier. We
believe that a lower percentage of high-risk individuals under age 65 are
vaccinated, and that the majority of influenza vaccine doses used in the United
States are being given to healthy adults under age 65, many of whom participate
in work place vaccination programs. Experts suggest that very few of the 70
million children in the United States under age 18 receive the influenza
vaccine, even those at high risk for complications.
AVIRON'S COLD ADAPTED INFLUENZA VACCINE
Our lead product candidate, FluMist, is based on the live cold adapted
influenza vaccine technology developed by Dr. H. F. Maassab, licensed from the
University of Michigan and subject to a Cooperative Research and Development
Agreement, or CRADA, with the NIH. FluMist has undergone, and is currently
undergoing, extensive clinical trials, many of which are coordinated with
NIH-sponsored investigators. At least 90 clinical trials of the cold adapted
influenza vaccine technology were performed prior to Aviron involvement,
including more than 15,000 volunteers, of whom more than 8,000 received the cold
adapted influenza vaccine.
FluMist is an investigational influenza vaccine delivered as a nasal spray.
It has been tested in more than 13,000 children and adults and has been shown to
provide a high protection rate against influenza in Phase 3 clinical trials in
children and healthy adults. In a Phase 3 effectiveness trial conducted at 13
sites nationwide
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in healthy working adults, reductions in days of illness, antibiotic use, health
resource use and missed work due to illness were observed.
We are developing FluMist for use every year in children and adults and for
use in conjunction with the flu shot for potentially improved protection in
high-risk adults, including the elderly. The immune response triggered by
FluMist differs from that triggered by the flu shot, which is an inactivated
vaccine. FluMist triggers an immune response similar to the natural immune
response to wild-type influenza, while the response to the flu shot is more
narrowly focused. In addition, FluMist is delivered in the nose, which is the
natural point of entry for airborne infections such as the influenza virus. In
addition, because FluMist is delivered as a nasal spray, we believe that it
provides a more convenient and comfortable way to vaccinate children each year.
Children are an important target population because, while most deaths from
influenza each year are in the elderly, much of the illness occurs in young
children. Children are also an important factor in the spread of influenza
throughout the population. Influenza is also associated with middle ear
infections, a leading cause of doctor visits and antibiotic use. We expect that
FluMist will be given to children in doctors' offices and other locations where
the current flu shot is given.
We are also targeting healthy adults, many of whom are being offered flu
shots by their employer and who may prefer FluMist. We believe that many adults
who regularly receive the flu shot will select FluMist if given the choice, and
that people who have avoided flu shots in the past may receive a vaccination if
FluMist is available. We believe that vaccination programs based on FluMist may
also decrease the time per vaccination compared to the flu shot. In addition, we
are developing FluMist for use with the flu shot for high-risk adults, including
the elderly. While efficacy in the elderly has not been conclusively tested, a
nursing home study suggests that administration of FluMist alongside the flu
shot offers added protection compared to the flu shot alone. We intend to seek
recommendations from the ACIP and the AAP and other medical advisory bodies for
use of the FluMist vaccine in appropriate populations.
INFLUENZA CLINICAL TRIALS
To date, we have tested FluMist in more than 13,000 children and adults,
including enrolling a total of:
- 647 participants in Phase 1/2 clinical trials;
- 92 participants in a challenge efficacy study in adults, in collaboration
with the NIH;
- 1,602 children in year 1 of the Phase 3 pediatric protective efficacy
trial, 1,358 of whom have returned for year 2 of the trial;
- 4,298 children in year 1 and 5,252 children in year 2 of a community
protection trial; and
- 4,561 adults in the healthy working adult effectiveness trial.
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We have limited data on the efficacy of FluMist against
laboratory-confirmed influenza from clinical trials in healthy adults. Our
clinical trials are being designed to support a BLA seeking approval of FluMist
in several target populations. The following table lists the major clinical
trials completed or in progress related to FluMist.
FLUMIST CLINICAL TRIALS
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TRIAL PURPOSE OF TRIAL NUMBER OF SUBJECTS YEAR OF TRIAL
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FROZEN FLUMIST
HEALTHY CHILDREN
AV002/AV002-2 Phase 1/2 356 1995-1996
Dose Escalation
Safety and Immunogenicity
AV006 Phase 3 Field 1,602 1996-1997
Pediatric Protective Efficacy (1st
year)
AV006 Phase 3 Field 1358 1997-1998
Pediatric Protective Efficacy (2nd
year)
AV007 Phase 3 500 1997
Manufacturing Consistency
AR001 Phase 3 65 1997-1998
Safety
AV011 Phase 3 222 1998
H1N1 Challenge
AV012 Phase 3 Field 4,298 (1st year) 1998-1999
Community Intervention 5,252 (2nd year) 1999-2000
AV014 Phase 3 225 1998-1999
Manufacturing "Bridge"
Safety and Immunogenicity
- ------------------------------------------------------------------------------------------------------
"HIGH RISK" CHILDREN
AV010 Phase 3 48 1997
Safety in Children with Asthma
DMID#99-012 Phase 2 49 1999-2000
Safety in Children with HIV
- ------------------------------------------------------------------------------------------------------
HEALTHY ADULTS
AV001 Phase 1 239 1995 1994-1995
Safety and Immunogenicity
(nasal drops vs. nasal spray)
AV003 Phase 3 92 1995-1996
Challenge
AV004 Phase 2 20 1995-1996
AV005 Phase 2 32 1996-1997
AR001 Phase 3 384 1997-1998
Safety
AV009 Phase 3 4,561 1997-1998
Effectiveness
- ------------------------------------------------------------------------------------------------------
"HIGH RISK" ADULTS
AV008 Phase 3 200 1997-1998
Safety of Co-administration
with Flu Shot
Veterans Phase 3 Field Safety and Efficacy of 2,215 1998-1999
Administration Co- Administration with Flu Shot in
Subjects with Chronic Obstructive
Pulmonary Disease
- ------------------------------------------------------------------------------------------------------
LIQUID FLUMIST
D153-P500 Phase 2 1,300 planned and 2000
Bridging Study over 500 currently
enrolled
- ------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
PHASE 3 CLINICAL TRIALS IN HEALTHY CHILDREN
Based on trials by others which showed that a modest immune response in
young children to one or two of the strains after a single dose could be boosted
significantly by a second dose approximately two months later, we initiated a
two-year pivotal Phase 3 clinical trial to evaluate one-and two-dose regimens in
children. Our clinical trial data suggest that a repeat or booster dose may be
beneficial in young children who do not have previous exposure to influenza or
influenza vaccines. Two doses of the flu shot are recommended each year for
young children receiving an influenza vaccine for the first time. We enrolled
1,602 children at 10 clinical sites in the pivotal Phase 3 clinical trial, of
which 1,314 were vaccinated with a second dose 46 to 74 days after their first
vaccination. The primary endpoint of the first stage of the study was defined as
protection of children from laboratory-confirmed influenza during the flu
season.
The influenza epidemic in the 1996-1997 influenza season was widespread
enough in the general population to allow the data to be unblinded following a
single year of enrolling patients. We and the NIAID announced that, based on an
initial analysis of the first stage of the Phase 3 trial, FluMist demonstrated a
93 percent protection rate against culture confirmed influenza in those children
receiving two doses, the primary endpoint of the study. Only one percent of
children receiving two doses of FluMist experienced culture-confirmed influenza,
compared to 18 percent of those receiving the placebo. These results were
statistically significant. No serious adverse events attributable to FluMist
were seen in any subjects to whom FluMist was administered.
The clinical investigators presented the initial findings of this trial at
a scientific conference in the fall of 1997 and, in May 1998, data from the
first year of a Phase 3 clinical trial of FluMist were published in The New
England Journal of Medicine. In the study, results show that only 14 of the
1,070 children vaccinated with FluMist experienced laboratory-confirmed
influenza, while 95 of the 532 placebo recipients experienced
laboratory-confirmed influenza. Of the children who received FluMist, only one
child developed influenza-associated ear infection, while 20 of the placebo
recipients developed influenza-associated ear infections. Throughout the entire
cough, cold and flu season, 1,070 children vaccinated with FluMist experienced
30 percent fewer ear infections with fever than children who received placebo,
and demonstrated a 35 percent reduction in related antibiotic use for ear
infections with fever.
The children who participated in the first year of this study were invited
back to participate for a second year of the study during 1997-1998 and were
either vaccinated with a single dose of FluMist or a placebo spray. In September
1998, the results of the second year of this study were presented at the
Interscience Conference on Antimicrobial Agents and Chemotherapy, or ICAAC, and
were subsequently published in the Journal of Pediatrics in February 2000. The
study showed that FluMist provided 100 percent protection against
laboratory-confirmed influenza strains included in the 1997-1998 flu vaccine,
and 86 percent protection against A/Sydney, an unexpected influenza strain which
was not included in any vaccine but was the predominant strain of influenza
circulating during the 1997-1998 flu season. Overall, FluMist provided 87
percent protection against all laboratory-confirmed influenza. In the 1,358
participants, there were five cases of influenza due to influenza strains
included in the vaccine and 66 cases caused by A/Sydney. Only two percent of
children vaccinated with FluMist, 15 out of 917, experienced
laboratory-confirmed influenza, all of which was attributable to the A/Sydney
strain, while 13 percent of the placebo recipients, 56 out of 441, experienced
laboratory-confirmed influenza. The difference between these two influenza
attack rates is used to calculate the overall protection rate of 87 percent.
The incidence of pneumonia and other lower respiratory diseases was also
reduced in those children vaccinated with FluMist, compared to placebo. Eight
children in the placebo group developed influenza-related wheezing, bronchitis
or pneumonia, all of which were due to the A/Sydney strain. No children who
received FluMist experienced lower respiratory complications. Among the 15 of
the 917 children receiving FluMist who did contract influenza from the variant
strain, the illness appeared to be milder than in the control group, based on
frequency of complications and duration of fever.
The NIH and Aviron began a large scale clinical trial in August 1998 to
assess the impact of community-wide influenza immunization. The three-year
trial, taking place in Temple, Texas, is funded by a $3.0 million grant from the
NIH awarded to the Baylor College of Medicine. In the first year of the trial,
4,298 children
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<PAGE> 13
enrolled and in the second year the enrollment increased to 5,252. The trial
will evaluate the impact of vaccinating pre-school and school-age children with
FluMist on the spread of influenza into the community as measured by the number
of doctor visits for flu-related illness.
PHASE 3 ADULT CHALLENGE TRIAL
FluMist has been tested in a 1995-1996 challenge efficacy study at two
Vaccine Treatment Evaluation Units involving 92 healthy young adults. Subjects
either received FluMist, the flu shot or placebo. There were no serious adverse
events attributable to FluMist, and there were no statistically significant
differences in the occurrence of any potential reactions assessed in the study
between either vaccine or placebo. Following vaccination, wild-type influenza
virus was given through the nose. Seven percent of those vaccinated with FluMist
and 13 percent of those vaccinated with the flu shot became ill with
laboratory-documented influenza, compared to 45 percent of those who received
placebo. This translates to an 85 percent protection rate for FluMist and a 71
percent protection rate for the flu shot compared to placebo, both of which were
statistically significant. The difference between 85 percent protection for
FluMist and 71 percent protection for the flu shot was not statistically
significant given the small number of people involved in the study.
Of the FluMist recipients, 10 percent experienced moderate or severe
symptoms following administration of the wild-type influenza virus, a
statistically significant reduction compared to 39 percent of placebo
recipients. The rate of moderate or severe symptoms observed following
administration of the wild-type influenza virus to those who had received the
flu shot was 22 percent which was not statistically significant compared to
placebo. While the rate of illness seen in the placebo group was consistent with
previous influenza challenge efficacy trials by others, the rate of fever or
systemic illness was lower than in previous trials. These data were published in
Vaccine in December 1999.
PHASE 3 CLINICAL TRIAL IN HEALTHY ADULTS
On December 5, 1998, preliminary results reported from a Phase 3 trial in
4,561 healthy working adults showed that those receiving FluMist experienced
statistically significant reductions in illness-associated missed work days and
health care provider visits, as well as prescription and over-the-counter
medication use associated with illness. The study was conducted to assess the
impact of immunization on the frequency of influenza-like illness, utilization
of health care services, and absenteeism from work. We intend to use this data
to support a label claim for the use of FluMist in healthy adults. These data
will also be used to support analysis of the cost-savings potential of
immunization programs based on FluMist.
Data from this trial were presented at the first International Symposium on
Influenza and Other Respiratory Viruses and published in the Journal of the
American Medical Association. Those receiving FluMist compared to those who
received the placebo spray missed 28 percent fewer days of work due to upper
respiratory illness with fever and had 40 percent fewer days of health care
provider visits. Participants also experienced a 45.5 percent reduction in days
of prescription antibiotic use, a 17.0 percent reduction in days of
non-antibiotic prescription drug use and 28 percent fewer days of
over-the-counter, or OTC, medicine use.
Study results show FluMist recipients had reductions in the occurrence of
illness by multiple definitions measured in the study including severe
influenza-like illness, 18 percent less, and upper respiratory tract illness
with fever, 23 percent less. The number of days of illness was also reduced in
FluMist recipients by 23 to 28 percent, depending on the specific illness
definitions. The prospectively determined primary endpoint was occurrence of
illness using the broadest definition, which was reduced in FluMist recipients
by 9.8 percent, a trend which did not reach statistical significance.
The trial was a double-blind, placebo-controlled study conducted in 13
clinical sites nationwide during the 1997-1998 flu season. Most study subjects
self-administered FluMist under the supervision of investigators at their
worksite or nearby clinic. Study participants reported their symptoms and health
events monthly. Because laboratory tests were not performed to diagnose
influenza, several pre-specified illness definitions were used to identify
health events that could have been due to influenza virus infection. These
included a very broad definition of influenza-like illness, which did not
necessarily include respiratory tract symptoms, as well as more severe
influenza-like illness and upper respiratory illness with fever.
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<PAGE> 14
PHASE 3 CLINICAL TRIAL IN HIGH-RISK ADULTS
We have completed a clinical trial for safety in 200 elderly high-risk
adults for the use of FluMist for co-administration with the currently available
injectable vaccine. Many of the participants in this trial self-administered
FluMist. We intend to use the data from this study to support a label claim for
safety for such co-administration in high-risk adults, including the elderly. As
this trial was not designed to generate efficacy data on use of FluMist in
high-risk adults, we cannot be certain that data from this trial, combined with
data from our other clinical trials and prior trials, will be sufficient to
support FDA approval of an indication for use of FluMist in high-risk adults.
Early in the fourth quarter of 1998, the Cooperative Studies program of the
Department of Veterans Affairs Office of Research and Development began a
one-year trial to evaluate the potential additional benefit of co-administration
of FluMist with the flu shot, compared to the flu shot alone, in high-risk
patients with chronic obstructive pulmonary disease. This study has been
completed with more 2,215 volunteers enrolled at 20 participating VA Medical
Centers in the United States. Results from this trial are being prepared for
analysis by the VA.
CLINICAL TRIALS FOR MANUFACTURING CONSISTENCY AND PROCESS
In February 1998, we reported positive results from a manufacturing
consistency lot trial of vaccine manufactured, blended, and filled into sprayers
at Medeva. We conducted a randomized, double-blind, placebo-controlled trial in
500 children, designed to evaluate the safety and immunogenicity of three
manufacturing lots of FluMist. The children were vaccinated between April and
September 1997. Analysis of patient diary cards and antibody responses following
two doses of FluMist showed consistent safety and immunogenicity for the
different lots according to the pre-defined endpoints. Evidence that different
lots of vaccine can be manufactured at a consistent quality level is generally
required by the FDA prior to approval of such products for commercial sale.
We have completed a bridging study designed to evaluate clinical
equivalence of vaccine blended and filled at our Pennsylvania facility, compared
to vaccine blended and filled at Medeva that was representative of vaccine used
in earlier clinical trials. This 225-person trial was completed in Australia in
collaboration with CSL Limited. The study's primary endpoint was to show that
the lot of FluMist blended and filled at our Pennsylvania facility had similar
immunogenicity for all three 1997-98 influenza strains to the lot of vaccine
blended and filled at Medeva. The secondary endpoint was to show that the two
lots of vaccine had similar safety and tolerability profiles. The trial was
conducted from December 1998 through March 1999. Participants were children age
12 to 42 months, randomized to receive vaccine blended and filled at one of the
two manufacturing sites. The study met the primary end-points for immunogenicity
and safety and we will include the data from this trial in our BLA. We cannot be
certain that the FDA will find these data sufficient to demonstrate consistency
of manufacture.
PHASE 2 BRIDGING STUDY WITH LIQUID FLUMIST
In March 2000, Wyeth Lederle, in conjunction with us, initiated a Phase 2
bridging study with a refrigerator-stable liquid formulation of FluMist in the
southern hemisphere.
This trial is intended to demonstrate clinical equivalence between first
generation frozen FluMist and liquid FluMist. To date, more than 500 of an
anticipated 1,300 children, age one to three years, have been enrolled.
Participants in this randomized, single-blind study will receive either frozen
or liquid FluMist.
FLUMIST BLA SUBMISSION
We are in the process of completing the manufacturing validation
requirements we believe necessary to support a BLA submission for FluMist during
the fourth quarter of 2000. This process includes validating the tests needed to
characterize and release our product and ensuring that all our manufacturing
processes, facilities and equipment, including those at our contract
manufacturing partner, Medeva, comply with FDA standards.
14
<PAGE> 15
Last fall, we announced that we would not submit a BLA for FluMist in 1999
due to inconsistent test results observed during validation exercises. At that
time, we initiated an investigation into these results. Importantly, the
investigation concluded that the inconsistencies were only associated with
certain assays, or tests, and not associated with FluMist or the manufacturing
process. We and Wyeth Lederle are addressing these issues to ensure consistent
assay performance at commercial scale.
Celltech Medeva, or Medeva, the international marketing arm of the Celltech
Group, plc, notified us that it received a warning letter from the FDA regarding
their UK facility where several key stages of the FluMist manufacturing process
take place. Some of the comments in the letter referred to the general utility
systems in the facility, such as water and clean steam, which are used to
prepare supplies used in the manufacture of FluMist. We have been informed by
Medeva that it is taking the necessary steps to bring its systems and facility
into compliance, and it is working with the FDA to fulfill that objective. While
we believe Medeva has taken the necessary steps to bring the relevant general
utility systems into compliance, we have also begun to implement plans to
eliminate our dependence on these utilities in connection with our planned
fourth quarter 2000 BLA submission. Those plans, which will require FDA
approval, involve the use of disposable supplies instead of relying on the
shared utility systems at Medeva.
OTHER PRODUCTS IN DEVELOPMENT
PARAINFLUENZA VIRUS TYPE 3
We are currently developing a vaccine for the treatment of the
parainfluenza virus type 3, or PIV-3, a common respiratory virus of childhood is
a cause of 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 percent of children are infected by the time they
reach two years of age, and 80 percent by four years of age. Children are also a
major factor in introducing PIV-3 infection into the family setting. PIV-3
frequently recurs 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 circulating and nasal antibodies against PIV-3 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 circulating
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. Our live intranasal
vaccine program for PIV-3 utilizes bovine PIV-3, or 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 as a vaccine to protect
humans from the related human virus. It is thought that the attenuation of
bPIV-3 seen in primates is due to mutations sustained throughout its genome
during its long evolutionary adaptation to the bovine host.
Clinical Results. Prior to our in-licensing of the bPIV-3 vaccine, it had
been tested in Phase 1 clinical trials in almost 100 adults, children and
infants. In all age groups, the bPIV-3 vaccine appeared satisfactorily
attenuated, safe and genetically stable. Eighty-five percent of infants and
children who had not been previously exposed had an immune response from the
tested dose; 61 percent of bPIV-3 recipients developed a rise in antibody to the
human PIV-3 virus. The vaccine strain caused an immune response in 92 percent of
infants younger than six months of age, even in the presence of maternal PIV-3
antibodies. The bPIV-3 vaccine stimulated an immune response to human PIV-3 in
42 percent of these young infants. A preliminary review of a Phase 2 clinical
trial announced in December 1998 found that after three doses, 79 percent of the
vaccine recipients showed evidence of immunization compared to seven percent of
placebo recipients. The trial met our pre-determined objectives for safety and
immunogenicity. We intend to move forward with additional clinical development
in 2001.
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<PAGE> 16
EPSTEIN-BARR VIRUS
We are currently developing a vaccine for the Epstein-Barr virus, a
herpesvirus that causes infectious mononucleosis and 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 when
infection first occurs in adolescence or young adulthood. Sore throat and
swollen neck glands are followed by a period of fatigue and lethargy which can
last for weeks or even months. Many 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, which is the reason
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
throughout much of Asia, and Burkitt's lymphoma, a significant disease in
Africa.
We are 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 we entered into a
worldwide collaboration with SmithKline Beecham, excluding Korea, whereby
SmithKline Beecham will fund the development of our EBV vaccine in exchange for
marketing rights. In August 1999, we announced that SmithKline Beecham completed
a Phase 1 clinical trial in Europe of the subunit vaccine in healthy adults to
evaluate safety and immunogenicity. The study showed that the vaccine tested was
safe and well-tolerated whether or not subjects had been exposed to EBV prior to
the study. Although the study was not designed to evaluate the efficacy of the
vaccine, laboratory tests showed evidence of immune response in vaccine
recipients.
CYTOMEGALOVIRUS
We are currently developing a vaccine for CMV, another member of the
herpesvirus group. Most people become infected with CMV at some time in their
life. In the United States approximately 50 percent of the population is
infected with CMV. 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 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 earlier in life, or a
new infection. Importantly, if a woman is first exposed to this virus during
pregnancy, the resulting infection can cause serious abnormalities in the child.
Approximately 40,000 infants in the United States are infected each year,
resulting in varying levels of brain damage, physical handicaps, or deafness in
over 10 percent of these infants. Congenital CMV syndrome results in significant
expenditures for neonatal intensive care and potentially lifelong custodial
care.
No vaccine currently is available for CMV. Recently, the Institute of
Medicine, a part of the National Academy of Sciences, issued a report in which
CMV was identified as a level I (most favorable) priority for development as a
vaccine, based on the public health benefit associated with CMV prevention.
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. These products are not used to
prevent congenital infection of newborn infants. We believe that widespread
vaccination of children/adolescents with a safe and 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 caused by
congenital infection by reducing the risk that mothers can acquire CMV during
pregnancy.
A weakened live virus vaccine candidate for CMV, 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
mothers of children in day care who were at risk for CMV infection, or in
transplant recipients at
16
<PAGE> 17
risk of acquiring CMV from the donor organs. Our scientists have discovered key
differences between Towne strain and the naturally occurring CMV virus. Based on
this knowledge, we have used our rational vaccine design approach to create new
recombinant CMV vaccine candidates in an attempt to achieve the appropriate
balance between attenuation and protection. The NIAID filed an IND for a Phase 1
clinical trial of several of Aviron's CMV vaccine candidates in December 1998.
We expect to initiate the first clinical trial for a CMV vaccine in 2000, in
conjunction with the NIAID.
HERPES SIMPLEX VIRUS TYPE 2
It is estimated that HSV-2, the cause of genital herpes, infects between 40
million and 60 million 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 people who do not have any symptoms. Genital herpes
is an 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 500,000 new cases of
genital herpes per year in the United States, and that the disease is
responsible for over 600,000 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. Each year in the
United States, approximately 1,500 infants are infected and these infants have
almost a 50 percent risk of death or severe, permanent neurologic damage. In
addition, efforts to prevent neonatal herpes contribute significantly to the
cost of the disease. For example, women in the United States with a history of
genital herpes are often advised to undergo a Cesarean section when prenatal
examinations suggest a herpes virus recurrence near the time of delivery. HSV-2
infection can also lead to serious and fatal complications in adults with poor
immune systems due to AIDS or drug therapy for organ transplants.
The most widely used drug therapy for HSV-2 disease is acyclovir, 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 preventative 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 preventative
vaccines are in clinical trials; however, no vaccine currently is available to
prevent genital herpes. One company recently reported a lack of efficacy in
Phase 3 clinical trials of a subunit vaccine. A second company is conducting a
Phase 3 clinical trial of a different subunit vaccine, and a third company has
announced commencement of a Phase 2 clinical trial of a disabled virus which can
undergo only a single cycle of replication after injection.
We have used our rational vaccine design approach to create live attenuated
vaccine candidates intended to prevent HSV-2 disease in uninfected children and
young adults. Two of our 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, or HSV-1. After extensive
preclinical testing, the virus was tested in humans; however, the immune
response following vaccination was deemed insufficient. This insufficiency most
likely resulted because too many genes had been deleted, thus rendering the
virus over-attenuated. We have licensed technology, along with patents covering
strategies for more specific deletions, from ARCH Development Corporation. We
have used this technology to create proprietary live vaccine candidates using an
HSV-2 backbone, which we have evaluated 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. We are developing additional vaccine candidates and intend to
use the results of further animal studies to select one or more candidates for
evaluation in clinical trials.
In July 1996, we licensed a portion of our patent rights covering or
related to the use of HSV-2 for treatment of cancer and for gene therapy, but
excluding use for vaccines, to NeuroVir Research, Inc., a private Delaware
corporation. In exchange, we received shares of capital stock and warrants to
purchase shares of capital stock, representing a minority interest in the
outstanding equity securities of NeuroVir on a fully diluted basis. We are under
no obligation to fund development of this technology by NeuroVir.
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<PAGE> 18
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 4,500 deaths a
year in the United States. RSV can also cause the common cold. 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.
The leading product used for the prevention of RSV is a humanized monoclonal
antibody against RSV and is delivered by injection. One company is testing a
cold adapted weakened live virus vaccine for RSV in infants. Available drug
therapy is reserved for the most serious cases as it has significant side
effects. We are developing a genetically engineered weakened live virus vaccine
for RSV using proprietary reverse genetics technology. Our objective is to use
this technology to create a number of live virus vaccine candidates that can be
tested in animal models before selecting a candidate for testing in humans.
However, no assurance can be given that we will be successful in identifying a
vaccine candidate.
LIVE VIRUSES AS VECTORS
We believe that our 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.
FLUMIST PRODUCTION AND MANUFACTURING
PRODUCTION
Master Virus Seed Production. After the FDA and the CDC select the
influenza strains to be included in the vaccine, we create the respective master
virus seeds for use in large-scale production. These contain the hemagglutinin,
or HA, and neuraminidase, or NA, genes of the expected epidemic strain and six
genes which hold the cold adapted, weakened properties of the master donor
strain. Two processes are available for us to make the master virus seeds:
classical reassortment and reverse genetics. In the classical reassortment
process, which we intend to include in our BLA submission, laboratory virus
cells are infected with both the expected strain in circulation and our cold
adapted master donor strain, which results in random genetic reassortments
between the two strains. The specific reassortment desired is isolated using
monoclonal antibodies. This process takes approximately four to six weeks and
has been used by scientists at the University of Michigan and Aviron to create
more than 20 different vaccine strains that have been tested in human clinical
trials. In the reverse genetics approach, which may be submitted in future
amendments to our BLA filing, HA and NA genes are isolated from the expected
circulating strain and introduced into the cold adapted master donor strain
using our proprietary reverse genetics technology. Potential advantages of this
process are that it may be somewhat faster and may offer lower risk of
contamination than classical reassortment. We have conducted a clinical trial to
evaluate safety of the reverse genetics process compared to the classical
reassortment process.
Bulk Monovalent Formulation Production. Under our current arrangement with
Medeva, the master virus seeds for each vaccine strain are transferred to Medeva
for large scale production of the bulk monovalent formulations of the three
vaccine strains, which involves infection, incubation and harvesting from hens'
eggs. The eggs used in this process are supplied by a third party that maintains
flocks certified to be free of specific pathogenic agents.
Trivalent Formulation Production. The bulk formulation is frozen and
transferred to our facility in Pennsylvania where the monovalent vaccine
material is blended into the trivalent formulation, filled into nasal spray
devices, packaged and labeled.
MANUFACTURING FACILITIES AND CONTRACTS
We currently do not have licensed facilities to manufacture FluMist and
have no direct experience with large scale manufacturing of this potential
product. All of the cold adapted vaccine material used in our early
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stage clinical trials was supplied solely by Medeva pursuant to an agreement
between us and Medeva entered into in November 1995. Pursuant to this agreement,
we have received timely and sufficient supplies for our clinical trials of
FluMist through four influenza seasons. Medeva is one of four companies licensed
by the FDA to produce influenza vaccine for sale in the United States and
produces its own injectable inactivated influenza vaccine. Since 1998 we have
been producing supplies for all frozen FluMist clinical trials through creation
of master virus seeds at our California facility, production of bulk monovalents
at Medeva and the blending and filling into the trivalent formulation at our
Pennsylvania facility.
We initially plan to obtain commercial quantities of bulk vaccine of frozen
FluMist from Medeva. Under an agreement between Aviron and Medeva entered into
in April 1997, Medeva agreed to manufacture frozen FluMist in bulk until
December 31, 2001. In July 1999, this agreement was revised and extended to
December 2005.
In October 1997, we entered into a nonexclusive arrangement with Packaging
Coordinators, Inc., a division of Cardinal Health, Inc., or PCI, for the
blending, filling, packaging, and labeling of FluMist for commercial sale until
October 2004. Under this agreement, we and PCI opened a 34,000-square-foot
manufacturing suite in Philadelphia, Pennsylvania at PCI's site in 1998, in
which PCI has blended, filled and packaged doses of FluMist for use in 1998-1999
clinical trials. All activities at this site are now referred to collectively as
"Aviron PA". If regulatory approval is received, this Aviron PA facility is
expected to be used for blending, filling, packaging, labeling and storage of
FluMist.
The production of FluMist is subject to the availability of a large number
of specific pathogen-free eggs, for which there are currently a limited number
of suppliers. In June 1999, we entered into a non-exclusive agreement with
Specific Pathogen-Free Avian Supply, a division of Charles River Laboratories
for the acquisition of pathogen-free hens' eggs through December 2001. This
agreement may be renewed by mutual agreement of the parties for an additional
term of three years.
In August 1998, Aviron and Becton Dickinson and Company entered into a
worldwide exclusive supply agreement under which Becton Dickinson will supply us
with its AccuSpray non-invasive nasal spray delivery system for the
administration of FluMist through the 2001-2002 flu season. In addition, we
depend on the submission by Becton Dickinson of a Device Master File
application, or DMF, for separate review by regulatory authorities. We will
reference the DMF as part of the BLA submission for FluMist.
Our current frozen formulation of FluMist is being designed to meet an
acceptable level of stability for the U.S. market. In addition to its current
frozen formulation, we are exploring alternative formulations and presentations
for FluMist which may enable improved distribution and longer shelf life. We
believe that a liquid formulation of FluMist will be required to address markets
outside the United States and Canada. Aviron and Wyeth Lederle are jointly
producing clinical trial material for the liquid formulation of FluMist at our
facilities in California and Pennsylvania and in Wyeth Lederle's facilities. As
part of our agreement with Wyeth Lederle, both companies have the ability to
manufacture liquid FluMist bulk materials.
MARKETING AND SALES
The current purchasers of vaccines are principally physicians, large HMOs
and state and federal government agencies. We intend to sell our products to
HMOs, large employers, and government health care agencies, physicians and
pharmacies, either directly or through our partners.
Clinical trials of FluMist have been conducted to provide information
regarding its use in three market segments: children, healthy adults, and adults
at high-risk of influenza complications due to age or to the presence of chronic
medical conditions such as heart or lung disease or diabetes. Use of influenza
vaccines in these three segments is subject to somewhat different market forces,
and customers are accessed by different channels of distribution.
CHILDREN
There are approximately 70 million children age 18 and under in the United
States. Influenza among children causes significant impact on families,
especially when a parent has to stay home from work to care for
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a sick child. The current injectable vaccine is rarely used in healthy children,
although children have the highest attack rate of influenza and play a major
role in the spread of the influenza epidemic. The current injectable influenza
vaccine is used in children at high-risk of influenza complications due to
conditions such as asthma and congenital heart disease, but public health
authorities are concerned that coverage rates are below optimal. Our objective
is to develop a new market for influenza prevention in healthy and high-risk
children by offering an innovative vaccine to prevent influenza. Because FluMist
is delivered as a comfortable nasal spray we believe it would provide an
attractive way to immunize children on an annual basis. In addition, FluMist can
have an impact in reducing middle ear infections and associated antibiotic use,
which increases its value in this population. While clinical data in healthy
children appears strong, FluMist studies in high-risk children are limited. We
cannot be sure that we will receive a labeling claim for high-risk children.
HEALTHY ADULTS
We believe that a large proportion of the current injectable influenza
vaccine used in the United States is being administered to healthy adults,
either via workplace immunization programs or in programs offered through
clinics, pharmacies or other retail outlets. There are approximately 120 million
adults in the United States between 18 and 50 years of age who are not
classified by the CDC or the ACIP as being at high-risk for influenza
complications, but who still could be susceptible to influenza. Our objective is
to expand the current market for influenza prevention by offering a unique
alternative for individuals who value flu prevention. We believe that
immunization programs using FluMist may also decrease the time per vaccination
compared to the current influenza injection and therefore allow improved
flexibility and efficiency of operation.
HIGH-RISK ADULTS
We have completed a clinical trial in high-risk adults to evaluate the
efficacy of FluMist when co-administered with the injectable influenza vaccine,
compared to the injectable influenza vaccine alone. If this trial is successful,
and regulatory approval is received, we intend to market FluMist to be used in
conjunction with the injectable influenza vaccine for adults over age 65,
approximately 34 million persons in the United States, and for adults under age
65 with conditions which put them at higher risk of influenza complications.
COLLABORATIVE AGREEMENTS
Our strategy for the development, clinical trials, manufacturing and
commercialization of certain of our products includes maintaining and entering
into various collaborations with corporate partners, licensors, licensees and
others. To date we have entered into the following collaborative agreements.
FLUMIST AGREEMENTS
Wyeth Lederle Vaccines
In January 1999, Wyeth Lederle and Aviron announced a worldwide
collaboration for the marketing of FluMist. This agreement became effective in
March 1999.
Under this agreement, we granted Wyeth Lederle exclusive worldwide rights
to market FluMist, excluding Korea, Australia, New Zealand and certain South
Pacific countries. We and Wyeth Lederle will co-promote FluMist in the United
States, while Wyeth Lederle will have the exclusive right to market the product
outside the United States. In each case, Wyeth Lederle will hold the marketing
rights for up to 11 years. We and Wyeth Lederle will also collaborate on the
regulatory, clinical, and marketing programs for FluMist.
We have received a cash payment of $15.0 million from Wyeth Lederle under
the collaboration, and will receive an additional $15.5 million upon acceptance
by the FDA of a BLA filing and an additional $20.0 million upon FDA marketing
approval for FluMist. We can also earn an additional $20.0 million in milestone
payments for expansions in labelling claims and advisory body recommendations.
In addition, we are entitled to receive a $10.0 million payment for the
submission of a license application in Europe, a
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$27.5 million payment for the approval of a liquid formulation of FluMist, and
up to $50.0 million upon licensure in international regions. Compensation for
achieving additional development and regulatory milestones is included in the
agreement terms. The granting of other rights under the license would trigger
additional payments to us by Wyeth Lederle in excess of $140.0 million.
Wyeth Lederle committed to provide up to $40.0 million in financing to us,
of which $1.3 million had been provided as of December 31, 1999. Subsequent to
December 31, 1999, Wyeth Lederle provided $4.0 million of financing. Of the
remaining $34.7 million, $20.0 million is available only upon FDA approval of
FluMist. The total potential value for the license fees, milestones and
financing support that we could receive exceeds $400.0 million.
Wyeth Lederle will distribute FluMist and record all product sales. In
addition to the payments mentioned above, we anticipate that we will receive
approximately 40 percent of FluMist revenues from Wyeth Lederle, in the form of
product transfer payments and royalties, which increase at higher sales levels.
We will incur expenses to supply and co-promote FluMist.
CSL Limited
In June 1998, Aviron and CSL Limited of Victoria, Australia, announced that
they will collaborate on the development, sale and distribution of FluMist, in
Australia, New Zealand and certain countries in the South Pacific. We and CSL
Limited will jointly carry out additional clinical trials in Australia for
FluMist. Under the agreement, CSL Limited will sponsor the marketing application
with the Therapeutic Goods Administration, Australia's equivalent to the FDA.
CSL Limited will have exclusive rights to sell and distribute FluMist in the
above listed territory. We and CSL Limited will share profits of FluMist in the
Territory. We also will benefit from expansion of CSL Limited's current flu
vaccine in pediatric and healthy adult market segments following the approval to
market FluMist in the territory. In addition, CSL Limited has agreed, under an
option agreement, to grant warrants to us to purchase CSL Limited common stock
upon CSL Limited's attainment of certain milestones.
National Institute of Allergy and Infectious Diseases -- Cold Adapted
Influenza Vaccine
Following a competitive application process, we entered into a
Collaborative Research and Development Agreement, or CRADA, in March 1995 with
the NIAID of the NIH to conduct clinical trials of our cold adapted influenza
vaccine. Wyeth-Ayerst licensed certain rights to the vaccine from the NIH in
1991 and was developing it for sale in collaboration with the NIH until
relinquishing its rights in 1993. We have 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, we 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. Aviron and the
NIAID are discussing a possible extension of the CRADA. Either party may
terminate the CRADA for material breach.
University of Michigan
In February 1995, we entered into a materials transfer and intellectual
property agreement with the University of Michigan. Pursuant to the agreement,
the University of Michigan granted us exclusive worldwide rights to certain
intellectual property and technology relating to the cold adapted influenza
vaccine and proprietary master donor strains of influenza viruses useful in the
production of products for vaccination against influenza and potentially for
gene therapy and other uses. Specifically, we obtained the exclusive right to
develop, manufacture, use, market and sell products incorporating any such
intellectual property or utilizing the master strains worldwide. In
consideration for the rights granted to us, we:
- made an initial cash payment to the university;
- agreed to pay a royalty to the university on net sales of products
subject to the license;
- entered into a sponsored research agreement with the university for a
period of at least two years; and
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- issued to the university 1,323,734 shares of Series B Preferred Stock,
which automatically converted into 264,746 shares of the common stock at
the time of our initial public offering.
The original agreement had also provided that, in the event that we receive
approval to commercially market a product based on the university's technology,
we agreed to issue a warrant to the university to purchase shares of our common
stock at a price of $10.00 per share, for a number of shares to be based on 1.25
percent of the common stock outstanding on the date of the first commercial sale
of the product incorporating the university's technology. In February 2000, the
agreement was amended to immediately grant the university a warrant to purchase
340,000 shares of our common stock at an exercise price of $10.00 per share.
Upon the date of the first commercial sale of FluMist, if 1.25 percent of our
common stock then outstanding exceeds 340,000 shares, we will issue a separate
warrant for the excess of that amount of shares over 340,000 allowing the
university to purchase the excess shares on the same terms.
Pursuant to the agreement, we are required to grant to the university an
irrevocable, royalty-free license for research purposes, or for transfer to a
subsequent licensee should the agreement be terminated, to (1) all improvements
developed by us, our 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 (2) all new technical information acquired
by us, our affiliates or sublicensees relating to the master strains and
products.
The term of the agreement is until the later of the last to expire of the
university's patents licensed to Aviron or 20 years from the date of first
commercial sale of a product incorporating the university's technology. We have
the further right to terminate for any reason upon 12 months notice to the
university.
OTHER COLLABORATIVE AGREEMENTS
National Institute of Allergy and Infectious Diseases -- Parainfluenza Virus
Type 3
In May 1996, we obtained exclusive rights from the NIAID of the NIH to
certain biological materials and clinical trial data for our PIV-3 program. The
NIH granted to us exclusive rights in specific strains of bovine parainfluenza
virus to develop, test, manufacture, use and sell products for vaccination
against human parainfluenza virus and other human and animal diseases. In
addition, we obtained from the NIAID the right to reference an existing IND and
certain data relating to the licensed materials. The NIH retained 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, we 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 us or our sublicensee. We have 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, we signed an agreement with SmithKline Beecham
Biologicals, S.A. defining a collaboration on our EBV vaccine technology. Under
the terms of our agreement, we granted SmithKline Beecham an exclusive license
to produce, use and sell inactivated EBV vaccines incorporating our technology
for prophylactic and therapeutic uses on a worldwide basis, except in Korea. 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 us during the term
of this agreement. We have retained the right to co-market a monovalent
formulation of the EBV vaccine in the United States and to have SmithKline
Beecham supply such vaccine.
SmithKline Beecham agreed to fund research and development at Aviron
related to the EBV vaccine, in specified minimum amounts, during the first two
years of this agreement. SmithKline Beecham made an initial up-front payment to
us and agreed to make additional payments upon the achievement of certain
product development milestones; the first such milestone payment was made in
1997. We are entitled to royalties from SmithKline Beecham based on net sales of
the vaccine. Unless otherwise terminated, the
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agreement will expire on a country-by-country basis upon the expiration or
invalidation of the last remaining patent covered by the agreement or 10 years
from the date of first commercial sale of the vaccine, whichever is later. The
agreement may be terminated by SmithKline Beecham with respect to any country at
any time.
Sang-A Pharm. Co., Ltd.
In May 1995, we entered into a Development and License Agreement with
Sang-A Pharm. Co., Ltd. We 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, we are under no obligation to develop any product.
Sang-A also will make payments to us upon Sang-A's meeting certain regulatory
milestones for each product in Korea and will pay a royalty to us on net sales
of such products in South and North Korea.
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 us or a reduced royalty
obligation, depending on the product.
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. Sang-A has notified Aviron
that, at this point, it does not intend to establish a manufacturing plant. In
January 1997, Sang-A declared bankruptcy and continues to operate while in
receivership. We are unable to predict what, if any, long-term effect the
bankruptcy will have on Sang-A and on our agreement with Sang-A.
The Mount Sinai School of Medicine
In February 1993, we entered into a technology transfer agreement with The
Mount Sinai School of Medicine. Under this agreement, Mount Sinai assigned to us
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 to us (1) an option to acquire any improvements to the inventions
disclosed in the assigned patents and patent applications thereafter developed
by Mount Sinai and (2) a right of first negotiation for a license or assignment
to additional related technology. In consideration for these rights, we issued
to Mount Sinai 35,000 shares of our common stock. We also issued to Mount Sinai
four warrants to purchase up to a total of 45,000 shares of our common stock,
each exercisable for a term of five years commencing upon the occurrence of
milestone events.
ARCH Development Corporation
In July 1992, we entered into a license agreement with ARCH Development
Corporation ARCH, pursuant to which we obtained an exclusive, worldwide
commercialization license, with the right to sublicense, to 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 us under this agreement, we 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 us 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. ARCH has asserted an interpretation of the
financial terms of this agreement with us, relating to the license by us of its
EBV technology to SmithKline Beecham, which would require us to pay ARCH
one-half of any future or past payments, including sublicense fees and milestone
payments we received under the SmithKline Beecham agreement. We dispute ARCH's
interpretation of the financial terms of the agreement.
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BUSINESS RISKS
This Form 10-K contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. When used
herein, the words "expects," "anticipates," "estimates," "intends," "plans" and
similar expressions are intended to identify such forward-looking statements.
Our actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this Form 10-K.
RISKS RELATED TO FLUMIST
For the foreseeable future, the risks relating to Aviron are primarily
those related to the development and commercialization of FluMist. All of our
potential near-term revenues are dependent on the commercialization of FluMist.
Because of the seasonality of influenza, FluMist must be available in the third
or fourth quarter of the year for us to achieve revenues for that season. Delay
in availability of FluMist in the initial year of commercialization or in
subsequent years could cause us to lose revenues for an entire influenza season
and require us to raise additional capital to cover the costs of additional
research and development, related expenses and ongoing fixed costs.
POSTPONING THE SUBMISSION OF OUR APPLICATION TO THE FDA FOR FLUMIST WILL DELAY
THE COMMERCIALIZATION OF FLUMIST.
In 1998, we submitted an application for FluMist, which was not accepted
for filing by the FDA. Additional information required before we resubmit our
application includes data on manufacturing validation, stability and clinical
equivalence. If our manufacturing validation exercises and studies to confirm
sufficient shelf-life stability are not successful, or if our facilities
validation is delayed, or we encounter additional problems, we will postpone our
submission beyond 2000, which will delay commercialization of FluMist.
IF THE FDA FINDS THAT OUR APPLICATION FOR FLUMIST DOES NOT SUPPORT APPROVAL, OR
IF ITS INSPECTORS FIND THAT OUR MANUFACTURING FACILITIES ARE NOT ADEQUATE,
COMMERCIALIZATION OF FLUMIST MAY BE DELAYED BY ONE OR MORE INFLUENZA SEASONS.
Approval risk related to manufacturing. If the FDA finds that the
validation, clinical or other required data in our application is insufficient,
it could refuse to accept our application for filing or could require corrective
action or additional data which could delay or prevent approval. The FDA is
likely to inspect each of the facilities involved in manufacturing FluMist. FDA
inspectors may find deficiencies in the facilities or processes that may lead to
delay in FluMist approval or prevent it from being approved at all.
Celltech Medeva, or Medeva, the international marketing arm of Celltech
Group, plc, notified us that it received a warning letter from the FDA regarding
their UK facility where several key stages of the FluMist manufacturing process
take place. Some of the comments in the letter referred to the general utility
systems in the facility, such as water and clean steam, which are used to
prepare supplies used in the manufacture of FluMist. We have been informed by
Medeva that it is taking the necessary steps to bring its systems and facility
into compliance, and it is working with the FDA to fulfill that objective. While
we believe Medeva has taken the necessary steps to bring the relevant general
utility systems into compliance, we have also begun to implement plans to
eliminate our dependence on these utilities in connection with our planned
fourth quarter 2000 BLA submission. Those plans, which will require FDA
approval, involve the use of disposable supplies, instead of relying on the
shared utility systems at Medeva.
Approval risk related to FluMist indications and claims. We are initially
seeking FDA approval for use of FluMist in children and healthy adults. The FDA
may not find our clinical data adequate to support use in any particular group
and may exclude any segment of the population. The FDA may request additional
clinical data to support the safety of FluMist. We may be required to commence
and complete additional clinical trials to generate additional data to support
product approval for one or more of our target populations,
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which may lead to substantial delay in FluMist approval or prevent it from being
approved for any of those population segments.
IF WE ARE UNABLE TO PERFORM THE COMPLEX ANNUAL UPDATE OF THE FLUMIST FORMULATION
FOR NEW INFLUENZA STRAINS IN A TIMELY MANNER, OUR SALES FOR THAT YEAR WILL BE
LIMITED OR WE MAY HAVE NO SALES AT ALL.
Early each year, the FDA determines which strains will be included in the
upcoming season's influenza vaccines. After the FDA makes its decision, we will
have approximately six months to include the selected strains and manufacture
FluMist for use in the upcoming influenza season. The major factors that may
delay availability of FluMist each year are:
- The FDA may delay its selection of strains for a given influenza season.
- We may experience difficulty or delay in the technically demanding
process we follow each year to update the formulation of FluMist.
- The FDA could require as a release test a brief clinical trial designed
to show the safety and activity of the vaccine including the new strains
selected for that particular year.
IF WE HAVE DIFFICULTIES WITH OUR MANUFACTURING PROCESS, WE MAY NOT HAVE
SUFFICIENT QUANTITIES OF VACCINE.
We may not have sufficient quantities of vaccine in time to assure
availability for the season due to problems with updated strains or performance
of suppliers or contract manufacturers. Following inoculation with our updated
strains, bulk vaccine is harvested from special hens' eggs. This is a
labor-intensive process which must be conducted under strict controls and tight
timelines. We are dependent on our contract manufacturer, Medeva, for successful
staffing, training and supervision for this process. We are currently dependent
on a single supplier for an adequate and timely supply of eggs.
We may have difficulty with the blending, filling and packaging of FluMist.
The bulk vaccine for three strains of influenza must be diluted and blended
together prior to filling the nasal spray device. This process must be conducted
under strict controls and tight timelines. We depend upon a single supplier for
our nasal spray device. We also depend upon our packaging contractor for
packaging of the vaccine. The vaccine is subject to strict quality control
testing during production and prior to release. Any quality control failures
could lead to a reduction in the available supply of FluMist.
IF THE MARKET DEMAND FOR FLUMIST EXCEEDS OUR MANUFACTURING CAPACITY, OUR REVENUE
MAY BE LIMITED.
We may be capacity constrained in our supply of vaccine. In order to secure
future production capacity, we may extend and expand existing arrangements,
collaborate with other third parties, or establish additional manufacturing
facilities. Using an alternative supplier or building a new facility would
require a substantial amount of funds and additional clinical trials and
testing. We cannot be sure that an additional source of supply will be
established on a timely basis, or that we will have or be able to obtain funds
sufficient for building or equipping a new facility.
THE SUCCESS OF FLUMIST IS HIGHLY DEPENDENT ON OUR PARTNER, WYETH LEDERLE, FOR
MARKETING, PROMOTION, SALES AND DISTRIBUTION ACTIVITIES.
We have entered into an exclusive agreement with Wyeth Lederle to
co-promote, sell, and distribute FluMist. We believe that for FluMist to be
widely adopted, the efforts of an experienced pharmaceutical sales force are
needed. If Wyeth Lederle fails to devote appropriate resources to promote, sell,
and distribute FluMist, sales of FluMist could be reduced. Distribution of
FluMist will be challenging for several reasons. First, influenza vaccine is a
seasonal product with a shipping period between August and January. Second,
FluMist is a frozen product and must remain frozen prior to use. It must be
maintained under recommended frozen storage conditions. Although Wyeth Lederle
has a distribution system that supports frozen vaccines, if it does not manage
these distribution challenges our revenues could be reduced.
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Wyeth Lederle also will participate in the development, manufacturing,
promoting, and selling of a liquid formulation of FluMist, which will be
particularly important if FluMist is to be accepted outside of the United
States. If Wyeth Lederle does not devote sufficient resources to the development
and commercialization of this formulation, its commercial availability will be
delayed.
If Wyeth Lederle breaches or terminates its agreement with us or otherwise
fails to conduct their FluMist related activities in a timely manner or if there
is a dispute about our or their respective obligations, we may need to seek
another partner. If any of these events occurs, revenues associated with
milestone payments or FluMist commercialization could be delayed, reduced or be
substantially more expensive for us to achieve.
IF MEDICAL ADVISORY BODIES, DOCTORS, AND OTHER HEALTH CARE PROVIDERS DO NOT
RECOMMEND FLUMIST ITS MARKET OPPORTUNITY WILL BE LIMITED.
We believe recommendations from advisory bodies such as the Advisory
Committee on Immunization Practices, or ACIP, of the CDC, and the American
Academy of Pediatrics, or AAP, will be important to encourage doctors and other
healthcare providers to recommend FluMist. If these bodies do not recommend
FluMist, the product's market opportunity will be limited. We will also need to
educate doctors and other healthcare advisors of the safety and clinical
efficacy of FluMist and its potential advantages over other influenza vaccines.
WHETHER OR NOT DOCTORS, OTHER HEALTH CARE PROVIDERS AND MEDICAL ADVISORY BODIES
RECOMMEND FLUMIST, IF THE MARKET DOES NOT ACCEPT FLUMIST, OUR SALES WILL BE
REDUCED.
FluMist acceptance may be limited by a number of factors, including:
- perceived effectiveness of competing influenza vaccines, including the
flu shot;
- unfavorable publicity concerning other vaccines;
- pricing of FluMist;
- broad accessibility to FluMist;
- reimbursement polices of government and third-party payors;
- side effects, such as the runny nose, sore throat or fever seen in some
clinical trial participants; and
- the requirement of frozen storage capacity by those distributing and
administering the vaccine.
WE FACE COMPETITION FROM COMPANIES WITH SUBSTANTIAL FINANCIAL, TECHNICAL, AND
MARKETING RESOURCES, WHICH COULD SERIOUSLY LIMIT OUR FUTURE REVENUES FROM
FLUMIST.
FluMist will be competing against the flu shot, which is sold by large
pharmaceutical companies, including Wyeth Lederle and Medeva.
We also operate in a rapidly evolving field. Other companies are working to
improve the efficacy of flu shots. In addition, we are aware of efforts to
develop non-injectable influenza vaccines that would be more directly
competitive with FluMist. For example:
- A nasally administered inactivated vaccine is being developed by
Biovector Therapeutics, S.A and Biochem Pharma, Inc. which has been
licensed to SmithKline Beecham; and
- A nasally administered live influenza vaccine has been developed and used
in Russia.
In 1999, the FDA approved two new products for the treatment of influenza:
zanamivir and oseltamivir. Zanamivir is marketed as Relenza and is sold by Glaxo
Wellcome plc and oseltamivir is marketed as Tamiflu and is sold by Roche
Holdings AG. These products inhibit the ability of the influenza virus to
replicate. Both zanamivir, delivered via an inhaled powder, and oseltamivir, a
pill, were approved for influenza treatment, but neither are approved for the
prevention of influenza. When administered within two days of contracting
influenza, zanamivir and oseltamivir may reduce the duration of influenza by
approximately one day. Clinical
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data also has shown that taking zanamivir or oseltamivir daily for a period of
time during the influenza season can have a preventative effect.
THE FLUMIST MASTER DONOR STRAINS ARE NOT PROTECTED BY PATENTS AND IF THE STRAINS
ARE DUPLICATED, THIRD PARTIES MAY BE ABLE TO DEVELOP, MARKET AND SELL A
COMPETING VACCINE.
We have no issued patents covering the FluMist master donor strains. Our
rights to the master donor strains are substantially based on (1) an exclusive
worldwide license of materials and know-how from the University of Michigan,
which owns the master donor strains from which our vaccine is derived; and (2)
an exclusive license of know-how and clinical trial data from the National
Institutes of Health, or NIH. Neither the University of Michigan nor the NIH has
been issued any patents covering the master donor strains. A third party may
gain access by some means to the University of Michigan master donor strains and
attempt to reproduce FluMist or develop another live virus influenza vaccine
that might be comparable to FluMist in terms of safety and effectiveness.
FAILURE TO RAISE ADDITIONAL CAPITAL COULD DELAY FLUMIST COMMERCIALIZATION AND
DELAY THE DEVELOPMENT OF A SECOND GENERATION FORMULATION OF FLUMIST AND OF OUR
OTHER POTENTIAL PRODUCTS.
Our operations to date have consumed substantial and increasing amounts of
cash. As of December 31, 1999, we had an accumulated deficit of approximately
$183.3 million. The negative cash flow from operations is expected to continue
and to accelerate in the foreseeable future. The commercialization of FluMist
will require a commitment of substantial funds for manufacturing, continued
clinical trial efforts and other commercialization activities. We also expect to
spend a substantial amount to develop a liquid formulation of FluMist. In
addition, we expect to continue funding the research, preclinical testing and
clinical trials necessary to develop our early-stage products. We expect our
current capital resources and financing commitments will enable us to maintain
our current and planned operations until 2001. We expect that we will need to
raise additional funds in the future. Our future capital requirements will
depend upon many factors, including:
- product commercialization activities;
- time and costs involved in obtaining regulatory approvals;
- increasing manufacturing capacity for FluMist;
- the progress of preclinical testing and clinical trials;
- continued scientific progress in the research and development of our
vaccine programs; and
- the addition of other early-stage programs to our product pipeline.
If adequate funds are not available, the commercialization of FluMist may be
delayed, we may need to delay the development of a liquid formulation of
FluMist, and we will be required to delay, reduce the scope of, or eliminate one
or more of our research or development programs. If additional funds are raised
by issuing equity or convertible securities, percentage ownership in Aviron by
existing stockholders will be reduced.
IF WE ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL, OUR
ABILITY TO COMMERCIALIZE FLUMIST AND DEVELOP A LIQUID FORMULATION OF FLUMIST MAY
BE DELAYED.
Attracting and retaining significant additional qualified personnel will be
critical to our success. To pursue the development and commercialization of
FluMist, we will be required to hire additional qualified personnel, especially
those with expertise in development, commercial-scale manufacturing, and quality
functions. Expansion in these areas is also expected to require the addition of
management personnel and the development of additional expertise by existing
management personnel. We face competition for qualified individuals from
numerous pharmaceutical, biopharmaceutical and biotechnology companies.
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<PAGE> 28
OTHER RISKS RELATED TO OUR COMPANY
SAFETY OF VACCINES CAN ONLY BE DETERMINED AFTER WIDESPREAD USE IN THE
POPULATION.
A vaccine could be licensed by the FDA and still be associated with adverse
events which reduce or eliminate revenue. For example, in 1998 the FDA approved
the use of a vaccine to prevent infant diarrhea, but the product was
subsequently withdrawn from the market due to a possible link between a serious
bowel disorder and the vaccine. This adverse event occurred at a frequency that
was not detectable in a typical clinical development program. In addition there
are a number of theoretical risks related to live virus vaccines, including
changing back to the naturally-occurring, or wild-type, and re-combining to form
a new strain which may cause disease. Also, because of the way it works, a
weakened live virus could make an individual more susceptible to secondary
infection. In addition, a weakened live virus could cause disease resembling a
wild-type virus infection in people with an immune system that is not working
properly because of a pre-existing disease, HIV infection or drug treatment for
cancer or organ transplantation. The potential for adverse events after
introduction to the market is an issue for all vaccines, including FluMist.
OTHER THAN FLUMIST, OUR PRODUCT CANDIDATES ARE AT EARLY STAGES OF DEVELOPMENT,
AND IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE PRODUCTS, WE WILL
NOT GENERATE REVENUES FROM THESE PRODUCTS.
To date, none of our product candidates has been commercialized. Other than
FluMist, all of our product candidates are in early stages of development. We
face the risk of failure normally found in developing biotechnology products
based on new technologies. Successfully developing, manufacturing, introducing
and marketing our early-stage product candidates will require several years and
substantial additional capital. Moreover, we must demonstrate safety and
efficacy and gain regulatory approval for these products. We are aware of
several companies that are marketing or are in late-stage development of
products that would be competitive with our early-stage product candidates.
In 1996, we completed construction of a pilot manufacturing facility for
our potential vaccine products other than FluMist. We currently do not have
facilities to manufacture any of our other potential products in commercial
quantities and have no experience with commercial manufacture of vaccine
products. We are alternatively considering the use of contract manufacturers for
the commercial production of our other potential products. We are aware of only
a limited number of manufacturers that we believe have the ability and capacity
to manufacture our other potential products in a timely manner.
WE MAY NOT RECEIVE PATENT PROTECTION FOR OUR POTENTIAL PRODUCTS AND
MANUFACTURING PROCESSES.
Our success depends to a significant degree upon our ability to develop
proprietary products. 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, we
cannot be certain that we were the first to make the inventions covered by each
of our pending patent applications or that we were the first to file patent
applications for these inventions. The patent positions of biotechnology and
pharmaceutical companies can be highly uncertain and involve complex legal and
factual questions. Therefore, the breadth of claims allowed in biotechnology and
pharmaceutical patents, or their enforceability, cannot be predicted. We cannot
be sure that any of our owned or licensed patents or patent applications will
issue or, if issued, will not be invalidated or circumvented, or that the rights
granted by them will provide any protection or competitive advantages to us.
The European Patent Office has informed us of its intention to deny claims
relating to methods and compositions of recombinant non-segmented
negative-strand RNA viruses contained in one of our granted European patents.
Although this decision will not affect our FluMist cold-adapted influenza
product, it may affect the European patent protection afforded our other vaccine
candidates, including recombinant RSV and recombinant PIV.
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<PAGE> 29
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, CAUSING
COSTLY LITIGATION AND THE LOSS OF SIGNIFICANT RIGHTS.
Our success will also depend upon us 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 our research and development programs. Some of
these patent applications or patents may limit the scope of claims issuing from
our patent applications, prevent certain claims from being issued, or conflict
in certain respects with claims made under our applications.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY CLAIMS AND THE DEFENSE OR LOSS OF
ANY SUCH CLAIM COULD BE COSTLY.
Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of vaccines. We have
obtained clinical trial liability insurance for our clinical trials. We also
intend to seek product liability insurance in the future for products approved
for marketing. However, we cannot be sure that we will be able to acquire or
maintain insurance at a reasonable cost or in sufficient amounts to protect us
from liability risks. A successful product liability claim or a series of claims
brought against us could seriously harm our business. We intend to seek
inclusion of some of our 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 a
number of recommended childhood vaccines. We cannot be sure that this government
program will continue or that our proposed vaccines will be included in the
program.
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS AND AN ACCIDENT COULD BE COSTLY.
Our business activities involve the controlled use of hazardous materials,
chemicals, various radioactive substances and viruses. Although we believe that
our safety procedures for handling and disposing of these materials comply with
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, we could be held liable for any damages that result and any such
liability would seriously harm our business. In addition, we may incur
substantial costs to comply with environmental regulations if we develop
manufacturing capacity.
OUR STOCK PRICE IS VOLATILE AND YOU MAY LOSE ALL OR A PART OF YOUR INVESTMENT.
The market price of our common stock has fluctuated significantly to date.
The market price of the common stock may fluctuate significantly in response to
the following factors, most of which are beyond our control:
- variations in our quarterly operating results;
- changes in securities analysts' estimates of our financial performance;
- changes in market valuations of similar companies;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- additions or departures of key personnel; and
- fluctuations in stock market price and volume, which are particularly
common among securities of biopharmaceutical companies.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK
PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biopharmaceutical companies have
experienced greater than average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other
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<PAGE> 30
industries. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, and could seriously harm our business.
WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS WHICH COULD DISCOURAGE OR PREVENT A
TAKEOVER, EVEN IF AN ACQUISITION COULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so could be beneficial to our
stockholders. These provisions include:
- establishment of a classified board of directors requiring that not all
members of the board may be elected at one time;
- prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
- limitations on the ability of stockholders to call special meetings of
stockholders;
- prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
- establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.
In October 1997, our board of directors adopted a share purchase rights
plan, commonly referred to as a "poison pill." In addition, Section 203 of the
Delaware General Corporations Law and the terms of our stock option plans may
discourage, delay or prevent a change in control of our company.
EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
The names of our executive officers and senior management as of December
31, 1999 and information about them is presented below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
EXECUTIVE OFFICERS
C. Boyd Clarke............................... 51 Chief Executive Officer, President and Director
Fred Kurland................................. 50 Senior Vice President and Chief Financial
Officer
Carol A. Olson............................... 42 Senior Vice President, Commercial Development
SENIOR MANAGEMENT
Edward J. Arcuri, Ph.D. ..................... 49 Vice President, Manufacturing
Dianne L. Mastilock.......................... 48 Vice President, Human Resources
Paul M. Mendelman, M.D. ..................... 52 Vice President, Clinical Research
Eric J. Patzer, Ph.D. ....................... 50 Vice President, Development
Rayasam S. Prasad............................ 47 Vice President, Technical Affairs
</TABLE>
C. Boyd Clarke, has been our President and Chief Executive Officer since
December 1999. From 1998 until joining us, Mr. Clarke was Chief Executive
Officer and President of U.S. Bioscience, Inc., a biotechnology company. Mr.
Clarke served as President and Chief Operating Officer of U.S. Bioscience, Inc.
from 1996 to 1998. From 1977 to 1996, Mr. Clarke held a number of positions at
Merck & Co., Inc., including being the first president of Pasteur-Merieux MSD,
and most recently as Vice President of Merck Vaccines. Mr. Clarke has a B.S. in
Biochemistry, and an M.A. in History from the University of Calgary.
Fred Kurland, has been our Senior Vice President and Chief Financial
Officer since January 1998. Prior to joining us, Mr. Kurland was Vice President
and Chief Financial Officer of Protein Design Labs, Inc., a biotechnology
company, from 1996 to 1998. From 1995 to 1996, Mr. Kurland was Vice President
and Chief Financial Officer at Applied Immune Sciences, a biotechnology company,
and from 1987 to 1995, he held a
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<PAGE> 31
number of positions at Syntex Corporation, a pharmaceutical company, most
recently as Vice President and Controller. Mr. Kurland, a Certified Public
Accountant, holds a B.S. in Business and Economics from Lehigh University, and
an M.B.A. and a J.D. from the University of Chicago.
Carol A. Olson, has been our Senior Vice President, Commercial Development
since May 1998. Prior to joining us, Ms. Olson was the founder and managing
director of the Churchill Madison Group, a management consulting firm focused on
building new businesses in the medical, life sciences and high technology
industries. From 1984 to 1993, Ms. Olson worked for the Hewlett Packard Company.
Ms. Olson holds a B.A. in Economics with honors from Yale University and an
M.B.A. from Stanford University.
Edward J. Arcuri, Ph.D., has been our Vice President, Manufacturing since
July 1999. Dr. Arcuri joined us from North American Vaccine, Inc., or NAVA,
where he served as Vice President, Manufacturing Operations and Process
Development from January 1995 to July 1999. Prior to joining NAVA, Dr. Arcuri
served as Senior Director, Biological Manufacturing at Merck and Co. from 1991
to 1994. Dr. Arcuri holds a B.S. degree in Biology from the State University of
New York at Albany and a masters degree and Ph.D. in Biology from Rensselaer
Polytechnic Institute.
Dianne L. Mastilock, has been our Vice President, Human Resources since
February 2000, and has held various positions at Aviron since April 1999. Ms.
Mastilock joined us from Digital Link, where she served as Vice President, Human
Resources from August 1994 to April 1999. Prior to joining Digital Link, Ms.
Mastilock served as Director, Human Resources at Humphry Instruments from 1993
to 1994. Prior to that, Ms. Mastilock was Director, Human Resources at Vitaphore
Corp. from 1991 to 1993. Ms. Mastilock holds a B.S. degree in Recreation and
Leisure Studies from San Jose State University and a Masters degree in Human
Resources and Organizational Development from the University of San Francisco.
Paul M. Mendelman, M.D., has been our Vice President, Clinical Research
since 1996. Dr. Mendelman also is currently consulting professor in the
Department of Pediatrics at the Stanford University School of Medicine. Prior to
joining Aviron, Dr. Mendelman was Director, Clinical Research, Infectious
Diseases for Merck Research Laboratories, a pharmaceutical company, since 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 our Vice President, Development since 1996.
Prior to joining the company, Dr. Patzer 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.
Rayasam (Ray) S. Prasad, has been our Vice President, Technical Affairs
since September 1999. Mr. Prasad joined Aviron from Chiron Vaccines, the global
vaccines business unit of Chiron Corporation, a biotechnology company, where he
served as Head of Regulatory, Quality and Drug Safety from October 1994 to
September 1999. Mr. Prasad also served as Director of Quality Assurance for
Therapeutics and Vaccines at Chiron. Prior to joining Chiron, Mr. Prasad held
positions in quality assurance and biological manufacturing operations at
Genentech from 1986 to 1994, and Burroughs Wellcome Co. from 1981 to 1986. Mr.
Prasad holds a B.S. in Pharmacy from Andhra University, India.
ITEM 2. PROPERTIES
We lease approximately 52,800 square feet of office and laboratory space in
Mountain View, California. We have leased this facility through October 2005 and
have two options to extend the lease for successive five-year periods. In
addition, we are leasing space pursuant to our agreement with PCI. In February
1999, we entered into a lease agreement for approximately 69,000 square feet of
office, laboratory and manufacturing space in Santa Clara, California. We have
leased this facility through January 2019, with an option to renew for seven
years. In July 1999, we obtained an additional 20,000 square feet of laboratory
and office space in a building near our current Mountain View facility under a
sublease arrangement through June 2001. In October 1999, we leased an additional
52,000 square feet of space in buildings adjacent to its current
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<PAGE> 32
Mountain View facility that is covered by the same lease terms as that facility.
This facility is being subleased to another party through April 2001. We expect
that, after taking possession of this space at the end of the sublease, we will
be able to meet our facility needs for office and lab space through 2001. We
expect that we may need to obtain additional space for manufacturing, research
and development activities and offices in the future.
ITEM 3. LEGAL PROCEEDINGS
On June 30, 1999, the European Patent Office held oral proceedings in an
Opposition filed by American Cyanamid against Aviron's granted European Patent
No. 0490972 relating to methods and compositions of recombinant negative-strand
RNA viruses. At the oral proceedings, the Opposition Division of the European
Patent Office informed us of its intent to issue a written opinion which upholds
claims limited to influenza and denies claims directed to non-segmented
negative-strand RNA viruses. This decision will not affect our FluMist
cold-adapted influenza product. We intend to appeal the decision insofar as it
relates to the denied claims; the appeal will request the Technical Board of
Appeals to reverse the decision with respect to the denial of the claims
directed to non-segmented RNA viruses. There can be no assurance that we will be
successful in obtaining claims directed to non-segmented RNA viruses as a result
of the appeal. If we do not succeed in the appeal of the claims directed to
non-segmented RNA viruses it could negatively impact our ability to exclude
others from commercializing an RSV or PIV vaccine based on genetically
engineered candidates in Europe.
On July 8, 1999, a lawsuit entitled Joany Chou v. The University of
Chicago, ARCH Development Corp., Bernard Roizman and Aviron Company, was filed
in the U.S. District Court for the Northern District of Illinois, Eastern
Division, or Court, by an individual formerly associated with the University of
Chicago. On February 18, 2000, the Court granted Aviron's motion to dismiss,
thereby dismissing without prejudice all pending claims made by the plaintiff
against Aviron. We cannot be sure that we will prevail in the defense of this
lawsuit in the event that the plaintiff appeals the Court's ruling and is
successful in reinstating her claims or in bringing new claims against Aviron.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to vote of the Aviron's security holders during
the fourth quarter of the fiscal year ended December 31, 1999.
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PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCK MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"AVIR." We commenced trading on the Nasdaq National Market on November 5, 1996.
The following table presents the high and low per share sales prices of our
common stock as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
COMMON STOCK PRICE
------------------
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. $28.00 $22.88
Second Quarter............................................ 33.00 22.00
Third Quarter............................................. 33.00 11.50
Fourth Quarter............................................ 26.63 11.50
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. $26.75 $17.50
Second Quarter............................................ 28.75 17.13
Third Quarter............................................. 34.06 21.00
Fourth Quarter............................................ 28.75 14.81
YEAR ENDED DECEMBER 31, 2000
First Quarter (through March 7, 2000)..................... $54.38 $15.00
</TABLE>
On March 7, 2000, the last reported sales price of our common stock on the
Nasdaq National Market was $44.44 per share. As of March 1, 2000, there were 402
record holders of our common stock.
RECENT SALES OF UNREGISTERED SECURITIES
On December 16, 1999, we sold and issued to American Home Products
Corporation 86,136 shares of our common stock, for a purchase price of $15.48
per share, in a private placement. We are obligated to register the shares
within 180 days of the purchase date. No underwriter or placement agent was
involved in the transaction. The sale of the shares was made in reliance on
Section 4(2) of the Securities Act of 1933, as amended. The common stock
purchase agreement is attached as Exhibit 4.11 hereto.
On February 3, 2000, we sold and issued to American Home Products
Corporation 103,332 shares of our common stock, for a purchase price of $19.36
per share, in a private placement. We are obligated to register the shares
within 180 days of the purchase date. No underwriter or placement agent was
involved in the transaction. The sale of the shares was made in reliance on
Section 4(2) of the Securities Act of 1933, as amended. The common stock
purchase agreement is attached as Exhibit 4.13 hereto.
On March 6, 2000, we sold and issued to American Home Products Corporation
121,212 shares of our common stock, for a purchase price of $16.50 per share, in
a private placement, pursuant to a December 30, 1999 agreement. We are obligated
to register the shares within 180 days of the purchase date. No underwriter or
placement agent was involved in the transaction. The sale of the shares was made
in reliance on Section 4(2) of the Securities Act of 1933, as amended. The
common stock purchase agreement is attached as Exhibit 4.12 hereto.
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<PAGE> 34
ITEM 6. SELECTED FINANCIAL DATA
The following statement of operations and balance sheet data are derived
from our audited financial statements. Our audited financial statements at
December 31, 1998 and 1999 and for each of the three years in the period ended
December 31, 1999, are included elsewhere in this Form 10-K. You should read our
selected financial data set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and related notes thereto contained elsewhere in this
Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues..................... $ 1,707 $ 1,625 $ 1,477 $ 745 $ 22,232
Operating expenses:
Research and development......... 10,220 14,997 24,254 46,583 68,212
General, administrative and
marketing..................... 3,252 4,595 5,978 10,085 13,159
-------- -------- -------- -------- --------
Total operating
expenses............... 13,472 19,592 30,232 56,668 81,371
-------- -------- -------- -------- --------
Loss from operations............... (11,765) (17,967) (28,755) (55,923) (59,139)
Interest income, net of interest
expense.......................... 362 466 2,253 1,121 (2,731)
-------- -------- -------- -------- --------
Net loss........................... $(11,403) $(17,501) $(26,502) $(54,802) $(61,870)
======== ======== ======== ======== ========
Basic and diluted net loss per
share............................ $ (20.79) $ (7.27) $ (1.94) $ (3.49) $ (3.90)
======== ======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share....... 546 2,406 13,684 15,724 15,848
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments........... $ 17,819 $ 17,872 $ 62,524 $ 88,856 $ 52,316
Working capital.................... 16,775 16,411 54,580 79,369 42,215
Total assets....................... 19,878 21,592 85,325 120,985 91,694
Long-term debt, excluding current
portion.......................... -- -- -- 100,000 112,666
Deferred compensation.............. 180 1,099 588 237 96
Accumulated deficit................ (22,444) (39,935) (66,411) (121,254) (183,279)
Total stockholders' equity
(deficit)........................ 17,537 17,947 75,742 8,966 (39,619)
</TABLE>
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<PAGE> 35
ITEM 7. 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 that involve risks
and uncertainties. When used herein, the words "expects," "anticipates,"
"estimates," "intends," "plans" and similar expressions are intended to identify
such forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Business -- Business Risks" elsewhere
in this Form 10-K.
OVERVIEW
Since our inception in April 1992, we have devoted substantially all of our
resources to our research and development programs. To date, we have not
generated any revenues from the sale of products and do not expect to generate
any revenues from the sale of products until 2001 at the earliest. We have
incurred cumulative net losses of approximately $183.3 million as of December
31, 1999, and expect to incur substantial operating losses over at least the
next several years.
We expect our research and development expenditures, which include
pre-marketing manufacturing expenses, to increase substantially over the next
several years as we expand our research and development efforts, preclinical
testing and clinical trials with respect to certain of our programs, and
early-stage commercial manufacturing activities principally in regard to
FluMist. In addition, general, administrative and marketing expenses are
expected to continue to increase as we expand our operations and prepare for the
potential commercial launch of FluMist.
In February 2000, we amended our agreement with the University of Michigan
to accelerate the issuance of a warrant to the university. As a result of this
amendment, we granted the university a warrant to purchase 340,000 shares of our
common stock at an exercise price of $10.00 per share. As a result of this
amendment, we will record a one-time charge of approximately $10.9 million in
the first quarter of 2000. Upon the date of the first commercial sale of
FluMist, if 1.25 percent of the common stock then outstanding exceeds 340,000
shares, we will issue an additional warrant allowing the university to purchase
the excess shares on the same terms.
To motivate our employees and align their interests with our stockholders,
on February 9, 2000, we granted options for the purchase of a total of 1,264,900
shares of our common stock at an exercise price of $24.00, the closing price of
our stock on February 8, 2000. Approximately 27 percent of the options become
exercisable upon the acceptance by the FDA of our BLA submission and another 40
percent become exercisable when FluMist is approved for marketing in the United
States. These options will become exercisable in February 2005 unless these
events related to FluMist occur earlier. The final 33 percent of these options
will become exercisable when FluMist is approved for marketing in the United
States, but only if this event occurs in 2001. If FDA approval for FluMist is
not obtained by December 31, 2001, these options will be cancelled. If the final
33 percent of these options become exercisable, we anticipate incurring
compensation expense in the period in which they become exercisable in an amount
equal to the difference between the exercise price of the options and the then
current fair market value of our common stock.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues. We earned $22.2 million in revenues for the year ended December
31, 1999, compared to $0.7 million for the year ended December 31, 1998. The
1999 revenues are comprised primarily of amounts earned from Wyeth Lederle under
the FluMist collaboration agreement, which included a non-refundable initial
payment in the amount of $15.0 million, $6.0 million in expense reimbursement
from Wyeth Lederle for clinical and commercialization expenses, and revenues
from other contracts and research grants. The 1998 revenues were from a grant
payment from the NIH for research on our cytomegalovirus, or CMV, vaccine and
from payments received for services rendered to other biotechnology companies.
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<PAGE> 36
Operating Expenses. Research and development expenses increased to $68.2
million in the year ended December 31, 1999, from $46.6 million for the year
ended December 31, 1998. The increase was due primarily to an increase in
development activities, depreciation, documentation, validation, and other
expenses associated with the commercial scale-up of the manufacturing facilities
associated with FluMist. We expect these expenses to increase in the future as
development and manufacturing activities expand in preparation for potential
commercialization of FluMist.
General, administrative and marketing expenses increased to $13.2 million
in the year ended December 31, 1999, from $10.1 million for the year ended
December 31, 1998. This increase was due to additional staffing, legal and other
infrastructure costs necessary to support the development of FluMist and other
products. These expenses are expected to increase in the future in continued
support of these activities.
Net Interest Income (Expense). Net interest decreased to a net expense of
$2.7 million for the year ended December 31, 1999, as compared to net interest
income of $1.1 million for the year ended December 31, 1998. The decrease in net
interest is due to a combination of increased interest expense associated with
the issuance of our convertible subordinated notes on March 30, 1998 and
decreased interest income associated with a reduction in the average balances of
cash, cash equivalents, and investments as funds have been used to meet
operating expenses and capital requirements.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues. Total revenues for the year ended December 31, 1998 were $0.7
million, compared to $1.5 million for the year ended December 31, 1997. Revenues
for 1998 were comprised of payments under governmental research grants and
contract revenue for services provided for others by our animal research
facility. Revenues for 1997 were principally payments for research support and
milestones due to us under our license and development agreement with SmithKline
Beecham for our Epstein-Barr virus vaccine, or EBV.
Operating Expenses. Research and development costs rose to $46.6 million in
1998 from $24.3 million in 1997. These increases were primarily due to increases
in research and development activities and clinical trials of FluMist and
parainfluenza virus 3, or PIV-3, vaccine, preclinical testing associated with
other programs, and depreciation and other expenses associated with the
documentation, validation, and test production at manufacturing facilities.
General, administrative and marketing costs rose to $10.1 million in 1998
from $6.0 million in 1997. This increase was due to increase in staffing and
infrastructure costs and market research activities principally associated with
the proposed commercial launch of FluMist.
Net Interest Income. Our net interest income decreased to $1.1 million in
the year ended December 31, 1998, from $2.3 million in the year ended December
31, 1997. Net interest income is the result of increased interest income on our
increase in average cash, cash equivalent and investment balances, due to our
public offering of common stock in August 1997 and the private offering of
convertible subordinated notes in March 1998, offset by the increase in interest
expense related to these notes.
LIQUIDITY AND CAPITAL RESOURCES
We had cash, cash equivalents and marketable securities at December 31,
1999 of approximately $52.3 million. In order to preserve principal and maintain
liquidity, our funds are invested primarily in United States Treasury
obligations, highly rated corporate obligations and other liquid investments.
Through December 31, 1999, we raised approximately $263.0 million from
sales of equity and convertible debt securities, and debt financing. During
1999, we entered into two credit facilities that could provide a total of up to
$27.0 million of additional financing during 1999 and 2000, of which we had
drawn $15.4 million at December 31, 1999. The credit facilities are secured by
various assets and require the maintenance of a minimum balance of cash and
investments in the amount of $20.0 million. The loans must be repaid over
periods ranging from 48 to 72 months in amounts ranging from 1.9 percent to 2.6
percent of the original principal sum of each advance. One of the credit
facilities has a residual payment of 5.0 percent of the original
36
<PAGE> 37
principal amount that will be due at the 73rd month. No principal payments on
our $100.0 million unsecured convertible subordinated notes are required prior
to 2005.
RECENT FINANCINGS
On January 10, 2000, we received a commitment for up to $48.0 million in
equity financing from Acqua Wellington North America Equities Fund, Ltd., or
Acqua Wellington, in amounts of up to $4.0 million per month, at our discretion,
through January 2001. The commitment is reduced by $4.0 million each month
whether we draw on the commitment or not. We currently have $44.0 million of
these funds available. The price at which this equity is issued is based on the
volume weighted average market price for the 18 trading days ending two days
prior to sale. In addition to the above commitment, on March 6, 2000, we sold
253,935 shares of common stock to Acqua Wellington for total proceeds of $8.0
million or approximately $31.50 per share. This price was based on the weighted
average market price for the 18 trading days period ending on March 2, 2000.
On February 3, 2000, we sold 309,995 shares of common stock to Ridgeway
Investment Ltd., or Ridgeway, for total proceeds of $6.0 million or $19.36 per
share. This share price was based on the volume weighted average market price
for the 18 trading days ending two days prior to sale.
On February 3, 2000, we sold 103,332 shares of common stock to AHP for
total proceeds of $2.0 million at the same share price and terms as those for
the Ridgeway investment described above. On March 6, 2000, we sold 121,212
shares of common stock to AHP for total proceeds of $2.0 million, or $16.50 per
share, which were sold pursuant to a December 30, 1999 agreement with AHP.
Cash used in operations was $58.4 million, $49.5 million and $19.8 million
for 1999, 1998 and 1997 respectively. Net cash used in operating activities
increased primarily due to increased research and development expenditures. We
expect expenditures for research and development, clinical trials and marketing,
general and administrative expenses to continue to increase in 2000 as we
develop our products, expand our clinical trials and prepare for the potential
commercial launch of FluMist. Cash expended for capital additions and to repay
lease financing arrangements amounted to approximately $12.3 million, $14.4
million and $6.3 million for 1999, 1998 and 1997, respectively. Capital
expenditures decreased in 1999 primarily due to a decrease in the level of
expenditures for our facilities and equipment at Aviron PA and those at Medeva,
which is partially offset by increases in expenditures for our Santa Clara and
Mountain View facilities. Capital expenditures are expected to decrease during
the year 2000 but are likely to increase in the future if we decide to expand
our product development and manufacturing capabilities. Our FluMist
manufacturing agreement with Medeva requires annual minimum payments which will
total 25.0 million British Pounds Sterling over the period from July 1999 to
December 2005.
We anticipate that our existing cash, cash equivalents and marketable
securities, revenues from existing collaborations, and committed financing
arrangements will enable us to maintain our current and planned operations until
2001. Our future cash requirements will depend on numerous factors, including
continued scientific progress in the research and development of our technology
and vaccine programs; the size and complexity of these programs; our ability to
establish and maintain collaborative arrangements; progress with preclinical
testing and clinical trials; the time and costs involved in obtaining regulatory
approvals; the cost involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims; the cost of constructing additional manufacturing
facilities, should they be deemed necessary; and product commercialization
activities.
INCOME TAXES
At December 31, 1999, we had federal and state net operating loss
carryforwards of approximately $178.4 million and $10.2 million, respectively.
We also had federal and state research and other tax credit carryforwards of
approximately $3.9 million and $2.5 million respectively. The federal net
operating loss and other tax credit carryforwards will expire at various dates
beginning in the year 2007 through 2019, if not utilized. The state net
operating losses will expire at various dates beginning in 2000 through 2004, if
not utilized. Utilization of the net operating losses and credits may be subject
to a substantial annual limitation
37
<PAGE> 38
due to the "ownership change" provisions of the Internal Revenue Code of 1986.
See Note 12 of notes to financial statements for additional information on
income taxes.
IMPACT OF "YEAR 2000"
We are not aware of any material problems resulting from Year 2000 issues,
either with our internal systems or the products and services of third parties.
We expensed approximately $50,000 during 1999 in connection with remediating our
systems. We will continue to monitor our mission critical computer applications
and those of our suppliers and vendors throughout the year 2000 to ensure that
any Year 2000 matters that may arise are addressed promptly.
RECENT ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements", or
SAB 101. Among other things, SAB 101 discusses the SEC staff's view on
accounting for non-refundable up-front fees received in connection with
collaboration agreements. We are currently evaluating the impact of SAB 101 on
the accounting for up-front license fees received from Wyeth Lederle. Should we
determine that a change in its accounting policy is necessary, such a change
will be made effective January 1, 2000 and would result in a charge to results
of operations for the cumulative effect of the change. This amount, if
recognized, would be recorded as deferred revenue and recognized as revenue in
future periods. Prior financial statements would not be restated.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including changes to interest rates and
foreign currency exchange rates.
Interest Rates. Our investment and interest income is sensitive to changes
in the general level of interest rates, primarily U.S. interest rates. In this
regard, changes in U.S. interest rates affect the interest earned on our cash
equivalents and investments. To mitigate the impact of fluctuations in U.S.
interest rates, we place our investments that meet high credit standards, as
specified in our investment policy guidelines; the policy also limits the amount
of credit exposure to any one issue, issuer, or type of investment and does not
permit derivative financial instruments in its investment portfolio. In
addition, the average maturity of portfolio is less than one year. As a result,
we do not expect any material loss with respect to our investment portfolio.
Foreign Currency Exchange Rates. We pay for the costs of manufacturing and
development activities, equipment, and facilities modifications at Medeva, which
is located in the United Kingdom in British Pounds Sterling. As a result, Our
financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in the United Kingdom. We
are exposed to changes in exchange rates in the United Kingdom. When the U.S.
dollar strengthens against the British Pounds Sterling, the U.S. dollar value of
British Pounds Sterling-based expenses decreases; when the U.S. dollar weakens,
the U.S. dollar value of British Pounds Sterling-based expenses increases.
Accordingly, changes in exchange rates, and in particular a weakening of the
U.S. dollar, may adversely affect our financial position as expressed in U.S.
dollars. We currently do not hedge our obligations in British Pounds Sterling.
Cash, Cash Equivalents and Investments. At December 31, 1999 we had cash
and cash equivalents of $28.1 million, with a weighted average interest rate of
5.57 percent per year, and short-term investments with a basis of $24.2 million
and a fair value of $24.0 million, with a weighted average interest rate of 5.46
percent.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and notes thereto appear on pages 42 through 59 in
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
38
<PAGE> 39
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in our definitive
Proxy Statement with respect our Annual Meeting of Stockholders, to be held on
June 1, 2000, under the captions "Election of Directors -- Nominees," and
"Security Ownership of Certain Beneficial Owners and Management -- Compliance
with the Reporting Requirement of Section 16(a)," and is incorporated by
reference. The information relating to our executive officers of is contained in
Part I, Item 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in our definitive
Proxy Statement with respect our Annual Meeting of Stockholders, to be held June
1, 2000, under the caption "Executive Compensation," and is hereby incorporated
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the our
definitive Proxy Statement with respect to our Annual Meeting of Stockholders,
to be held June 1, 2000, under the captain "Security Ownership of Certain
Beneficial Owners and Management," and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in our definitive
Proxy Statement with respect to our Annual Meeting of Stockholders, to be held
June 1, 2000, under the caption "Certain Transactions," and is hereby
incorporated by reference.
39
<PAGE> 40
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) INDEX TO FINANCIAL STATEMENTS
The Financial Statements required by this item are submitted in a separate
section beginning on page 50 of this report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... 42
Balance Sheets at December 31, 1998 and 1999................ 43
Statements of Operations for each of the three years in the
period ended December 31, 1999............................ 44
Statement of Stockholders' Equity for the three years in the
period ended December 31, 1999............................ 45
Statements of Cash Flows for each of the three years in the
period ended December 31, 1999............................ 46
Notes to Financial Statements............................... 47
</TABLE>
(2) INDEX TO FINANCIAL STATEMENTS SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or in the notes thereto.
(3) EXHIBITS
See Exhibit Index.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 8, 2000.
AVIRON
By: /s/ C. BOYD CLARKE
------------------------------------
C. Boyd Clarke
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. Boyd Clarke and Fred Kurland, or
either of them, his or her attorney-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report, and to file the same, with exhibits thereto and other documents
in connections therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ C. BOYD CLARKE President and Chief Executive Officer March 8, 2000
- -------------------------------------- (Principal Executive Officer)
C. Boyd Clarke
/s/ FRED KURLAND Senior Vice President and Chief March 8, 2000
- -------------------------------------- Financial Officer
Fred Kurland (Principal Financial and Accounting
Officer)
/s/ J. LEIGHTON READ, M.D. Chairman of the Board March 8, 2000
- --------------------------------------
J. Leighton Read, M.D.
/s/ REID W. DENNIS Director March 8, 2000
- --------------------------------------
Reid W. Dennis
/s/ DENNIS M. FENTON, PH.D. Director March 8, 2000
- --------------------------------------
Dennis M. Fenton, Ph.D.
/s/ WAYNE T. HOCKMEYER, PH.D. Director March 8, 2000
- --------------------------------------
Wayne T. Hockmeyer, Ph.D.
/s/ PAUL H. KLINGENSTEIN Director March 8, 2000
- --------------------------------------
Paul H. Klingenstein
/s/ BERNARD ROIZMAN, SC.D. Director March 8, 2000
- --------------------------------------
Bernard Roizman, Sc.D.
/s/ JANE E. SHAW, PH.D. Director March 8, 2000
- --------------------------------------
Jane E. Shaw, Ph.D.
</TABLE>
41
<PAGE> 42
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Aviron
We have audited the accompanying balance sheets of Aviron as of December
31, 1999 and 1998, and the related statements of operations, stockholders'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Palo Alto, California
February 17, 2000
42
<PAGE> 43
AVIRON
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 28,164 $ 28,081
Short-term investments.................................... 60,692 24,235
Accounts receivable....................................... -- 3,241
Inventory................................................. -- 2,082
Prepaid expenses and other current assets................. 1,303 1,009
--------- ---------
Total current assets.............................. 90,159 58,648
Long-term investments..................................... 6,002 --
Property and equipment, net............................... 18,521 25,635
Deposits and other assets................................. 6,303 7,411
--------- ---------
TOTAL ASSETS................................................ $ 120,985 $ 91,694
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 2,792 $ 3,038
Accrued compensation...................................... 804 1,739
Accrued clinical trial costs.............................. 757 846
Accrued expenses and other liabilities.................... 6,029 8,029
Current portion of capital lease obligations.............. 408 101
Current portion of long-term debt......................... -- 2,680
--------- ---------
Total current liabilities......................... 10,790 16,433
Deferred rent............................................. 1,116 2,214
Capital lease obligations, net of current portion......... 113 9
Long-term debt, net of current portion.................... 100,000 112,657
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.001 par value; 5,000,000 shares
authorized; issuable in series; none outstanding at
December 31, 1998 and 1999............................. -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized; 15,723,343 and 16,669,018 shares
outstanding at December 31, 1998 and 1999,
respectively........................................... 16 17
Additional paid-in capital................................ 130,524 143,822
Notes receivable from stockholders........................ (83) (83)
Deferred compensation..................................... (237) (96)
Accumulated deficit....................................... (121,254) (183,279)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)........................ 8,966 (39,619)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $ 120,985 $ 91,694
========= =========
</TABLE>
See accompanying notes.
43
<PAGE> 44
AVIRON
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Contract revenue and grants.............................. $ 1,477 $ 745 $ 22,232
-------- -------- --------
OPERATING EXPENSES:
Research and development................................. 24,254 46,583 68,212
General, administrative and marketing.................... 5,978 10,085 13,159
-------- -------- --------
TOTAL OPERATING EXPENSES................................... 30,232 56,668 81,371
-------- -------- --------
LOSS FROM OPERATIONS....................................... (28,755) (55,923) (59,139)
OTHER INCOME (EXPENSE):
Interest income.......................................... 2,433 6,003 3,633
Interest expense......................................... (180) (4,882) (6,364)
-------- -------- --------
TOTAL OTHER INCOME (EXPENSE), NET.......................... 2,253 1,121 (2,731)
-------- -------- --------
NET LOSS................................................... $(26,502) $(54,802) $(61,870)
======== ======== ========
BASIC AND DILUTED NET LOSS PER SHARE....................... $ (1.94) $ (3.49) $ (3.90)
======== ======== ========
SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
SHARE.................................................... 13,684 15,724 15,848
======== ======== ========
</TABLE>
See accompanying notes.
44
<PAGE> 45
AVIRON
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN NOTES DEFERRED ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL RECEIVABLE COMPENSATION DEFICIT EQUITY (DEFICIT)
------ ---------- ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996.............. $11 $ 59,127 $(157) $(1,099) $ (39,935) $ 17,947
Issuance of 1,714,286 shares of common
stock in private placement, net of
offering costs of $59................... 2 14,939 -- -- -- 14,941
Issuance of 2,690,000 shares of common
stock in secondary public offering net
of offering costs of $4,766............. 3 67,979 -- -- -- 67,982
Issuance of 226,157 shares of common stock
upon exercise of stock options, warrants
and purchase of shares through employee
stock purchase plan, net of
repurchases............................. -- 477 -- -- -- 477
Deferred compensation recorded relating to
grant of certain stock options.......... -- 218 -- (218) -- --
Issuance of warrants in lieu of a cash
payment for services rendered........... -- 100 -- -- -- 100
Amortization of deferred compensation..... -- -- -- 729 -- 729
Payment of notes receivable............... -- -- 42 -- -- 42
Change in net unrealized loss on
available-for-sale investments.......... -- -- -- -- 26 26
Net loss.................................. -- -- -- -- (26,502) (26,502)
--- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1997.............. 16 142,840 (115) (588) (66,411) 75,742
Issuance of 181,578 shares of common stock
upon exercise of stock options, warrants
and purchase of shares through employee
stock purchase plan, net of
repurchase.............................. -- 1,019 -- -- -- 1,019
Deferred compensation recorded relating to
grant of certain stock options.......... -- 14 -- (14) -- --
Amortization of deferred compensation..... -- -- -- 365 -- 365
Repurchase of 540,711 shares of common
stock................................... -- (13,349) -- -- -- (13,349)
Payment of notes receivable............... -- -- 32 -- -- 32
Change in net unrealized loss on
available-for-sale investments.......... -- -- -- -- (41) (41)
Net loss.................................. -- -- -- -- (54,802) (54,802)
--- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1998.............. 16 130,524 (83) (237) (121,254) 8,966
Issuance of 708,180 shares of common stock
in private placements, net of offering
costs of $73............................ 1 11,259 -- -- -- 11,260
Issuance of 237,495 shares of common stock
upon exercise of stock options and
warrants, and purchase of shares through
employee stock purchase plan............ -- 1,691 -- -- -- 1,691
Stock compensation for options granted to
consultants............................. -- 348 -- -- -- 348
Amortization of deferred compensation..... -- -- -- 141 -- 141
Change in net unrealized loss on
available-for-sale investments.......... -- -- -- -- (155) (155)
Net loss.................................. -- -- -- -- (61,870) (61,870)
--- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1999.............. $17 $143,822 $ (83) $ (96) $(183,279) $(39,619)
=== ======== ===== ======= ========= ========
</TABLE>
See accompanying notes
45
<PAGE> 46
AVIRON
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(26,502) $ (54,802) $(61,870)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 657 3,019 4,800
Amortization of convertible debt offering costs......... -- 423 570
Amortization of deferred compensation................... 729 365 141
Stock compensation for options granted to consultants... -- -- 348
Changes in assets and liabilities:
Accounts receivable.................................. 471 29 (3,241)
Inventory............................................ -- -- (2,082)
Prepaid expenses and other current assets............ (188) (302) 294
Deposits and other assets............................ (1,514) (1,179) (1,678)
Accounts payable..................................... 2,963 (844) 246
Accrued expenses and other liabilities............... 3,542 3,757 3,024
Deferred rent........................................ -- -- 1,098
-------- --------- --------
Net cash used in operating activities..................... (19,842) (49,534) (58,350)
Cash flows from investing activities:
Purchases of investments................................ (74,028) (105,990) (43,980)
Maturities of investments............................... 19,888 99,127 86,284
Expenditures for property and equipment................. (5,767) (13,958) (11,914)
-------- --------- --------
Net cash provided by (used in) investing activities....... (59,907) (20,821) 30,390
Cash flow from financing activities:
Principal payments on capital lease and other
obligations.......................................... (578) (445) (411)
Proceeds from issuance of:
Convertible subordinated debt........................ -- 96,055 --
Debt financing....................................... -- -- 15,337
Common stock......................................... 83,400 1,019 12,951
Repurchase of common stock.............................. -- (13,349) --
-------- --------- --------
Net cash provided by financing activities................. 82,822 83,280 27,877
Net increase (decrease) in cash and cash equivalents...... 3,073 12,925 (83)
Cash and cash equivalents, at beginning of year........... 12,166 15,239 28,164
-------- --------- --------
Cash and cash equivalents, at end of year................. $ 15,239 $ 28,164 $ 28,081
======== ========= ========
Supplemental schedule of non-cash financing and investing
activities:
Equipment acquired under lease line of credit........... 153 -- --
Deferred compensation related to grant of certain stock
options, less cancellations.......................... 218 14 --
Warrant issued in lieu of payment of legal fees......... 100 -- --
Supplemental disclosures of cash flow information:
Cash paid for interest.................................. 179 2,999 6,364
</TABLE>
See accompanying notes.
46
<PAGE> 47
AVIRON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Aviron (the "Company") was incorporated in the State of California in April
1992 and was reincorporated in the State of Delaware in November 1996. The
Company is a biopharmaceutical company focused on the prevention of disease
through innovative vaccine technology. The Company is currently focusing its
product development and commercialization efforts on its lead product candidate,
FLUMIST(TM), an investigational live virus vaccine for influenza delivered as a
nasal spray. The Company expects to submit an application for regulatory
approval to market FLUMIST(TM) in 2000.
The Company anticipates working on a number of other long-term development
projects which involve experimental and unproven technology. The projects may
require many years and substantial expenditures to complete, and 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.
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.
Concentration of Credit Risk
Cash, cash equivalents and investments are financial instruments that
potentially subject the Company to concentrations of credit risk. The Company
primarily invests in money market funds, U.S. government obligations, notes of
U.S. corporations, certificates of deposit, commercial paper and foreign
government securities. By policy, the Company limits the amount of credit
exposure to any one entity or financial institution and to any one type of
investment other than securities issued by the U.S. government.
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
approximately $4,295,000 and $26,654,000 in money market funds at December 31,
1998 and 1999, respectively.
Investments
The Company's entire 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, if any, 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.
Accounts Receivable
Accounts receivable is comprised principally of amounts receivable in
connection with reimbursement of certain expenses associated with the
development and commercialization of FLUMIST(TM), the Company's live
cold-adapted virus vaccine (see Note 3).
Inventory
Inventory is comprised principally of sprayer components that will be used
in the manufacture of commercial batches of FLUMIST(TM) for sale. Inventory is
stated at the lower of cost (FIFO) or market value.
47
<PAGE> 48
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
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. Property and equipment at December 31,
1999 includes approximately $280,000 of construction in progress. No
depreciation has been charged for these assets during 1999 because such assets
have not been placed in service. Leasehold improvements are amortized on a
straight-line basis over the shorter of their useful lives or the term of the
lease.
As of January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1 requires companies to capitalize certain
qualifying computer software costs, which are incurred during the application
development stage, and amortize them over the software's estimated useful life.
The adoption of SOP 98-1 did not have a significant effect on the results of
operations or the financial position of the Company.
Revenue Recognition
Collaborative research revenue and grant revenue are earned 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. Non-refundable license fees are recognized as revenue when all
obligations related to the fees have been met. Milestone payments are recognized
as revenue in the period earned. Contract revenue for services provided by the
Company's animal research facility is earned when services are provided per the
contract.
Stock Compensation
The Company accounts for stock options granted to employees using the
intrinsic-value method and thus recognizes no compensation expense for options
granted with exercise prices equal to the fair value of the Company's common
stock on the date of the grant.
Net Loss per Share
The Company computes net loss per share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS
128 requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more dilutive, for all periods presented. In
accordance with SFAS 128, basic net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the period.
Diluted net loss per share has not been presented separately as, given the
Company's net loss position, the result would be anti-dilutive.
Had the Company been in a net income position, diluted earnings per share
would have been presented separately and would have included the shares used in
the computation of basic net loss per share as well as the effect of an
additional 427,613, 3,159,451, and 3,485,233 shares for the years ended December
31, 1997, 1998 and 1999, respectively, related to the exercise of outstanding
options and warrants and the conversion of the convertible subordinated notes
into common stock, which shares are not included above. The number of additional
shares has been determined using the treasury stock method for options and
warrants and the as if converted method for convertible debt.
Reporting Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 establishes rules for reporting and display of comprehensive income (loss)
and its components. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale investments, which are reported in the
stockholders' equity, to be included in the comprehensive income (loss). As such
items have not been material, separate presentation has not been
48
<PAGE> 49
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
included in the Statement of Stockholders' Equity. However, the amounts of the
change in net unrealized gain (loss) in available-for-sale investments for the
years ended December 31, 1997, 1998, and 1999 approximate $26,000, ($41,000),
and ($155,000), respectively. There was no impact from the adoption on the
Company's financial position or results of operations.
Segment Reporting
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. As the Company has only one segment and
operates solely within the United States, the adoption of SFAS 131 had no impact
on the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which is required to be adopted for the year ending December 31, 2001.
Management does not anticipate that the adoption of SFAS 133 will have a
significant effect on the results of operations or the financial position of the
Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). Among other things, SAB 101 discusses the SEC staff's view on accounting
for non-refundable up-front fees received in connection with collaboration
agreements. The Company is currently evaluating the impact of SAB 101 on the
accounting for up-front license fees received from Wyeth Lederle Vaccines, a
business unit of Wyeth-Ayerst Laboratories, the pharmaceutical division of
American Home Products Corporation (see note 3). Should the Company determine
that a change in its accounting policy is necessary, such a change will be made
effective January 1, 2000 and would result in a charge to results of operations
for the cumulative effect of the change. This amount, if recognized, would be
recorded as deferred revenue and recognized as revenue in future periods. Prior
financial statements would not be restated.
2. LICENSE AGREEMENTS
ARCH Development Corporation
In July 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 1999. 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.
During 1997, ARCH asserted an interpretation of the financial terms of the
agreement with the Company relating to the license for Epstein-Barr virus
technology. The assertion would require the Company to pay ARCH one-half of any
future or past payments (including sublicense fees and milestone payments)
received by the Company under its agreement with SmithKline Beecham (see Note
5). As of December 31, 1999, the Company had received $3,352,000 from SmithKline
Beecham. The Company disputes ARCH's interpretation of the financial terms of
the agreement. No assurance can be given, however, that the Company's
interpretation will prevail. Failure of the Company to prevail could have a
material adverse effect on the Company's results of operations.
49
<PAGE> 50
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
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 approximately
$8,750, and warrants to purchase, in the aggregate, 225,000 shares of Series A
preferred stock. Upon the closing of the Company's initial public offering,
warrants previously exercisable for 45,000 shares of Series A preferred stock
became exercisable for 9,000 shares of common stock at $4.50 per share; warrants
covering an additional 148,750 shares of Series A preferred stock became
exercisable for 29,750 shares of common stock at $10.00 per share; and the
remaining warrants were canceled. These warrants expire on various dates through
2001. As of December 31, 1999 warrants covering 6,234 shares at $4.50 a share,
and 1,148 shares at $10.00 per share have been exercised. 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 which gives the Company a worldwide license to the
University of Michigan's inventions and discoveries 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 shares of Series B preferred stock (which converted into
264,746 shares of common stock upon the closing of the Company's initial public
offering), resulting in a charge to research and development expense of
approximately $1,588,000. Upon commercialization of the vaccine product, the
license agreement provides that the Company will pay royalties based on net
revenues and will issue a warrant to purchase 1.25% of the Company's then total
outstanding common stock at an exercise price equal to $10.00 per share. The
warrant will be exercisable for five years after its issuance date.
On February 16, 2000, the Company amended its agreement with the University
of Michigan to accelerate the issuance of a warrant to the university. As a
result of this amendment, the Company granted the University of Michigan a
warrant to purchase 340,000 shares of Aviron common stock at an exercise price
of $10.00 per share. As a result of this amendment, the Company will record a
one-time charge of approximately $10.9 million in the first quarter of 2000.
Upon the date of the first commercial sale of FLUMIST(TM), if 1.25% of the
common stock then outstanding exceeds 340,000 shares, the Company will issue a
separate warrant allowing the University of Michigan to purchase the excess
shares on the same terms.
As of December 31, 1999, the Company had funded $1,050,000 of research at
the University of Michigan and has no further obligations to fund research.
NeuroVir Research, Inc.
In July 1996, the Company licensed certain of its patent rights covering or
relating to the use of HSV-2 for treatment of cancer and for gene therapy, but
excluding use in vaccines, to NeuroVir Research Inc. ("NeuroVir"), a private
Delaware corporation. In exchange, the Company received 458,334 shares of common
stock, 3,208,332 shares of preferred stock and a warrant to purchase 1,000,000
shares of common stock. At December 31, 1999, the Company owned approximately
12% of NeuroVir's outstanding capital stock. The Company's investment has a
carrying value of zero and Aviron is under no obligation to provide any funding
to NeuroVir. As no market exists for NeuroVir's capital stock, it is not
practicable to determine the fair value of shares held by the Company.
50
<PAGE> 51
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
3. COLLABORATION AGREEMENT
On January 12, 1999, the Company announced a worldwide collaboration for
the marketing of FLUMIST(TM) with Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation ("Wyeth"). This agreement became effective in March 1999.
Under the agreement, Aviron granted Wyeth exclusive worldwide rights to
market FLUMIST(TM). Wyeth and Aviron will co-promote FLUMIST(TM) in the United
States, while Wyeth has the exclusive right to market the product outside the
United States. In each case, Wyeth holds the marketing rights for up to eleven
years. The collaboration excludes Korea, Australia, New Zealand and certain
South Pacific countries. The companies will collaborate on the regulatory,
clinical, and marketing programs for the product.
As consideration under the agreement, the Company received a non-refundable
cash payment of $15.0 million for the license that was recognized as revenue
during the quarter ended March 31, 1999. During the period from March 15 through
December 31, 1999, the Company recorded $6 million of revenue in expense
reimbursements from Wyeth for a portion of its clinical development and
commercialization costs.
In addition, the Company will receive $15.5 million upon acceptance by the
U.S. Food and Drug Administration ("FDA") of a BLA filing and $20.0 million upon
FDA marketing approval for FLUMIST(TM). The Company can also earn an additional
$20.0 million in milestone payments for expansions in labelling claims and
advisory body recommendations. In addition, the Company is entitled to receive a
$10.0 million payment for submission of a license application in Europe, a $27.5
million payment for the approval of a liquid formulation of FLUMIST(TM), and up
to $50.0 million upon licensure in international regions. Compensation for
achieving additional development and regulatory milestones is included in the
agreement terms. The granting of certain rights under the license would trigger
additional payments in excess of $140.0 million to the Company. Consideration
for the license also includes a commitment to provide up to $40.0 million in
future financing to the Company from Wyeth, a portion of which is contingent
upon regulatory approval of the product, with the remaining amount to come from
participation in the Company's future securities offerings. The potential value
for the license fees, milestones and financing support that the Company could
receive under the collaboration exceeds $400.0 million. In addition to the
payments mentioned above, if FLUMIST(TM) is approved for marketing the Company
anticipates that it will earn product revenues from Wyeth, in the form of
product transfer payments and royalties, which increase at higher sales levels.
The Company will incur expenses to supply and co-promote the product.
4. MANUFACTURING AGREEMENT
On July 2, 1999 the Company and Celltech Medeva ("Medeva"), the
international marketing arm of Celltech Group, plc, extended their collaboration
covering the manufacture of key components of FLUMIST(TM) through December 2005.
The Company paid Medeva $1.0 million as an up-front fee upon execution of the
agreement and an additional $1.0 million of such fees has been accrued as of
December 31, 1999. These amounts were charged to expense.
Under the terms of the new agreement, the Company will make specified
payments to Medeva for reaching certain technological, regulatory, and
employment milestones, supplying the vaccine components of FLUMIST(TM), and
providing the use of facilities. The Company is required to make annual minimum
payments to Medeva which will total 25 million British Pounds Sterling over the
term of the agreement. These minimum payments include all of the milestone,
supply, and facility use payments described above.
In addition, the Company could make payments to Medeva totaling up to $20.0
million over the term of the agreement based on net sales of FLUMIST(TM).
The Company recorded expense associated with the Medeva contracts during
1997, 1998, and 1999 in the amounts of $1.1 million, $6.6 million, and $7.0
million, respectively.
51
<PAGE> 52
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. DEVELOPMENT AGREEMENTS
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. Under the
terms of this 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 Korea. The Company retained U.S. co-marketing rights to a monovalent
EBV vaccine formulation which will be supplied by SmithKline Beecham. The
Company is entitled to royalties from SmithKline Beecham based on net sales of
the non-live EBV vaccine. No assurance can be given, however, that the Company
will receive any future payments from SmithKline Beecham or that SmithKline
Beecham will not terminate this agreement.
The Company recorded revenue under this agreement during 1997 of
$1,477,000. No revenue was recorded under this agreement in 1998 or 1999.
Sang-A Pharm. Co., Ltd.
In May 1995, the Company entered into a Development and License Agreement
with Sang-A Pharm. Co., Ltd. ("Sang-A"). The Company granted to Sang-A certain
exclusive clinical development and marketing rights in Korea for specified
products developed by the Company, including vaccines for influenza cold-adapted
and recombinant EBV, CMV, HSV-2 and RSV on meeting certain conditions. However,
the Company is under no obligation to develop any product. Sang-A also will make
payments to the Company upon Sang-A'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 South and North Korea. No assurance can be given, however, that the
Company will receive any future payments from Sang-A or that Sang-A will not
terminate its agreement with the Company. In January 1997, Sang-A declared
bankruptcy and continues to operate in receivership. The Company is unable to
predict what, if any, long-term effect the bankruptcy will have on Sang-A and on
the Company's agreement with Sang-A.
6. INVESTMENTS
Investments consist of the following (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
As of December 31, 1998:
Certificates of deposit................. $ 5,663 $ 30 $ -- $ 5,693
Corporate commercial paper.............. 28,415 -- (12) 28,403
U.S. corporate bonds.................... 36,688 125 (175) 36,638
U.S. government agency obligations...... 11,960 21 (8) 11,973
Municipal bonds......................... 2,153 1 -- 2,154
Foreign government securities........... 5,702 4 (4) 5,702
------- ---- ----- -------
$90,581 $181 $(199) $90,563
======= ==== ===== =======
As of December 31, 1999:
Corporate commercial paper.............. $ 4,386 $ 25 $ -- $ 4,411
U.S. corporate notes.................... 9,251 -- (139) 9,112
U.S. corporate bonds.................... 9,385 3 (40) 9,348
U.S. government agency obligations...... 1,004 -- (13) 991
Municipal bonds......................... 1,810 -- (9) 1,801
------- ---- ----- -------
$25,836 $ 28 $(201) $25,663
======= ==== ===== =======
</TABLE>
52
<PAGE> 53
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Included in the above table are U.S. corporate bonds and commercial paper
and U.S. government agency obligations with fair values of $23,869,000 and
$1,428,000 at December 31, 1998 and 1999, respectively, which have been
classified as cash equivalents in the accompanying balance sheet. All securities
had maturities of one year or less except for securities with a market value of
$6,002,000 at December 31, 1998, which had maturities no greater than two years.
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Manufacturing equipment..................................... $ 4,288 $ 5,978
Laboratory equipment........................................ 2,790 5,992
Computer equipment.......................................... 1,488 3,113
Office equipment............................................ 776 1,070
Leasehold improvements...................................... 12,773 18,930
Construction in progress.................................... 1,334 280
------- -------
23,449 35,363
Less accumulated depreciation and amortization.............. (4,928) (9,728)
------- -------
$18,521 $25,635
======= =======
</TABLE>
Included in property and equipment at December 31, 1998 and 1999, are
assets with costs of $2,874,000 and accumulated depreciation of approximately
$2,253,800 and $2,848,000, respectively, which have been financed pursuant to
the lease line of credit. In addition, $5,445,000 of property and equipment,
with accumulated depreciation of $389,000, has been pledged as collateral under
the terms of a credit facility entered into during 1999 (see Note 10).
8. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------ ------
<S> <C> <C>
Accrued interest............................................ $1,445 $1,438
Accrued manufacturing....................................... 3,219 3,394
Accrued legal expenses...................................... 477 965
Accrued testing services.................................... 433 775
Accrued expense other....................................... 455 1,457
------ ------
Total............................................. $6,029 $8,029
====== ======
</TABLE>
9. LEASE ARRANGEMENTS
The Company leases certain office, equipment, warehouse and manufacturing
facilities under capital and operating lease agreements. Several leases include
options for renewal or purchase, and contain clauses for payment of operating
costs, including real estate taxes, utilities, insurance and maintenance. Lease
terms range from 2000 to 2019, with options to renew at varying terms. The
Company also sub-leases a portion of their leased facilities.
Rent expense for all operating leases charged against earnings for the
years ended December 31, 1997, 1998 and 1999, net of sub-lease income was
approximately $1,831,000, $3,787,000 and $6,042,000, respectively.
53
<PAGE> 54
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
At December 31, 1999, the Company's aggregate commitments under such
arrangements, net of sub-lease income, are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING
OBLIGATIONS LEASE
------------- ---------
<S> <C> <C>
Years ending December 31, 2000.............................. $ 107 $ 5,168
2001...................................................... 10 6,728
2002...................................................... -- 7,134
2003...................................................... -- 8,377
2004...................................................... -- 7,758
Thereafter................................................ -- 33,892
----- -------
117 $69,057
=======
Less amounts representing interest.......................... (7)
-----
110
Less current portion........................................ (101)
-----
$ 9
=====
</TABLE>
In October 1997, the Company entered into a 7 year operating lease
agreement for a facility to be used in the manufacturing, packaging and storage
of its products. The facility is owned by a contract manufacturer who will
provide services to the Company. The lease includes an option allowing the
Company to extend the lease beyond the initial term. The agreement requires the
Company to pay certain operating costs including a portion of utilities and
insurance. The agreement provides for the deferral of 40% of the base monthly
rental for a 2-year period. This amount has been accounted for as deferred rent
in the accompanying balance sheet. The Company is required to deposit and
maintain the deferred amount in an escrow account. As of December 31, 1998 and
1999 deferred rent amounted to approximately $1,116,000 and $2,214,000,
respectively. The agreement also requires the lessor to provide a $1,000,000
improvement allowance for construction and improvements to the facility. The
Company will repay $500,000 of the improvement allowance to the lessor through
an additional charge per unit of production. The $500,000 is presently deposited
in an escrow account.
10. LONG-TERM DEBT
Convertible Debt
On March 30, 1998, the Company sold unsecured convertible subordinated
notes in the aggregate principal amount of $100,000,000 at an interest rate of
5 3/4% due 2005 (the "Notes"). Net proceeds to the Company, after deducting
legal and other expenses, were approximately $96,055,000.
The Notes are convertible into common stock at any time after 90 days
following the original issuance through maturity, unless previously redeemed, at
a conversion price of $30.904 per share (equivalent to a conversion rate of
approximately 32.3583 shares per $1,000 principal amount of Notes), which is
subject to adjustment in certain events. Interest on the Notes is paid
semi-annually on April 1 and October 1. The Notes can be redeemed by the Company
on or after April 6, 2001.
The fair market value of the Notes as of December 31, 1998 and 1999
approximated $100,250,000 and $70,500,000, respectively, based on quoted market
prices.
Credit Facilities
During 1999, the Company entered into two new credit facilities that could
provide a total of up to $27 million of additional financing during 1999 and
2000. The credit facilities are secured by various assets of the Company and
require the maintenance of a minimum balance of cash and investments in the
amount of $20 million. On December 29, 1999, $15.4 million was drawn under these
credit facilities Once drawn, the
54
<PAGE> 55
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
loans will be repaid over varying terms ranging from 48 to 72 months in monthly
payments (which include principal and interest) ranging from 1.9 to 2.6% of the
original principal sum of each advance. One of the credit facilities will have a
residual payment of 5% of the original principal amount that will be due at the
73rd month.
The loan amounts drawn in December 1999 bear interest at rates ranging from
11.63% to 13.76% with a weighted average rate of 12.37%.
Principal payments during each of the years from 2000 through 2004 are $2.6
million, $3.1 million, $3.4 million, $3.7 million, and $1.3 million,
respectively.
11. STOCKHOLDERS' EQUITY
Common Stock
Certain shares of common stock issued to members of management in 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, 1998 and 1999, there were 37,920 and 10,540
shares, respectively, remaining subject to the Company's right of repurchase.
On January 10, 2000, the Company received a commitment for up to $48.0
million in equity financing from Acqua Wellington North American Equity Fund,
Ltd. ("Acqua Wellington") in amounts of up to $4.0 million per month, at the
Company's discretion, through January 2001. The commitment is reduced by $4.0
million each month whether the Company draws on the commitment or not. The price
at which this equity is issued is based on the volume weighted average market
price for the 18 trading days ending two days prior to sale.
On February 3, 2000, the Company sold 309,995 shares of common stock to
Ridgeway Investment Ltd. for total proceeds of $6.0 million, or $19.36 per
share, and sold 103,332 shares of common stock to American Home Products
("AHP"), at the same per share price, for total proceeds of $2.0 million.
In March 2000, the Company issued further shares (see Note 16).
Warrants
Outstanding warrants to purchase common stock are as follows at December
31, 1999:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE EXPIRATION
--------- -------- -------------
<S> <C> <C>
16,666...................................... $ 2.00 January 2000
2,766...................................... $ 4.50 May 2000
28,602...................................... $10.00 November 2001
</TABLE>
On February 16, 2000 the Company granted the University of Michigan a
warrant to purchase 340,000 shares of Aviron's common stock (see note 2).
Employee Stock Purchase Plan
The Company has adopted an Employee Stock Purchase Plan under which
employees can purchase shares of the Company's common stock based on a
percentage of their compensation but not greater than 15 percent of their
earnings. The purchase price per share must be equal to the lower of 85% of the
market value at the beginning or end of the applicable offering period. A total
of 350,000 shares of common stock are reserved for issuance under the plan. As
of December 31, 1999, 105,325 shares had been issued under the Plan.
55
<PAGE> 56
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Stock Options
On September 15, 1992, the Board of Directors adopted the 1992 Stock Option
Plan (the "1992 Plan"). In March 1996, the Company amended and restated the 1992
Plan as the 1996 Equity Incentive Plan (the "1996 Plan"). On June 3, 1999, an
amendment of the 1996 Plan was approved by the shareholders to increase the
total shares of common stock reserved for future issuance under the 1996 Plan to
4,030,000. The 1996 Plan provides for the grant of incentive and nonstatutory
stock options to employees and consultants of the Company and became effective
in November 1996 upon the closing of the initial public offering.
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. The Directors'
Plan became effective upon the closing of the initial public offering.
On September 21, 1999, the Board of Directors adopted the 1999 Non-Officer
Equity Incentive Plan (the "1999 Plan"). Under the 1999 Plan, 1,900,000 shares
of common stock were reserved for future issuance. The 1999 Plan provides for
the grant of nonstatutory stock options, stock bonuses, rights to purchase
restricted stock, and stock appreciation rights to consultants and employees who
are not officers or directors of the Company.
The Company's Plans had 2,456,375 shares available to grant options to
employees, consultants and directors at December 31, 1999. Most of the options
granted have 10 year terms and vest ratably over 50 months of continued
employment.
In addition, the Company has issued non-qualified stock options outside of
the above plans.
A summary of the Company's stock option activity, and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of
year............................ 611,936 $ 1.60 885,819 $ 8.87 1,714,535 $19.08
Granted........................... 441,780 $16.08 1,068,717 $24.69 2,017,200 $20.55
Exercised......................... (141,032) $ 0.70 (155,553) $ 2.80 (198,577) $ 5.66
Forfeited......................... (26,865) $ 2.70 (84,448) $13.25 (248,382) $22.89
--------- ---------- ----------
Outstanding -- end of year........ 885,819 $ 8.86 1,714,535 $19.08 3,284,776 $20.51
========= ========== ==========
Weighted-average fair value of
options granted during year..... $ 11.07 $ 19.23 $ 16.34
</TABLE>
During 1995, officers of the Company exercised options granted outside the
Plan for 168,000 shares by signing promissory notes amounting to $310,000 which
bear interest at 5.73% subject to the Company's right of repurchase which lapses
over fifty months. As of December 31, 1999, $82,500 of the promissory notes were
still outstanding and 10,540 shares were subject to repurchase.
The Company has recognized deferred compensation for certain options
granted in 1997 and 1998. Total deferred compensation of approximately
$2,094,000 recorded through December 31, 1999 is being amortized over the
vesting period of such options on an accelerated basis. A portion of these
options vested immediately upon grant.
56
<PAGE> 57
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The options outstanding at December 31, 1999 have been segregated for
additional disclosure as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------
OPTIONS WEIGHTED-
OPTIONS WEIGHTED-AVERAGE WEIGHTED- CURRENTLY AVERAGE
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT EXERCISE
RANGE OF EXERCISE PRICES DEC. 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE DEC. 31, 1999 PRICE
------------------------ -------------- ---------------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.25 - $ 1.00................. 22,632 4.7 $ 0.52 22,632 $ 0.52
$ 1.01 - $ 5.00................. 94,431 6.5 $ 1.25 71,815 $ 1.25
$ 5.01 - $10.00................. 131,175 7.0 $ 8.77 93,591 $ 8.56
$10.01 - $20.00................. 1,183,989 9.6 $16.66 83,766 $15.38
$20.01 - $30.38................. 1,852,549 8.8 $25.02 481,107 $25.47
</TABLE>
To motivate the Company's employees and align their interests with the
Company's stockholders, on February 9, 2000, the Company granted options for the
purchase of a total of 1,264,900 shares of common stock at an exercise price of
$24.00, the closing price of our stock on February 8, 2000. Approximately 27% of
the options become exercisable upon the acceptance by the FDA of the Company's
BLA submission and another 40% become exercisable when FLUMIST(TM)is approved
for marketing in the United States. These options will become exercisable in
February 2005 unless these events related to FLUMIST(TM) occur earlier. The
final 33% of these options will become exercisable when FLUMIST(TM) is approved
for marketing in the United States, but only if this event occurs in 2001. If
FDA approval for FLUMIST(TM) is not obtained by December 31, 2001, these options
will be cancelled. If the final 33% of these options become exercisable, the
Company will incur compensation expense in the period in which they become
exercisable in an amount equal to the difference between the exercise price of
the options and the then current fair market value of the Company's common
stock.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, if the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma net loss and net loss per share information is required by SFAS
123, which also requires that the information be determined as if the Company
has accounted for its employee stock options granted subsequent to December 31,
1994 under the fair market value method of that statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions: risk free
interest rates of 6.80% for 1997, 4.85% for 1998, and 6.65% for 1999,
respectively; volatility factors of the expected market price of the Company's
common stock of 0.80 for 1997, 0.80 for 1998, and 0.79 for 1999; no expected
dividends; and a weighted-average expected life of the options of 5.0 years for
1997, 7.2 years for 1998, and 7.9 years for 1999.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options and employee stock
purchase plans have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair market value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options and shares issued pursuant to the employee stock
purchase plan.
57
<PAGE> 58
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for net loss per share
information):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Pro forma net loss............................. $(27,733) $(64,883) $(72,122)
Pro forma net loss per share (basic)........... $ (2.03) $ (4.13) $ (4.55)
</TABLE>
Share Purchase Rights
In October 1997, the Company's Board of Directors adopted a Share Purchase
Rights Plan. The Share Purchase Rights Plan provides for the distribution of
certain rights to acquire shares of the Company's Series A Junior Participating
Preferred Stock, par value $0.001 (the "Rights") as a dividend for each share of
Common Stock held of record as of October 23, 1997. The Rights are triggered and
become exercisable upon the occurrence of either (i) the date of a public
announcement of the acquisition of 20% or more beneficial ownership of the
Company's Common Stock by a person or group (an "Acquiring Person"), or (ii) ten
business days (or such later time as may be set by the Board of Directors) after
a public announcement of a tender or exchange offer for 20% or more beneficial
ownership of the Company's Common Stock by an Acquiring Person. If the Rights
are triggered, each Right effectively provides its holder, the right to purchase
shares of Common Stock at a 50% discount from the market price at that time,
upon payment of an exercise price of $150 per Right.
Reserved Shares
As of December 31, 1999, the Company has reserved shares of common stock
for future issuance as follows:
<TABLE>
<S> <C>
Options:
Outstanding............................................... 3,284,776
Available for grant....................................... 2,456,375
Employee Stock Purchase Plan.............................. 244,675
Warrants.................................................. 48,034
Conversion of debt........................................ 3,235,827
---------
9,269,687
=========
</TABLE>
12. INCOME TAXES
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $178.4 million and $10.2 million,
respectively. The Company also had federal and California research and other tax
credit carryforwards of approximately $3,900,000 and $2,500,000, respectively.
The federal net operating loss and credit carryforwards will expire at various
dates beginning in the year 2007 through 2019, if not utilized. The state of
California net operating loss and credit carryforwards will expire at various
dates beginning in 2000 through 2004, if not utilized.
Utilization of the federal and state net operating loss and credit
carryforwards may be subject to a substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue Code of 1986. The
annual limitation may result in the expiration of net operating losses and
credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the
58
<PAGE> 59
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Company's deferred tax assets for federal and state income taxes as of December
31 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Net operating loss carryforwards............................ $ 41,200 $ 61,300
Research tax credits........................................ 5,500 6,400
Capitalized research and development expenses............... 3,300 2,900
Deferred revenue............................................ -- 800
Other -- Net................................................ 600 3,800
-------- --------
Net deferred tax assets..................................... 50,600 75,200
Valuation allowance......................................... (50,600) (75,200)
-------- --------
$ -- $ --
======== ========
</TABLE>
Due to the Company's lack of earnings history, the net deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $12.3 million and $22.4 million during the years ended December 31,
1997 and 1998, respectively.
Approximately $2,000,000 of the valuation allowance for deferred tax assets
relates to benefits of stock option deductions which, when recognized, will be
allocated directly to contributed capital.
13. COMMITMENTS
In August 1998, the Company announced the signing of a worldwide multiyear
supply agreement with Becton Dickinson and Company ("Becton Dickinson"), in
which Becton Dickinson will supply its AccuSpray(TM) non-invasive nasal spray
delivery system for administration of FLUMIST(TM). The agreement requires the
Company to advance a total of $2,000,000 to Becton Dickinson for facility
expansion of plant capacity. As of December 31, 1999, the entire advance had
been paid and is included in other assets in the accompanying balance sheet.
14. RELATED PARTY TRANSACTIONS
In 1995, the Company made unsecured loans to members of senior management
totaling $100,000 which bear interest at 7.75% and are due in April 2000. In
1997, the Company made two additional unsecured loans to members of senior
management totaling $200,000, which bear interest at 7.75% and are due in
February and July 2001, respectively. As of December 31, 1999, the unpaid
balance was $110,000.
15. LITIGATION
On July 8, 1999 a lawsuit entitled Joany Chou v. The University of Chicago,
ARCH Development Corp., Bernard Roizman and Aviron Company, was filed in the
U.S. District Court for the Northern District of Illinois, Eastern Division
("Court"), by an individual formerly associated with the University of Chicago.
On February 18, 2000, the Court granted Aviron's motion to dismiss, thereby
dismissing without prejudice all pending claims made by the plaintiff against
Aviron. There can be no assurance that we will prevail in the defense of this
lawsuit in the event that the plaintiff appeals the Court's ruling and is
successful in reinstating her claims or in bringing new claims against Aviron.
16. SUBSEQUENT EVENTS (UNAUDITED)
In addition to the commitment described in note 11, on March 6, 2000, the
Company sold 253,935 shares of common stock to Acqua Wellington for total
proceeds of $8.0 million, or $31.50 per share. Also on March 6, 2000, the
Company sold 121,212 shares of common stock to AHP for total proceeds of $2.0
million, or $16.50 per share, pursuant to a December 1999 agreement with AHP.
59
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
---- -----------
<C> <S>
3.1 Bylaws of the Registrant(2).
3.2 Restated Certificate of Incorporation of the Registrant(2).
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Stock Certificate(1).
4.3 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.4 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.5 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.6 Warrant or Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.7 Warrant for Series C Preferred Stock, issued to Raymond,
James & Associates(1).
4.8 Investors Rights Agreement, dated July 18, 1995, among the
Registrant and the investors named therein(1).
4.9 Common Stock Purchase Agreement between the Registrant and
Biotech Target, S.A., dated as of March 27, 1997(3).
4.10 Rights Agreement between the Registrant and BankBoston,
N.A., dated as of October 8, 1997(5).
4.11 Common Stock Purchase Agreement between the Registrant and
American Home Products Corporation, dated as of December 16,
1999.
4.12 Common Stock Purchase Agreement between the Registrant and
American Home Products Corporation, dated as of December 30,
1999.
4.13 Common Stock Purchase Agreement between the Registrant and
American Home Products Corporation, dated as of February 3,
2000.
4.14 Warrant for Common Stock, issued to University of Michigan.
+10.1 License Agreement between the Registrant and ARCH
Development Corporation, dated July 1, 1992(1).
+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(1).
+10.3 Materials Transfer and Intellectual Property Agreement
between the Registrant and the Regents of the University of
Michigan, dated February 24, 1995(1).
10.4 Stock Transfer Agreement between the Registrant and the
Regents of the University of Michigan, dated February 24,
1995(1).
+10.5 Development and License Agreement between the Registrant and
Sang-A Pharm. Co., Ltd., dated May 3, 1995(1).
+10.6 Cooperative Research and Development Agreement between the
Registrant and the National Institutes of Health, dated May
30, 1995(1).
+10.7 Heads of Agreement between the Registrant and SmithKline
Beecham Biologicals S.A., dated October 8, 1995(1).
+10.8 Manufacturing and Development Agreement between the
Registrant and Evans Medical Limited, dated November 7,
1995(1).
*10.9 1996 Equity Incentive Plan(1).
*10.10 1996 Non-Employee Directors' Stock Option Plan(1).
*10.11 1996 Employee Stock Purchase Plan(1).
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
ITEM DESCRIPTION
---- -----------
<C> <S>
10.12 Industrial lease between the Registrant and the Vanni
Business Park General Partnership, dated August 29, 1995(1).
+10.13 First Amendment to License Agreement between the Registrant
and ARCH Development Corporation dated March 15, 1996(1).
+10.14 Biological Materials License Agreement between the
Registrant and the National Institutes of Health, dated May
31, 1996(1).
+10.15 Contract Manufacture Agreement between the Registrant and
Evans Medical Limited, dated as of April 16, 1997(4).
+10.16 Production Agreement between the Registrant and Packaging
Coordinators, Inc., dated as of October 31, 1997(6).
10.17 Facility Reservation Agreement between the Registrant and
Packaging Coordinators, Inc., dated as of October 31,
1997(6).
+10.18 Influenza Vaccine Collaboration and License Distributor
Agreement between the Registrant and CSL Limited, dated June
19, 1998(7).
+10.19 Supply Agreement between the Registrant and Becton Dickinson
and Company dated July 1, 1998(8).
+10.20 United States License and Co-Promotion Agreement between the
Registrant and Wyeth Lederle Vaccines dated January 11,
1999(9).
+10.21 International FluMist(TM) License Agreement between the
Registrant and Wyeth dated January 11, 1999(9).
+10.22 FluMist(TM) Supply Agreement between the Registrant and
Wyeth Lederle Vaccines dated January 11, 1999(9).
+10.23 Credit Agreement between the Registrant and American Home
Products Corporation dated January 11, 1999(9).
+10.24 Letter Amendment to the Materials Transfer and Intellectual
Property Agreement between the Registrant and the Regents of
the University of Michigan dated February 24, 1999(10).
10.25 Real Property Lease by and between the Registrant and
Spieker Properties, L.P. dated February 5, 1999(11).
+10.26 First Amendment to the Influenza Vaccine Collaboration and
License and Distribution Agreement by and between the
Registrant and CSL Limited, A.C.N. dated June 7, 1999(11).
10.27 Loan and Security Agreement by and between the Registrant
and Transamerica Business Credit Corporation dated June 23,
1999(11).
10.28 Master Loan and Security Agreement by and between the
Registrant and FINOVA Capital Corporation dated July 23,
1999(12).
++10.29 Amended and Restated Contract Manufacture Agreement by and
between the Registrant and Medeva Pharma Limited dated June,
1999, as amended.
10.30 Real Property Lease by and between the Registrant and MELP
VII L.P., dated October 12, 1999.
10.31 Offer Letter, as amended, by and between the Registrant and
C. Boyd Clarke, dated November 24, 1999.
10.32 Employment Agreement by and between the Registrant and J.
Leighton Read, dated December 6, 1999.
10.33 Amendment No. 1 to Stock Transfer Agreement by and between
the Registrant and The Regents of the University of
Michigan, dated February 16, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 62
- ---------------
+ Confidential treatment has been granted for portions of this exhibit.
++ Confidential treatment has been requested for portions of this exhibit.
* Compensatory Plan or Agreement
(1) Incorporated by reference to the correspondingly numbered exhibit to our
Registration Statement on Form S-1, File No. 333-05209, filed June 5, 1996,
as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q, File No. 0-20815, for the quarter ended
September 30, 1996, filed December 20, 1996.
(3) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File
No. 0-20815, filed May 15, 1997.
(4) Incorporated by reference to the correspondingly numbered exhibit to our
Current Report on Form 8-K, File No. 0-20815, dated April 16, 1997 and
filed July 21, 1997.
(5) Incorporated by reference to the correspondingly numbered exhibit to our
Current Report on Form 8-K, File No. 0-20815, dated October 8, 1997 and
filed October 10, 1997.
(6) Incorporated by reference to the correspondingly numbered exhibit to our
Registration Statement on Form S-3, File No. 333-41649, filed December 10,
1997.
(7) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, File No.
0-20815, filed August 14, 1998.
(8) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
File No. 0-20815, filed November 16, 1998.
(9) Incorporated by reference to the correspondingly numbered exhibit to our
Annual Report on Form 10-K for the year ended on December 31, 1998, File
No. 0-20815 filed March 31, 1999.
(10) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, File
No. 0-20815, filed May 13, 1999.
(11) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File No.
0-20815, filed August 13, 1999.
(12) Incorporated by reference to the correspondingly numbered exhibit to our
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999,
File No. 0-20815, filed November 15, 1999.
<PAGE> 1
EXHIBIT 4.11
AVIRON
COMMON STOCK PURCHASE AGREEMENT
DECEMBER 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. Purchase and Sale of Common Stock.................................................1
Section 2. Closing Date; Delivery............................................................1
2.1 Closing Date.........................................................................1
2.2 Delivery.............................................................................1
Section 3. Representations, Warranties and Covenants of Purchaser............................1
3.1 Authorization........................................................................1
3.2 Investment Experience................................................................1
3.3 Investment Intent....................................................................2
3.4 Registration or Exemption Requirements...............................................2
3.5 Restriction on Short Sales...........................................................2
Section 4. Representations, Warranties and Covenants of Company..............................2
4.1 Organization, Good Standing and Qualification........................................2
4.2 Authorization and Rights.............................................................3
4.3 Listing of Shares....................................................................3
4.4 Maintaining Listing of Shares........................................................3
4.5 Publicity............................................................................3
4.6 Filings..............................................................................3
Section 5. Registration Rights...............................................................3
5.1 Registration Requirements............................................................3
5.2 Indemnification and Contribution.....................................................5
Section 6. Restrictions on Transferability of Shares: Compliance with Securities Act.........8
6.1 Restrictions on Transferability......................................................8
6.2 Restrictive Legend...................................................................8
6.3 Transfer of Shares after Registration................................................9
6.4 Purchaser Information................................................................9
Section 7. Miscellaneous.....................................................................9
7.1 Waivers and Amendments...............................................................9
7.2 Governing Law........................................................................9
7.3 Survival.............................................................................9
7.4 Successors and Assigns...............................................................9
7.5 Entire Agreement.....................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.6 Notices, etc.........................................................................9
7.7 Severability of this Agreement......................................................11
7.8 Counterparts........................................................................11
7.9 Further Assurances..................................................................11
7.10 Expenses............................................................................11
</TABLE>
2
<PAGE> 4
AVIRON
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
December 16, 1999 (the "Effective Date"), by and between AVIRON, a Delaware
corporation (the "Company") and AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation (the "Purchaser").
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the
Company 86,136 shares of the Company's Common Stock, $0.001 par value (the
"Shares"), for a purchase price of $15.479396 per share.
SECTION 2. CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Cooley Godward LLP,
Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California, 94306 at
10:00 a.m. on December 16, 1999 or at such other time and place upon which the
Company and Purchaser shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
2.2 DELIVERY.
(a) At the Closing, the Company will deliver to Purchaser a
certificate, registered in Purchaser's name, representing the number of shares
of Common Stock to be purchased by Purchaser. Such delivery shall be against
payment of the purchase price therefor by wire transfer to the Company's bank
account.
(b) At the Closing, the Company will deliver to Purchaser an
Officer's Certificate certifying the price per share paid by the Purchaser and
number of shares purchased by Purchaser. The Company will also attach to the
Officer's Certificate a true and correct copy of that certain Stock Purchase
Agreement by and between the Company and Ridgeway Investment Limited dated
December 15, 1999.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser hereby represents and warrants to the Company, effective as of
the Closing Date, as follows:
3.1 AUTHORIZATION. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Shares and to carry out and perform all
of its obligations under this Agreement; and (ii) this Agreement constitutes the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or
<PAGE> 5
similar laws relating to or affecting the enforcement of creditors' rights
generally and (b) as limited by equitable principles generally.
3.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Shares.
3.3 INVESTMENT INTENT. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale, distribution or fractionalization thereof, in whole or in part,
within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed the Purchaser Certificates/Questionnaire
attached hereto as Exhibits A-1 and A-2 for use in connection with the sale of
Shares and in preparation of the Registration Statement (as defined below), will
deliver the such Certificates/Questionnaires to the Company on or prior to the
Closing Date, and the responses provided therein shall be true and correct as of
the Closing Date.
3.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the Shares must be held for investment
purposes, and they may not be resold or otherwise transferred except in a
transaction registered under the Securities Act or an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Shares will be imprinted with a legend that prohibits the
transfer of the Shares unless (i) they are registered or such registration is
not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act ("Rule 144") and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt and in compliance with applicable state law.
3.5 RESTRICTION ON SHORT SALES. Purchaser represents and warrants to and
covenants with the Company that Purchaser has not engaged and will not engage in
any short sales of the Company's Common Stock prior to the effectiveness of the
Registration Statement, except to the extent that any such short sale is fully
covered by shares of Common Stock of the Company other than the Shares.
Section 4. Representations, Warranties and Covenants of Company
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company has the requisite corporate power and
2
<PAGE> 6
authority to enter into and perform this Agreement and to issue and sell the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
on behalf of the Company by a duly authorized officer. This Agreement
constitutes, or shall constitute when executed and delivered by such authorized
officer, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
4.2 Authorization and Rights. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
4.3 Listing of Shares. The Company will take all action necessary on its
part to list the Shares of Common Stock for trading on the NASDAQ system or any
relevant market of system, if applicable.
4.4 Maintaining Listing of Shares. The Company will continue to take all
action necessary to continue the listing of trading of its Common Stock on the
NASDAQ National Market or any relevant market or system, if applicable, and will
comply in all respects with the Company's reporting, listing (including, without
limitation, the listing of the Shares purchased by the Purchaser) or other
obligations under the rules of the NASDAQ National Market or any relevant market
or system.
4.5 Publicity. Except as required by law or applicable legal process,
the Company may not issue a press release or otherwise make a public statement
or announcement with respect to the transactions contemplated hereby without the
prior written consent of Purchaser.
4.6 Filings. The Company will deliver and make available at the
Purchaser's request all filings filed with the Securities Exchange Commission
made after the execution hereof (collectively, the "Commission Filings"). The
Company has not provided to the Purchaser any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, each
of the Commission Filings complied in all material respects with the
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Commission promulgated thereunder and other
federal, state, and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Commission Filings
referred to above contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Filings comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. No
event or circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses,
3
<PAGE> 7
properties, prospects, operations, or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
SECTION 5. REGISTRATION RIGHTS
5.1 REGISTRATION REQUIREMENTS
(a) Except as provided in paragraph (d) below, the Company shall
use its best efforts to prepare and file a registration statement on Form S-3
with the SEC under the Securities Act within 180 days from the date of this
Agreement to register the resale of the Shares by Purchaser (the "Registration
Statement") and to use its best efforts to cause the Registration Statement to
be declared effective as soon as practicable. In the event that at any time the
filing of such Registration Statement is undertaken or is required to be
undertaken the Company fails to qualify for use of Form S-3 (or other available
form for similar type securities registration) for purposes of registering for
resale the Shares, the Company shall cause a registration statement on Form S-1
(or other available form for similar type securities registration) to be filed
as soon as practicable thereunder. The Purchaser agrees to furnish promptly to
the Company in writing all information reasonably required by the Company to
file such Registration Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser shall pay all Selling Expenses (as defined below).
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
and independent public accountants for the Company, blue sky fees, transfer
agent fees and expenses and the expense of any special audits incident to or
required by any such registration. "Selling Expenses" shall mean selling
commissions, underwriting fees and stock transfer taxes applicable to the
Shares.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earliest of (A) the second
anniversary of the Closing Date, (B) such date as all of the Shares have been
resold or (C) such time as all of the Shares held by Purchaser can be sold
without restriction pursuant to Rule 144 under the Securities Act; (ii) prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Registration
Statement; (iii) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
Purchaser from time to time may reasonably request in order to facilitate the
public sale or other disposition of all or any of the Shares held by Purchaser;
(iv) cause all Shares registered as described herein to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (v) provide a
transfer agent and registrar for all Shares registered pursuant to the
Registration Statement and a CUSIP number for all such Shares; (vi) otherwise
use its best efforts promptly to comply with all applicable rules and
regulations of the SEC; and (vii) file the documents required of the Company and
otherwise use its best efforts
4
<PAGE> 8
promptly to obtain, if applicable, and maintain requisite blue sky clearance in
(A) all jurisdictions in which any of the Shares are originally sold and (B) all
other states specified in writing by Purchaser, provided as to clause (B),
however, that the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not now so qualified
or has not so consented. The Company shall use its best efforts to qualify for
use of Form S-3 or other similar form then available under the Securities Act to
register the resale of the Shares and to maintain such qualification during the
periods described in paragraph (i).
(d) The Company may delay the filing of the Registration
Statement for up to forty-five (45) days by giving written notice to Purchaser
if the Board of Directors of the Company shall have determined in good faith
that the Company may be required to disclose any material corporate development
which disclosure may have a material effect on the Company.
(e) Following the effectiveness of the Registration Statement,
the Company may, at any time, but not more than once in any six-month period,
suspend the effectiveness of such registration statement for up to 30 days, as
appropriate (a "Suspension Period"), by giving notice to Purchaser, if the
Company shall have determined that the Company may be required to disclose any
material corporate development which disclosure may have a material effect on
the Company. The Company agrees to use commercially reasonable efforts to
minimize the length of any such suspension. The duration of any Suspension
Period shall be added to the period of time that the Company agrees to keep the
Registration Statement effective. Purchaser agrees that, upon receipt of any
notice from the Company of a Suspension Period, Purchaser shall forthwith
discontinue disposition of shares covered by such Registration Statement or
prospectus until Purchaser (i) is advised in writing by the Company that the use
of the applicable prospectus may be resumed, (ii) has received copies of a
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
(f) The Company will, as expeditiously as possible, notify
Purchaser (i) of the effective date of the Registration Statement and the date
when any post-effective amendment the Registration Statement becomes effective;
(ii) of any stop order or notification from Securities and Exchange Commission
or any other jurisdiction as to the suspension of the effectiveness of the
Registration Statement; and (iii) of the end of any suspension hereunder.
(g) With a view to making available to Purchaser the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time permit
Purchaser to sell Shares to the public without registration or pursuant to
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the second anniversary of the Closing Date or (B) such
date as all of the Shares shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
Exchange Act and maintain registration of its Common Stock under Section 12 of
the Exchange Act; and (iii) furnish to Purchaser upon request, as long as
Purchaser owns any Shares, (A) a written statement by the Company that it has
complied with the reporting requirements of the Exchange Act, (B) a copy of the
most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail Purchaser of any
rule or regulation of the SEC that permits the selling of any such Shares
without registration.
5
<PAGE> 9
5.2 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify Purchaser and hold Purchaser
harmless from and against any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) to which Purchaser may become subject (under
the Securities Act, Exchange Act, state securities laws or otherwise) insofar as
such losses, claims, damages or liabilities (or actions proceedings or
settlements in respect thereof) arise out of, or are based upon, (i) any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, on the effective date thereof or any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, (ii) the omission or the alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
or (iii) any failure by the Company (or its agents) to fulfill any undertaking
included in the Registration Statement, and the Company will, as incurred,
reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, loss, damage,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement (or omission) made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Purchaser specifically
for use in preparation of the Registration Statement, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement (or omission) in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to Purchaser
by the Company prior to the pertinent sale or sales by Purchaser. The Company
will reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this section and the
possibility that such payments might later be held to be improper, provided,
that (i) to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them and (ii) such persons
shall provide to the Company, upon request, reasonable assurances of their
ability to effect any refund, when and if due.
(b) Purchaser agrees to indemnify and hold harmless the Company
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which the Company may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of Purchaser specifically for use in preparation of the
Registration Statement, provided, however, that Purchaser shall not be liable in
any such case for any untrue statement included in any Prospectus which
statement has been corrected, in writing, by Purchaser and delivered to the
Company before the sale from which such loss occurred, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by Purchaser, provided, further, however, that the
liability of Purchaser hereunder shall be limited to the proceeds received by
Purchaser from the sale of the Shares covered by such Registration Statement;
and provided, further, however, that the obligations of Purchaser hereunder
shall not apply to amounts paid in settlement of any
6
<PAGE> 10
such loss, claim, damage, liability, or action settlement is effected without
the consent of Purchaser. Purchaser will reimburse the Company for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim up to the limits set forth herein
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligations under this section and the possibility that
such payments might later be held to be improper, provided, that (i) to the
extent any such payment is ultimately held to be improper, the persons receiving
such payments shall promptly refund them and (ii) such persons shall provide to
Purchaser, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the commencement of any action in respect of which indemnity is to
be sought against an indemnifying person pursuant to this Section 5.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume and undertake the defense thereof, with
counsel reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume and undertake the defense thereof, the indemnifying person
shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense
thereof; provided, however, that if there exists or shall exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified person
and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person.
(d) If the indemnification provided for in this Section 5.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions proceedings or settlements in respect thereof) referred
to therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchaser
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or Purchaser on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Purchaser agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by
7
<PAGE> 11
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d),
Purchaser shall not be required to contribute any amount in excess of the amount
by which the amount received by Purchaser (net of Selling Expenses) from the
sale of the Shares to which such loss relates exceeds the amount of any damages
which Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Purchaser under this
Section 5.2 shall be in addition to any liability which the Company and
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company or Purchaser within
the meaning of the Securities Act.
SECTION 6. RESTRICTIONS ON TRANSFERABILITY OF SHARES: COMPLIANCE WITH
SECURITIES ACT
6.1 RESTRICTIONS ON TRANSFERABILITY. The Shares shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
6.2 RESTRICTIVE LEGEND. Each certificate representing Shares shall bear
substantially the following legends (in addition to any legends required under
applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE COMMON STOCK
PURCHASE AGREEMENT DATED DECEMBER 16, 1999 BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 5.1 AND 6.3 OF THE
AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY.
Upon the request of Purchaser, the Company shall remove the foregoing
legend from the certificates evidencing the Shares and issue to Purchaser new
certificates free of any transfer legend if with such request, and at the
request of the Company, the Company shall have received
8
<PAGE> 12
an opinion of counsel reasonably satisfactory to the Company, to the effect that
any transfers by Purchaser of such Shares may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws.
6.3 TRANSFER OF SHARES AFTER REGISTRATION. Purchaser hereby covenants
with the Company not to make any sale of the Shares except either (i) in
accordance with the Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus, (ii) in a
private sale transaction permitted under the Securities Act, or (iii) in
accordance with Rule 144, in which case Purchaser covenants to comply with Rule
144. Purchaser further acknowledges and agrees that such Shares are not
transferable on the books of the Company unless the certificate submitted to the
Company's transfer agent evidencing such Shares is accompanied by a separate
certificate executed by an officer of, or other person duly authorized by, the
Purchaser in the form attached hereto as Exhibit B.
6.4 PURCHASER INFORMATION. Purchaser covenants that it will promptly
notify the Company in writing of any changes in the information set forth in the
Registration Statement regarding Purchaser.
SECTION 7. MISCELLANEOUS
7.1 WAIVERS AND AMENDMENTS. The terms of this Agreement may be waived or
amended with the written consent of the Company and Purchaser.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of New York without any
regard to conflicts of laws principles.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
Purchaser and the Closing. With respect to any registration made pursuant to
this Agreement, the covenants and agreements set forth in section 4.1 shall
continue in effect until all obligations hereunder with respect thereto are
fulfilled, and provided that the indemnification and contribution obligations as
set forth in Section 4.2 shall survive for the period of the statute of
limitations with respect thereto.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
Purchaser shall not assign this Agreement without the prior written consent of
the Company, which shall not be unreasonably withheld or delayed.
7.5 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or
Purchaser, as the case may be, at their respective addresses set forth below:
9
<PAGE> 13
If to the Company:
Aviron
297 North Bernardo Avenue
Mountain View, CA 94043
Attn: J. Leighton Read, M.D.
President and Chief Executive Officer
Telephone: (650) 919-6500
Facsimile: (650) 919-6610
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Robert J. Brigham, Esq.
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Purchaser:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Chief Financial Officer
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
With copies to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
All notices and other communications shall be effective upon the earlier
of actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such
10
<PAGE> 14
notice or communication shall have been deposited in the United States mail. Any
notice delivered to a party hereunder shall be sent simultaneously, by the same
means, to such party's counsel as set forth above.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.10 EXPENSES. Except as set forth herein, the Company and the Purchaser
each agree to bear their own cost of fees and expenses in connection with the
transactions contemplated herein.
11
<PAGE> 15
The foregoing agreement is hereby executed as of the date first above
written.
AVIRON AMERICAN HOME PRODUCTS
CORPORATION
By: /s/ FRED KURLAND By: /s/ GERALD A. JIBILIAN
------------------------ -------------------------------------
Fred Kurland
Chief Financial Officer Name: Gerald A. Jibilian
----------------------------------
Title: Vice President
----------------------------------
12
<PAGE> 16
EXHIBIT A
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on the
signature page. The Agreement must be executed by an individual
authorized to bind the Purchaser.
2. Exhibit A-1 - Stock Certificate Questionnaire: Provide the
information requested by the Stock Certificate Questionnaire;
3. Exhibit A-2 - Registration Statement Questionnaire: Provide the
information requested by the Registration Statement
Questionnaire.
4. Return the signed Purchase Agreement including the properly
completed Exhibit A to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Robert J. Brigham, Esq.
Fax: (650) 857-0663
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to Purchaser by the Company at a later date.
C. Upon the resale of the Shares by Purchaser after the Registration
Statement covering the Shares is effective, as described in the Purchase
Agreement, Purchaser:
(i) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer (prospectuses, and
annual and quarterly reports may be obtained from the Company at
the Purchaser's request); and
(ii) must send a letter in the form of Exhibit B to the
Company so that the Shares may be properly transferred.
13
<PAGE> 17
EXHIBIT A-1
AVIRON
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
<TABLE>
<S> <C>
1. The exact name that the Shares are to be
registered in (this is the name that will
appear on the stock certificate(s)). You
may use a nominee name if appropriate:
American Home Products Corporation
2. The relationship between the Purchaser of
the Shares and the Registered Holder
listed in response to item 1 above:
---------------------------------
3. The mailing address of the Registered
Holder listed in response to item 1 above:
5 Giralda Farms
Madison, New Jersey 07940
4. The Tax Identification Number of the
Registered Holder listed in response to
item 1
above: 13-2526821
</TABLE>
<PAGE> 18
EXHIBIT A-2
AVIRON
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in
the Registration Statement:
American Home Products Corporation
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company?
[X] Yes [ ] No
If yes, please indicate the nature of any such relationships below:
See documents relating to transactions by and between American Home
Products Corporation, its divisions and affiliates with Aviron.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 19
EXHIBIT B
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: Aviron
297 N. Bernardo Avenue
Mountain View, CA 94043
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that American Home Products
Corporation was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about either
(check the applicable box): (i) in accordance with the registration statement,
file number in which case the Purchaser certifies that the requirement of
delivering a current prospectus has been complied with or will be complied with
in connection with such sale, or (ii) in a private sale transaction permitted
under the Securities Act, or: (iii) in accordance with Rule 144 under the
Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies that
it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser:
------------------------------------------------------
Name of Individual
representing Purchaser:
------------------------------------------------
Title of Individual
representing Purchaser:
-------------------------------------------------
Signature by:
Individual representing
Purchaser:
-------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.12
AVIRON
COMMON STOCK PURCHASE AGREEMENT
DECEMBER 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. Purchase and Sale of Common Stock.................................................1
Section 2. Closing Date; Delivery............................................................1
2.1 Closing Date.........................................................................1
2.2 Delivery.............................................................................1
Section 3. Representations, Warranties and Covenants of Purchaser............................1
3.1 Authorization........................................................................1
3.2 Investment Experience................................................................1
3.3 Investment Intent....................................................................2
3.4 Registration or Exemption Requirements...............................................2
3.5 Restriction on Short Sales...........................................................2
Section 4. Representations, Warranties and Covenants of Company..............................2
4.1 Organization, Good Standing and Qualification........................................2
4.2 Authorization and Rights.............................................................3
4.3 Listing of Shares....................................................................3
4.4 Maintaining Listing of Shares........................................................3
4.5 Publicity............................................................................3
4.6 Filings..............................................................................3
Section 5. Registration Rights...............................................................3
5.1 Registration Requirements............................................................3
5.2 Indemnification and Contribution.....................................................5
Section 6. Restrictions on Transferability of Shares: Compliance with Securities Act.........8
6.1 Restrictions on Transferability......................................................8
6.2 Restrictive Legend...................................................................8
6.3 Transfer of Shares after Registration................................................9
6.4 Purchaser Information................................................................9
Section 7. Miscellaneous.....................................................................9
7.1 Waivers and Amendments...............................................................9
7.2 Governing Law........................................................................9
7.3 Survival.............................................................................9
7.4 Successors and Assigns...............................................................9
7.5 Entire Agreement.....................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
7.6 Notices, etc.........................................................................9
7.7 Severability of this Agreement......................................................11
7.8 Counterparts........................................................................11
7.9 Further Assurances..................................................................11
7.10 Expenses............................................................................11
</TABLE>
2
<PAGE> 4
AVIRON
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
December 30, 1999 (the "Effective Date"), by and between AVIRON, a Delaware
corporation (the "Company") and AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation (the "Purchaser").
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the
Company 121,212 shares of the Company's Common Stock, $0.001 par value (the
"Shares"), for a purchase price of $16.50 per share.
SECTION 2. CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Cooley Godward LLP,
Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California, 94306 at
10:00 a.m. on March 6, 2000 or at such other time and place upon which the
Company and Purchaser shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
2.2 DELIVERY.
(a) At the Closing, the Company will deliver to Purchaser a
certificate, registered in Purchaser's name, representing the number of shares
of Common Stock to be purchased by Purchaser. Such delivery shall be against
payment of the purchase price therefor by wire transfer to the Company's bank
account.
(b) At the Closing, the Company will deliver to Purchaser an
Officer's Certificate certifying the price per share paid by the Purchaser and
number of shares purchased by Purchaser. The Company will also attach to the
Officer's Certificate a true and correct copy of that certain Stock Purchase
Agreement by and between the Company and Ridgeway Investment Limited dated
November 16, 1999.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser hereby represents and warrants to the Company, effective as of
the Closing Date, as follows:
3.1 AUTHORIZATION. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Shares and to carry out and perform all
of its obligations under this Agreement; and (ii) this Agreement constitutes the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or
<PAGE> 5
similar laws relating to or affecting the enforcement of creditors' rights
generally and (b) as limited by equitable principles generally.
3.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Shares.
3.3 INVESTMENT INTENT. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale, distribution or fractionalization thereof, in whole or in part,
within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed the Purchaser Certificates/Questionnaire
attached hereto as Exhibits A-1 and A-2 for use in connection with the sale of
Shares and in preparation of the Registration Statement (as defined below), will
deliver the such Certificates/Questionnaires to the Company on or prior to the
Closing Date, and the responses provided therein shall be true and correct as of
the Closing Date.
3.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the Shares must be held for investment
purposes, and they may not be resold or otherwise transferred except in a
transaction registered under the Securities Act or an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Shares will be imprinted with a legend that prohibits the
transfer of the Shares unless (i) they are registered or such registration is
not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act ("Rule 144") and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt and in compliance with applicable state law.
3.5 RESTRICTION ON SHORT SALES. Purchaser represents and warrants to and
covenants with the Company that Purchaser has not engaged and will not engage in
any short sales of the Company's Common Stock prior to the effectiveness of the
Registration Statement, except to the extent that any such short sale is fully
covered by shares of Common Stock of the Company other than the Shares.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company has the requisite corporate
2
<PAGE> 6
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
on behalf of the Company by a duly authorized officer. This Agreement
constitutes, or shall constitute when executed and delivered by such authorized
officer, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
4.2 AUTHORIZATION AND RIGHTS. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
4.3 LISTING OF SHARES. The Company will take all action necessary on its
part to list the Shares of Common Stock for trading on the NASDAQ system or any
relevant market of system, if applicable.
4.4 MAINTAINING LISTING OF SHares. The Company will continue to take all
action necessary to continue the listing of trading of its Common Stock on the
NASDAQ National Market or any relevant market or system, if applicable, and will
comply in all respects with the Company's reporting, listing (including, without
limitation, the listing of the Shares purchased by the Purchaser) or other
obligations under the rules of the NASDAQ National Market or any relevant market
or system.
4.5 PUBLICITY. Except as required by law or applicable legal process,
the Company may not issue a press release or otherwise make a public statement
or announcement with respect to the transactions contemplated hereby without the
prior written consent of Purchaser.
4.6 FILINGS. The Company will deliver and make available at the
Purchaser's request all filings filed with the Securities Exchange Commission
made after the execution hereof (collectively, the "Commission Filings"). The
Company has not provided to the Purchaser any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, each
of the Commission Filings complied in all material respects with the
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Commission promulgated thereunder and other
federal, state, and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Commission Filings
referred to above contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Filings comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. No
event or circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses,
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<PAGE> 7
properties, prospects, operations, or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
SECTION 5. REGISTRATION RIGHTS
5.1 REGISTRATION REQUIREMENTS
(a) Except as provided in paragraph (d) below, the Company shall
use its best efforts to prepare and file a registration statement on Form S-3
with the SEC under the Securities Act within 180 days from the date of this
Agreement to register the resale of the Shares by Purchaser (the "Registration
Statement") and to use its best efforts to cause the Registration Statement to
be declared effective as soon as practicable. In the event that at any time the
filing of such Registration Statement is undertaken or is required to be
undertaken the Company fails to qualify for use of Form S-3 (or other available
form for similar type securities registration) for purposes of registering for
resale the Shares, the Company shall cause a registration statement on Form S-1
(or other available form for similar type securities registration) to be filed
as soon as practicable thereunder. The Purchaser agrees to furnish promptly to
the Company in writing all information reasonably required by the Company to
file such Registration Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser shall pay all Selling Expenses (as defined below).
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
and independent public accountants for the Company, blue sky fees, transfer
agent fees and expenses and the expense of any special audits incident to or
required by any such registration. "Selling Expenses" shall mean selling
commissions, underwriting fees and stock transfer taxes applicable to the
Shares.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earliest of (A) the second
anniversary of the Closing Date, (B) such date as all of the Shares have been
resold or (C) such time as all of the Shares held by Purchaser can be sold
without restriction pursuant to Rule 144 under the Securities Act; (ii) prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Registration
Statement; (iii) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
Purchaser from time to time may reasonably request in order to facilitate the
public sale or other disposition of all or any of the Shares held by Purchaser;
(iv) cause all Shares registered as described herein to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (v) provide a
transfer agent and registrar for all Shares registered pursuant to the
Registration Statement and a CUSIP number for all such Shares; (vi) otherwise
use its best efforts promptly to comply with all applicable rules and
regulations of the SEC; and (vii) file the documents required of the Company and
otherwise use its best efforts
4
<PAGE> 8
promptly to obtain, if applicable, and maintain requisite blue sky clearance in
(A) all jurisdictions in which any of the Shares are originally sold and (B) all
other states specified in writing by Purchaser, provided as to clause (B),
however, that the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not now so qualified
or has not so consented. The Company shall use its best efforts to qualify for
use of Form S-3 or other similar form then available under the Securities Act to
register the resale of the Shares and to maintain such qualification during the
periods described in paragraph (i).
(d) The Company may delay the filing of the Registration
Statement for up to forty-five (45) days by giving written notice to Purchaser
if the Board of Directors of the Company shall have determined in good faith
that the Company may be required to disclose any material corporate development
which disclosure may have a material effect on the Company.
(e) Following the effectiveness of the Registration Statement,
the Company may, at any time, but not more than once in any six-month period,
suspend the effectiveness of such registration statement for up to 30 days, as
appropriate (a "Suspension Period"), by giving notice to Purchaser, if the
Company shall have determined that the Company may be required to disclose any
material corporate development which disclosure may have a material effect on
the Company. The Company agrees to use commercially reasonable efforts to
minimize the length of any such suspension. The duration of any Suspension
Period shall be added to the period of time that the Company agrees to keep the
Registration Statement effective. Purchaser agrees that, upon receipt of any
notice from the Company of a Suspension Period, Purchaser shall forthwith
discontinue disposition of shares covered by such Registration Statement or
prospectus until Purchaser (i) is advised in writing by the Company that the use
of the applicable prospectus may be resumed, (ii) has received copies of a
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
(f) The Company will, as expeditiously as possible, notify
Purchaser (i) of the effective date of the Registration Statement and the date
when any post-effective amendment the Registration Statement becomes effective;
(ii) of any stop order or notification from Securities and Exchange Commission
or any other jurisdiction as to the suspension of the effectiveness of the
Registration Statement; and (iii) of the end of any suspension hereunder.
(g) With a view to making available to Purchaser the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time permit
Purchaser to sell Shares to the public without registration or pursuant to
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the second anniversary of the Closing Date or (B) such
date as all of the Shares shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
Exchange Act and maintain registration of its Common Stock under Section 12 of
the Exchange Act; and (iii) furnish to Purchaser upon request, as long as
Purchaser owns any Shares, (A) a written statement by the Company that it has
complied with the reporting requirements of the Exchange Act, (B) a copy of the
most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail Purchaser of any
rule or regulation of the SEC that permits the selling of any such Shares
without registration.
5
<PAGE> 9
5.2 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify Purchaser and hold Purchaser
harmless from and against any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) to which Purchaser may become subject (under
the Securities Act, Exchange Act, state securities laws or otherwise) insofar as
such losses, claims, damages or liabilities (or actions proceedings or
settlements in respect thereof) arise out of, or are based upon, (i) any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, on the effective date thereof or any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, (ii) the omission or the alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
or (iii) any failure by the Company (or its agents) to fulfill any undertaking
included in the Registration Statement, and the Company will, as incurred,
reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, loss, damage,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement (or omission) made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Purchaser specifically
for use in preparation of the Registration Statement, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement (or omission) in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to Purchaser
by the Company prior to the pertinent sale or sales by Purchaser. The Company
will reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this section and the
possibility that such payments might later be held to be improper, provided,
that (i) to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them and (ii) such persons
shall provide to the Company, upon request, reasonable assurances of their
ability to effect any refund, when and if due.
(b) Purchaser agrees to indemnify and hold harmless the Company
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which the Company may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of Purchaser specifically for use in preparation of the
Registration Statement, provided, however, that Purchaser shall not be liable in
any such case for any untrue statement included in any Prospectus which
statement has been corrected, in writing, by Purchaser and delivered to the
Company before the sale from which such loss occurred, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by Purchaser, provided, further, however, that the
liability of Purchaser hereunder shall be limited to the proceeds received by
Purchaser from the sale of the Shares covered by such Registration Statement;
and provided, further, however, that the obligations of Purchaser hereunder
shall not apply to amounts paid in settlement of any
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<PAGE> 10
such loss, claim, damage, liability, or action settlement is effected without
the consent of Purchaser. Purchaser will reimburse the Company for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim up to the limits set forth herein
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligations under this section and the possibility that
such payments might later be held to be improper, provided, that (i) to the
extent any such payment is ultimately held to be improper, the persons receiving
such payments shall promptly refund them and (ii) such persons shall provide to
Purchaser, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the commencement of any action in respect of which indemnity is to
be sought against an indemnifying person pursuant to this Section 5.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume and undertake the defense thereof, with
counsel reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume and undertake the defense thereof, the indemnifying person
shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense
thereof; provided, however, that if there exists or shall exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified person
and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person.
(d) If the indemnification provided for in this Section 5.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions proceedings or settlements in respect thereof) referred
to therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchaser
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or Purchaser on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Purchaser agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by
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<PAGE> 11
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d),
Purchaser shall not be required to contribute any amount in excess of the amount
by which the amount received by Purchaser (net of Selling Expenses) from the
sale of the Shares to which such loss relates exceeds the amount of any damages
which Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Purchaser under this
Section 5.2 shall be in addition to any liability which the Company and
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company or Purchaser within
the meaning of the Securities Act.
SECTION 6. RESTRICTIONS ON TRANSFERABILITY OF SHARES: COMPLIANCE WITH SECURITIES
ACT
6.1 RESTRICTIONS ON TRANSFERABILITY. The Shares shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
6.2 RESTRICTIVE LEGEND. Each certificate representing Shares shall bear
substantially the following legends (in addition to any legends required under
applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE COMMON STOCK
PURCHASE AGREEMENT DATED DECEMBER 30, 1999 BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 5.1 AND 6.3 OF THE
AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY.
Upon the request of Purchaser, the Company shall remove the foregoing
legend from the certificates evidencing the Shares and issue to Purchaser new
certificates free of any transfer legend if with such request, and at the
request of the Company, the Company shall have received
8
<PAGE> 12
an opinion of counsel reasonably satisfactory to the Company, to the effect that
any transfers by Purchaser of such Shares may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws.
6.3 TRANSFER OF SHARES AFTER REGISTRATION. Purchaser hereby covenants
with the Company not to make any sale of the Shares except either (i) in
accordance with the Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus, (ii) in a
private sale transaction permitted under the Securities Act, or (iii) in
accordance with Rule 144, in which case Purchaser covenants to comply with Rule
144. Purchaser further acknowledges and agrees that such Shares are not
transferable on the books of the Company unless the certificate submitted to the
Company's transfer agent evidencing such Shares is accompanied by a separate
certificate executed by an officer of, or other person duly authorized by, the
Purchaser in the form attached hereto as Exhibit B.
6.4 PURCHASER INFORMATION. Purchaser covenants that it will promptly
notify the Company in writing of any changes in the information set forth in the
Registration Statement regarding Purchaser.
SECTION 7. MISCELLANEOUS
7.1 WAIVERS AND AMENDMENTS. The terms of this Agreement may be waived or
amended with the written consent of the Company and Purchaser.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of New York without any
regard to conflicts of laws principles.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
Purchaser and the Closing. With respect to any registration made pursuant to
this Agreement, the covenants and agreements set forth in section 4.1 shall
continue in effect until all obligations hereunder with respect thereto are
fulfilled, and provided that the indemnification and contribution obligations as
set forth in Section 4.2 shall survive for the period of the statute of
limitations with respect thereto.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
Purchaser shall not assign this Agreement without the prior written consent of
the Company, which shall not be unreasonably withheld or delayed.
7.5 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or
Purchaser, as the case may be, at their respective addresses set forth below:
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<PAGE> 13
If to the Company:
Aviron
297 North Bernardo Avenue
Mountain View, CA 94043
Attn: C. Boyd Clarke
President and Chief Executive Officer
Telephone: (650) 919-6500
Facsimile: (650) 919-6610
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Robert J. Brigham, Esq.
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Purchaser:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Chief Financial Officer
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
With copies to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
All notices and other communications shall be effective upon the earlier
of actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such
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<PAGE> 14
notice or communication shall have been deposited in the United States mail. Any
notice delivered to a party hereunder shall be sent simultaneously, by the same
means, to such party's counsel as set forth above.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.10 EXPENSES. Except as set forth herein, the Company and the Purchaser
each agree to bear their own cost of fees and expenses in connection with the
transactions contemplated herein.
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<PAGE> 15
The foregoing agreement is hereby executed as of the date first above
written.
AVIRON AMERICAN HOME PRODUCTS
CORPORATION
By: /s/ FRED KURLAND By: /s/ GERALD A. JIBILIAN
--------------------------------- ---------------------------------
Fred Kurland
Chief Financial Officer Name: Gerald A. Jibilian
-------------------------------
Title: Vice President
------------------------------
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<PAGE> 16
EXHIBIT A
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on the
signature page. The Agreement must be executed by an individual
authorized to bind the Purchaser.
2. Exhibit A-1 - Stock Certificate Questionnaire: Provide the
information requested by the Stock Certificate Questionnaire;
3. Exhibit A-2 - Registration Statement Questionnaire: Provide the
information requested by the Registration Statement
Questionnaire.
4. Return the signed Purchase Agreement including the properly
completed Exhibit A to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Robert J. Brigham, Esq.
Fax: (650) 857-0663
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to Purchaser by the Company at a later date.
C. Upon the resale of the Shares by Purchaser after the Registration
Statement covering the Shares is effective, as described in the Purchase
Agreement, Purchaser:
(i) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer (prospectuses, and
annual and quarterly reports may be obtained from the Company at
the Purchaser's request); and
(ii) must send a letter in the form of Exhibit B to the
Company so that the Shares may be properly transferred.
13
<PAGE> 17
EXHIBIT A-1
AVIRON
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
<TABLE>
<CAPTION>
<S> <C> <C>
1. The exact name that the Shares are to be
registered in (this is the name that will
appear on the stock certificate(s)). You
may use a nominee name if appropriate:
American Home Products Corporation
2. The relationship between the Purchaser of
the Shares and the Registered Holder
listed in response to item 1 above:
-----------------------------------
3. The mailing address of the Registered
Holder listed in response to item 1 above:
5 Giralda Farms
Madison, New Jersey 07940
4. The Tax Identification Number of the
Registered Holder listed in response to
item 1
above: 13-2526821
</TABLE>
14
<PAGE> 18
EXHIBIT A-2
AVIRON
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should
appear in the Registration Statement:
American Home Products Corporation
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company?
X Yes No
----- -----
If yes, please indicate the nature of any such relationships below:
See documents relating to transactions by and between American Home
Products Corporation, its divisions and affiliates with Aviron.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE> 19
EXHIBIT B
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: Aviron
297 N. Bernardo Avenue
Mountain View, CA 94043
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that American Home Products
Corporation was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about either
(check the applicable box): (i) in accordance with the registration statement,
file number in which case the Purchaser certifies that the requirement of
delivering a current prospectus has been complied with or will be complied with
in connection with such sale, or (ii) in a private sale transaction permitted
under the Securities Act, or: (iii) in accordance with Rule 144 under the
Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies that
it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser:
------------------------------------------------------
Name of Individual
representing Purchaser:
-------------------------------------------------
Title of Individual
representing Purchaser:
-------------------------------------------------
Signature by:
Individual representing
Purchaser:
--------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.13
AVIRON
COMMON STOCK PURCHASE AGREEMENT
FEBRUARY 3, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. Purchase and Sale of Common Stock.................................................1
Section 2. Closing Date; Delivery............................................................1
2.1 Closing Date.........................................................................1
2.2 Delivery.............................................................................1
Section 3. Representations, Warranties and Covenants of Purchaser............................1
3.1 Authorization........................................................................1
3.2 Investment Experience................................................................1
3.3 Investment Intent....................................................................2
3.4 Registration or Exemption Requirements...............................................2
3.5 Restriction on Short Sales...........................................................2
Section 4. Representations, Warranties and Covenants of Company..............................2
4.1 Organization, Good Standing and Qualification........................................2
4.2 Authorization and Rights.............................................................3
4.3 Listing of Shares....................................................................3
4.4 Maintaining Listing of Shares........................................................3
4.5 Publicity............................................................................3
4.6 Filings..............................................................................3
Section 5. Registration Rights...............................................................3
5.1 Registration Requirements............................................................3
5.2 Indemnification and Contribution.....................................................5
Section 6. Restrictions on Transferability of Shares: Compliance with Securities Act.........8
6.1 Restrictions on Transferability......................................................8
6.2 Restrictive Legend...................................................................8
6.3 Transfer of Shares after Registration................................................9
6.4 Purchaser Information................................................................9
Section 7. Miscellaneous.....................................................................9
7.1 Waivers and Amendments...............................................................9
7.2 Governing Law........................................................................9
7.3 Survival.............................................................................9
7.4 Successors and Assigns...............................................................9
7.5 Entire Agreement.....................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.6 Notices, etc.........................................................................9
7.7 Severability of this Agreement......................................................11
7.8 Counterparts........................................................................11
7.9 Further Assurances..................................................................11
7.10 Expenses............................................................................11
</TABLE>
2
<PAGE> 4
AVIRON
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
February 3, 2000 (the "Effective Date"), by and between AVIRON, a Delaware
corporation (the "Company") and AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation (the "Purchaser").
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
Subject to the terms and conditions of this Agreement, the Company
agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the
Company 103,332 shares of the Company's Common Stock, $0.001 par value (the
"Shares"), for a purchase price of $19.35515 per share.
SECTION 2. CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Cooley Godward LLP,
Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California, 94306 at
10:00 a.m. on February 3, 2000 or at such other time and place upon which the
Company and Purchaser shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
2.2 DELIVERY.
(a) At the Closing, the Company will deliver to Purchaser a
certificate, registered in Purchaser's name, representing the number of shares
of Common Stock to be purchased by Purchaser. Such delivery shall be against
payment of the purchase price therefor by wire transfer to the Company's bank
account.
(b) At the Closing, the Company will deliver to Purchaser an
Officer's Certificate certifying the price per share paid by the Purchaser and
number of shares purchased by Purchaser. The Company will also attach to the
Officer's Certificate a true and correct copy of that certain Stock Purchase
Agreement by and between the Company and Ridgeway Investment Limited dated
February 2, 2000.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser hereby represents and warrants to the Company, effective as of
the Closing Date, as follows:
3.1 AUTHORIZATION. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the Shares and to carry out and perform all
of its obligations under this Agreement; and (ii) this Agreement constitutes the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or
<PAGE> 5
similar laws relating to or affecting the enforcement of creditors' rights
generally and (b) as limited by equitable principles generally.
3.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Shares.
3.3 INVESTMENT INTENT. Purchaser is purchasing the Shares for its own
account as principal, for investment purposes only, and not with a view to, or
for, resale, distribution or fractionalization thereof, in whole or in part,
within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
has completed or caused to be completed the Purchaser Certificates/Questionnaire
attached hereto as Exhibits A-1 and A-2 for use in connection with the sale of
Shares and in preparation of the Registration Statement (as defined below), will
deliver the such Certificates/Questionnaires to the Company on or prior to the
Closing Date, and the responses provided therein shall be true and correct as of
the Closing Date.
3.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the Shares must be held for investment
purposes, and they may not be resold or otherwise transferred except in a
transaction registered under the Securities Act or an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Shares will be imprinted with a legend that prohibits the
transfer of the Shares unless (i) they are registered or such registration is
not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act ("Rule 144") and, if
the Company shall so request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect that the transaction is so
exempt and in compliance with applicable state law.
3.5 RESTRICTION ON SHORT SALES. Purchaser represents and warrants to and
covenants with the Company that Purchaser has not engaged and will not engage in
any short sales of the Company's Common Stock prior to the effectiveness of the
Registration Statement, except to the extent that any such short sale is fully
covered by shares of Common Stock of the Company other than the Shares.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company has the requisite corporate
2
<PAGE> 6
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
on behalf of the Company by a duly authorized officer. This Agreement
constitutes, or shall constitute when executed and delivered by such authorized
officer, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
4.2 AUTHORIZATION AND RIGHTS. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
4.3 LISTING OF SHARES. The Company will take all action necessary on its
part to list the Shares of Common Stock for trading on the NASDAQ system or any
relevant market of system, if applicable.
4.4 MAINTAINING LISTING OF SHares. The Company will continue to take all
action necessary to continue the listing of trading of its Common Stock on the
NASDAQ National Market or any relevant market or system, if applicable, and will
comply in all respects with the Company's reporting, listing (including, without
limitation, the listing of the Shares purchased by the Purchaser) or other
obligations under the rules of the NASDAQ National Market or any relevant market
or system.
4.5 PUBLICITY. Except as required by law or applicable legal process,
the Company may not issue a press release or otherwise make a public statement
or announcement with respect to the transactions contemplated hereby without the
prior written consent of Purchaser.
4.6 FILINGS. The Company will deliver and make available at the
Purchaser's request all filings filed with the Securities Exchange Commission
made after the execution hereof (collectively, the "Commission Filings"). The
Company has not provided to the Purchaser any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective dates, each
of the Commission Filings complied in all material respects with the
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Commission promulgated thereunder and other
federal, state, and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Commission Filings
referred to above contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Filings comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. No
event or circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses,
3
<PAGE> 7
properties, prospects, operations, or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
SECTION 5. REGISTRATION RIGHTS
5.1 REGISTRATION REQUIREMENTS
(a) Except as provided in paragraph (d) below, the Company shall
use its best efforts to prepare and file a registration statement on Form S-3
with the SEC under the Securities Act within 180 days from the date of this
Agreement to register the resale of the Shares by Purchaser (the "Registration
Statement") and to use its best efforts to cause the Registration Statement to
be declared effective as soon as practicable. In the event that at any time the
filing of such Registration Statement is undertaken or is required to be
undertaken the Company fails to qualify for use of Form S-3 (or other available
form for similar type securities registration) for purposes of registering for
resale the Shares, the Company shall cause a registration statement on Form S-1
(or other available form for similar type securities registration) to be filed
as soon as practicable thereunder. The Purchaser agrees to furnish promptly to
the Company in writing all information reasonably required by the Company to
file such Registration Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser shall pay all Selling Expenses (as defined below).
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions herein
described, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
and independent public accountants for the Company, blue sky fees, transfer
agent fees and expenses and the expense of any special audits incident to or
required by any such registration. "Selling Expenses" shall mean selling
commissions, underwriting fees and stock transfer taxes applicable to the
Shares.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earliest of (A) the second
anniversary of the Closing Date, (B) such date as all of the Shares have been
resold or (C) such time as all of the Shares held by Purchaser can be sold
without restriction pursuant to Rule 144 under the Securities Act; (ii) prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Registration
Statement; (iii) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
Purchaser from time to time may reasonably request in order to facilitate the
public sale or other disposition of all or any of the Shares held by Purchaser;
(iv) cause all Shares registered as described herein to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (v) provide a
transfer agent and registrar for all Shares registered pursuant to the
Registration Statement and a CUSIP number for all such Shares; (vi) otherwise
use its best efforts promptly to comply with all applicable rules and
regulations of the SEC; and (vii) file the documents required of the Company and
otherwise use its best efforts
4
<PAGE> 8
promptly to obtain, if applicable, and maintain requisite blue sky clearance in
(A) all jurisdictions in which any of the Shares are originally sold and (B) all
other states specified in writing by Purchaser, provided as to clause (B),
however, that the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not now so qualified
or has not so consented. The Company shall use its best efforts to qualify for
use of Form S-3 or other similar form then available under the Securities Act to
register the resale of the Shares and to maintain such qualification during the
periods described in paragraph (i).
(d) The Company may delay the filing of the Registration
Statement for up to forty-five (45) days by giving written notice to Purchaser
if the Board of Directors of the Company shall have determined in good faith
that the Company may be required to disclose any material corporate development
which disclosure may have a material effect on the Company.
(e) Following the effectiveness of the Registration Statement,
the Company may, at any time, but not more than once in any six-month period,
suspend the effectiveness of such registration statement for up to 30 days, as
appropriate (a "Suspension Period"), by giving notice to Purchaser, if the
Company shall have determined that the Company may be required to disclose any
material corporate development which disclosure may have a material effect on
the Company. The Company agrees to use commercially reasonable efforts to
minimize the length of any such suspension. The duration of any Suspension
Period shall be added to the period of time that the Company agrees to keep the
Registration Statement effective. Purchaser agrees that, upon receipt of any
notice from the Company of a Suspension Period, Purchaser shall forthwith
discontinue disposition of shares covered by such Registration Statement or
prospectus until Purchaser (i) is advised in writing by the Company that the use
of the applicable prospectus may be resumed, (ii) has received copies of a
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
(f) The Company will, as expeditiously as possible, notify
Purchaser (i) of the effective date of the Registration Statement and the date
when any post-effective amendment the Registration Statement becomes effective;
(ii) of any stop order or notification from Securities and Exchange Commission
or any other jurisdiction as to the suspension of the effectiveness of the
Registration Statement; and (iii) of the end of any suspension hereunder.
(g) With a view to making available to Purchaser the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time permit
Purchaser to sell Shares to the public without registration or pursuant to
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the second anniversary of the Closing Date or (B) such
date as all of the Shares shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
Exchange Act and maintain registration of its Common Stock under Section 12 of
the Exchange Act; and (iii) furnish to Purchaser upon request, as long as
Purchaser owns any Shares, (A) a written statement by the Company that it has
complied with the reporting requirements of the Exchange Act, (B) a copy of the
most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail Purchaser of any
rule or regulation of the SEC that permits the selling of any such Shares
without registration.
5
<PAGE> 9
5.2 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify Purchaser and hold Purchaser
harmless from and against any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) to which Purchaser may become subject (under
the Securities Act, Exchange Act, state securities laws or otherwise) insofar as
such losses, claims, damages or liabilities (or actions proceedings or
settlements in respect thereof) arise out of, or are based upon, (i) any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, on the effective date thereof or any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, (ii) the omission or the alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
or (iii) any failure by the Company (or its agents) to fulfill any undertaking
included in the Registration Statement, and the Company will, as incurred,
reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, loss, damage,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon (i) an untrue statement (or omission) made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Purchaser specifically
for use in preparation of the Registration Statement, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement (or omission) in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to Purchaser
by the Company prior to the pertinent sale or sales by Purchaser. The Company
will reimburse Purchaser for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this section and the
possibility that such payments might later be held to be improper, provided,
that (i) to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them and (ii) such persons
shall provide to the Company, upon request, reasonable assurances of their
ability to effect any refund, when and if due.
(b) Purchaser agrees to indemnify and hold harmless the Company
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which the Company may become subject (under
the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of Purchaser specifically for use in preparation of the
Registration Statement, provided, however, that Purchaser shall not be liable in
any such case for any untrue statement included in any Prospectus which
statement has been corrected, in writing, by Purchaser and delivered to the
Company before the sale from which such loss occurred, (ii) the failure of
Purchaser to comply with the covenants and agreements contained in Section 3.1
or 6.3 hereof, or (iii) any untrue statement in any Prospectus that is corrected
in any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by Purchaser, provided, further, however, that the
liability of Purchaser hereunder shall be limited to the proceeds received by
Purchaser from the sale of the Shares covered by such Registration Statement;
and provided, further, however, that the obligations of Purchaser hereunder
shall not apply to amounts paid in settlement of any
6
<PAGE> 10
such loss, claim, damage, liability, or action settlement is effected without
the consent of Purchaser. Purchaser will reimburse the Company for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim up to the limits set forth herein
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligations under this section and the possibility that
such payments might later be held to be improper, provided, that (i) to the
extent any such payment is ultimately held to be improper, the persons receiving
such payments shall promptly refund them and (ii) such persons shall provide to
Purchaser, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the commencement of any action in respect of which indemnity is to
be sought against an indemnifying person pursuant to this Section 5.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume and undertake the defense thereof, with
counsel reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume and undertake the defense thereof, the indemnifying person
shall not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with the defense
thereof; provided, however, that if there exists or shall exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified person
and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person.
(d) If the indemnification provided for in this Section 5.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions proceedings or settlements in respect thereof) referred
to therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchaser
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or Purchaser on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Purchaser agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by
7
<PAGE> 11
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d),
Purchaser shall not be required to contribute any amount in excess of the amount
by which the amount received by Purchaser (net of Selling Expenses) from the
sale of the Shares to which such loss relates exceeds the amount of any damages
which Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Purchaser under this
Section 5.2 shall be in addition to any liability which the Company and
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company or Purchaser within
the meaning of the Securities Act.
SECTION 6. RESTRICTIONS ON TRANSFERABILITY OF SHARES: COMPLIANCE WITH SECURITIES
ACT
6.1 RESTRICTIONS ON TRANSFERABILITY. The Shares shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Shares in order to enforce the foregoing
restrictions.
6.2 RESTRICTIVE LEGEND. Each certificate representing Shares shall bear
substantially the following legends (in addition to any legends required under
applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE COMMON STOCK
PURCHASE AGREEMENT DATED DECEMBER 16, 1999 BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 5.1 AND 6.3 OF THE
AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY.
Upon the request of Purchaser, the Company shall remove the foregoing
legend from the certificates evidencing the Shares and issue to Purchaser new
certificates free of any transfer legend if with such request, and at the
request of the Company, the Company shall have received
8
<PAGE> 12
an opinion of counsel reasonably satisfactory to the Company, to the effect that
any transfers by Purchaser of such Shares may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws.
6.3 TRANSFER OF SHARES AFTER REGISTRATION. Purchaser hereby covenants
with the Company not to make any sale of the Shares except either (i) in
accordance with the Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus, (ii) in a
private sale transaction permitted under the Securities Act, or (iii) in
accordance with Rule 144, in which case Purchaser covenants to comply with Rule
144. Purchaser further acknowledges and agrees that such Shares are not
transferable on the books of the Company unless the certificate submitted to the
Company's transfer agent evidencing such Shares is accompanied by a separate
certificate executed by an officer of, or other person duly authorized by, the
Purchaser in the form attached hereto as Exhibit B.
6.4 PURCHASER INFORMATION. Purchaser covenants that it will promptly
notify the Company in writing of any changes in the information set forth in the
Registration Statement regarding Purchaser.
SECTION 7. MISCELLANEOUS
7.1 WAIVERS AND AMENDMENTS. The terms of this Agreement may be waived or
amended with the written consent of the Company and Purchaser.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of New York without any
regard to conflicts of laws principles.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
Purchaser and the Closing. With respect to any registration made pursuant to
this Agreement, the covenants and agreements set forth in section 4.1 shall
continue in effect until all obligations hereunder with respect thereto are
fulfilled, and provided that the indemnification and contribution obligations as
set forth in Section 4.2 shall survive for the period of the statute of
limitations with respect thereto.
7.4 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Notwithstanding the foregoing,
Purchaser shall not assign this Agreement without the prior written consent of
the Company, which shall not be unreasonably withheld or delayed.
7.5 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
7.6 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or
Purchaser, as the case may be, at their respective addresses set forth below:
9
<PAGE> 13
If to the Company:
Aviron
297 North Bernardo Avenue
Mountain View, CA 94043
Attn: C. Boyd Clarke
President and Chief Executive Officer
Telephone: (650) 919-6500
Facsimile: (650) 919-6610
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Robert J. Brigham, Esq.
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Purchaser:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Chief Financial Officer
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
With copies to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Telephone: (973) 660-5000
Facsimile: (973) 660-7156
All notices and other communications shall be effective upon the earlier
of actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such
10
<PAGE> 14
notice or communication shall have been deposited in the United States mail. Any
notice delivered to a party hereunder shall be sent simultaneously, by the same
means, to such party's counsel as set forth above.
7.7 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
7.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.9 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
7.10 EXPENSES. Except as set forth herein, the Company and the Purchaser
each agree to bear their own cost of fees and expenses in connection with the
transactions contemplated herein.
11
<PAGE> 15
The foregoing agreement is hereby executed as of the date first above
written.
AVIRON AMERICAN HOME PRODUCTS
CORPORATION
By: /s/ FRED KURLAND By: /s/ THOMAS M. NEE
------------------------------ -------------------------------------
Fred Kurland
Senior Vice President and Name: Thomas M. Nee
Chief Financial Officer ------------------------------------
Title: Vice President
----------------------------------
12
<PAGE> 16
EXHIBIT A
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on the
signature page. The Agreement must be executed by an individual
authorized to bind the Purchaser.
2. Exhibit A-1 - Stock Certificate Questionnaire: Provide the
information requested by the Stock Certificate Questionnaire;
3. Exhibit A-2 - Registration Statement Questionnaire: Provide the
information requested by the Registration Statement
Questionnaire.
4. Return the signed Purchase Agreement including the properly
completed Exhibit A to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Robert J. Brigham, Esq.
Fax: (650) 857-0663
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to Purchaser by the Company at a later date.
C. Upon the resale of the Shares by Purchaser after the Registration
Statement covering the Shares is effective, as described in the Purchase
Agreement, Purchaser:
(i) must deliver a current prospectus, and annual and
quarterly reports of the Company to the buyer (prospectuses, and
annual and quarterly reports may be obtained from the Company at
the Purchaser's request); and
(ii) must send a letter in the form of Exhibit B to the
Company so that the Shares may be properly transferred.
13
<PAGE> 17
EXHIBIT A-1
AVIRON
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
<TABLE>
<S> <C>
1. The exact name that the Shares are to be
registered in (this is the name that will
appear on the stock certificate(s)). You
may use a nominee name if appropriate:
American Home Products Corporation
2. The relationship between the Purchaser of
the Shares and the Registered Holder
listed in response to item 1 above:
-----------------------------------
3. The mailing address of the Registered
Holder listed in response to item 1 above:
5 Giralda Farms
Madison, New Jersey 07940
4. The Tax Identification Number of the
Registered Holder listed in response to
item 1
above: 13-2526821
</TABLE>
<PAGE> 18
EXHIBIT A-2
AVIRON
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in
the Registration Statement:
American Home Products Corporation
2. Have you or your organization had any position, office or other
material relationship within the past three years with the Company?
[X] Yes [ ] No
If yes, please indicate the nature of any such relationships below:
See documents relating to transactions by and between American Home
Products Corporation, its divisions and affiliates with Aviron.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 19
EXHIBIT B
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
To: Aviron
297 N. Bernardo Avenue
Mountain View, CA 94043
The undersigned, the Purchaser or an officer of, or other person duly
authorized by the Purchaser, hereby certifies that American Home Products
Corporation was the Purchaser of the shares evidenced by the attached
certificate, and as such, proposes to transfer such shares on or about either
(check the applicable box): (i) in accordance with the registration statement,
file number in which case the Purchaser certifies that the requirement of
delivering a current prospectus has been complied with or will be complied with
in connection with such sale, or (ii) in a private sale transaction permitted
under the Securities Act, or: (iii) in accordance with Rule 144 under the
Securities Act of 1933 ("Rule 144"), in which case the Purchaser certifies that
it has complied with or will comply with the requirements of Rule 144.
Print or type:
Name of Purchaser:
------------------------------------------------------
Name of Individual
representing Purchaser:
-------------------------------------------------
Title of Individual
representing Purchaser:
-------------------------------------------------
Signature by:
Individual representing
Purchaser:
--------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.14
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
AVIRON
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: 340,000
CLASS OF STOCK: Common Stock
INITIAL EXERCISE PRICE: $10.00
DATE OF GRANT: February 16, 2000
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 seven (7) 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.
(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.
1.
<PAGE> 2
2. TERM.
The purchase right and Conversion Right (as defined in Section 7.1)
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;
(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
2.
<PAGE> 3
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 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.
3.
<PAGE> 4
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, in whole or in part, (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 the portion of the Warrant specified for conversion at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Warrant Price, immediately prior to the exercise of the Conversion
Right, of the number of shares to be converted, from the aggregate fair market
value [as determined pursuant to Section 7.3 below], immediately prior to the
exercise of the Conversion Right, of those Shares) 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, and specifying the number of
shares to be converted. Certificates of the shares of stock issuable upon
exercise of the Conversion Right shall be delivered to the Warrantholder within
thirty (30) days following the Company's receipt of this Warrant together with
the aforesaid written statement, 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.
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
4.
<PAGE> 5
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.
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.
5.
<PAGE> 6
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
By: /s/ FRED KURLAND
--------------------------------------
Fred Kurland
Senior Vice President and
Chief Financial Officer
6.
<PAGE> 7
APPENDIX A
NOTICE OF EXERCISE
TO: AVIRON
1. The undersigned hereby elects to purchase shares of the stock of
Aviron, a Delaware 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> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.29
AMENDED AND RESTATED
CONTRACT MANUFACTURE AGREEMENT
THIS AGREEMENT (the "Restated Agreement") is made the June of 1999,
between MEDEVA PHARMA LIMITED ("Medeva"), with offices at Gaskill Road, Speke,
Liverpool L24 9GR, United Kingdom, and AVIRON ("Aviron") with offices at 297
North Bernardo Avenue, Mountain View, California 94043, United States of
America.
RECITALS
A. Medeva carries on the business of, inter alia, manufacture, assembly and
packaging of pharmaceutical products, or components thereof.
B. Medeva and Aviron have collaborated on the development of the manufacturing
process for the Intermediate Product under the terms of that certain
Manufacturing and Development Agreement dated 7th November 1995 (the "1995
Development Agreement").
C. Aviron wishes Medeva to Manufacture the Intermediate Product (as hereinafter
defined), and Medeva is willing to Manufacture the Intermediate Product on the
terms and conditions hereinafter set out.
D. Aviron is the exclusive licensee of the University of Michigan to certain
live attenuated influenza Master Virus Seeds and the technology associated with
and required for the production of certain reassortants therefrom;
E. Aviron and Medeva have entered into that certain Contract Manufacture
Agreement dated April 16, 1997 (the "1997 Contract Manufacture Agreement"), and
wish to amend and restate said agreement as provided in this Restated Agreement.
AGREEMENT
In consideration of the mutual covenants herein set forth, the adequacy of which
consideration is hereby acknowledged, the parties agree as follows:
1 AMENDMENT AND RESTATEMENT.
The parties hereby amend and restate the Contract Manufacture Agreement
dated April 16, 1997, to read in full as set forth below.
2 DEFINITIONS
In this Restated Agreement, the terms below shall have the meanings as
defined herein. Terms defined in the singular form shall include the
plural meaning and vice versa.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
1
<PAGE> 2
2.1 "Agency" means any governmental body responsible for licensing of
the Finished Product for commercial sale and the licensing of
premises and facilities of the Manufacturer.
2.2 "Associated Companies" means (i) in respect of Medeva, any company
which at the relevant time is a subsidiary of that party's ultimate
holding company or any subsidiary of such a subsidiary where the
term subsidiary shall have the meaning as defined in Section 736 of
the English Companies Act 1985 (as amended); and, (ii) in respect of
Aviron, any entity that directly or indirectly owns, is owned by or
is under common ownership with Aviron, where own or ownership means
direct or indirect possession of at least fifty percent (50%) of the
outstanding voting securities of a corporation or a comparable
equity interest in any other type of entity.
2.3 "Aviron Assets" means capital equipment purchased by Aviron for use
in the Manufacture of the Intermediate Product as more particularly
specified in Schedule 1.
2.4 "Aviron Process Technology" means all technology (including
improvements, modifications, or adaptations to the process or method
of Manufacture) specific solely to the Manufacture of the
Intermediate Product or the Vaccine and which was developed and/or
disclosed by Medeva during the Term of this Restated Agreement, the
1997 Contract Manufacture Agreement or the 1995 Development
Agreement, and which is not in the public domain or otherwise
generally available to the public.
2.5 "Aviron Unit" or "AVU" means the manufacturing facility where the
Intermediate Product is Manufactured, as further described and
delineated in the map attached as Schedule 2, and as expanded from
time to time by mutual agreement of the parties. For the avoidance
of doubt, all plant and machinery save for the Aviron Assets and all
buildings, fixtures and fittings comprising the Aviron Unit belong
to and are owned and operated by Medeva.
2.6 "Best Endeavours" shall mean that the relevant party shall take such
action in complying with its obligations for which such endeavors
are required that is, having regard to costs and degree of
difficulty, commercially practicable, and that Medeva is not
required to take any action pursuant to this clause which would
undermine its commercial goodwill or standing or lead to its
financial ruin.
2.7 "BLA"shall have the meaning as defined in the Technical Agreement.
2.8 "CAIV Product" means a live, attenuated, intranasally deliverable
cold-adapted influenza vaccine which, when [ * ] produces an [ * ]
that is not less than [ * ] of the [ * ] produced in [ * ].
2.9 "Certificate of Analysis" means documentation provided by suppliers
specifying the characteristics of materials being supplied as such
term is understood in U.K. pharmaceutical manufacturing practice.
2.10 "Consistency Lot" means batches of Intermediate Product Manufactured
for the purposes of establishing that the process of Manufacture of
the Intermediate Product can be consistently repeated, as required
for obtaining Agency approval to market, distribute, and sell the
Vaccine.
2.11 "Development" means the development of a process for Manufacture of
Intermediate Product.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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2.12 "Direct Damages" means the [ * ] incurred for [ * ] Intermediate
Product rejected by Aviron pursuant to Clause 6.4.2, and [ * ] of
such Intermediate Product, [ * ].
2.13 "Effective Date" means the date first written above.
2.14 "Eggs" means the specific pathogen-free eggs supplied by Aviron
or its supplier to Medeva for the Manufacture of the Intermediate
Product.
2.15 "ELA" means Medeva's Establishment License Application to be
submitted to the FDA in order to receive the manufacturing
license for the Manufacture of the Intermediate Product.
2.16 "FDA" means Food and Drug Administration of the United States of
America.
2.17 "Finished Product" means the Vaccine in its final form packaged
for sale to the consumer.
2.18 "Flu Season" means, in respect of the northern hemisphere, the
period of time during a calendar year anticipated to start
approximately in the beginning of August and ending approximately
in January in which it is anticipated that the Vaccine will be
used to vaccinate patients.
2.19 "Force Majeure" means, in relation to either party, any
circumstances beyond the reasonable control of that party
including, without limitation, any Act of God, fire, explosion,
flood, war or hostilities, acts of Government appointed agents,
embargoes or other export restrictions, or perils of the sea.
2.20 "GSA" means the general service area as described in Schedule 4.
2.21 "cGMP" means current FDA Good Manufacturing Practices as set
forth in the United States 21 Code of Federal Regulations Parts
210 and 211 as amended from time to time, and the corresponding
regulations of PIC and the EU, [ * ] during the term of this
Restated Agreement.
2.22 "Harvest" shall have the meaning as defined in the Technical
Agreement.
2.23 "Improvement" means any improvements, modifications or
adaptations to the process of Manufacture of the Intermediate
Product;
2.24 "Intermediate Product" means Monovalent Virus Harvest and/or NAF,
Manufactured according to and conforming with the Specifications
which is intended for use in the manufacture of the Vaccine.
2.25 "Manufacture" means the production of the Intermediate Product
from the Raw Materials and shall include production of [ * ],
production of [ * ] and "Manufactured," "Manufacturing," and
"Manufacturer" shall be interpreted accordingly.
2.26 "Manufacturing Instructions" means the documentation of the
Manufacturing process and applicable standard operating
procedures which must be followed by Medeva in the
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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Manufacture of the Intermediate Product incorporated as part of
Appendix 2 to the Technical Agreement.
2.27 "Manufacturing Period" means a period of one year starting with
[ * ] and ending [ * ] of the next calendar year during the term
of this Restated Agreement.
2.28 "Manufacturing Records" "Manufacturing Records" means
manufacturing, facility/systems and environmental monitoring and
cleaning, packaging and quality control and quality assurance
records generated by Medeva in the course of the Manufacture,
including, without limitation, the Manufacturing Instructions,
production, packaging, quality control, and quality assurance
records.
2.29 "Manufacturing Working Virus Seeds" means the virus reassortants
produced by Medeva, from time to time, from the Master Virus
Seeds, and from which the Monovalent Virus Harvest is produced.
2.30 "Master Donor Strains" shall mean the live attenuated influenza
strains derived by Dr. Maassab and designated Type A/Ann
Arbor/6/60-H2N2 and Type B/Ann Arbor/1/66, exclusively licensed
from Michigan to Aviron, and which are modified at Aviron to
produce Master Virus Seeds.
2.31 "Master Virus Seeds" means certain reassortants produced by
Aviron from the Master Donor Strain.
2.32 "Medeva Process Technology" means all technology (including
improvements, modifications, or adaptations to the process or
method of Manufacture) developed, owned, controlled or licensed
(with the right to sub-license) by Medeva pertaining to [ * ] or
any other formulation of a product [ * ] which is not Aviron
Process Technology including such process technology arising from
the 1995 Development Agreement and the 1997 Contract Manufacture
Agreement between the parties, and which is not in the public
domain or otherwise generally available to the public.
2.33 "Michigan" means 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.
2.34 "Michigan Agreement" means the Material Transfer and Intellectual
Property Agreement dated February 24, 1995 between Michigan and
Aviron, as amended annexed hereto as Schedule 5.
2.35 "Monovalent Virus Harvest" means each of the three virus strains
to be incorporated in the Vaccine for a given Flu Season in bulk
form.
2.36 "MPU" stands for Media Preparation Unit and means the facility
where media for Manufacture is prepared, as further described in
Schedule 6.
2.37 "NAF" means "Normal Allentoic Fluid" used as a diluent in the
Vaccine.
2.38 "Named Executives" means a director of Medeva and a vice
president of Aviron designated and replaced from time to time by
the respective party. As of the Effective Date the Named
Executive of Medeva shall be [ * ] and the Named
Executive of Aviron shall be [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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2.39 "PAI" means pre-approval inspection.
2.40 "PIC" means the Pharmaceutical Inspection Convention.
2.41 "PPI" means the Producer Price Index produced by the UK
Statistics Office.
2.42 "Process Evaluation Team" shall have the meaning as set forth in
the Technical Agreement.
2.43 "Raw Materials" means the components defined in the Technical
Agreement and required by Medeva in the Manufacture of the
Intermediate Product.
2.44 "Recruited" means the person concerned is on the payroll of
Medeva or has formally accepted an offer of employment with
Medeva and Recruitment shall be interpreted accordingly.
2.45 "Restricted Information" means (i) Master Donor Strains, Master
Virus Seeds and Working Seeds; (ii) all Technical Information
relating to Master Donor Strains, the Master Virus Seeds and the
Manufacture of the Intermediate Product; (iii) all information
relating to the Discloser's business; and (iv) all information
arising pursuant to this Restated Agreement, the 1995 Development
Agreement and the 1997 Contract Manufacture Agreement between the
parties, disclosed by one party to this Restated Agreement (the
"Discloser") to the other (the "Recipient") in connection with
this Restated Agreement, excluding any such information which:
2.45.1 is or was already known to the Recipient at the time of
disclosure by the Discloser as evidenced by the written
records of the Recipient; or
2.45.2 was at the time of such disclosure or communication by the
Discloser or thereafter becomes or became published,
accessible to the public or otherwise in the public domain
other than through any act or omission of the Recipient;
or
2.45.3 must be disclosed to government inspectors in the
discharge of statutory obligations provided that before
disclosure the Recipient shall use 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; or
2.45.4 must be disclosed by the Recipient to the relevant Agency
in the course of applying for, obtaining or maintaining
regulatory approval; or
2.45.5 is hereafter disclosed to the Recipient by a third party,
who to the knowledge of the Recipient does not have any
obligations of confidentiality to any third party or who
has not, to the actual knowledge of the Recipient, derived
it directly or indirectly from the Discloser or the
University of Michigan; or
2.45.6 is required to be disclosed by law.
2.46 "Specifications" means requirements and specifications for the
Intermediate Product and its Manufacture, attached to the
Technical Agreement, as may be amended from time to time in
accordance with the terms of this Agreement.
2.47 "Specifications Working Group" or "SWG" shall have the same
meaning as set forth in the Technical Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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2.48 "SPF Unit" means the facility where Eggs are [ * ], as further
described in Schedule 7.
2.49 "Technical Agreement" means the Technical Agreement, as amended
from time to time, entered into between the parties on even date
herewith and attached hereto and incorporated herein as Schedule
8.
2.50 "Technical Information" means all registration data, know-how,
experience, instructions, standards, methods, test and trial
results, manufacturing and formulation processes, hazard
assessments, quality control standards, formulae, specifications,
storage and data, samples, drawings, designs, description of
packaging materials and all other relevant information relating
to the Intermediate Product or its design, Manufacture,
formulation, handling, storage and use.
2.51 "Term of Agreement" means the period from April 16, 1997 until
the expiration or termination of this Restated Agreement as
provided in Clause 15.
2.52 "Trained" means the employee of Medeva has undergone Medeva's
induction process which covers the basic theory and principles of
Health and Safety, cGMP, work in cleanrooms and basic
microbiology and has started in depth job training.
2.53 "Vaccine" means Aviron's live, attenuated, intranasally delivered
cold adapted influenza vaccine in the frozen formulation made
using the Master Donor Strains (i.e. which, during the dating
period established by the FDA, maintains stability at
temperatures of [ * ] and may maintain stability at temperatures
of [ * ] but does not maintain stability at [ * ] or at [ * ] as
further described in the FDA BLA.
2.54 "W-A" means Wyeth-Ayerst Laboratories Division of America Home
Products, Corp. or any entity that directly or indirectly owns,
is owned by or is under common ownership with W-A, where own or
ownership means direct or indirect possession of at least fifty
percent (50%) of the outstanding voting securities of a
corporation or a comparable equity interest in any other type of
entity.
3 CONTRACT MANUFACTURE
3.1 APPOINTMENT. Aviron hereby appoints Medeva and Medeva accepts the
appointment as a contract Manufacturer of the Intermediate
Product for the term of this Restated Agreement. During the term
of this Restated Agreement, Medeva will Manufacture for Aviron
the Intermediate Product in accordance with this Restated
Agreement, the Technical Agreement and the Specifications.
3.2 SUPPLY OF MASTER VIRUS SEEDS; EXPORT OF INTERMEDIATE PRODUCT.
Aviron shall [ * ] and shall [ * ] the importation into the
United Kingdom and [ * ] Medeva of [ * ] and [ * ] used for
growing the Manufacturing Working Virus Seeds. Aviron shall [ * ]
of the Intermediate Product from the United Kingdom and [ * ] in
accordance with the [ * ] set forth in [ * ] Medeva shall assist,
at Aviron's reasonable request [ * ] with the export of the
Intermediate Product from the United Kingdom.
3.3 COORDINATION. Technical staff of Aviron and Medeva shall
cooperate and coordinate closely the points of intersection
between tasks relating to the Manufacture, release and shipping
of the Intermediate Product performed by Medeva and by Aviron.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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3.4 SAMPLING. Samples of the Intermediate Product and the Raw
Materials shall be retained, stored and provided to Aviron in the
manner set forth in the Technical Agreement.
3.5 RELEASE. The release of the Product shall be carried out in the
manner set forth in the Technical Agreement.
3.6 RECORD MAINTENANCE. All provisions pertaining to the
maintenance and retention of Manufacturing Records are set
forth in the Technical Agreement;
3.7 OTHER OBLIGATIONS OF MEDEVA. Medeva covenants the following:
3.7.1 MANUFACTURE. It will carry out the Manufacture in
accordance with this Restated Agreement the Technical
Agreement and the Specifications;
3.7.2 MAINTENANCE. It will maintain the GSA, the MPU, the SPF
Unit, the Aviron Unit and Medeva's equipment used in the
Manufacture pursuant to Medeva's standard procedure
pertaining to the maintenance of equipment of a similar
nature to the Aviron Unit and Medeva's equipment in
compliance with Clauses 3.7.1, 3.7.6 and 3.7.7;
3.7.3 SUPPLY OF RAW MATERIALS. All Raw Materials supplied by
Medeva and used in Manufacture will comply with the
Technical Agreement and the Specifications;
3.7.4 STORAGE OF MATERIALS. It will keep the Master Virus Seed,
the Manufacturing Working Virus Seed, any other Raw
Materials and Intermediate Product under environmental
conditions as defined in the Technical Agreement and the
Specifications;
3.7.5 COMPLIANCE WITH CGMP. It will Manufacture all
Intermediate Product in compliance with cGMP; provided,
that if the [ * ] of the [ * ] and [ * ] the parties will
[ * ] and [ * ]
3.7.6 COMPLIANCE WITH HEALTH AND SAFETY AND ENVIRONMENTAL
REGULATIONS. It will comply with applicable UK and EU
health and safety and environmental laws and regulations
in the Manufacture of the Intermediate Product.
3.7.7 INSPECTIONS BY AVIRON
3.7.7.1 It will permit, [ * ] of this Agreement and during
normal business hours and upon reasonable notice,
representatives of Aviron and its Associated
Companies [ * ] including a representative of W-A
[ * ] any such [ * ] of any representatives of
Aviron, its Associated companies or W-A [ * ] to
have access to any relevant records in connection
with such Manufacture, and to inspect the relevant
parts of the premises where Manufacture of
Intermediate Product is carried out, and assess
its compliance with cGMP and any current practices
of any relevant Agency, and to discuss any related
issues with Medeva's management personnel.
3.7.7.2 Notwithstanding the foregoing, Medeva's
obligation to allow such visitors is on condition
that: (a) Aviron, Aviron's Associated Companies
and W-A, respectively, procure agreement from such
visitors in writing
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 8
to observe the regulations of Medeva regarding
security, health and safety and any other
applicable regulations at the relevant premises,
and confidentiality obligations corresponding to
those contained in this Restated Agreement; (b)
any visit shall be under the specific supervision
of Medeva [ * ] and (c) Aviron, Aviron's
Associated Companies and W-A, respectively, [ * ]
and shall [ * ] to [ * ] or any [ * ] or [ * ] or
[ * ] on [ * ] and (d) Aviron, Aviron's
Associated Companies and W-A use their Best
Endeavours to ensure that the visit is of minimal
disruption to Medeva's day to day business.
3.7.8 INSPECTIONS BY AGENCIES.
3.7.8.1 It will allow representatives of any Agency to
inspect the relevant parts of its premises where
the Manufacture of the Intermediate Product is
carried out and to inspect the Manufacturing
Records to ensure compliance with cGMP and other
practices or regulations. In the event that an
Agency inspects those areas of Medeva's premises
used in the Manufacture of the Intermediate
Product, Medeva shall provide as much notice as
practicable of such inspection to Aviron and shall
permit representatives of Aviron to [ * ] said
inspection. Aviron acknowledges that its
representatives [ * ] the [ * ] to [ * ] in [ * ]
except that [ * ] the [ * ] to [ * ] in the [ * ]
of [ * ] and [ * ] any wrap-up sessions conducted
by the Agency representative which relate solely
to the Manufacture of the Intermediate Product
and/or the Aviron Unit.
3.7.8.2 In connection with the PAI, Medeva will permit
[ * ] Aviron's [ * ] to be present and participate
[ * ] relating to the Vaccine; provided, however,
that Medeva shall have the right [ * ] where he
would become privy to confidential information not
related to the Vaccine. Furthermore, in
preparation of the PAI, Medeva shall [ * ] and
during the PAI shall make accessible to the Agency
[ * ] all documentation specifically associated
with the Manufacture of the Intermediate Product.
3.7.8.3 Medeva shall inform Aviron of any questions or
recommendations made by the Agency and shall
provide to Aviron copies of any written questions
or recommendations received from the Agency
insofar as they pertain to the Manufacture of the
Intermediate Product. Medeva and Aviron shall
[ * ] any written questions and recommendations of
the Agency and [ * ] any verbal questions or
recommendations of the Agency or regulatory body
that do not require an immediate response subject
always to [ * ] right to have [ * ] the contents
of any response to a question or recommendation of
an agency that pertains to [ * ] and save where
the response to the question or recommendation of
the agency pertains [ * ] in which case [ * ]
shall have [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 9
[ * ] as to the contents of such response. In the
case of a question or recommendation made by the
Agency requiring [ * ] Medeva's representatives
present during said inspection shall [ * ] and
shall [ * ] the response made. Further, Medeva
shall promptly send to Aviron a copy of any
reports, citations, or warning letters received by
Medeva in connection with an Agency Inspection to
the extent such documents relate to or affect the
Manufacture of the Intermediate Product.
3.7.9 RECALL OF THE FINISHED PRODUCT. It will, [ * ] provide to
Aviron such assistance with any recall of the Finished Product
as reasonably necessary.
3.7.10 MANUFACTURING LICENSE. It is in possession of, and during the
term of the Restated Agreement will [ * ] to maintain, a
current Manufacturing License No ML 0039/02 granted pursuant
to the Medicines Act 1968.
3.7.11 RESOURCES. It will [ * ] from time to time and [ * ]
reasonably necessary to perform its obligations under this
Restated Agreement, in particular in the areas of:
o training of employees who will be engaged in the
Manufacture
o quality assurance
o quality services
o regulatory affairs
o Manufacture
o quality control
o validation
o documentation
o facility maintenance
o GSA, SPF Unit, and MPU operation
o warehousing
o calibration
o release and shipping
Aviron and Medeva agree to discuss and review on an ongoing
basis such staffing and resources. Medeva shall be entitled to
amend staffing levels in accordance with clauses 9.2.6.4,
9.2.6.5. and 9.2.6.6.
3.7.12 TECHNICAL SUPPORT. It shall provide its personnel for
technical support as set forth in Schedule 9, including,
without limitation, for:-
3.7.12.1 [ * ] the Specifications Working Group; and
3.7.12.2 [ * ] the Process Evaluation Team; and
3.7.12.3 assisting Aviron with its post-approval FDA BLA
maintenance, preparation, filing and post-approval
maintenance of BLAs in territories other than the
USA.
3.7.12.4 PAIs of Agencies other than the FDA.
3.7.13 Any reasonable assistance to Aviron with obtaining FDA
approval of the BLA, preparation and attendance of FDA's PAI,
training of Medeva employees,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 10
continuing validation, engineering changes which are
[ * ] to the Manufacturing process, routine post-approval
inspections, PAIs, maintenance of documentation ([ * ]),
transfer of Medeva Process Technology to Aviron's
sublicensees [ * ] over the life of the Restated
Agreement (out-of-pocket expenses and travel as provided
in Medeva's company travel policy to be invoiced and
charged separately to Aviron), [ * ] in the [ * ] of the
[ * ] set forth in Schedule 9. Any additional [ * ] will
be provided pursuant to Clause 3.7.12
3.7.14 The cost of any actions or assistance to be undertaken or
provided by Medeva relating only to the Vaccine required by an
Agency after BLA approval will be [ * ] based on [ * ].
3.7.15 MANUFACTURE OF MANUFACTURING WORKING VIRUS SEEDS. During each
manufacturing period Medeva shall manufacture, [ * ] strains
of Manufacturing Working Virus Seeds for which Aviron has
supplied the Master Virus Seeds, in sufficient quantities to
undertake the Manufacture of Monovalent Virus Harvest. Should
Aviron require [ * ] Manufacturing Working Virus Seeds to be
manufactured by Medeva it shall notify Medeva of such and
shall [ * ] for each additional Manufacturing Working Virus
Seed manufactured by Medeva.
3.7.16 Y2K Medeva confirms that it has reviewed its principal
systems for Y2K compliance and that a programme is in place
for the review of other areas of potential concern such as
embedded microchips.
3.7.17 SPF UNIT. Medeva will reorganize its internal manufacturing
processes for products other than the Intermediate Product in
such a manner that within [ * ] from the Effective Date, any
eggs processed in the Aviron incubators in the SPF Unit will
be used only in the Manufacture of the Intermediate Product.
3.8 OTHER OBLIGATIONS OF AVIRON. Aviron covenants the following:
3.8.1 SUPPLY OF TECHNICAL INFORMATION. It will supply to Medeva
and promptly update all Technical Information in its
possession which is necessary to enable Medeva to
Manufacture the Intermediate Product, including all
information regarding health, safety, environmental
issues, and FDA regulations, as it becomes known;
3.8.2 TECHNICAL ASSISTANCE. It will provide such technical
assistance, [ * ] as may be required to enable the
effective transfer of the Technical Information under
3.8.1 such that Medeva should reasonably be expected to be
able to Manufacture the Intermediate Product on the basis
of such Technical Information;
3.8.3 SUPPLY OF RAW MATERIALS. It shall provide the Raw
Materials set forth in Schedule 10 to Medeva in accordance
with the requirements for such agreed between the parties
pursuant to clause 6.2. Such Raw Materials shall comply
with the Technical Agreement and the Specifications, and
where appropriate shall be accompanied by a Certificate of
Analysis;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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3.8.4 INSTRUCTIONS REGARDING RECORD KEEPING. It shall notify
Medeva of, and Medeva shall comply with any special
requirements in respect of record keeping that may be
necessary to comply with Aviron's Product Tracking and/or
Recall Procedure or other Agency requirements. If such
requirements of Aviron [ * ] of [ * ] of Medeva , [ * ] on
[ * ] including, without limitation by [ * ] should the
compliance with such requirements [ * ] Medeva.
3.8.5 RECALL OF THE FINISHED PRODUCT. Aviron shall notify Medeva
of any recall of the Finished Product and shall, in that
notice, provide as much detail as possible of the reason
for the recall.
3.8.6 Y2K. Aviron confirms that it has reviewed its principal
systems and the systems of its suppliers of Raw Materials
for Y2K compliance and that a programme is in place for
the review of other areas of potential concern such as
embedded microchips.
3.9 NOTIFICATION.
3.9.1 Aviron shall notify Medeva of [ * ] in any [ * ] of the
[ * ] and any [ * ] of [ * ] the Finished Product for a
[ * ] for [ * ] and its [ * ] If any regulatory
requirements [ * ] with the then-current requirements
applicable to the Manufacture of the Intermediate Product
under this Restated Agreement (including without
limitation, cGMP, and applicable health, safety and
environmental regulations) or [ * ] of the Finished
Product [ * ] in relation to [ * ] or its [ * ] the
parties will discuss [ * ] on how to [ * ] and Aviron
shall [ * ] the Finished Product [ * ] or for the [ * ]
the [ * ] how to [ * ] or [ * ]. Medeva hereby
acknowledges that the Finished Product is anticipated to
be marketed in [ * ], and that there are no conflicts or
difficulties regarding product liability insurance
regarding those territories.
3.9.2 Aviron shall notify Medeva promptly upon receiving any
request of Michigan for the transfer of Medeva Process
Technology or Manufacturing Instructions as provided under
the terms of the Michigan Agreement.
4 AVIRON UNIT.
4.1 USE OF AVIRON UNIT. The Aviron Unit, in addition to other
facilities as required, will be made available for the
Manufacture of the Intermediate Product during the term of this
Restated Agreement [ * ] and [ * ] in respect of [ * ]
Furthermore and subject to Aviron's agreement, the Aviron Unit
may be used by Medeva for the conduct of research and development
towards the improvement of the Intermediate Product and the
Manufacture, provided however, that any and all proprietary
rights to such improvements shall be governed by Clause 7. Aviron
shall pay to Medeva the sums set forth in Schedule 11 for use of
the Aviron Unit. [ * ] pursuant to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] the Aviron Unit shall not be used by Medeva outside the
scope of this Restated Agreement without the consent of
Aviron.
4.2 AVIRON ASSETS.
4.2.1 PURCHASE. Medeva shall be entitled to purchase and install
equipment, all replacement tooling or parts or make
modifications to the buildings and services as may be
required for the Manufacture of the Intermediate Product,
[ * ] of which [ * ] to [ * ] upon [ * ] Notwithstanding
the above, Medeva shall not purchase and/or install any
such equipment, tooling or parts or make such
modifications [ * ] or where the [ * ] in relation to the
Restated Agreement without first obtaining the prior
written consent of Aviron. Such equipment, tooling or
parts form part of Aviron Assets and shall be deemed
included in Schedule 1. Where the [ * ] Medeva may at its
discretion [ * ] from Aviron such [ * ] up to [ * ] the
[ * ] prior to [ * ]. Medeva will ensure that such items
are in compliance with the requirements of the Agency and
with health and safety and environmental regulations. Any
equipment or tooling purchased by Medeva hereunder and
[ * ] shall [ * ] by Medeva for any purpose outside the
scope of this Restated Agreement without the consent of
Aviron.
4.2.2 OWNERSHIP AND LIABILITY. All Aviron Assets are owned by
Aviron. [ * ] shall bear the risk of loss or damage to
Aviron Assets, except for loss or damage caused by [ * ]
in which circumstance [ * ] shall be liable to [ * ] for
such loss or damage. Aviron shall [ * ] and [ * ] that
Aviron Assets are [ * ] and that such [ * ] any [ * ] of
[ * ] to [ * ] as a consequence of [ * ] to or [ * ] or
[ * ] unless [ * ] to the [ * ].
4.2.3 MAINTENANCE OF AVIRON ASSETS. Medeva shall maintain the
Aviron Assets in compliance with Clauses 3.7.1, 3.7.6 and
3.7.7 and in accordance with Medeva's operating procedure
pertaining to maintenance of equipment of a similar nature
to the Aviron Assets. [ * ] shall be responsible for the
reasonable cost of maintaining such equipment.
4.2.4 EFFECT OF EXPIRY OR TERMINATION. Upon expiry or
termination of this Restated Agreement, Aviron shall,
[ * ] remove the Aviron Assets from Medeva's premises and
shall [ * ] to the [ * ] to the [ * ] (except for [ * ]
from the [ * ] of the Intermediate Product), any part of
[ * ] where such [ * ] at [ * ] unless [ * ] such
equipment [ * ]. At the point of Medeva purchasing such
equipment from Aviron, all of Aviron's obligations [ * ]
relating to such assets terminates. Should Aviron fail to
remove the Aviron Assets [ * ] as provided in this clause
4.2.4 within the [ * ] Medeva may arrange,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] of the [ * ] and [ * ].
5 TECHNICAL AGREEMENT AND REGULATORY MATTERS
5.1 SCOPE. The respective responsibilities of Medeva and Aviron
relating to the Manufacture of the Intermediate Product, the way
in which each batch of the Intermediate Product has been
Manufactured and checked for compliance with and adherence to the
Technical Agreement, the responsibility for purchasing materials,
testing and releasing materials and undertaking production and
quality control including in-process controls as well as sampling
and analysis shall be as specified in the Technical Agreement.
5.2 MANUFACTURING HAZARDS. Medeva shall be responsible for ensuring
the safe operation of the process of Manufacture of the
Intermediate Product set forth in, inter alia, the Technical
Information and the Technical Agreement. Aviron and Medeva shall
continuously provide the other with any pertinent information of
which they become aware relating to any hazardous aspect of the
Manufacture, the Raw Materials or the Intermediate Product
including but not limited to any information pertaining to the
possibility of any cross contamination of any other products
being manufactured or stored by Medeva. Should [ * ] that any
[ * ] of the Manufacture of the Intermediate Product [ * ] then
it shall so notify [ * ] of such in writing and both parties
shall use their Best Endeavours, [ * ] (at [ * ] set forth in
Schedule [ * ], to [ * ] prior to undertaking the Manufacture. If
such [ * ] shall have the [ * ] with the Manufacture of the
Intermediate Product. If [ * ] that such [ * ] either party may
[ * ] on the provision of [ * ].
5.3 AMENDMENTS TO THE TECHNICAL AGREEMENT AND THE SPECIFICATIONS.
5.4 Any amendment to the Technical Agreement, including an amendment
to the Specifications, shall be made by [ * ] as provided in the
Technical Agreement. Aviron shall [ * ] in connection with the
implementation of such amendments to the Technical Agreement or
the Specifications. The parties shall discuss and agree in good
faith on [ * ] including, without limitation, a [ * ] or an [ * ]
and on [ * ] to [ * ] resulting from [ * ] or [ * ] resulting
from such amendments.
5.5 REGULATORY APPLICATIONS.
5.5.1 BLA. Aviron will file the BLA in its own name and will own
all rights thereto. Medeva will submit to Aviron in a
timely fashion data and information relating to the
Manufacture of the Intermediate Product for inclusion by
Aviron in the BLA as requested by Aviron from time to
time, and will [ * ] in a [ * ] such data and information
once included.
5.5.2 ELA. Medeva will file a supplement to the existing ELA for
Manufacture of Intermediate Product in the Aviron Unit at
Speke plant concurrently with filing of BLA by Aviron.
Subject to CBER consent, certain confidential information
regarding the Aviron Unit or any processes and equipment
which is filed with the ELA will be [ * ]. If
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] such [ * ] will be [ * ] subject to the
confidentiality obligations of this Restated Agreement.
6 CAPACITY, FORECAST, AND SUPPLY
6.1 CAPACITY.
6.1.1 The parties acknowledge and agree that the [ * ] amount of
the Intermediate Product that Medeva can Manufacture in
any Manufacturing Period shall be determined, inter alia,
by the [ * ] of the respective Master Donor Strains and
therefore such Manufacturing capacity [ * ] until such
[ * ] are [ * ] The parties also acknowledge and agree
that such [ * ] of the respective Manufacturing Working
Virus Seeds will generally not [ * ] of any year. Hence,
the parties shall, once the [ * ] of the respective
Manufacturing Working Virus Seeds for the relevant year
are [ * ] the Manufacturing capacity for Medeva for [ * ]
and the [ * ] based on the factors set forth in Schedule
12. The parties agree that the Manufacturing capacity for
the first Manufacturing Period starting [ * ] and ending
[ * ] is [ * ] of Finished Product. For the second and any
subsequent Manufacturing Periods, the parties shall set a
[ * ] Manufacturing capacity by [ * ] prior to the
Manufacturing Period in question based on the capacity of
the then current Manufacturing Period and the factors set
forth in Schedule 12.
6.1.2 During any Manufacturing Period the Manufacturing capacity
of Medeva determined in accordance with clause 6.1.1 above
shall be [ * ] in the event of:-
6.1.2.1 the [ * ] the Raw Materials as provided in clause
3.8.3, the [ * ] of the Raw Materials; and
6.1.2.2 any [ * ] to carry out [ * ] in relation to the
process of Manufacture which prevents Medeva from
Manufacturing the Intermediate Product for any
time; and
6.1.2.3 any specific requirement [ * ] of the
Intermediate Product which results in [ * ] the
Aviron Unit and the Raw Materials; and
6.1.2.4 any [ * ] the [ * ] of the Master Working Virus
Seed and the [ * ] of the Monovalent Virus
Harvest.
6.1.3 The extent of any [ * ] in the Manufacturing capacity of
Medeva arising under clause 6.1.2 shall be [ * ] by the
[ * ] of the [ * ] within [ * ] after the end of each
Manufacturing Period.
6.1.4 Medeva will [ * ] during each Manufacturing Period to the
capacity determined pursuant to Clauses 6.1.1 to 6.1.3
above.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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6.2 FORECASTING.
6.2.1 On the [ * ] Aviron shall provide to Medeva its written
forecast of its requirements for technical support in man
days and AVU days as set forth in Schedule 9, NAF and
Monovalent Virus Harvest for [ * ]. On or before [ * ] of
each year of this Restated Agreement Aviron shall provide
to Medeva its written forecast of its requirements for
technical support [ * ] as set forth in Schedule 9, NAF
and Monovalent Virus Harvest for [ * ] of [ * ] to [ * ]
of the [ * ]. On or before [ * ] of each year of this
Restated Agreement Aviron shall provide to Medeva its
written forecast of its requirements for technical support
[ * ] as set forth in Schedule 9, NAF and Monovalent Virus
Harvest for [ * ] of the [ * ] to [ * ] of the [ * ]. On
or before [ * ] of the [ * ] of this Restated Agreement
and each year thereafter Aviron shall provide to Medeva
its written forecast of its requirements for technical
support [ * ] as set forth in Schedule 9, NAF and
Monovalent Virus Harvest for [ * ] of [ * ] to [ * ] of
the [ * ]. On or before [ * ] and each year thereafter
Aviron shall provide to Medeva a forecast of its
requirements for technical support [ * ] as set forth in
Schedule 9, NAF and Monovalent Virus Harvests until [ * ]
of the Manufacturing Period and for the period from [ * ]
of that [ * ] to [ * ] of the [ * ].
6.2.2 Within [ * ] of receipt of any forecast from Aviron Medeva
shall [ * ] in writing any factors of which Medeva is
aware which [ * ] to be [ * ]. In the event that Medeva
has provided such a written indication, the parties shall,
[ * ] of receipt by Aviron of Medeva's notice regarding
such, [ * ] the issues raised by Medeva. If the parties
[ * ] then Aviron shall submit [ * ]. If it is [ * ] that
a [ * ] of the [ * ] is [ * ] then the [ * ] shall
continue to apply. If Medeva has provided a notification
pursuant to this clause and the parties have [ * ] and the
factors notified to Aviron [ * ] Intermediate Product in
the forecasted quantities, then, [ * ] is [ * ] or at the
end of any [ * ] shall [ * ] to [ * ] those [ * ] which
[ * ] to [ * ] provided that [ * ] to [ * ] any such [ * ]
or [ * ].
6.2.3 Medeva shall use Best Endeavours to supply the
Intermediate Product in the [ * ] pursuant to clause 6.2.2
[ * ] shall [ * ] in respect of the quantities forecast by
Aviron in excess of the Manufacturing capacity [ * ]
pursuant to clause 6.1
6.3 DELIVERY TERMS. Medeva will at the request of Aviron deliver
the Intermediate Product packaged for shipment under [ * ]
delivery terms (as defined in Incoterms 1990). [ * ] the [ * ] or
[ * ] in the Intermediate Product, [ * ] the Intermediate Product
[ * ] to [ * ] until [ * ] of [ * ] of the Intermediate Product
has been [ * ] and [ * ] by Medeva.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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6.4 ACCEPTANCE TESTING AND REJECTION.
6.4.1 RELEASE OF THE PRODUCT. The Intermediate Product will be
released by Medeva in accordance with Clause 10 of the
Technical Agreement and the Intermediate Product shall be
released by Aviron in accordance with Clause 11of the
Technical Agreement.
6.4.2 NOTICE OF REJECTION. Aviron may, within [ * ] of
completion of testing of the Intermediate Product by
Aviron or its designee, in accordance with this Clause 6.4
reject (in whole or in part) any batch of Intermediate
Product which contains Intermediate Product that does not
conform with the Specifications. Any notice of
rejection shall be in writing and shall indicate, in
sufficient detail to allow Medeva to investigate, the
reasons for such rejection. If no such notice of rejection
is received, Aviron shall be deemed to have accepted such
delivery of the Intermediate Product, except for defects
which could not reasonably be detected with the acceptance
tests performed pursuant to Clause 10 of the Technical
Agreement.
6.4.3 EVALUATION BY THE PROCESS EVALUATION TEAM The Process
Evaluation Team shall [ * ] the cause of any
non-conformance with Specifications detected by Medeva
upon testing pursuant to Clause 10.1 of the Technical
Agreement or by Aviron pursuant to Clause 11.1 of the
Technical Agreement. Both parties shall provide to the
Process Evaluation Team such samples (including the sample
retained by Medeva pursuant to Clause 6.4.1 for testing by
the independent laboratory as set forth in Clause 6.4.5)
and such information as the Process Evaluation Team
requests in order to [ * ] as to the defect and the cause
thereof.
6.4.4 DISPUTE RESOLUTION If [ * ] the [ * ] of the Process
Evaluation Team or if the Process Evaluation Team [ * ]
regarding the defect or cause thereof within [ * ] after
receipt of the notice of rejection by Medeva, the matter
shall be referred to the [ * ] of Medeva and Aviron. If
such [ * ] are unable to find a mutually agreeable
solution, the dispute shall be referred to the [ * ] for
good faith discussion and resolution within thirty (30)
days of such referral.
6.4.5 INDEPENDENT LABORATORY. At any time in the course of the
investigation by the PET or the dispute resolution
proceeding set forth in Clause 6.4.4, either party may
require that an independent laboratory mutually agreed
between the parties [ * ] the [ * ] in [ * ] shall be
asked to determine whether a further sample of the
Intermediate Product complies with the Specification or
not, and the determination of such independent laboratory
shall be [ * ] with respect to the issue of whether or not
the Intermediate Product complies with Specifications.
6.4.6 REMEDIES. If Medeva accepts that the non-conformance of
the Intermediate Product was the result of the [ * ] then
Medeva shall either (i) Manufacture and deliver to Aviron
[ * ] a [ * ] of the Intermediate Product [ * ] the
non-conforming batch or batches [ * ] Medeva with such
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ], and providing a [ * ] by Aviron, or (ii) [ * ] due
to [ * ] Aviron with an [ * ] to the [ * ] by Aviron [ * ]
for the rejected shipment, plus [ * ] incurred by Aviron.
The parties shall discuss the possibility of [ * ]
Intermediate Product and [ * ] before Aviron [ * ] of the
aforementioned methods of compensation it [ * ]. Any [ * ]
paid or credited [ * ] are subject to the [ * ] set forth
in [ * ].
6.4.7 If Aviron accepts that the relevant batches of
Intermediate Product were Manufactured in accordance with
the Specifications and that any non-conformity of the
Intermediate Product with the Specifications was not the
result of the [ * ] or [ * ] and Aviron shall [ * ] of
such Intermediate Product and [ * ] as [ * ] to [ * ].
6.4.8 If the Process Evaluation Team or the [ * ] of the
parties designated in [ * ] come to the conclusion that
[ * ] the cause of the defect which caused Medeva not to
release Intermediate Product as provided in Clause 10 of
the Technical Agreement, or Aviron to reject the
Intermediate Product as provided in Clause 6.4.2,
[ * ] relating to the Manufacture of such product, and
neither party [ * ] for [ * ] Intermediate Product not
released by Medeva or rejected by Aviron.
7 INTELLECTUAL PROPERTY AND IMPROVEMENTS
7.1 OWNERSHIP. Except as expressly provided in this Restated
Agreement, each party hereby acknowledges that it shall not
acquire any rights in respect of any of the other party's
intellectual property in relation to the Intermediate Product or
the Manufacture thereof or of the goodwill associated therewith.
7.2 NO LICENSES. Other than as is necessary for the proper
performance of this Restated Agreement by the parties, or as is
expressly provided in this Restated Agreement, no license,
expressed or implied, is granted by this Restated Agreement by
either party to the other under any of its intellectual property
rights. The parties may grant further licenses if mutually
agreeable.
7.3 OWNERSHIP OF MANUFACTURING RECORDS. [ * ] all Manufacturing
Records shall [ * ] shall be treated as [ * ] and shall not be
[ * ] as provided in the Technical Agreement or for the purposes
associated with manufacture of the Vaccine and where necessary
for disclosing to the relevant Agency and to its licensees and
distributors in order to comply with regulatory requirements and
to prepare for regulatory filings or PAIs. Aviron may [ * ] of
all Manufacturing Records, for the purposes of complying with the
requirements of the relevant Agency. Aviron may [ * ] the
Restricted Information to [ * ], having previously made
reasonable efforts to obtain an obligation of confidentiality
from the said [ * ] concerning the Restricted Information.
Nothing in
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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this Clause 7.3 shall limit Aviron's right and ability to
disclose Medeva Process Technology to third parties pursuant to
the license granted under Clause 7.5.
7.4 PROCESS TECHNOLOGY.
7.4.1 Aviron Process Technology. Medeva acknowledges and
agrees that Aviron Process Technology shall be the
property of Aviron.
7.4.2 Medeva Process Technology. All Medeva Process Technology
shall be the property of Medeva.
7.5 LICENSE TO AVIRON.
7.5.1 Medeva hereby grants to Aviron a worldwide, [ * ]
sublicenseable (as provided in Clause 7.5.2) [ * ] license
under Medeva Process Technology to make, have made, use,
import, offer for sale and sell CAIV Products. The term
[ * ] as used herein shall mean that Medeva shall have the
right to [ * ] CAIV Products which [ * ] the Master Donor
Strains or [ * ] but shall not [ * ] or [ * ] CAIV
Products during the term of this Restated Agreement other
than the Manufacture for Aviron or its designee or W-A
under this Restated Agreement. For the avoidance of
doubt:-
7.5.1.1 Medeva shall not, for the term of this Restated
Agreement, manufacture, in eggs, cell culture, or
by other means, for itself or a third party any
CAIV Product based on the Master Donor Strains,
the Master Virus Seeds or any reassortants or
derivatives thereof, and Medeva shall not conduct
any research or development activities using the
Master Donor Strains, Master Virus Seeds,
reassortants or derivatives thereof, which have
not been not authorized in writing by Aviron,
including but not limited to any replication of
said [ * ], but otherwise nothing in this Restated
Agreement shall prevent Medeva from manufacturing
for a third party a CAIV Product (other than any
CAIV Product based on the Master Donor Strains,
the Master Virus Seeds or any reassortants or
derivatives thereof) in circumstances where that
third party provides to Medeva complete technical
information pertaining to the process of
manufacture of the third party's CAIV Product and
Medeva is not required to utilize Medeva Process
Technology to help develop or enhance the third
party's process of manufacture of its CAIV
Product.; and
7.5.1.2 Aviron may utilize those [ * ] the Medeva
Process Technology [ * ] to make, have made, use,
import, offer for sale and sell products other
than CAIV Products. If Aviron is in [ * ] as to
[ * ] a [ * ] the Medeva Process Technology is
[ * ], it shall provide to Medeva a [ * ] setting
forth sufficient detail to allow Medeva to [ * ]
and Medeva shall, [ * ] of receipt of such [ * ],
provide to Aviron [ * ] provided, that if the
parties disagree whether or not a [ * ] of Medeva
Process Technology is [ * ], the matter shall be
submitted for expert opinion in accordance with
Schedule 14. Thereafter, if there is still a
dispute between the parties as to whether or not a
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] the matter shall be referred to the
respective Chief Executive Officers of the parties
and, thereafter, if the matter is still
unresolved, either party may issue proceeding to
have the matter determined by a court of law in
accordance with clause 21.5; and
7.5.1.3 Nothing in this Agreement shall in any way hinder
the right of Medeva to use the Medeva Process
Technology in relation to non-CAIV Products.
7.5.2 Aviron shall have the right to grant sublicenses under the
license granted under Clause 7.5.1 above to its Associated
Companies, contract manufacturers and licensees of CAIV
Products. For the sake of clarity and in no way limiting
the generality of the rights provided to Aviron pursuant
to the licence, Aviron's Associated Companies, contract
manufacturers and licensees may [ * ] use the Medeva
Process Technology in relation to [ * ]. Aviron shall
ensure that any sub-licence contains appropriate
restrictions on the use of the Medeva Process Technology
to ensure it shall [ * ] be used for any purpose other
than in relation to [ * ]. Aviron shall, [ * ] to the [ *
] a [ * ] showing the [ * ] to the [ * ] to the
sub-licensee and [ * ] provide to Aviron [ * ] on the [ *
]. If, in the [ * ] the [ * ] on the [ * ] which would
result in a [ * ] shall notify both Aviron and
Medeva and [ * ] of the [ * ] so that it [ * ].
7.5.3 The [ * ] of the Medeva Process Technology [ * ] by the
license granted to Aviron under Clause 7.5.1 shall [ * ]
this Agreement.
7.5.4 Notwithstanding anything in this Clause 7.5, Medeva shall
[ * ] CAIV Products using Medeva Process Technology and
[ * ] for licensees of Aviron of the CAIV Product to the
extent that such licensees are permitted by the license
and supply agreements that the licensees have with Aviron
to have the licensed CAIV Product manufactured by a party
other than Aviron
7.6 IMPROVEMENTS
7.6.1 Any Improvement developed by Medeva [ * ] shall be the
property of Aviron and Aviron shall own all intellectual
property pertaining to that Improvement. Medeva shall
promptly disclose such Improvement to Aviron. Aviron shall
grant to Medeva a [ * ] license to utilise such
Improvements in the Manufacture of the Intermediate
Product. Medeva shall be entitled to utilise freely and
without limitation from Aviron any aspect of any such
Improvement that is [ * ] or otherwise [ * ].
7.6.2 Should Medeva, in carrying out manufacture of any of its
[ * ] develop a manufacturing technique which may be able
to be utilised in the Manufacture of the Intermediate
Product, it shall [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] such to Aviron and Medeva shall
own the manufacturing technique and any intellectual
property rights pertaining thereto. If Medeva [ * ] such
manufacturing technique to Aviron, it shall do so under
strict obligations of confidentiality and the parties
[ * ] the aforesaid manufacturing technique.
7.6.3 Should Medeva, in Manufacturing the Intermediate Product
[ * ] that [ * ] shall be part of [ * ] and the terms
pertaining to the use of [ * ] set forth in clause [ * ]
shall apply to that Improvement.
7.6.4 Any Improvement developed by Aviron shall be owned by
Aviron and Aviron shall own all intellectual property
rights in the Improvement. Aviron shall have the [ * ]
such Improvement to Medeva. If Aviron [ * ] such
Improvement to Medeva, it shall do so under strict
obligations of confidentiality and the parties [ * ] the
aforesaid Improvement.
8 PRICES
8.1 PRICE.
8.1.1 PRICE FOR THE INTERMEDIATE PRODUCT. Aviron shall pay to
Medeva a price for Monovalent Virus Harvest and for NAF
conforming to Specifications as set forth in Schedule 15
(the "Supply Price").
8.1.2 PRICE FOR USE OF [ * ]. Aviron shall pay Medeva for the
use of the [ * ] as set forth in Schedule 11. The price
payable by Aviron for the use of the [ * ] shall [ * ]
related to the [ * ]. If the [ * ] is unusable due to
[ * ], or as a consequence of [ * ] (unless such [ * ]),
the price payable by Aviron for the relevant year of this
Agreement for the use of [ * ] shall be [ * ] the [ * ] is
[ * ].
8.1.3 PRICE FOR [ * ]. Aviron shall [ * ] Medeva for [ * ] by
Medeva as a result of having to have the Intermediate
Product or any of the Raw Materials [ * ].
8.2 PAYMENT.
8.2.1 Once the quantity for any forecast has been determined
pursuant to clause 6.2.2, Medeva shall render to Aviron a
[ * ] invoice for the price of [ * ] of the quantity of
the Intermediate Product pertaining to the then current
Manufacturing Period so determined, such price to be
determined pursuant to Schedule 15.
8.2.2 If the forecast of quantities of [ * ] provided pursuant
to Clause 6.2.1 (or as revised pursuant to Clause 6.2.2)
differs from the immediately preceding forecast of such
quantities, the monthly invoice amount shall be
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] as provided in Clause 8.2.1 above. Furthermore,
the [ * ] shall be [ * ], and Medeva shall [ * ] or [ * ]
as the case may be.
8.2.3 Aviron will pay to Medeva the full invoice amount for the
Supply Price within [ * ] after receipt. Payment will be
made direct into Medeva's bank account by bank transfer.
Medeva will provide Aviron with the necessary details of
Medeva's bank account and will take whatever actions are
necessary to facilitate payment by bank transfer.
8.2.4 As soon as practicable following the end of any
Manufacturing Period, the parties shall, by mutual
agreement, [ * ] by Aviron [ * ] and the
sum payable by Aviron to Medeva in respect of that
quantity of the Intermediate Product. If the sum payable
by Aviron so determined [ * ] pursuant to this clause 8.2,
Medeva shall render to Aviron an invoice for the balance
outstanding and Aviron shall pay such invoice in
accordance with the terms of this clause 8.2. If the sum
payable by Aviron so determined is [ * ] pursuant to this
clause 8.2, Aviron shall render to Medeva an invoice for
the amount of the over-payment and Medeva shall [ * ]
direct to the bank account of Aviron by bank transfer.
Aviron will provide Medeva with the necessary details of
Aviron's bank account and will take whatever actions are
necessary to facilitate payment by bank transfer.
8.3 PAYMENT FOR OTHER CHARGES. Invoices will be submitted to Aviron
[ * ] to cover the costs set forth in clauses [ * ] and [ * ]
above. Invoices will be submitted to Aviron [ * ] to cover the
costs set forth in clause 8.1.2 above. Aviron will pay to Medeva
the [ * ] within [ * ] after the date of the invoice. Payment
will be made direct into Medeva's bank account by bank transfer,
and upon written request by Aviron, Medeva will provide Aviron
with the necessary details of Medeva's bank account and will take
whatever actions are necessary to facilitate payment by bank
transfer.
8.4 PRICE CHANGES. The Supply Price is fixed until [ * ]. The Supply
Price supplied thereafter during the Manufacturing Period
starting on [ * ] will be subject to a price adjustment according
to the change in the [ * ] as determined by the [ * ] over the
[ * ]. Thereafter, for the remainder of the term of the Restated
Agreement, the parties shall meet each [ * ] to take effect in
the following Manufacturing Period. If the parties [ * ] the
Supply Price [ * ] according to [ * ] between the [ * ] of the
Manufacturing Period [ * ] the Manufacturing Period for which the
[ * ] is to take effect.
8.4.1 If applicable, [ * ] on any of the amounts payable by
Aviron pursuant to clauses 8.1 and 8.3 and Aviron shall
[ * ].
9 SIGNING AND OTHER PAYMENTS
Upon [ * ] set forth below, Aviron will make to Medeva the
corresponding payments, which shall be due, except where
otherwise expressly stated, [ * ] after the date on which the
event was achieved. For the sake of clarity,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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failure of Medeva to achieve any of the aforementioned
deadlines shall [ * ] and shall [ * ] other than by [ * ] save
where the event is the [ * ] other than [ * ] whereupon [ * ]
available in the event of [ * ] as set forth in this
Agreement.
9.1 UPFRONT PAYMENT. Aviron shall pay to Medeva [ * ] upon signing
of this Restated Agreement [ * ] by [ * ].
9.2 OTHER PAYMENTS.
9.2.1 [ * ].
9.2.1.1 In the event that Medeva completes [ * ] and [ * ]
and [ * ] , for such [ * ] by [ * ] which [ * ]
confirm that [ * ] have been met, Aviron will pay
to Medeva [ * ].
9.2.1.2 Save as provided below, the payment made under
clause 9.2.1.1 shall be [ * ] in the event of a
[ * ] on [ * ] pursuant to this clause 9.2.1 or
[ * ]. Such [ * ] as contemplated by this clause
shall be made by [ * ] of the parties reviewing any
[ * ] and agreeing that its [ * ] on the reports or
information provided by Medeva pursuant to this
clause 9.2.1 or not provided despite Aviron's
request, or [ * ] on the reports or information
provided by Medeva pursuant to this clause 9.2.1 or
not provided despite Aviron's request. If the [ * ]
resulted from any report or information provided by
Medeva where that report or information was [ * ]
the payment shall [ * ] as otherwise provided in
this clause 9.2.1.2.
9.2.1.3 In the event that Medeva successfully completes
[ * ] for the [ * ] Aviron will pay to Medeva
[ * ].The [ * ] will be deemed successfully
completed if[ * ] performed by Aviron pursuant to
the Technical Agreement, and if the [ * ] have an
overall [ * ] of [ * ] and if no [ * ] has a [ * ]
of [ * ].
9.2.2 [ * ].
9.2.2.1 If as of [ * ] Medeva [ * ] relating to the
Manufacture of the Vaccine within [ * ] of receipt
of [ * ] made
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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from time to time in writing and describing in as much
details as is practicable the [ * ] Aviron will pay to
Medeva [ * ]. The payment under this Section 9.2.2 will
be due and payable if Medeva [ * ] in accordance with
the previous sentence and [ * ] or, in the event of a
[ * ] if such [ * ] on the documents or information of
the [ * ] provided by Medeva (or not provided despite
Aviron's request). Aviron may inform Medeva of [ * ] if,
even with all reasonable , [ * ].
9.2.2.2 For the purposes of this clause 9.2.2, Aviron's [ * ]
shall be [ * ], [ * ], and shall originate from [ * ]
(or any replacement of [ * ] notified by Aviron in
writing from time to time) of Aviron, and shall be sent
by fax addressed to [ * ] (or any replacement of [ * ]
notified by Medeva in writing from time to time) at the
fax numbers notified to Aviron in writing from time to
time. Such [ * ] is deemed received by Medeva the
working day after the date indicated on the transmission
report by Aviron.
9.2.3 [ * ]. Upon confirmation by the FDA that [ * ] or if [ * ], if (a)
any [ * ] will not [ * ] or (b) any [ * ] relate to the [ * ] and
[ * ] Aviron will pay to Medeva [ * ]. For the avoidance of doubt,
the payment under this Clause 9.2.3 will not be owed if [ * ] based
[ * ] by Medeva and [ * ].
9.2.4 [ * ]. Upon [ * ] Aviron will pay to Medeva [ * ].
9.2.5 [ * ].
9.2.5.1 Upon [ * ] of the lesser of either the [ * ] for the [ * ] or
[ * ] corresponding to [ * ] determined by the parties
pursuant to Clause 6.1 as calculated promptly after the end of
the Manufacturing Period, Aviron will pay to Medeva [ * ].
Notwithstanding anything in clause 6.1, the payment under this
clause 9.2.5.1 shall be due and payable only in the event that
Medeva has [ * ] for at least [ * ] of the Vaccine save where
Aviron has [ * ] in relation to the Manufacture of the
Intermediate Product which [ * ] of the Aviron Unit and the
Raw Materials in which
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 24
case the [ * ] accordingly.
9.2.5.2 [ * ] of the lesser of either the [ * ] for the
[ * ] or the [ * ] corresponding to [ * ]
determined by the parties pursuant to Clause 6.1
as calculated promptly after the end of the
Manufacturing Period, Aviron will pay to Medeva
[ * ].
9.2.5.3 [ * ] in the [ * ] and each [ * ] thereafter of
[ * ] or the [ * ] corresponding to [ * ]
determined by the parties pursuant to Clause 6.1
as calculated promptly after the end of the
Manufacturing Period, for the [ * ] Manufacturing
Period, Aviron will pay to Medeva [ * ] of the
Intermediate Product.
9.2.5.4 For the sake of clarity, the [ * ] that give rise
to payment under clauses 9.2.5.1 to 9.2.5.3 shall
not exceed [ * ] set forth in clause 6.1 as
calculated promptly after the end of the
Manufacturing Period.
9.2.6 [ * ]. Upon attaining [ * ] Aviron agrees to pay Medeva
[ * ] as set forth below:
9.2.6.1 [ * ] and [ * ] as set forth in Schedule 17 by
[ * ], Aviron will pay Medeva [ * ], to be payable
[ * ].
9.2.6.2 [ * ] and [ * ] set forth in Schedule 17 for [ * ]
Aviron will pay Medeva [ * ] on [ * ].
9.2.6.3 [ * ] that [ * ] at Medeva have been sufficient to
[ * ] at Medeva as determined in accordance with
clause 6.1, and that no [ * ] due from the
[ * ] but payable only after proof of [ * ] as
provided for in this clause 9.2.6.3 has been
provided to Aviron.
9.2.6.4 Medeva shall have the right to [ * ] under this
Clause 9.2.6 with properly [ * ] on a [ * ] if
necessary to make up for [ * ] and shall use Best
Endeavours to [ * ] with [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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9.2.6.5 The aforementioned [ * ] apply, subject to clauses
9.2.6.6 and 9.2.6.7, to the [ * ] and thereafter
Medeva [ * ] subject to it being able to achieve in
each year, the Manufacturing capacity agreed
pursuant to clause 6.1, after prior consultation
with Aviron.
9.2.6.6 The parties may, by mutual agreement, reduce the
[ * ] set forth in this clause 9.2.6. Further,
Medeva shall be [ * ] except if Aviron [ * ] the
[ * ] of the [ * ] (as defined in Clause [ * ]).
9.2.6.7 Medeva shall [ * ], as a factor in [ * ] agreed
pursuant to clause 6.1, [ * ] if those levels have
been [ * ] or action, below the levels set forth
above in this clause 9.2.6, or if Medeva [ * ] the
[ * ] set forth above in this clause 9.2.6.
9.3 [ * ]
9.3.1 Save as provided below, within [ * ] from the end of each
calendar quarter, Aviron shall pay to Medeva an amount
corresponding to [ * ] of [ * ] licensed under Section
7.5, up to a total of [ * ] provided that any amount of
said [ * ] not paid on [ * ] shall be due and payable
within [ * ] days of such date.
9.3.2 Aviron's obligation to make any [ * ] to Medeva pursuant
to clause 9.3.1 shall not commence until such time as
[ * ] exceeds an amount equal to [ * ] up to the time of
[ * ] and thereafter [ * ] up to the date Medeva's [ * ]
such sum. For the avoidance of doubt, Medeva's total [ * ]
pursuant to clause 9.3.1 shall be reduced by the amount
equal to [ * ] calculated in accordance with this clause
9.3.2.
9.3.3 As used herein, [ * ] means the [ * ] [ * ] by Aviron, its
Associated Companies [ * ] from person or entities
[ * ], less the following [ * ], but only to the extent
such [ * ], or are [ * ]
9.3.3.1[ * ];
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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9.3.3.2[ * ]
9.3.3.3[ * ] other than those described above;
9.3.3.4[ * ] (to the extent that the foregoing [ * ] do
not exceed [ * ] of the sum of all amounts [ * ]
and all other consideration [ * ] (or, when in a
form other than cash or its equivalent, the fair
market value thereof when received));
9.3.3.5[ * ]; and
9.3.3.6[ * ]
[ * ] not intended for [ * ], and made [ * ] shall not be
[ * ] Under no circumstances shall the combined reductions
from [ * ] attributable to the factors listed in clauses
9.3.3.1 and 9.3.3.4 [ * ]
9.3.4 Medeva shall be entitled, upon reasonable notice and
during normal business hours, to have an independent
auditor reasonably acceptable to Aviron inspect the
financial records of Aviron pertaining to sales of CAIV
Products to confirm the accuracy of any report or
information provided to Medeva concerning [ * ] and Medeva
and Aviron shall make available to said independent
auditor such records, in whatever form.
10 [ * ] PAYMENTS
10.1 Medeva shall receive from Aviron payments [ * ] for the [ * ] and
payments [ * ] for [ * ] (such payments to include payments under
[ * ] but excluding payments under [ * ] above) during the Term of
this Restated Agreement until the below mentioned [ * ] is reached.
If Medeva has not received payments from Aviron under this Restated
Agreement [ * ], Aviron shall [ * ] corresponding to [ * ] between
the [ * ] as set forth in this clause and the [ * ]. Aviron shall
[ * ] under this Clause 10 upon [ * ] Medeva within [ * ] from
receipt of [ * ]. Such obligation shall expire at the time Medeva
has [ * ] from Aviron [ * ] under [ * ].
10.2 Payments made by Aviron under this Restated Agreement prior to [ * ]
shall be counted towards the amount of [ * ] due for the [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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10.3 The amount of the [ * ] pursuant to Clause 10.1 shall be [ * ] of
the time during which Medeva is unable to Manufacture Intermediate
Product for reasons caused as a consequence of any inspections or
actions of a U.S. or U.K. Agency; provided, however, that Medeva
shall not [ * ] except if Aviron undertakes to make [ * ].
11 INDEMNITY
11.1 Subject to clauses 11.2, 11.3, 11.8 and 11.9 Medeva indemnifies and
shall keep Aviron indemnified against any third party claims for
losses, damages and costs (including court costs and reasonable
attorney's fees) to the extent they arise from
11.1.1 Medeva's failure to Manufacture the Intermediate Product in
accordance with the Technical Agreement and the
Specifications; and
11.1.2 Medeva's failure to store the Intermediate Product while it
is in Medeva's control in accordance with the Specifications;
and
11.1.3 the [ * ] of Medeva, its employees or agents
11.2 Medeva shall not be liable under the indemnity provided under clause
11.1 above:-
11.2.1 to the extent that any failure of the Intermediate Product to
comply with the Specifications results from the failure of the
Master Donor Strains and/or the Eggs supplied by Aviron or
Aviron's suppliers to comply with Specifications; and/or
11.2.2 for any factor [ * ] the Intermediate Product [ * ].
11.3 Medeva's liability for [ * ] in respect of Intermediate Product that
does not comply with the Technical Agreement and the Specifications
shall be determined in compliance with clause 6.4, Schedule 3 and
clauses 11.8 and 11.9
11.4 Aviron indemnifies Medeva against all third party claims for losses,
damages and costs (including court costs and reasonable attorney's
fees) arising in relation to the Intermediate Product, the Vaccine
and the Finished Product except under the circumstances which give
rise to an indemnity in favour of Aviron by Medeva as set forth in
the Clauses 11.1 and 11.2 above.
11.5 Medeva shall be liable for any loss of or damage to Aviron Assets
(fair wear and tear excepted), Raw Materials, components or
Intermediate Product [ * ] up to replacement value, provided,
however, that any Aviron Assets [ * ] will be [ * ] expiration or
termination of this Restated Agreement.
11.6 Aviron hereby indemnifies and will keep Medeva indemnified against
all costs, damages or liabilities up to a maximum of [ * ] in any
[ * ] of this Agreement and [ * ] arising from any [ * ], any [ * ]
or any [ * ] caused by the [ * ] save where
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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such [ * ] is caused by the [ * ]
11.7 Each party undertakes to ensure that it has in place product
liability insurance with a reputable insurer in an amount
appropriate for its business and products of the type the subject
of this Restated Agreement. At either party's request, the other
party shall provide the requesting party with evidence of the
existence and maintenance of such coverage.
11.8 Notwithstanding anything contained in this Restated Agreement,
Medeva's liability in contract, tort (including breach of
statutory duty) or otherwise arising by reason of or in
connection with this Restated Agreement or any agreement or
indemnity contemplated hereunder (except in relation to death or
personal injury caused by the negligence of Medeva or its
employees while acting in the course of their employment) shall
be [ * ] in any [ * ] of this Restated Agreement. For the
avoidance of doubt, [ * ] to be made [ * ] and Aviron shall not
be permitted to make claims [ * ] pertaining to [ * ] for which a
claim [ * ].
11.9 In no event, and notwithstanding anything contained in this
Restated Agreement, shall either party be liable in contract,
tort (including breach of statutory duty) or otherwise howsoever,
and whatever the cause thereof, for any [ * ] of any nature
whatsoever.
11.10 All indemnities under this Restated Agreement given by either
party shall be subject to [ * ] duties and defenses including
without limitation, the duty to mitigate, contributory
negligence, and issues of causation and remoteness.
11.11 If Medeva is subject to a change of control as described in
Clause 14.4, and where the third party acquiring control is a
competitor or potential competitor to Aviron , and, through its
actions or inactions willfully or intentionally breaches or
causes Medeva to breach its obligations under this Restated
Agreement, the aforementioned [ * ] shall [ * ].
11.12 Should [ * ] determine that [ * ] in respect of any aspect of
this Restated Agreement or the 1995 Development Agreement or the
1997 Contract Manufacture Agreement, Aviron [ * ] on any such
aspects and [ * ]. In the event that [ * ] make such a ruling
Medeva shall, [ * ], use all reasonable endeavours to reduce the
exposure of both Medeva and Aviron to the [ * ] including, but
not limited to, [ * ].
12 CONFIDENTIALITY
12.1 The Recipient undertakes to keep confidential all Restricted
Information received by it directly or indirectly from the
Discloser or obtained by it pursuant to the performance of this
Restated Agreement and not to use such Restricted Information
except as provided in this Restated Agreement. The obligations
set forth in this Clause 12.1 shall apply during the period of
this Restated Agreement and for a period of the longer of (i)
[ * ] after the termination or expiry of the Michigan
Agreement or (ii) [ * ] after the termination of this Restated
Agreement.
12.2 Recipient shall allow access to the Discloser's Restricted
Information exclusively to those of its employees who have
reasonable need to see and use it for the purposes of this
Restated Agreement and shall inform each of such employees of the
confidential nature
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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of the Restricted Information and of the obligations on the
Recipient with respect to such Restricted Information and
shall ensure that each of its employees having access to the
Restricted Information is contractually bound by obligations
of confidentiality and shall take such steps as may be
necessary to enforce such obligations.
12.3 On the expiry or termination of this Restated Agreement,
Recipient will return to Discloser all Restricted Information of
Discloser in its possession and the Recipient shall have the
option to retain one (1) copy, but shall not make any further use
of that information save for record keeping purposes.
12.4 In this Clause 12 references to the Discloser or Recipient shall
be deemed to include any Associated Companies of that party.
12.5 Aviron's shall have the right to disclose Medeva Process
Technology to permitted sublicensees only to the extent permitted
by its licence under clause 7.5.1 and under obligations of
confidentiality not less stringent than those contained herein.
For the sake of clarity and in no way limiting the generality of
the foregoing, Aviron shall not be entitled to disclose any
Medeva Process Technology otherwise than in respect of the
manufacture of CAIV Products.
13 LIAISON
The parties will each identify in writing the person responsible
for the day to day operation of this Restated Agreement including
production planning relating to forecast requirements. The person
responsible may be changed from time to time with written
notification to the other party. From the date of signature of
this Restated Agreement Aviron's designated person pursuant to
this clause shall be [ * ] and Medeva's shall be [ * ]
14 ASSIGNMENT AND CHANGE OF CONTROL
14.1 [ * ] party may assign any of its rights or delegate any of its
obligations under this Restated Agreement (other than by Medeva
to its Associated Companies or Aviron to its Associated Companies
as the case may be, or in the event of a merger or consolidation
of a party with or into any other entity, including a triangular
merger involving such party or a sale of all or substantially all
of the assets or business unit to which this Restated Agreement
relates) [ * ] the prior written consent of the other party,
except as expressly provided herein.
14.2 This Restated Agreement shall be binding upon and shall inure to
the benefit of Medeva and Aviron and their respective permitted
successors and assignees (if any).
14.3 The parties acknowledge and agree that any change of
ownership or control of either Medeva or Aviron shall not affect,
either at law, or as between the parties, that party's rights and
obligations under this Restated Agreement, to the extent that the
party undergoing such change of ownership or control survives
such change of ownership or control.
14.4 Each party (the Notifying Party) shall forthwith notify the other
party (the Receiving Party) if there is an effective change of
ownership or control of the Notifying Party; or if the Notifying
Party sells all or substantially all of the assets or all or
substantially all of the business to which this Restated
Agreement relates. Within a period of [ * ] of receipt of such
notice or actual sale, should the Receiving Party [ * ] that the
party assuming effective ownership or control of, or purchasing
the assets or business of the Notifying Party
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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[ * ] or a party [ * ] the Receiving Party [ * ] then:-
14.4.1 in the event that the Receiving Party is [ * ] it may,
subject to clause 14.6 below, by a [ * ] written notice
terminate this Restated Agreement; and
14.4.2 in the event that the Receiving party is [ * ] it may
terminate this Restated Agreement, [ * ], on provision of
[ * ] notice and, [ * ] on provision of [ * ] notice
subject to expiration or termination of this Restated
Agreement pursuant to other clauses of the Restated
Agreement.
14.5 If Aviron terminates this Restated Agreement pursuant to clause
14.4 above at a time [ * ] is, at that time, [ * ] Aviron shall
pay to the party that acquires Medeva [ * ] pursuant to [ * ] at
the date of such termination.
14.6 Any purported assignment in violation of this section by either
party shall be voidable by the other party.
15 TERM AND TERMINATION
15.1 TERM OF AGREEMENT. Unless sooner terminated as provided under
Clauses 14 or 15, this Restated Agreement shall come into force
on the Effective Date hereof and shall continue in force until
31 December, 2005.
15.2 TERMINATION FOR BREACH OR BANKRUPTCY. Either party shall be
entitled forthwith to terminate this Restated Agreement by
written notice to the other if:
15.2.1 that other party is in material breach of any of the
provisions of this Restated Agreement and, in the case of
a material breach capable of remedy, fails to remedy the
same within thirty (30) days of receipt of a written
notice specifying the material breach and requiring its
remedy; or
15.2.2 an encumbrancer takes possession or a receiver is
appointed over any of the property or assets of that
other party; or
15.2.3 the other party becomes subject to an administration
order; or
15.2.4 that other party goes into liquidation except for the
purposes of amalgamation or reconstruction and in such
manner that the company resulting therefrom effectively
agrees to be bound by or assumes the obligations imposed
on that other party under this Restated Agreement;
15.2.5 that other party is the subject of any proceeding or order
or other event in any applicable jurisdiction which would
have an effect analogous to any of the events mentioned in
Clauses 15.2.2 to 15.2.4 above.
15.3 For the purpose of Clause 15.2.1 a material breach shall be
considered capable of remedy if the party in breach can comply
with the provisions in question in all respects other than as to
time of performance provided that time of performance is not of
the essence.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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15.4 This Restated Agreement shall terminate upon the termination of
the Michigan Agreement. In such event, at Michigan's option as
notified to Medeva by Aviron, Medeva shall, at Aviron's cost, (1)
destroy or return to Aviron as required all Master Virus Seeds,
Manufacturing Working Virus Seeds, derivatives thereof and all
finished and unprocessed Vaccine, (2) provide to Michigan copies
of all Manufacturing Instructions and Manufacturing Records and
(3) grant to Michigan a royalty free license to use the
Manufacturing Instructions and the Manufacturing Records. .
15.5 NO WAIVERS. Any waiver by either party of a breach of any
provision of this Restated Agreement shall not be considered as a
waiver of any subsequent breach of the same or any other
provision thereof.
15.6 OTHER REMEDIES. The rights to terminate this Restated Agreement
given by this Clause shall be without prejudice to any other
right or remedy of either party in respect of the material breach
concerned (if any).
15.7 EFFECTS OF EXPIRATION OR TERMINATION.
15.7.1 On expiration or termination of this Restated Agreement
for any reason:
15.7.1.1 Medeva shall, [ * ] immediately cease
Manufacture of the Intermediate Product or
complete the Manufacture of the Intermediate
Product then in the course of Manufacture,
provided, however, that if [ * ] is made [ * ]
whether Medeva shall cease Manufacture immediately
or complete Manufacture of the Intermediate
Product then in the course of Manufacture;
15.7.1.2 subject to 15.7.1.1 and 12.3, each party shall
deliver up to the other all materials, reports,
and other documents (including copies thereof) in
its possession or control containing Restricted
Information of the other party, and each will
cease to make use of the others Restricted
Information;
15.7.1.3 Aviron shall pay outstanding invoices or
invoices for accepted Intermediate Product due to
be raised according to terms specified in this
Restated Agreement. In the event Medeva shall
[ * ] not to complete the Manufacture of the
Materials, then such unfinished Intermediate
Product shall be [ * ] or [ * ] at the [ * ]
incurred up to the time Manufacture was
discontinued;
15.7.1.4 Aviron will be obliged to purchase and Medeva
will be obliged to supply all stocks of Raw
Materials purchased by Medeva in support of
purchase orders or forecasts submitted by Aviron
[ * ] within a reasonable time, [ * ]
15.7.1.5 Aviron will collect all Raw Materials supplied
to Medeva free of charge save for any Raw
Materials required to complete the Manufacture of
the Intermediate Product in the event of [ * ] In
the event that Aviron has not collected the Eggs
within [ * ] and all other Raw Materials within
[ * ] of the date of termination of this
Agreement, Medeva may, after [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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destroy such Eggs and, after [ * ] destroy such
other Raw Materials and [ * ] a [ * ] such Raw
Materials.
15.7.1.6 Termination of this Restated Agreement for any
reason shall not bring to an end any provisions of
this Restated Agreement which, in order to give
effect to their meaning, need to survive its
termination and such provisions shall remain in
full force and effect thereafter and in particular
but without limiting the scope of foregoing the
rights and obligations of the parties under
Clauses 3.6.6, 3.6.7, 3.6.10, 3.6.11, 3.9.2,
4.2.2, 4.2.4, 6, 7, 8, 9.1, 9.2.4, 9.2.5, 9.3, 10,
11, 12, 15, 17, 20.5, and 21 .
15.8 Upon expiry or termination of this Restated Agreement Medeva
shall return to Aviron or destroy all Master Donor Strains,
Master Virus Seeds and related material as instructed by Aviron.
15.9 - EMPLOYMENT CLAUSE
15.9.1 For the purposes of this sub-clause 15.9:
15.9.2 "Employee" shall mean any employee of Medeva working more
than [ * ] of his or her time specifically on the
Manufacture of the Intermediate Product for Aviron during
the period of [ * ] to termination of such employee, or
the term of employment, if shorter.
15.9.3 [ * ] shall mean the [ * ] for each relevant Employee
during any part of the relevant [ * ] when the Employee is
[ * ].
15.9.4 [ * ] shall mean the [ * ] each relevant Employee the
[ * ] to which he/she [ * ].
15.9.5 [ * ] shall mean the [ * ] to all its employees of
comparable skill, experience, tenure and position at the
Speke plant.
15.9.6 If at any time during the period of or on the termination
of the Restated Agreement, Aviron's requirements for
Employees reduce or cease, other than due to a breach of
this Agreement by or bankruptcy of Medeva, which results
in Medeva having to find suitable alternative employment
for, or to retrain, or terminate the employment of any
Employee the parties agree as follows:
15.9.7 Aviron shall notify Medeva of any anticipated
reduction in the required staffing levels in sufficient
time for Medeva to comply with its statutory and
contractual obligations regarding redundancy notification
and consultation with the Employees and their
representatives before notices of termination of
employment are given to the Employees. Aviron may at any
time request from Medeva a summary of the current
applicable law and statutory obligations pertaining to
redundancy notification and consultation with Employees
and Medeva shall provide such summary [ * ]. If the timing
does not allow Medeva to comply with its statutory
obligations, [ * ] all claims, actions, proceedings,
Employment Tribunal awards and compensation, protective
awards, legal costs
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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and expenses resulting from Medeva's failure to comply
with its statutory obligations.
15.9.8 Medeva shall make a good faith effort to retrain or to
find suitable alternative employment for Employees before
terminating any Employee's employment.
15.9.9 Medeva shall make a good faith effort to effect any
necessary dismissals fairly and in accordance with their
usual Human Resources procedures.
15.9.10 [ * ] against the following costs and expenses:
15.9.10.1 All reasonable [ * ] resulting from Medeva's [ * ]
for the Employees [ * ] of the [ * ] and the [ * ]
for the relevant Employee
15.9.10.2 All [ * ] and [ * ] paid by [ * ] in connection
with the [ * ] of the Employees.
15.9.10.3 All claims, demands, actions, proceedings,
Employment Tribunal awards and compensation,
protective awards, interest, legal costs and
expenses in respect of the Employees arising from
[ * ] in the event that the [ * ] of the
Manufacture of the Intermediate Product or [ * ] of
the Restated Agreement is deemed to be a [ * ] for
the purposes of the [ * ] as may be amended from
time to time.
15.9.10.4 Any claims, demands or proceedings in [ * ] (other
than those referred to in clause 10.14.9.2 (iii)
above) arising from the [ * ] of any Employee shall
be [ * ] in accordance with the chart set out in
Schedule 18. For the purposes of the chart in
Schedule 18:
15.9.10.4.1 [ * ] shall mean [ * ] and the
provision of sufficient information relating
to a [ * ] as is reasonably required [ * ]
to make an informed decision on the
appropriate course of action to be taken
with respect to an [ * ]
15.9.10.4.2 [ * ] shall mean all payments made
[ * ] in order [ * ] any such [ * ] or
[ * ], and interest and all reasonable legal
fees and expenses. It shall not include the
[ * ] and [ * ] incurred by [ * ].
15.9.10.4.3 "Notice" shall mean notice in writing
to Aviron together with a copy of [ * ]
received by [ * ], such notice to be given
as soon as is reasonably practicable after
Medeva receives [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 34
15.9.10.5 Medeva shall keep complete and accurate
records relating to:
15.9.10.6 the allocation of the Employees;
15.9.10.7 Medeva's good faith efforts [ * ] and/or
[ * ]; and
15.9.10.8 the accuracy of the [ * ] and the [ * ] of
payments made to such Employees.
Aviron shall have the right on reasonable notice to audit such
records to confirm the accuracy of the allocation of Employees to
the Manufacture, and the [ * ], and Medeva's efforts to [ * ] at
Medeva or to [ * ].
16 EXCHANGE RATE
16.1 Any sums payable in US$ pursuant to this Agreement are based on
the $US/Pound Sterling exchange rate of [ * ]
16.2 Should the [ * ] against the US$ compared to the exchange rate
set forth in Clause 16.1, any payments denominated in US$ under
this Restated Agreement shall [ * ] so that Medeva shall receive
such payments in amounts calculated based on an exchange rate of
[ * ]
16.3 Should the [ * ] against the US$ compared to the exchange rate
set forth in Clause 16.1, any payments denominated in US$ under
this Restated Agreement shall [ * ] so that Aviron shall make
such payments in amounts calculated based on an exchange rate of
[ * ]
17 ASSOCIATED COMPANIES
Medeva shall be entitled to perform any of the obligations
undertaken by it and to exercise any of the rights granted to it
under this Restated Agreement through any of its Associated
Companies with Aviron's consent, such consent not to be
unreasonably withheld, and any act or omission of any such
company shall for the purposes of this Restated Agreement be
deemed to be the act or omission of Medeva. For the purposes of
such delegated performance Medeva shall be entitled to disclose
only on a need to know basis Aviron's Restricted Information to
employees of relevant Associated Companies.
18 FORCE MAJEURE
18.1 If either party is affected by Force Majeure it shall forthwith
notify the other party of the nature and extent thereof. The
affected party shall additionally [ * ] take all reasonable steps
as may be necessary to overcome the Force Majeure and to minimize
its effects.
18.2 Neither party shall be deemed to be in breach of this Restated
Agreement, or otherwise be liable to the other by reason of any
delay in performance, or non-performance, of any its obligations
hereunder to the extent that such delay or non-performance is due
to any Force Majeure of which it has notified the other party and
the time for performance of that obligation shall be extended
accordingly.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 35
18.3 All sums due and payable at the time of suspension due to Force
Majeure [ * ] by Aviron.
18.4 The party affected by Force Majeure shall give notice to the
other party as soon as practical after the matter constituting
Force Majeure has arisen or occurred giving the other party full
particulars of the nature and extent of such matter.
18.5 In the event of any Force Majeure occurrence 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 Restated Agreement.
19 NOTICES
19.1 Any notices or other information required or authorized by this
Restated Agreement to be given by either party to the other may
be given in writing, by hand or sent to the other by first class
airmail registered pre-paid post, telex, facsimile transmission
or comparable means of communication. The same shall be sent or
delivered to the other party at the address shown for that party
at the beginning of this Restated Agreement or to such other
address which may be notified in writing to the other party from
time to time. Six (6)-working days should be allowed for delivery
save that such six (6) working day period shall not apply to
notice to be provided under clause 9.2.2
19.2 Any notice or other information given by post pursuant to Clause
19.1 which is not returned to the sender as undelivered shall be
deemed to have been given on the sixth working day after the
envelope containing the same was so posted. Proof that the
envelope containing any such notice or information was properly
addressed, pre-paid, registered and posted, and that it has not
been so returned to the sender, shall be sufficient evidence that
such notice or information has been duly given.
19.3 Any notice or other information sent by telex, facsimile
transmission or comparable means of communication shall be deemed
to have been duly sent on the date of transmission, provided that
a confirming copy thereof is sent by first class airmail
registered pre-paid post to the other party at the address
referred to in clause 19.1 within one working day after
transmission.
20 MICHIGAN LICENSE
20.1 Medeva accepts:
20.2 The Master Virus Seeds or the Working Seeds may be used only for
the Manufacture of Intermediate Product; and
20.3 Medeva shall not provide any Master Virus Seeds, Manufacturing
Working Virus Seeds or derivatives thereof to any third party
save as is required by independent third party laboratories for
testing as provided in Clause 6.4. Medeva shall limit access to
the Master Virus Seed supplied by Aviron and Manufacturing
Working Virus Seeds made by Medeva to those employees reasonably
requiring such access for the purpose of Development and
Manufacture of the Intermediate Product, which employees are
governed by Medeva's customary confidentiality obligations.
20.4 Aviron shall:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 36
20.4.1 use every reasonable effort to honor and observe its
obligations under the Michigan Agreement and shall not act
or fail to act in any way which might jeopardize or cause
to be terminated the Michigan Agreement; and,
20.4.2 promptly notify Medeva of any amendment to the Michigan
Agreement; and,
20.4.3 make every reasonable effort to notify Medeva in writing
of the expiry or termination of the Michigan Agreement at
least [ * ] to either event.
20.5 Medeva will use every reasonable effort to store the Master Virus
Seeds and Manufacture Intermediate Product in accordance with all
applicable government laws and regulatory agency requirements .
20.6 Aviron, on Michigan's behalf, may request from Medeva at
reasonable times and in reasonable quantities at a cost [ * ] of
Intermediate Product as it may desire, provided that Medeva shall
[ * ] under this sub-clause or otherwise to produce extra batches
of Intermediate Product [ * ] Any requirements of Michigan shall
be supplied from [ * ] with [ * ] such part thereof to Michigan [
* ] Any Intermediate Product provided to Michigan pursuant to
this clause shall [ * ] of the then relevant production payment
set forth in clause 9.
20.7 Medeva acknowledges Michigan's warranty disclaimer and limitation
of liability contained in Section 13 of the Michigan Agreement [
* ] Notwithstanding such, Medeva will 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
of liability contained in said Section 13.
20.8 Subject to those limitations of liability contained in Clauses
11.8 and 11.9 hereof, Medeva will indemnify Michigan, its
fellows, officers, employees and agents for and against any and
all claims, damages, losses and expenses of any nature (including
attorney's fees and other litigation expenses) resulting from,
but not limited to, death, personal injury, illness or property
damage, arising from or in connection with the following:
20.8.1 any Manufacture, use, sale other disposition by Medeva of
the Master Virus Seeds or Intermediate Products; or
20.8.2 the use, handling, storage or disposal of Master Virus
Seeds, any derivatives or Intermediate Products by
Medeva; or
20.8.3 the use by Medeva of any know-how, or technical data
sub-licensed to Aviron from Michigan (and of which
know-how and technical data Aviron has expressly notified
Medeva as being sub-licensed to Aviron by Michigan) or
developed by Medeva pursuant to this Restated Agreement
that is necessary or useful to the manufacture or use of
the cold-adapted influenza vaccine product derived from
Master Donor Strains; or
20.8.4 No approval, review, inspection nor receipt by Michigan of
any such know-how or technical data or samples or
otherwise or representations made with respect thereto
shall in any manner relieve Medeva of the responsibilities
under this Clause 20.8,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 37
where but only where such claims damages losses or expenses [ *
]. Nothing in this indemnity shall in any way reduce or limit the
extent of the indemnity provided by Aviron in favour of Medeva
pursuant to clause 11.4.
20.9 Medeva shall not use the name of Michigan in publicity or
advertising concerning the Intermediate Product or the Master
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.
21 GENERAL
21.1 Any reference in this Restated Agreement to "writing" or cognate
expressions includes a reference to telex, cable, facsimile
transmission or comparable means of communication.
21.2 The headings in this Restated Agreement are for convenience only
and shall not affect its interpretation.
21.3 No variation or amendment of this Restated Agreement shall bind
either party unless made in writing in the English language and
agreed to in writing by duly authorized officers of both parties.
21.4 If any provision of this Restated Agreement is agreed by the
parties to be illegal void or unenforceable under any law that is
applicable hereto or if any court of competent jurisdiction in a
final decision so determines this Restated Agreement shall
continue in force save that such provision shall be deemed to be
excised here from with effect from the date of such agreement or
decision or such earlier date as the parties may agree.
21.5 This Restated Agreement shall be governed by and construed in all
respects in accordance with the [ * ] and the parties hereby
submit to the jurisdiction of the [ * ] for the determination of
any dispute arising hereunder. Either party shall be entitled to
enforce any order of the [ * ] in any other jurisdiction.
21.6 Unless this Restated Agreement or any agreement or arrangement of
which this Restated Agreement forms a part is a non-notifiable
agreement for the purpose of section 27A of the Restrictive Trade
Practices Act 1976, if there is a provision of this Restated
Agreement or any such agreement or arrangement which causes or
would cause this Restated Agreement or any such agreement or
arrangement to be subject to registration under the Restrictive
Trade Practices Act 1976, that provision shall not take effect
until the date after particulars of this Restated Agreement (or
of that agreement or arrangement as the case may be) have been
furnished to the Director General of Fair Trading pursuant to
section 24 of the Restrictive Trade Practices Act 1976.
22 PUBLIC DISCLOSURE
No public announcement of any kind shall be made in respect of or in
connection with this Restated Agreement except as specifically agreed in
writing between the parties, or except to the extent that an
announcement is required by law or by the US or UK stock exchange as the
case may be but in such event any announcement by either party shall
only be issued after prior consultation with the other, having taken
reasonable account of any comment or reasonable requirement of the
other.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 38
23 ENTIRE AGREEMENT
23.1 This Restated Agreement, the Technical Agreement (etc etc) are
the entire agreements and understandings between the parties
relating to the subject matter of this Restated Agreement and,
save as provide in clause 24 below, supersedes and previous
agreement between the parties.
23.2 Each of the parties acknowledges and agrees that in entering into
this Restated Agreement, and the documents referred to in it, it
does not rely on and shall have no remedy in respect of, any
statement, representation, warranty or understanding (whether
negligently or innocently made and whether written or oral) of
any person (whether party to this Restated Agreement or not)
other than as expressly set out in this Restated Agreement.
23.3 Nothing in this clause shall operate to limit or exclude any
liability for fraud.
23.4 The terms of this Restated Agreement shall supersede any
conflicting standard terms and conditions, purchase orders,
acceptance notices and other documents exchanged between the
Parties in the course of ordering and supplying Intermediate
Product under this Restated Agreement, and any such terms and
conditions conflicting with or in addition to the terms of this
Restated Agreement are hereby expressly rejected.
24 PROVISIONS PERTAINING TO PREVIOUS AGREEMENTS
24.1 All sums due and owing to Medeva as at [ * ] pursuant to the 1995
Development Agreement and the 1997 Contract Manufacture Agreement
in the amount of [ * ] shall be paid by Aviron to Medeva on the
Effective Date. All sums due and owing to Medeva for work
performed by Medeva under the 1997 Contract Manufacture Agreement
or the 1995 Development Agreement between [ * ] and the [ * ]
will be paid under the terms of the 1997 Contract Manufacture
Agreement or the 1995 Development Agreement as is appropriate.
24.2 Medeva shall notify Aviron should it be approached by any third
party wishing to exploit the process technology developed by
Medeva pursuant to the 1995 Development Agreement, the 1997
Contract Manufacture Agreement, or this Restated Agreement in
respect of [ * ] and, within [ * ] of receipt of such
notification, Aviron may request that the parties enter
negotiations for a licence in respect thereof. If Aviron does not
so request the commencement of negotiations, or if the parties
have not executed a license agreement after [ * ] of good faith
negotiations, [ * ] such process technology relating to [ * ]
to a [ * ].
24.3 Clause 8.1 (other than the first two sentences) and clauses 8.3,
8.4, 10.10, 14, 15 and 16 of the 1995 Development Agreement
survive the termination of the 1995 Development Agreement.
24.4 Notwithstanding anything in clause 20.3 of the 1995 Development
Agreement, said section is hereby terminated.
24.5 Any materials purchased by [ * ] pursuant to clause [ * ] of the
1995 Development Agreement shall be deemed to be [ * ] and the
terms concerning such set forth in this Restated Agreement shall
apply.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 39
24.6 Any costs for plant and facilities to be recovered by Medeva
pursuant to clause 7.5 of the 1995 Development Agreement shall be
deemed to be and are included in the payment from Aviron to
Medeva for use of the Aviron Unit.
24.7 Any Virus Seeds, the Working Seed and the Vaccine referred to in
clause 9.5 of the 1995 Development Agreement shall be used or
disposed of as provided in this Restated Agreement.
24.8 Sections 6.1 and 6.2 of the 1995 Development Agreement are hereby
terminated. All process technology referred to in clauses 6.1 and
6.2 of the 1995 Development Agreement shall be deemed to be
Medeva Process Technology and Aviron Process Technology and the
terms of this Restated Agreement shall apply to such accordingly.
24.9 Subject to the above, the 1995 Development Agreement is hereby
terminated. Neither party shall have any further rights,
obligations or liabilities to the other party under the terms of
the 1995 Development Agreement unless expressly stated herein and
except for rights, obligations and liabilities under any
surviving clauses set forth in Clause 24.3.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<PAGE> 40
IN WITNESS WHEREOF, this Restated Agreement has been executed by the duly
authorized representatives of the parties the day and year first above written
MEDEVA PHARMA LIMITED AVIRON
By: /s/ M. J. Harvey By: /s/ Fred Kurland
-------------------------------- --------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 1
AVIRON ASSETS
[ * ] [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 2
AVIRON UNIT
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 3
DIRECT DAMAGES
1. [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 4
GSA
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 5
MICHIGAN AGREEMENT
The Michigan Agreement was filed with the SEC by Aviron as Exhibit 10.3 to
Aviron's Registration Statement on Form S-1, File No. 333-05209, filed June 5,
1996, as amended, which exhibit was titled "Materials Transfer and Intellectual
Property Agreement between Aviron and the Regents of the University of
Michigan, dated February 24, 1995," and is hereby incorporated by reference.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 6
MPU
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 7
SPF UNIT
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 8
TECHNICAL AGREEMENT
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 9
TECHNICAL SUPPORT
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 10
RAW MATERIALS SUPPLIED BY AVIRON
1. [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 11
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 12
MANUFACTURING CAPACITY
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 13
FORMAT OF FORECAST
- -------------------------------------------------------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EGG QUANTITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DELIVERY DATE OF EGGS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INTENDED USE (NAF/MVH)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DELIVERY DATE OF MVS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SET DATE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVAIL DATE OF MWVS
FOR INOC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INOCULATION DATE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HARVEST DATE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLANNED STRAIN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Q.A RELEASE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHIP DATE OF
INTERMEDIATE PRODUCT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 14
EXPERT DISPUTE RESOLUTION PROCEDURES
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 15
SUPPLY PRICE
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 16
LIST OF CRITICAL EQUIPMENT
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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SCHEDULE 17
EMPLOYMENT LEVELS
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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Schedule 18
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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Medeva Pharma Limited
Vale of Bardsley, Ashton-under-Lyne
Lancashire OL7 9RR
Telephone +44 (0)161 330 4531
FAX +44 (0)161 343 5083
Our ref: MJH/KAM
30 June 1999
Mr. Fred Kurland
Senior Vice President and CFO
Aviron
297 North Bernardo Avenue
Mountain View, California 94043 BY FACSIMILE & POST
Dear Sirs:
Medeva Pharma Limited and Aviron hereby, in consideration for the mutual
covenants set forth herein, the adequacy of which is agreed by both parties,
agree to the following amendments of the Contract Manufacture Agreement entered
into between the parties in June 1999.
Clause 2.38 - shall be amended to read "Named Executives" means a director of
Medeva and Vice President of Aviron designated and replaced from time to time by
the respective party. As of the Effective Date the Named Executives of the
respective parties shall be those persons set forth in Schedule 19.
Clause 3.7.8.2 shall be amended to read "In connection with the PAI, Medeva will
permit Aviron's [ * ], currently the individual whose name is set forth in
Schedule 19, to be present and participate [ * ] relating to the Vaccine
provided, however, that Medeva shall have the right [ * ] where he would become
privy to confidential information not related to the Vaccine. Furthermore, in
preparation of the PAI, Medeva shall [ * ] and during the PAI shall make
accessible to the Agency [ * ], all documentation specifically associated with
the Manufacture of the Intermediate Product. Aviron may, in relation to this
clause 3.7.8.2, change the individual who is entitled to be present and
participate [ * ] from the individual names in Schedule 19 [ * ], such [ * ] not
to be [ * ].
A new clause 3.7.15 shall be inserted which shall read "Medeva shall make
available the GSA, AVU, MPU and SPF Unit to Aviron for purposes other than
Manufacture of Intermediate Product intended for use in Vaccines for commercial
sale, as requested from time to time by Aviron. Aviron shall pay to Medeva for
any such use the [ * ] as set forth in Schedule 9. For the avoidance of doubt,
Aviron shall not pay any [ * ] in connection with such use".
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 60
Clause 3.7.17 - shall be amended by the addition of the following words "The
specification of any other eggs processed by Medeva in the SPF Unit shall be the
same or higher than the specification of the Eggs. Medeva shall provide to
Aviron promptly after the Effective Date a draft SOP pertaining to the [ * ] of
the Eggs in the SPF Unit. Aviron may, by written request, [ * ] such SOP and
[ * ], the requested amendments are reasonable to ensure that the processing of
the Eggs for the Manufacture of the Intermediate Product is not compromised,
[ * ] make such alterations to the procedures and SOP's. Medeva shall provide to
Aviron a written [ * ] any amendment [ * ] has [ * ].
Clause 6.1.2 - shall be amended so that the word [ * ] in the second line shall
be replaced by the word [ * ].
Clause 6.1.3 - shall be amended so that the word [ * ] in the first line shall
be replaced by the word [ * ].
Clause 6.2.1 - there shall be two changes to this clause. In the last sentence,
the reference to [ * ] shall be replaced by [ * ]. Further, the following words
shall be added at the end of Clause 6.2.1.
"Any forecast provided by Aviron shall be in the format set forth in Schedule
13".
Clause 6.4.6 - the emboldened square bracket in the seventh line shall be
deleted.
Clause 7.2 - shall be amended by addition at the end of the following sentence
added "For the avoidance of doubt, Medeva does not have a license to use the
Aviron Process Technology except for the purpose of Manufacturing the
Intermediate Product pursuant to this Restated Agreement or for Aviron's
licensees as provided in Clause 7.5.4"
Clause 9.2.1.1 - shall be deleted and replaced with the following "In the event
that Medeva [ * ] and [ * ] and [ * ] which shall be [ * ], for such [ * ] which
[ * ], Aviron shall pay to Medeva [ * ].
Clause 9.2.2.1 - the word "endeavors" shall be inserted after the words "all
reasonable" in the penultimate line.
Clause 9.3.3 - the sentence reading "under no circumstances shall the combined
reductions from [ * ]" shall be deleted.
Clause 11.6 - shall be deleted and replaced with the following: "Aviron hereby
indemnifies and shall keep Medeva indemnified against all costs, damages or
liabilities up to a maximum of [ * ] of this Agreement arising from
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 61
[ * ] save where such [ * ] is caused by the negligence, willful malfeasance or
default of Medeva or its employees in which case Aviron shall have no liability
to Medeva pursuant to the indemnity set forth in this clause 11.6. Aviron shall
not be liable under the indemnity set forth in this Clause 11.6 for any indirect
or consequential losses, costs, damages or liabilities suffered by Medeva as a
result of the contamination or interruption to the business of Medeva
contemplated by this Clause 11.6
Clause 16.1 - shall be amended by the deletion of [ * ] and replacing such with
[ * ].
Clause 16.2 - shall be amended by replacing [ * ] with [ * ].
Clause 16,3 - shall be amended by deletion of [ * ] and replacing such with [ *
].
By insertion of a new Clause 20.9 which shall read "Upon termination of the
Michigan Agreement, Medeva shall assist Aviron in complying with its obligations
under Clauses 15.5 and 15.6 of the Michigan Agreement".
Clause 23.1 - By deletion of"(etc etc)" from the first line of Clause 23.1.
Schedule 9 - In the section at the end of Schedule 9 under the heading
"Definitions" the following amendments shall be made: (a) the following words
shall be added to the sentence which reads [ * ]; "this figure includes costs
pertaining to the relevant part of the GSA, SPF and MPU utilised for that day".
(b) The following words shall be added to the sentence which reads [ * ],
"except in relation to [ * ] in which circumstances Aviron will pay to Medeva
[ * ]
By insertion of a new Schedule 19 as attached.
Yours faithfully
/s/ M. J. Harvey
M J Harvey
New Business Development Director
Signed for and on behalf of Aviron
/s/ Fred Kurland Date 7/14/99
- ----------------------------------------- ----------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 62
SCHEDULE 19
RELEVANT INDIVIDUALS
The individuals pursuant to Clause 2.38 are [ * ].
The individuals pursuant to Clause 3.7.8.2 are [ * ].
The individuals pursuant to Clause 13 are [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 63
Medeva Pharma Limited
Gaskill Road, Speke
Liverpool L24 9GR
Telephone +44 (0)151 486 1866
FAX: +44 (0)151 486 5033
2nd July 1999
Mr. Fred Kurland
Senior Vice President and CFO
Aviron
297 North Bernardo Avenue
Mountain View, California 94043 BY FACSIMILE & POST
Dear Sirs:
Medeva Pharma Limited and Aviron hereby, in consideration for the mutual
covenants set forth herein, the adequacy of which is agreed by both parties,
agree to the following amendments of the Contract Manufacture Agreement entered
into between the parties in June 1999 as amended by the letter agreement dated
June 30, 1999.
Clause [ * ] shall be deleted and replaced with the following:
"SPF Unit. Medeva will [ * ] for products manufactured in the SPF Unit [ * ] in
such a manner that within [ * ] from the Effective Date, any [ * ] in the SPF
Unit [ * ] of the Manufacturing Working Virus Seed and the Intermediate Product.
Notwithstanding the foregoing, Aviron hereby [ * ], for the period of [ * ], at
[ * ], to use Aviron Assets in the SPF Unit for the processing of [ * ] for use
in products other than the Intermediate Product and the Working Virus Seed. The
[ * ] processed by Medeva in the SPF Unit shall be the [ * ] than the [ * ].
Medeva shall provide to Aviron promptly after the Effective Date draft SOPs and
procedures pertaining to the [ * ] in the SPF unit. Medeva shall ensure any SOPs
that pertain to [ * ] processed in the SPF unit are [ * ], such that any
procedure carried out or required by [ * ] with any [ * ] of [ * ] where the
meaning of [ * ] for the purposes of this provision shall include but not be
limited to [ * ] or the [ * ] carried out in the SPF Unit. If in the reasonable
opinion of an independent competent third party, appointed by agreement of
Medeva and Aviron (such third party having experience and expertise appropriate
to resolve such an issue) that [ * ] with the [ * ],
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 64
Medeva [ * ] those SOPs [ * ] in the SPF Unit so that they [ * ] pertaining to
the [ * ]. Medeva is not obligated to provide Aviron with [ * ] of [ * ] after
they have [ * ] SPF Unit."
Clause 9.2.1.1 - shall be amended by the deletion of " , save for PQ014 which
shall be delivered by August 31, 1999,".
Clause 11.1 shall be amended by deleting the reference to Clause 11.9 so that
the first sentence shall commence:
"Subject to Clauses 11.2, 11.3 and 11.8 Medeva indemnifies ...."
Clause 11.9 shall be amended so that the first sentence shall commence:
"Subject to Clause 11.1...."
Yours faithfully
/s/ M. J. Harvey
M J Harvey
New Business Development Director
Signed for and on behalf of Aviron
/s/ Fred Kurland Date 7/2/99
- -------------------------------------- ---------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 1
EXHIBIT 10.30
LEASE
BY AND BETWEEN
MELP VII L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
AS LANDLORD
AND
AVIRON, A DELAWARE CORPORATION
AS TENANT
OCTOBER 20, 1999
<PAGE> 2
LEASE
THIS LEASE, dated October 20, 1999 for reference purposes only, is made
by and between MELP VII L.P., a California limited partnership ("Landlord") and
Aviron, a Delaware corporation, to be effective and binding upon the parties as
of the date the last of the designated signatories to this Lease shall have
executed this Lease (the "Effective Date of this Lease").
ARTICLE 1 REFERENCE
1.1 REFERENCES. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
<TABLE>
<CAPTION>
<S> <C>
Tenant's Address for Notice: Prior to Commencement Date:
297 N. Bernardo
Mountain View, CA 94043
Attn: Chief Financial Officer
After Commencement Date:
4575 Patrick Henry Drive
Santa Clara, CA 95054
Landlord's Address for Notices: c/o Menlo Equities LLC
525 University Avenue
Suite 100
Palo Alto, California 94301
Landlord's Representative: Henry Bullock/Richard Holmstrom
Phone Number: (650) 326-9300
Intended Commencement Date: November 1, 1999
Intended Term: Five years
Lease Expiration Date: Five (5) Years from
the Actual Lease Commencement Date,
unless earlier terminated by
Landlord in accordance with the
terms of this Lease, or extended by
Tenant pursuant to Article 15.
Options to Renew: One option(s) to renew, for a term
of five (5) years.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
First Month's Prepaid Rent: $39,375.00
Tenant's Security Deposit: $44,316.91
Late Charge Amount: Five Percent (5%) of the Delinquent Amount
Tenant's Required Liability
Coverage: $3,000,000 Combined Single Limit
Tenant's Broker(s): BT Commercial
Property: That certain real property situated in the City
of Santa Clara, County of Santa Clara, State of
California, as presently improved with one
building, which real property is shown on the
Site Plan attached hereto as Exhibit "A" and is
commonly known as or otherwise described as
follows: 4575 Patrick Henry Drive, Suite
___, Santa Clara, California.
Building: That certain building on the Property in which
the Leased Premises are located commonly known as
4575 Patrick Henry Drive (the "Building") located
on Assessor's Parcel No. 104-04-131, which
Building is shown outlined on Exhibit "A" hereto.
Outside Areas: The "Outside Areas" shall mean all areas within
Assessor's Parcel No. 104-04-131 which are
located outside the Building, such as pedestrian
walkways, parking areas, landscaped areas, open
areas and enclosed trash disposal areas.
Leased Premises: All the interior space within the Building,
including stairwells, connecting walkways, and
atriums, consisting of approximately 22,500 square
feet and, for purposes of this Lease, agreed to
contain said number of square feet.
Tenant's Expense Share: The term "Tenant's Expense Share" shall mean the
percentage obtained by dividing the rentable
square footage of the Leased Premises at the time
of calculation by the rentable square footage of
all buildings located on the Property at the time
of calculation. Such percentage is currently
40.9%. In the event that any portion of the
Property is sold by Landlord, or the rentable
square footage of the Leased Premises or the
Property is otherwise changed, Tenant's Expense
Share shall be recalculated to equal the
percentage described in the first sentence of
this paragraph, so that the aggregate Tenant's
Expense Share of all tenants of the Property
shall equal 100%.
Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
Months Rent
1 - 12 $39,375.00
13 - 24 $40,556.25
25 - 36 $41,772.94
37 - 48 $43,026.12
49 - 60 $44,316.91
Permitted Use: Office, research and administration and related
legal uses.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Exhibits: The term "Exhibits" shall mean the Exhibits of
this Lease which are described as follows:
Exhibit "A" - Site Plan showing the Property and
delineating the Building in which the Leased
Premises are located.
Exhibit "B" - Work Letter
Exhibit "C" - Form of Tenant Estoppel Certificate
</TABLE>
ARTICLE 2 LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant's own use in the conduct of Tenant's
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article 1 as the Leased Premises, reserving and
excepting to Landlord the right to fifty percent (50%) of all assignment
consideration and excess rentals as provided in Article 7 below. Tenant's lease
of the Leased Premises, together with the appurtenant right to use the Outside
Areas as described in Paragraph 2.2 below, shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and Property, and
(iv) all reasonable rules and regulations from time to time established by
Landlord. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees all rights of access, use and
occupancy of the Building roof, and Tenant shall have no right of access, use or
occupancy of the Building roof except (if at all) to the extent required in
order to enable Tenant to perform Tenant's maintenance and repair obligations
pursuant to this Lease.
2.2 RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right to
the use and occupancy of the Leased Premises, Tenant shall have the right to use
the Outside Areas in conjunction with its use of the Leased Premises solely for
the purposes for which they were designated and intended and for no other
purposes whatsoever. Tenant's right to so use the Outside Areas shall be subject
to the limitations on such use as set forth in Article 1 and shall terminate
concurrently with any termination of this Lease.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4 below, the
term of this Lease shall begin, and the Lease Commencement Date shall be deemed
to have occurred, on the Intended Commencement Date, as set forth in Article 1
(the "Lease Commencement Date"). The term of this Lease shall in all events end
at 11:59 p.m. on the day immediately preceding the five (5) year anniversary of
the Lease Commencement Date. The Lease Term shall be that period of time
commencing on the Lease Commencement Date and ending on the Lease Expiration
Date (the "Lease Term").
2.4 DELIVERY OF POSSESSION. Landlord shall deliver to Tenant possession of the
Leased Premises on November 1, 1999; if Landlord is unable to deliver possession
of the Leased Premises on such date to Tenant in no event shall Landlord be
liable in damages to Tenant for such delay.
2.5 PERFORMANCE OF IMPROVEMENT WORK; ACCEPTANCE OF POSSESSION. Landlord shall
have no obligation to make any improvements or alterations to the Leased
Premises before delivering the Leased Premises to Tenant. Tenant will be
responsible for performing improvement work pursuant to the Work Letter (such
work and installations hereinafter referred to as the "Improvement Work").
Without limiting the foregoing, Landlord agrees to deliver in good working order
the roof surface and all existing plumbing, lighting, heating, ventilating and
air conditioning systems within the Leased Premises.
<PAGE> 5
2.6 SURRENDER OF POSSESSION. Not later than the expiration or upon the sooner
termination of this Lease, Tenant shall remove all of Tenant's signs from the
exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations, special improvements (as
defined in Exhibit B) and other personal property from within the Leased
Premises, the Building and the Outside Areas, and shall vacate and surrender the
Leased Premises, the Building, the Outside Areas and the Property to Landlord in
the same condition, broom clean, as existed at the Lease Commencement Date,
reasonable wear and tear, acts of God and condemnation excepted. Tenant shall
repair all damage to the Leased Premises, the exterior of the Building and the
Outside Areas caused by Tenant's removal of Tenant's property. Tenant shall
patch and refinish, to Landlord's reasonable satisfaction, all penetrations made
by Tenant or its employees to the floor, walls or ceiling of the Leased
Premises, whether such penetrations were made with Landlord's approval or not.
Tenant shall repair or replace all stained or damaged ceiling tiles, wall
coverings and floor coverings to the reasonable satisfaction of Landlord. Tenant
shall repair all damage caused by Tenant to the exterior surface of the Building
and the paved surfaces of the Outside Areas and, where necessary, replace or
resurface same. Additionally, to the extent that Landlord shall have notified or
is deemed to have notified Tenant in writing at the time the improvements were
completed that it desired to have certain improvements made by Tenant or at the
request of Tenant removed at the expiration or sooner termination of the Lease,
Tenant shall, upon the expiration or sooner termination of the Lease, remove any
such improvements constructed or installed by Landlord or Tenant and repair all
damage caused by such removal. If the Leased Premises, the Building, the Outside
Areas and the Property are not surrendered to Landlord in the condition required
by this paragraph at the expiration or sooner termination of this Lease,
Landlord may, at Tenant's expense, so remove Tenant's signs, property and/or
improvements not so removed and make such repairs and replacements not so made
or hire, at Tenant's expense, independent contractors to perform such work.
Tenant shall be liable to Landlord for all costs incurred by Landlord in
returning the Leased Premises, the Building and the Outside Areas to the
required condition, together with interest on all costs so incurred from the
date paid by Landlord at the then maximum rate of interest not prohibited or
made usurious by law until paid. Tenant shall pay to Landlord the amount of all
costs so incurred plus such interest thereon, within twenty (20) days of
Landlord's billing Tenant for same. Tenant shall indemnify Landlord against loss
or liability resulting from delay by Tenant in surrendering the Leased Premises,
including, without limitation, any claims made by any succeeding Tenant or any
losses to Landlord with respect to lost opportunities to lease to succeeding
tenants.
ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS
3.1 BASE MONTHLY RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term,
Tenant shall pay to Landlord, without prior demand therefor, in advance on the
first day of each calendar month, the amount set forth as "Base Monthly Rent" in
Article 1 (the "Base Monthly Rent").
3.2 ADDITIONAL RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term, in
addition to the Base Monthly Rent and to the extent not required by Landlord to
be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:
(a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Payment shall be made by the following method:
Landlord shall deliver to Tenant Landlord's reasonable estimate
of any given expense (such as Landlord's Insurance Costs or Real Property
Taxes), or group of expenses, which it anticipates will be paid or incurred for
the ensuing calendar or fiscal year, as Landlord may determine, and Tenant shall
pay to Landlord an amount equal to the estimated amount of such expenses for
such year in equal monthly installments during such year with the installments
of Base Monthly Rent. The estimated amount may be changed over the course of the
year to reflect Landlord's reasonable understanding of a change in the amount.
Landlord reserves the right to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.
(b) Landlord's share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7.
<PAGE> 6
(c) Any legal fees and costs that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and
(d) Any other charges or reimbursements due Landlord from Tenant
pursuant to the terms of this Lease.
Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than five (5) days
before such Real Property Taxes become delinquent.
3.3 YEAR-END ADJUSTMENTS. If Landlord shall have elected to bill Tenant for the
Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord
shall furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, at its election, either (i) credit the amount of such overpayment toward
the next ensuing payment or payments of Additional Rent that would otherwise be
due or (ii) refund in cash to Tenant the amount of such overpayment within
thirty (30) days after the date of such statement. If such year-end statement
shall show that Tenant did not pay its obligation for such expenses in full,
then Tenant shall pay to Landlord the amount of such underpayment within twenty
(20) days from receipt of Landlord's billing of same to Tenant. The provisions
of this Paragraph shall survive the expiration or sooner termination of this
Lease. Tenant may, at any time within sixty (60) days after Landlord delivers to
Tenant Landlord's final reconciliation of Property Operating Expenses, audit
Landlord's books and records with respect to the Property Operating Expenses.
3.4 LATE CHARGE, AND INTEREST ON RENT IN DEFAULT. Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within five (5) calendar days after the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to the
amount set forth in Article 1 as the "Late Charge Amount," and if any Additional
Rent is not received by Landlord when the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to 5% of the
Additional Rent not so paid. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the anticipated loss Landlord would suffer by
reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's failure
to pay each rental installment due under this Lease when due, including the
right to terminate this Lease. If any rent remains delinquent for a period in
excess of five (5) calendar days, then, in addition to such late charge, Tenant
shall pay to Landlord interest on any rent that is not so paid from said tenth
day at the lesser of (a) then maximum rate of interest not prohibited or made
usurious by Law or (b) the prime rate (as set forth in the money rates section
of The Wall Street Journal) plus 5% until paid.
3.5 PAYMENT OF RENT. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.
<PAGE> 7
3.6 PREPAID RENT. Tenant shall, upon execution of this Lease, pay to Landlord
the amount set forth in Article 1 as "First Month's Prepaid Rent" as prepayment
of rent for credit against the first payment of Base Monthly Rent due hereunder.
3.7 SECURITY DEPOSIT. Tenant has deposited with Landlord the amount set forth
in Article 1 as the "Security Deposit" as security for the performance by Tenant
of the terms of this Lease to be performed by Tenant, and not as prepayment of
rent. Landlord may apply such portion or portions of the Security Deposit as are
reasonably necessary for the following purposes: (i) to remedy any default by
Tenant, beyond applicable notice and cure periods, in the payment of Base
Monthly Rent or Additional Rent or a late charge or interest on defaulted rent,
or any other monetary payment obligation of Tenant under this Lease; (ii) to
repair damage to the Leased Premises, the Building or the Outside Areas caused
or permitted to occur by Tenant; (iii) to clean and restore and repair the
Leased Premises, the Building or the Outside Areas following their surrender to
Landlord if not surrendered in the condition required pursuant to the provisions
of Article 2, and (iv) to remedy any other default of Tenant, beyond applicable
notice and cure periods, to the extent permitted by Law including, without
limitation, paying in full on Tenant's behalf any sums claimed by materialmen or
contractors of Tenant to be owing to them by Tenant for work done or
improvements made at Tenant's request to the Leased Premises. In this regard,
Tenant hereby waives any restriction on the uses to which the Security Deposit
may be applied as contained in Section 1950.7(c) of the California Civil Code
and/or any successor statute. In the event the Security Deposit or any portion
thereof is so used, Tenant shall pay to Landlord, within five (5) days of the
receipt of demand, an amount in cash sufficient to restore the Security Deposit
to the full original sum. If Tenant fails to promptly restore the Security
Deposit and if Tenant shall have paid to Landlord any sums as "Last Month's
Prepaid Rent," Landlord may, in addition to any other remedy Landlord may have
under this Lease, reduce the amount of Tenant's Last Month's Prepaid Rent, if
any, by transferring all or portions of such Last Month's Prepaid Rent to
Tenant's Security Deposit until such Security Deposit is restored to the amount
set forth in Article 1. Landlord shall not be deemed a trustee of the Security
Deposit. Landlord may use the Security Deposit in Landlord's ordinary business
and shall not be required to segregate it from Landlord's general accounts.
Tenant shall not be entitled to any interest on the Security Deposit. If
Landlord transfers the Building or the Property during the Lease Term, Landlord
shall pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any successor
statute, in which event the transferring landlord shall be released from all
liability for the return of the Security Deposit. Tenant specifically grants to
Landlord (and Tenant hereby waives the provisions of California Civil Code
Section 1950.7 to the contrary) a period of forty-five (45) days following a
surrender of the Leased Premises by Tenant to Landlord within which to inspect
the Leased Premises, make required restorations and repairs, receive and verify
workmen's billings therefor, and prepare a final accounting with respect to the
Security Deposit. In no event shall the Security Deposit or any portion thereof,
be considered prepaid rent.
ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA
4.1 PERMITTED USE. Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall continuously and without interruption use the Leased
Premises for such purpose for the entire Lease Term. Any discontinuance of such
use for a period of sixty consecutive calendar days shall be, at Landlord's
election, a default by Tenant under the terms of this Lease. Tenant shall have
the right to use the Outside Areas in conjunction with its Permitted Use of the
Leased Premises solely for the purposes for which they were designed and
intended and for no other purposes whatsoever.
4.2 GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the Building, or (iii) damage
or impair the efficient operation of the sprinkler system (if any) within or
servicing the Leased Premises or the Building. Tenant shall not install any
equipment or antennas on or make any penetrations of the exterior walls or roof
of the Building. Tenant shall not affix any equipment to or make any
penetrations or cuts in the floor, ceiling, walls or roof of the Leased Premises
without Landlord's consent, which will not be unreasonably
<PAGE> 8
withheld; if Landlord consents to any such installation, penetration or cut,
Tenant shall restore the affected area to its condition before such
installation, penetration or cut. Tenant shall not place any loads upon the
floors, walls, ceiling or roof systems which could endanger the structural
integrity of the Building or damage its floors, foundations or supporting
structural components. Tenant shall not place any explosive, flammable or
harmful fluids or other waste materials in the drainage systems of the Leased
Premises, the Building, the Outside Areas or the Property. Tenant shall not
drain or discharge any fluids in the landscaped areas or across the paved areas
of the Property. Tenant shall not use any of the Outside Areas for the storage
of its materials, supplies, inventory or equipment and all such materials,
supplies, inventory or equipment shall at all times be stored within the Leased
Premises. Tenant shall not commit nor permit to be committed any waste in or
about the Leased Premises, the Building, the Outside Areas or the Property.
4.3 NOISE AND EMISSIONS. All noise generated by Tenant in its use of the Leased
Premises shall be confined or muffled so that it does not interfere with the
businesses of or unreasonably annoy the occupants and/or users of adjacent
properties. All dust, fumes, odors and other emissions generated by Tenant's use
of the Leased Premises shall be sufficiently dissipated in accordance with sound
environmental practice and exhausted from the Leased Premises in such a manner
so as not to interfere with the businesses of or unreasonably annoy the
occupants and/or users of adjacent properties, or cause any damage to the Leased
Premises, the Building, the Outside Areas or the Property or any component part
thereof or the property of adjacent property owners.
4.4 TRASH DISPOSAL. Tenant shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Tenant shall cause such trash, garbage and waste
to be regularly removed from the Property. Tenant shall keep the Leased Premises
and the Outside Areas in a clean, safe and neat condition free and clear of all
of Tenant's trash, garbage, waste and/or boxes, pallets and containers
containing same at all times.
4.5 PARKING. Tenant will have the right, on a non-exclusive basis, to use 83
parking spaces in the parking area designated on Exhibit A hereto. Tenant shall
not, at any time, park or permit to be parked any recreational vehicles,
inoperative vehicles or equipment in the Outside Areas or on any portion of the
Property. Tenant agrees to assume responsibility for compliance by its employees
and invitees with the parking provisions contained herein. If Tenant or its
employees park any vehicle within the Property in violation of these provisions,
then Landlord may, upon prior written notice to Tenant giving Tenant one (1) day
(or any applicable statutory notice period, if longer than one (1) day) to
remove such vehicle(s), in addition to any other remedies Landlord may have
under this Lease, charge Tenant, as Additional Rent, and Tenant agrees to pay,
as Additional Rent, One Hundred Dollars ($100) per day for each day or partial
day that each such vehicle is so parked within the Property. Landlord reserves
the right to grant easements and access rights to others for use of the parking
areas on the Property, provided that such grants do not materially interfere
with Tenant's use of the parking areas.
4.6 SIGNS. Tenant shall not place or install on or within any portion of the
Leased Premises, the exterior of the Building, the Outside Areas or the Property
any sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises. Tenant shall not place or install on or within
any portion of the Leased Premises, the exterior of the Building, the Outside
Areas or the Property any business identification sign which is visible from the
exterior of the Leased Premises until Landlord shall have approved in writing
and in its sole but reasonable discretion the location, size, content, design,
method of attachment and material to be used in the making of such sign;
provided, however, that so long as such signs are normal and customary business
directional or identification signs within the Building, Tenant shall not be
required to obtain Landlord's approval. Any sign, once approved by Landlord,
shall be installed at Tenant's sole cost and expense and only in strict
compliance with Landlord's approval, using a person reasonably approved by
Landlord to install same. Landlord may remove any signs (which have not been
approved in writing by Landlord), advertisements, banners, placards or pictures
so placed by Tenant on or within the Leased Premises, the exterior of the
Building, the Outside Areas or the Property and charge to Tenant the cost of
such removal, together with any costs incurred by Landlord to repair any damage
caused thereby, including any cost incurred to restore the surface (upon which
such sign was so affixed) to its original condition. Tenant shall remove all of
Tenant's signs, repair any damage caused thereby, and restore the surface upon
which the sign was affixed to its original condition, all to Landlord's
reasonable satisfaction,
<PAGE> 9
upon the expiration or earlier termination of this Lease.
4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Subject to the provisions of
Section 6.3 below, Tenant shall abide by and shall promptly observe and comply
with, at its sole cost and expense, all Laws and Private Restrictions respecting
the use and occupancy of the Leased Premises, the Building, the Outside Areas or
the Property including, without limitation, all Laws governing the use and/or
disposal of hazardous materials, and shall defend with competent counsel,
indemnify and hold Landlord harmless from any claims, damages or liability
resulting from Tenant's failure to so abide, observe, or comply. Tenant's
obligations hereunder shall survive the expiration or sooner termination of this
Lease.
4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provisions of this Lease, Tenant shall not conduct nor permit any other person
to conduct any activities nor keep, store or use (or allow any other person to
keep, store or use) any item or thing within the Leased Premises, the Building,
the Outside Areas or the Property which (i) is prohibited under the terms of any
such policies, (ii) could result in the termination of the coverage afforded
under any of such policies, (iii) could give to the insurance carrier the right
to cancel any of such policies, or (iv) could cause an increase in the rates
(over standard rates) charged for the coverage afforded under any of such
policies. Tenant shall comply with all requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverages carried by either Landlord
or Tenant pursuant to this Lease.
4.9 LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or tenants; (iii) making necessary
alterations, additions or repairs; and (iv) performing any of Tenant's
obligations when Tenant has failed to do so after any notice (if required) from
Landlord provided, that during any entry pursuant to clause (ii), Tenant may
accompany Landlord. Landlord shall have the right to enter the Leased premises
during normal business hours (or as otherwise agreed), subject to Tenant's
reasonable security measures, for purposes of supplying any maintenance or
services agreed to be supplied by Landlord. Landlord shall have the right to
enter the Outside Areas during normal business hours for purposes of (i)
inspecting the exterior of the Building and the Outside Areas; (ii) posting
notices of nonresponsibility (and for such purposes Tenant shall provide
Landlord at least ten (10) days' prior written notice of any work to be
performed on the Leased Premises); and (iii) supplying any services to be
provided by Landlord. Any entry into the Leased Premises or the Outside Areas
obtained by Landlord in accordance with this paragraph shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Leased Premises, or an eviction, actual or constructive of
Tenant from the Leased Premises or any portion thereof. In exercising the
foregoing rights, Landlord will make reasonable efforts not to interfere with
Tenant's use of the Premises or with Tenant's parking rights.
4.10 USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall at
all times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
reasonable opinion of Landlord, unauthorized persons are using any of the
Outside Areas by reason of, or under claim of, the express or implied authority
or consent of Tenant, then Tenant, upon demand of Landlord, shall restrain, to
the fullest extent then allowed by Law, such unauthorized use, and shall
initiate such appropriate proceedings as may be required to so restrain such
use. Landlord reserves the right to grant easements and access rights to others
for use of the Outside Areas and shall not be liable to Tenant for any
diminution in Tenant's right to use the Outside Areas as a result. In exercising
the rights set forth in this Section 4.10, Landlord shall not materially
increase Tenant's obligations or diminish Tenant's rights under this Lease,
unless the rights are exercised to comply with a requirement of a utility
provider or governmental entity.
4.11 ENVIRONMENTAL PROTECTION. Tenant's obligations under this Section 4.11
shall survive the expiration or termination of this Lease.
<PAGE> 10
(a) As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq., (b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq., (c) Federal Water Pollution Control Act ("FSPCA"), 33
U.S.C. Section 1251 et seq., (d) Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., (e) Toxic Substances Control Act ("TSCA"), 14 U.S.C. Section 2601 et
seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act ("California
Superfund"), Cal. Health & Safety Code Section 25300 et seq., (h) California
Hazardous Waste Control Act, Cal. Health & Safety code Section 25100 et seq.,
(i) Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water
Code Section 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal.
Health & Safety codes Section 25220 et seq., (k) Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety code Section
25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safety code Section 25280 et seq., (m) Air Resources Law, Cal. Health &
Safety Code Section 39000 et seq., and (n) regulations promulgated pursuant to
said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.
(b) Notwithstanding anything to the contrary in this Lease, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; provided, however, that Tenant shall not be
responsible for contamination of the Leased Premises by Hazardous Materials
existing as of the date the Leased Premises are delivered to Tenant (whether
before or after the Scheduled Delivery Date) unless caused by Tenant. Tenant
shall not store, use or dispose of any Hazardous Materials except for those
Hazardous Materials (i) listed in a Hazardous Materials management plan
("HMMP"), if any, which if applicable to Tenant, Tenant shall deliver to
Landlord upon execution of this Lease and update at least annually with Landlord
and (ii) that are ordinary and customary office cleaning products in amounts
reasonably necessary for Tenant's permitted use of the Leased Premises
("Permitted Materials") which may be used, stored and disposed of provided (i)
such Permitted Materials are used, stored, transported, and disposed of in
strict compliance with applicable laws, (ii) such Permitted Materials shall be
limited to the materials listed in clause (ii) above or on (and may be used only
in the quantities specified in) the HMMP, if any, and (iii) Tenant shall provide
Landlord with copies of all material safety data sheets and other documentation
required under applicable Laws in connection with Tenant's use of Permitted
Materials, if any, as and when such documentation is provided to any regulatory
authority having jurisdiction, in no event shall Tenant cause or permit to be
discharged into the plumbing or sewage system of the Building or onto the land
underlying or adjacent to the Building any Hazardous Materials. Tenant shall be
solely responsible for and shall defend, indemnify, and hold Landlord and its
agents harmless from and against all claims, costs and liabilities, including
reasonable attorneys' fees and costs, arising out of or in connection with
Tenant's storage, use and/or disposal of Hazardous Materials. If the presence of
Hazardous Materials on the Leased Premises caused or permitted by Tenant results
in contamination or deterioration of water or soil, then Tenant shall promptly
take any and all action necessary to clean up such contamination, but the
foregoing shall in no event be deemed to constitute permission by Landlord to
allow the presence of such Hazardous Materials. At any time prior to the
expiration of the Lease Term if Tenant has a reasonable basis to suspect that
there has been any release or the presence of Hazardous Materials in the ground
or ground water on the Leased Premises which did not exist upon commencement of
the Lease Term, Tenant
<PAGE> 11
shall promptly so notify Landlord and shall have the right, but not the
obligation, to conduct appropriate tests of water and soil and to deliver to
Landlord the results of such tests to demonstrate that no contamination in
excess of permitted levels has occurred as a result of Tenant's use of the
Leased Premises. Tenant shall further be solely responsible for, and shall
defend, indemnify, and hold Landlord and its agents harmless from and against
all claims, costs and liabilities, including reasonable attorneys' fees and
costs, arising out of or in connection with any removal, cleanup and restoration
work and materials required hereunder to return the Leased Premises and any
other property of whatever nature to their condition existing prior to the
appearance of the Hazardous Materials caused by Tenant.
(c) Upon termination or expiration of the Lease, Tenant at its sole
expense shall cause all Hazardous Materials placed in or about the Leased
Premises, the Building and/or the Property by Tenant, its agents, contractors,
or invitees, and all installations (whether interior or exterior) made by or on
behalf of Tenant relating to the storage, use, disposal or transportation of
Hazardous Materials to be removed from the property and transported for use,
storage or disposal in accordance and compliance with all Laws and other
requirements respecting Hazardous Materials used or permitted to be used by
Tenant. If applicable to Tenant, Tenant shall apply for and shall obtain from
all appropriate regulatory authorities (including any applicable fire department
or regional water quality control board) all permits, approvals and clearances
necessary for the closure of the Property and shall take all other actions as
may be required to complete the closure of the Building and the Property. In
addition, prior to vacating the Leased Premises, Tenant shall undertake and
submit to Landlord an environmental site assessment from an environmental
consulting company reasonably acceptable to Landlord which site assessment shall
evidence Tenant's compliance with this Paragraph 4.11. Notwithstanding anything
to the contrary contained in the foregoing, if Tenant uses only ordinary office
cleaning products on the Leased Premises, and unless Tenant commences to use
other Hazardous Materials, Tenant shall not be obligated to perform the
environmental site assessment referenced in the preceding sentence.
(d) At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Tenant's
reasonable security requirements and provided such activities do not
unreasonably interfere with the conduct of Tenant's business at the Leased
Premises, Landlord shall have the right to enter in and upon the Property,
Building and Leased Premises in order to conduct appropriate tests of water and
soil to determine whether levels of any Hazardous Materials in excess of legally
permissible levels has occurred as a result of Tenant's use thereof. Landlord
shall furnish copies of all such test results and reports to Tenant and, at
Tenant's option and cost, shall permit split sampling for testing and analysis
by Tenant. Such testing shall be at Tenant's expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous Materials
in the soil or surface or ground water in, on, under, or about the Property, the
Building or the Leased Premises, which has been caused by or resulted from the
activities of Tenant, its agents, contractors, or invitees.
(e) Landlord may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Tenant shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.
4.12 RULES AND REGULATIONS. Landlord shall have the right from time to time to
establish reasonable rules and regulations and/or amendments or additions
thereto respecting the use of the Building, the Leased Premises and the Outside
Areas for the care and orderly management of the Property. Upon delivery to
Tenant of a copy of such rules and regulations or any amendments or additions
thereto, Tenant shall comply with such rules and regulations. A violation by
Tenant of any of such rules and regulations shall constitute a default by Tenant
under this Lease. If there is a conflict between the rules and regulations and
any of the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall not be responsible or liable to Tenant for the violation of such
rules and regulations by any other tenant of the Property. Notwithstanding
anything to the contrary contained in this Section 4.12, Tenant shall not be
required to comply with any rule or regulation (unless required by governmental
authorities or requirements) that unreasonably interferes with Tenant's use of
the Premises or Tenant's parking rights.
4.13 RESERVATIONS. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems
<PAGE> 12
necessary, and to cause the recordation of parcel maps and restrictions, so long
as such easements, rights of way and dedications not unreasonably interfere with
the use of the Leased Premises by Tenant, materially increase Tenant's
obligations or diminish Tenant's rights under this Lease, unless required by
governmental authorities or requirements. Tenant agrees to execute any documents
reasonably requested by Landlord to effectuate any such easement rights,
dedications, maps or restrictions.
ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of Article 10 shall
control, the parties shall have the following obligations and responsibilities
with respect to the repair and maintenance of the Leased Premises, the Building,
the Outside Areas, and the Property.
(a) TENANT'S OBLIGATIONS. Subject to the provisions of Section 5.1(b)
below, Tenant shall, at all times during the Lease Term and at its sole cost and
expense, regularly clean and continuously keep and maintain in good order,
condition and repair the Leased Premises and every part thereof including,
without limiting the generality of the foregoing, (i) all interior walls, floors
and ceilings, (ii) all windows, doors and skylights, (iii) all electrical
wiring, conduits, connectors and fixtures within the Leased Premises or
connected to outside services, (iv) all plumbing, pipes, sinks, toilets, faucets
and drains, (v) all lighting fixtures, bulbs and lamps and all heating,
ventilating and air conditioning equipment serving the Leased Premises, and (vi)
all entranceways to the Leased Premises. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed heating,
ventilating and air conditioning contractor to regularly and periodically (not
less frequently than every three months) inspect and perform required
maintenance on the heating, ventilating and air conditioning equipment and
systems serving the Leased Premises, or alternatively, Landlord may, at its
election, contract in its own name for such regular and periodic inspections of
and maintenance on such heating, ventilating and air conditioning equipment and
systems and charge to Tenant, as Additional Rent, the cost thereof. Landlord
shall contract in its own name for regular and periodic inspections (not less
frequently than every six months) of and maintenance on the roof by a licensed
roofing contractor and charge to Tenant, as Additional Rent, Tenant's Expense
Share of the cost thereof. Tenant shall, at its sole cost and expense, repair
all damage to the Leased Premises, the Building, the Outside Areas or the
Property caused by the activities of Tenant, its employees, invitees or
contractors promptly following written notice from Landlord to so repair such
damages. If Tenant shall fail to perform the required maintenance or fail to
make repairs required of it pursuant to this paragraph within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or at law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any broken glass shall promptly be replaced by
Tenant at Tenant's expense with glass of the same kind, size and quality.
(b) LANDLORD'S OBLIGATION. Landlord shall, at all times during the
Lease Term, maintain in good condition and repair the foundation, roof
structure, load-bearing and exterior walls of the Building. Subject to Section
13.12(c), the provisions of this subparagraph (b) shall in no way limit the
right of Landlord to charge to Tenant, as Additional Rent pursuant to Article 3
(to the extent permitted pursuant to Article 3), the costs incurred by Landlord
in performing such maintenance and/or making such repairs.
5.2 UTILITIES. Tenant shall arrange at its sole cost and expense and in its own
name, for the supply of gas and electricity to the Leased Premises. In the event
that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant's
name, Tenant shall do so at Tenant's sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant's needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.
<PAGE> 13
5.3 SECURITY. Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or, except to the extent caused by the sole active
negligence or willful misconduct of Landlord, its agents, employees or
contractors, the protection of Tenant's property or Tenant's employees, invitees
or contractors. To the extent Tenant determines that such security or protection
services are advisable or necessary, Tenant shall arrange for and pay the costs
of providing same.
5.4 ENERGY AND RESOURCE CONSUMPTION. Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of such compliance or cooperation. Tenant agrees at
all times to cooperate fully with Landlord and to abide by all reasonable rules
established by Landlord (i) in order to maximize the efficient operation of the
electrical, heating, ventilating and air conditioning systems and all other
energy or other resource consumption systems with the Property and/or (ii) in
order to comply with the requirements and recommendations of utility suppliers
and governmental agencies regulating the consumption of energy and/or other
resources.
5.5 LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property, except to the extent caused by the gross negligence or
willful misconduct of Landlord, its agents, employees or contractors, or loss of
Tenant's business or profits, nor shall Tenant be entitled to terminate this
Lease or to any reduction in or abatement of rent by reason of (i) Landlord's
failure to provide security services or systems within the Property for the
protection of the Leased Premises, the Building or the Outside Areas, or the
protection of Tenant's property or Tenant's employees, invitees, agents or
contractors, or (ii) Landlord's failure to perform any maintenance or repairs to
the Leased Premises, the Building, the Outside Areas or the Property until
Tenant shall have first notified Landlord, in writing, of the need for such
maintenance or repairs, and then only after Landlord shall have had a reasonable
period of time following its receipt of such notice within which to perform such
maintenance or repairs, or (iii) any failure, interruption, rationing or other
curtailment in the supply of water, electric current, gas or other utility
service to the Leased Premises, the Building, the Outside Areas or the Property
from whatever cause (other than Landlord's sole active negligence or willful
misconduct or that of its agents, employees or contractors), or (iv) the
unauthorized intrusion or entry into the Leased Premises by third parties (other
than Landlord).
ARTICLE 6 ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises the
cost of which exceeds $10,000 until Landlord shall have first approved, in
writing, the plans and specifications therefor, which approval will not be
unreasonably withheld or delayed. Landlord's approval shall be deemed given if
not denied by Landlord in a written notice to Tenant delivered within fifteen
(15) days following receipt of Tenant's written request. Tenant's written
request shall also contain a request for Landlord to elect whether or not it
will require Tenant to remove the subject alterations, modifications or
improvements at the expiration or earlier termination of this Lease. If such
additional request is not included, Landlord may make such election at the
expiration or earlier termination of this Lease (and for purposes of Tenant's
removal obligations set forth in Section 2.6 above, Landlord shall be deemed to
have made the election at the time the alterations, modifications or
improvements were completed). All such modifications, alterations or
improvements, once so approved, shall be made, constructed or installed by
Tenant at Tenant's expense (including all permit fees and governmental charges
related thereto), using a licensed contractor first reasonably approved by
Landlord, in substantial compliance with the Landlord-approved plans and
specifications therefor. All work undertaken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been obtained,
(ii) all requirements regarding insurance imposed by this Lease have been
satisfied, (iii) Tenant shall have given Landlord at least five (5) business
days prior written notice of its intention to commence such work so that
Landlord may post and file notices of non-responsibility, and (iv) if reasonably
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder's risk insurance in an amount satisfactory to Landlord in its
reasonable discretion to cover any perils relating to the proposed work not
covered by
<PAGE> 14
insurance carried by Tenant pursuant to Article 9. In no event shall Tenant make
any modification, alterations or improvements whatsoever to the Outside Areas or
the exterior or structural components of the Building including, without
limitation, any cuts or penetrations in the floor, roof or exterior walls of the
Leased Premises. As used in this Article, the term "modifications, alterations
and/or improvements" shall include, without limitation, the installation of
additional electrical outlets, overhead lighting fixtures, drains, sinks,
partitions, doorways, or the like.
6.2 OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease. Any such modifications, alterations or
improvements, once completed, shall not be altered or removed from the Leased
Premises during the Lease Term without Landlord's written approval first
obtained in accordance with the provisions of Paragraph 6.1 above. At the
expiration or sooner termination of this Lease, all such modifications,
alterations and improvements other than Tenant's inventory, equipment, movable
furniture, wall decorations and trade fixtures, shall automatically become the
property of Landlord and shall be surrendered to Landlord as part of the Leased
Premises as required pursuant to Article 2, unless Landlord shall require Tenant
to remove any of such modifications, alterations or improvements in accordance
with the provisions of Article 2, in which case Tenant shall so remove same.
Landlord shall have no obligations to reimburse Tenant for all or any portion of
the cost or value of any such modifications, alterations or improvements so
surrendered to Landlord. All modifications, alterations or improvements which
are installed or constructed on or attached to the Leased Premises by Landlord
and/or at Landlord's expense shall be deemed real property and a part of the
Leased Premises and shall be property of Landlord. All lighting, plumbing,
electrical, heating, ventilating and air conditioning fixtures, partitioning,
window coverings, wall coverings and floor coverings installed by Tenant shall
be deemed improvements to the Leased Premises and not trade fixtures of Tenant.
6.3 ALTERATIONS REQUIRED BY LAW. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that are
required by any Law because of (i) Tenant's use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, (ii) Tenant's
application for any permit or governmental approval, or (iii) Tenant's making of
any modifications, alterations or improvements to or within the Leased Premises.
If Landlord shall, at any time during the Lease Term, be required by any
governmental authority to make any modifications, alterations or improvements to
the Building or the Property, the cost incurred by Landlord in making such
modifications, alterations or improvements, including interest at a rate equal
to the greater of (a) 12%, or (b) the sum of that rate quoted by Wells Fargo
Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%)
("Wells Prime Plus Two") (but in no event more than the maximum rate of interest
not prohibited or made usurious), shall be amortized by Landlord over the useful
life of such modifications, alterations or improvements, as determined in
accordance with generally accepted accounting principles, and the monthly
amortized cost of such modifications, alterations and improvements as so
amortized shall be considered a Property Maintenance Cost.
6.4 LIENS. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within twenty (20) days after the same has been recorded. Tenant's
failure to do so shall be conclusively deemed a material default under the terms
of this Lease.
<PAGE> 15
ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent which shall not be
unreasonably withheld or delayed. Any attempted subletting or assignment without
Landlord's prior written consent, at Landlord's election, shall constitute a
default by Tenant under the terms of this Lease. The acceptance of rent by
Landlord from any person or entity other than Tenant, or the acceptance of rent
by Landlord from Tenant with knowledge of a violation of the provisions of this
paragraph, shall not be deemed to be a waiver by Landlord of any provision of
this Article or this Lease or to be a consent to any subletting by Tenant or any
assignment of Tenant's interest in this Lease. Without limiting the
circumstances in which it may be reasonable for Landlord to withhold its consent
to an assignment or subletting, Landlord and Tenant acknowledge that it shall be
reasonable for Landlord to withhold its consent in the following instances:
(a) the proposed assignee or sublessee is a governmental agency;
(b) in Landlord's reasonable judgment, the use of the Leased Premises by
the proposed assignee or sublessee would involve occupancy by other than for a
Permitted Use, would entail any alterations which would lessen the value of the
leasehold improvements in the Leased Premises, or would require increased
services by Landlord;
(c) in Landlord's reasonable judgment, the financial worth of the
proposed assignee is less than that of Tenant or does not meet the credit
standards applied by Landlord;
(d) the proposed assignee or sublessee (or any of its affiliates) has
been in material default under a lease, has been in litigation with a previous
landlord, or in the ten years prior to the assignment or sublease has filed for
bankruptcy protection, has been the subject of an involuntary bankruptcy, or has
been adjudged insolvent;
(e) Landlord has experienced a previous default by or is in litigation
with the proposed assignee or sublessee;
(f) in Landlord's reasonable judgment, the Leased Premises, or the
relevant part thereof, will be used in a manner that will violate any negative
covenant as to use contained in this Lease;
(g) the use of the Leased Premises by the proposed assignee or sublessee
will violate any applicable law, ordinance or regulation;
(h) the proposed assignee or sublessee is, as of the date of this Lease,
a tenant in the Building;
(i) the proposed assignment or sublease fails to include all of the
terms and provisions required to be included therein pursuant to this Article 7;
(j) Tenant is in default of any obligation of Tenant under this Lease,
or Tenant has defaulted under this Lease on three or more occasions during the
12 months preceding the date that Tenant shall request consent; or
(k) in the case of a subletting of less than the entire Leased Premises,
if the subletting would result in the division of the Leased Premises into more
than two subparcels or would require improvements to be made outside of the
Leased Premises.
Tenant may, without obtaining Landlord's consent, assign this Lease or sublet
the Leased Premises (a) to an affiliate or subsidiary of Tenant, provided that
(i) such affiliate or subsidiary is wholly owned by Tenant and (ii) such
affiliate or subsidiary will use the Leased Premises in the same manner as
Tenant used the Leased Premises; and (b) to an entity that acquires
substantially all the assets of Tenant (by merger, reorganization or sale),
provided that such entity (i) has net worth that exceeds the net worth of Tenant
immediately before the acquisition and (ii) conducts operations in the Leased
Premises substantially identical to the operations of Tenant before the
acquisition.
7.2 MERGER, REORGANIZATION, OR SALE OF ASSETS. Subject to the provisions of
Section 7.1 above, any dissolution, merger, consolidation or other
reorganization of Tenant, or the sale or other transfer in the aggregate over
the Lease Term of a controlling percentage of the capital stock of
<PAGE> 16
Tenant, or the sale or transfer of all or a substantial portion of the assets of
Tenant, shall be deemed a voluntary assignment of Tenant's interest in this
Lease. The phrase "controlling percentage" means the ownership of and the right
to vote stock possessing more than fifty percent of the total combined voting
power of all classes of Tenant's capital stock issued, outstanding and entitled
to vote for the election of directors. If Tenant is a partnership, a withdrawal
or change, voluntary, involuntary or by operation of Law, of any general
partner, or the dissolution of the partnership, shall be deemed a voluntary
assignment of Tenant's interest in this Lease.
7.3 LANDLORD'S ELECTION. If Tenant shall desire to assign its interest under
the Lease or to sublet the Leased Premises, Tenant must first notify Landlord,
in writing, of its intent to so assign or sublet, at least twenty (20) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee's or sublessee's intended use of the Leased Premises, current
financial statements (including a balance sheet, income statement and statement
of cash flow, all prepared in accordance with generally accepted accounting
principles) of such proposed assignee or sublessee, the form of documents to be
used in effectuating such assignment or subletting and such other information as
Landlord may reasonably request. Landlord shall have a period of ten (10)
business days following receipt of such notice and the required information
within which to do one of the following: (i) consent to such requested
assignment or subletting subject to Tenant's compliance with the conditions set
forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested
assignment or subletting, provided that such consent shall not be unreasonably
refused or delayed, or (iii) terminate this Lease as to the portion (including
all) of the Leased Premises that is the subject of the proposed assignment or
subletting. Notwithstanding anything to the contrary contained in this Section,
if Landlord elects to exercise its right of recapture as set forth in this
Section, Tenant shall have the right, within five (5) days after receipt of
Landlord's election, to notify Landlord in writing that Tenant rescinds its
request for Landlord's consent to the assignment or sublet, in which case this
Lease shall continue in full force and effect. During such ten (10) business day
period, Tenant covenants and agrees to supply to Landlord, upon request, all
necessary or relevant information which Landlord may reasonably request
respecting such proposed assignment or subletting and/or the proposed assignee
or sublessee.
7.4 CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the conditions below set forth, and any purported
assignment or subletting made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the
election of Landlord, which election may be exercised at any time following such
a purported assignment or subletting but prior to the satisfaction of each of
the stated conditions, shall constitute a material default by Tenant under this
Lease until cured by satisfying in full each such condition by the assignee or
sublessee. The conditions are as follows:
(a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
(b) Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased.
(c) Tenant having fully and completely performed all of its obligations
under the terms of this Lease through and including the date of such assignment
or subletting.
(d) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment.
(e) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.
(f) Tenant having paid, or having agreed in writing to pay as to future
payments, to
<PAGE> 17
Landlord fifty percent (50%) of all assignment consideration or excess rentals
to be paid to Tenant or to any other on Tenant's behalf or for Tenant's benefit
for such assignment or subletting as follows:
(i) If Tenant assigns its interest under this Lease and if all
or a portion of the consideration for such assignment is to be paid by the
assignee at the time of the assignment, that Tenant shall have paid to Landlord
and Landlord shall have received an amount equal to fifty percent (50%) of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or
(ii) If Tenant assigns its interest under this Lease and if
Tenant is to receive all or a portion of the consideration for such assignment
in future installments, that Tenant and Tenant's assignee shall have entered
into a written agreement with and for the benefit of Landlord satisfactory to
Landlord and its counsel whereby Tenant and Tenant's assignee jointly agree to
pay to Landlord an amount equal to fifty percent (50%) of all such future
assignment consideration installments to be paid by such assignee as and when
such assignment consideration is so paid.
(iii) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent (50%) of all
excess rentals to be paid by such sublessee as and when such excess rentals are
so paid.
7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED. For purposes of this
Article, including any amendment to this Article by way of addendum or other
writing, the term "assignment consideration" shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant's behalf or for
Tenant's benefit as consideration for such assignment, deducting any commissions
paid by Tenant or any other costs or expenses (including, without limitation,
tenant improvements, capital improvements, building upgrades, permit fees,
attorneys' fees, and other consultants' fees) incurred by Tenant in connection
with such assignment, and the term "excess rentals" shall mean all consideration
to be paid by the sublessee to Tenant or to any other party on Tenant's behalf
or for Tenant's benefit for the sublease of all or any portion of the Leased
Premises in excess of the rent due to Landlord under the terms of this Lease for
the portion so subleased for the same period, deducting any commissions paid by
Tenant or any other costs or expenses (including, without limitation, tenant
improvements, capital improvements, building upgrades, permit fees, attorneys'
fees, and other consultants' fees) incurred by Tenant in connection with such
sublease. Tenant agrees that the portion of any assignment consideration and/or
excess rentals arising from any assignment or subletting by Tenant which is to
be paid to Landlord pursuant to this Article now is and shall then be the
property of Landlord and not the property of Tenant.
7.6 PAYMENTS. All payments required by this Article to be made to Landlord
shall be made in cash or check in full as and when they become due. At the time
Tenant, Tenant's assignee or sublessee makes each such payment to Landlord,
Tenant or Tenant's assignee or sublessee, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which
the amount due Landlord was calculated and certified by the party making such
payment as true and correct.
7.7 GOOD FAITH. The rights granted to Tenant by this Article are granted in
consideration of Tenant's express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant's personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this covenant, Landlord may
immediately declare Tenant to be in default under the terms of this Lease and
terminate this Lease and/or exercise any other rights and remedies Landlord
would have under the terms of this Lease in the case of a material default by
Tenant under this Lease.
7.8 EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant's
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
If
<PAGE> 18
Landlord shall have been ordered by a court of competent jurisdiction to consent
to a requested assignment or subletting, or such an assignment or subletting
shall have been ordered by a court of competent jurisdiction over the objection
of Landlord, such assignment or subletting shall not be binding between the
assignee (or sublessee) and Landlord until such time as all conditions set forth
in Paragraph 7.4 above have been fully satisfied (to the extent not then
satisfied) by the assignee or sublessee, including, without limitation, the
payment to Landlord of all agreed assignment considerations and/or excess
rentals then due Landlord.
ARTICLE 8 LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, members, officers, agents, employees, lenders, attorneys, and
consultants from, any and all liability, whether in contract, tort or on any
other basis, for any injury to or any damage sustained by Tenant, Tenant's
agents, employees, contractors or invitees, any damage to Tenant's property, or
any loss to Tenant's business, loss of Tenant's profits or other financial loss
of Tenant resulting from or attributable to the condition of, the management of,
the repair or maintenance of, the protection of, the supply of services or
utilities to, the damage in or destruction of the Leased Premises, the Building,
the Property or the Outside Areas, including without limitation (i) the failure,
interruption, rationing or other curtailment or cessation in the supply of
electricity, water, gas or other utility service to the Property, the Building
or the Leased Premises; (ii) the vandalism or forcible entry into the Building
or the Leased Premises; (iii) the penetration of water into or onto any portion
of the Leased Premises; (iv) the failure to provide security and/or adequate
lighting in or about the Property, the Building or the Leased Premises, (v) the
existence of any design or construction defects within the Property, the
Building or the Leased Premises; (vi) the failure of any mechanical systems to
function properly (such as the HVAC systems); (vii) the blockage of access to
any portion of the Property, the Building or the Leased Premises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord's or Landlord's agents', employees' or
contractors' active negligence or willful misconduct, or Landlord's failure to
perform an obligation expressly undertaken pursuant to this Lease after a
reasonable period of time shall have lapsed following receipt of written notice
from Tenant to so perform such obligation. In this regard, Tenant acknowledges
that it is fully apprised of the provisions of Law relating to releases, and
particularly to those provisions contained in Section 1542 of the California
Civil Code which reads as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor."
Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall defend with competent
counsel reasonably satisfactory to Landlord any claims made or legal actions
filed or threatened against Landlord with respect to the violation of any Law,
or the death, bodily injury, personal injury, property damage, or interference
with contractual or property rights suffered by any third party occurring within
the Leased Premises or resulting from Tenant's use or occupancy of the Leased
Premises, the Building or the Outside Areas, or resulting from Tenant's
activities in or about the Leased Premises, the Building, the Outside Areas or
the Property, and Tenant shall indemnify and hold Landlord, Landlord's partners,
principals, members, employees, agents and contractors harmless from any loss
liability, penalties, or expense whatsoever (including any loss attributable to
vacant space which otherwise would have been leased, but for such activities)
resulting therefrom, except to the extent proximately caused by the active
negligence or willful misconduct of Landlord, its agents, employees or
contractors. This indemnity agreement shall survive the expiration or sooner
termination of this Lease.
ARTICLE 9 INSURANCE
9.1 TENANT'S INSURANCE. Tenant shall maintain insurance complying with all of
the following:
(a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:
<PAGE> 19
(i) Commercial general liability insurance insuring Tenant
against liability for personal injury, bodily injury, death and damage to
property occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in an amount equal to Tenant's Required Liability
Coverage (as set forth in Article 1), which insurance shall contain "blanket
contractual liability" and "broad form property damage" endorsements insuring
Tenant's performance of Tenant's obligations to indemnify Landlord as contained
in this Lease.
(ii) Fire and property damage insurance in so-called "fire and
extended coverage" form insuring Tenant against loss from physical damage to
Tenant's personal property, inventory, trade fixtures and improvements within
the Leased Premises with coverage for the full actual replacement cost thereof;
(iii) Business income/extra expense insurance sufficient to pay
Base Monthly Rent and Additional Rent for a period of not less than twelve (12)
months;
(iv) Plate glass insurance, at actual replacement cost;
(v) Boiler and machinery insurance, if applicable, to limits
sufficient to restore the Building;
(vi) If applicable, product liability insurance (including,
without limitation, if food and/or beverages are distributed, sold and/or
consumed within the Leased Premises, to the extent obtainable, coverage for
liability arising out of the distribution, sale, use or consumption of food
and/or beverages (including alcoholic beverages, if applicable) at the Leased
Premises for not less than Tenant's Required Liability Coverage (as set forth in
Article 1);
(vii) Workers' compensation insurance (statutory coverage) with
employer's liability in amounts not less than $1,000,000 insurance sufficient to
comply with all laws; and
(viii) With respect to making of any alterations or
modifications or the construction of improvements or the like undertaken by
Tenant, course of construction, commercial general liability, automobile
liability and workers' compensation (to be carried by Tenant's contractor), in
an amount and with coverage reasonably satisfactory to Landlord.
<PAGE> 20
(b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(vii) above, name Landlord, Landlord's property
manager and Lender(s), if any, and such others as are designated by Landlord, as
additional insureds; (ii) shall be primary insurance providing that the insurer
shall be liable for the full amount of the loss, up to and including the total
amount of liability set forth in the declaration of coverage, without the right
of contribution from or prior payment by any other insurance coverage of
Landlord; (iii) shall be in a form reasonably satisfactory to Landlord; (iv)
shall be carried with companies reasonably acceptable to Landlord with Best's
ratings of at least A and XI; (v) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty (30) days
prior written notice to Landlord, and (vi) shall contain a so-called
"severability" or "cross liability" endorsement. Each policy of property
insurance maintained by Tenant with respect to the Leased Premises or the
Property or any property therein (i) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty (30) days
prior written notice to Landlord and (ii) shall contain a waiver and/or a
permission to waive by the insurer of any right of subrogation against Landlord,
its partners, principals, members, officers, employees, agents and contractors,
which might arise by reason of any payment under such policy or by reason of any
act or omission of Landlord, its partners, principals, members, officers,
employees, agents and contractors.
(c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form reasonably
satisfactory to Landlord that a policy has been issued, premium paid, providing
the coverage required by this Paragraph and containing the provisions specified
herein. With respect to each renewal or replacement of any such insurance, the
requirements of this Paragraph must be complied with not less than thirty days
prior to the expiration or cancellation of the policies being renewed or
replaced. Landlord may, at any time and from time to time, inspect and/or copy
any and all insurance policies required to be carried by Tenant pursuant to this
Article. If Landlord's Lender, insurance broker, advisor or counsel reasonably
determines at any time that the amount of coverage set forth in Paragraph 9.1(a)
for any policy of insurance Tenant is required to carry pursuant to this Article
is not adequate, then Tenant shall increase the amount of coverage for such
insurance to such greater amount as Landlord's Lender, insurance broker, advisor
or counsel reasonably deems adequate.
9.2 LANDLORD'S INSURANCE. With respect to insurance maintained by Landlord:
(a) Landlord shall maintain, as the minimum coverage required of it by
this Lease, fire and property damage insurance in so-called "fire and extended
coverage" form insuring Landlord (and such others as Landlord may designate)
against loss from physical damage to the Building with coverage of not less than
one hundred percent (100%) of the full actual replacement cost thereof and
against loss of rents for a period of not less than six months. Such fire and
property damage insurance, at Landlord's election but without any requirements
on Landlord's behalf to do so, (i) may be written in so-called "all risk" form,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; (iii) may be endorsed to cover loss or damage caused by any additional
perils against which Landlord may elect to insure, including earthquake and/or
flood; and/or (iv) may provide coverage for loss of rents for a period of up to
twelve months. Landlord shall not be required to cause such insurance to cover
any of Tenant's personal property, inventory, and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises, except permanently affixed Tenant Improvements
constructed pursuant to the Work Letter. Landlord shall use commercially
reasonable efforts to obtain such insurance at competitive rates.
(b) Landlord shall maintain commercial general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Ten Million Dollars ($10,000,000). Landlord may carry such greater
coverage as Landlord or Landlord's Lender, insurance broker, advisor or counsel
may from time to time determine is reasonably necessary for the adequate
protection of Landlord and the Property.
<PAGE> 21
(c) Landlord may maintain any other insurance which in the opinion of
its insurance broker, advisor or legal counsel is prudent in carry under the
given circumstances, provided such insurance is commonly carried by owners of
property similarly situated and operating under similar circumstances.
9.3 MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, and Tenant
hereby releases Landlord and its respective partners, principals, members,
officers, agents, employees and servants, from any and all liability for loss,
damage or injury to the property of the other in or about the Leased Premises or
the Property which is caused by or results from a peril or event or happening
which is covered by insurance actually carried and in force at the time of the
loss by the party sustaining 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. Landlord and
Tenant will use reasonable efforts to cause their property insurance to contain
a waiver and/or a permission to waive by the insurer of any right of subrogation
against Tenant or Landlord (as applicable), their partners, principals, members,
officers, employees, agents and contractors.
ARTICLE 10 DAMAGE TO LEASED PREMISES
10.1 LANDLORD'S DUTY TO RESTORE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant
pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord's obligation to restore shall be limited to the
improvements constructed by Landlord. Landlord shall have no obligation to
restore any alterations, modifications or improvements made by Tenant to the
Leased Premises or any of Tenant's personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all of Tenant's personal property, inventory, trade
fixtures and other improvements constructed by Tenant to like or similar
conditions as existed at the time immediately prior to such damage or
destruction.
10.2 INSURANCE PROCEEDS. All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become the
property of Landlord, and the remainder of such proceeds shall be paid to and
become the property of Tenant. If this Lease is not terminated pursuant to
either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance
carried by Tenant which cover loss to property that is Landlord's property shall
be paid to and become the property of Landlord, and all proceeds available from
such insurance which cover loss to property which would only become the property
of Landlord upon the termination of this Lease shall be paid to and remain the
property of Tenant. The determination of Landlord's property and Tenant's
property shall be made pursuant to Paragraph 6.2.
10.3 LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
(a) The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction (an "insured peril") to such an extent that the
estimated cost to restore the Building exceeds the lesser of (i) the insurance
proceeds available from insurance actually carried by Landlord, or (ii) fifty
percent of the then actual replacement cost thereof;
(b) The Building is damaged by an uninsured peril, which peril Landlord
was not required to insure against pursuant to the provisions of Article 9 of
this Lease.
(c) The Building is damaged by any peril and, because of the laws then
in force, the Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same
<PAGE> 22
use being made thereof before such damage.
10.4 TENANT'S RIGHT TO TERMINATE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within ten (10) business days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:
(a) If the time estimated to substantially complete the restoration
exceeds twelve months from and after the date the architect's or construction
consultant's written opinion is delivered; or
(b) If the damage occurred within twelve months of the last day of the
Lease Term and the time estimated to substantially complete the restoration
exceeds one hundred eighty days from and after the date such restoration is
commenced.
(c) If the time estimated for completion of the restoration is less than
two hundred seventy (270) days but Landlord fails to complete the restoration
within two hundred seventy (270) days after commencement of the restoration.
10.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 10.4 above, captioned "Tenant's Right To Terminate", are intended to
supersede and replace the provisions contained in California Civil Code, Section
1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly,
Tenant hereby waives the provisions of such Civil Code Sections and the
provisions of any successor Civil Code Sections or similar laws hereinafter
enacted.
10.6 ABATEMENT OF RENT. In the event of damage to the Leased Premises which
does not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion in the degree to which Tenant's use of the Leased Premises is
impaired by such damage.
ARTICLE 11 CONDEMNATION
11.1 TENANT'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Tenant shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, or (ii) twenty-five percent (25%) or more of the Leased
Premises is taken and the part of the Leased Premises that remains cannot,
within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant's business. Tenant must exercise such option
within a reasonable period of time, to be effective on the later to occur of (i)
the date that possession of that portion of the Leased Premises that is
condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased
Premises.
11.2 LANDLORD'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises or the Building is taken, (ii) twenty-five percent (25%) or more of the
Building is taken and the part of the Leased Premises that remains cannot,
within a reasonable period of time, be made reasonably suitable for the
continued operation of Tenant's business, or (iii) because of the laws then in
force, the Leased Premises may not be used for the same use being made before
such taking, whether or not restored as required by Paragraph 11.3 below. Any
such option to terminate by Landlord must be exercised within a reasonable
period of time, to be effective as of the date possession is taken by the
condemnor.
11.3 RESTORATION. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.
11.4 TEMPORARY TAKING. If a portion of the Leased Premises is temporarily taken
for a
<PAGE> 23
period of one year or less and such period does not extend beyond the Lease
Expiration Date, this Lease shall remain in effect. If any portion of the Leased
Premises is temporarily taken for a period which exceeds one year or which
extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant
shall be determined in accordance with Paragraphs 11.1 and 11.2 above.
11.5 DIVISION OF CONDEMNATION AWARD. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade fixtures belonging
to Tenant, (ii) for the interruption of Tenant's business or its moving costs,
or (iii) for the value of any leasehold improvements installed and paid for by
Tenant. The rights of Landlord and Tenant regarding any condemnation shall be
determined as provided in this Article, and each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure, and
the provisions of any similar law hereinafter enacted, allowing either party to
petition the Supreme Court to terminate this Lease and/or otherwise allocate
condemnation awards between Landlord and Tenant in the event of a taking of the
Leased Premises.
11.6 ABATEMENT OF RENT. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (other than a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.
11.7 TAKING DEFINED. The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.
ARTICLE 12 DEFAULT AND REMEDIES
12.1 EVENTS OF TENANT'S DEFAULT. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:
(a) Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due; or
(b) Tenant shall have done or permitted to be done any act, use or thing
in its use, occupancy or possession of the Leased Premises or the Building or
the Outside Areas which is prohibited by the terms of this Lease; or
(c) Tenant shall have failed to perform any term, covenant or condition
of this Lease (except those requiring the payment of Base Monthly Rent or
Additional Rent, which failures shall be governed by subparagraph (a) above)
within thirty (30) days after receipt of written notice from Landlord to Tenant
specifying the nature of such failure and requesting Tenant to perform same; or
(d) Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of law; or
(e) Tenant shall have abandoned the Leased Premises and failed to
maintain the Leased Premises in its condition as required when the Leased
Premises was occupied; or
(f) Tenant or any Guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantor's) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within sixty (60) days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier; or
<PAGE> 24
(g) Tenant or any Guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or
(h) Tenant or any Guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within sixty (60) days after its original entry; or
(i) Tenant or any Guarantor of this Lease shall have availed itself of
the protection of any debtor's relief law, moratorium law or other similar law
which does not require the prior entry of a decree or order.
12.2 LANDLORD'S REMEDIES. In the event of any default by Tenant, and without
limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:
(a) Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.
(b) Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice, in which event Tenant
shall immediately surrender the Leased Premises to Landlord, and if Tenant fails
to do so, Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
Leased Premises and expel or remove Tenant and any other person who may be
occupying the Leased Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor. Any termination under this
subparagraph shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease constitute a termination of this
Lease:
(i) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;
(ii) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or
(iii) Any action taken by Landlord or its partners, principals,
members, officers, agents, employees, or servants, which is intended to mitigate
the adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken to maintain and preserve the Leased Premises on any
action taken to relet the Leased Premises or any portion thereof for the account
at Tenant and in the name of Tenant.
(c) In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 ("lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes
<PAGE> 25
due, if lessee has right to sublet or assign, subject only to reasonable
limitations"), as in effect on the Effective Date of this Lease.
(d) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by law shall be
used where permitted. Such damages shall include, without limitation:
(i) The worth at the time of the award of the unpaid rent which
had been earned at the time of termination;
(ii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco, at the time of award plus one percent; and
(iii) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the Leased Premises, (ii) expenses for
altering, remodeling or otherwise improving the Leased Premises for the purpose
of reletting, including removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker's fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant's
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney's fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
retaking possession of the Leased Premises, establishing damages hereunder, and
releasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant's default.
12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES. In the event Landlord fails to
perform its obligations under this Lease, Landlord shall nevertheless not be in
default under the terms of this Lease until such time as Tenant shall have first
given Landlord written notice specifying the nature of such failure to perform
its obligations, and then only after Landlord shall have had thirty (30) days
following its receipt of such notice (except in the case of emergency, in which
case Landlord will have a reasonable period of time to perform in light of all
the circumstances) within which to perform such obligations; provided that, if
longer than thirty (30) days is reasonably required in order to perform such
obligations, Landlord shall have such longer period. In the event of Landlord's
default as above set forth, then, and only then, Tenant may then proceed in
equity or at law to compel Landlord to perform its obligations and/or to recover
damages proximately caused by such failure to perform (except as and to the
extent Tenant has waived its right to damages as provided in this Lease).
12.4 LIMITATION OF TENANT'S RECOURSE. If Landlord is a corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity, Tenant agrees that (i) the
obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals of such business entity, and
(ii) Tenant shall have recourse only to the property of such corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity for the satisfaction of such
obligations and not against the assets of such officers, directors, trustees,
partners, joint venturers, members, owners, stockholders or principals.
Additionally, if Landlord is a partnership or limited liability company, then
Tenant covenants and agrees:
(a) No partner or member of Landlord shall be sued or named as a party
in any suit or action brought by Tenant with respect to any alleged breach of
this Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);
<PAGE> 26
(b) No service of process shall be made against any partner or member of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and
(c) No writ of execution will ever be levied against the assets of any
partner or member of Landlord other than to the extent of his or her interest in
the assets of the partnership or limited liability company constituting
Landlord.
Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or at common law.
12.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of
Paragraph 12.3 above are intended to supersede and replace the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant
hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and
1942 and/or any similar or successor law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease.
ARTICLE 13 GENERAL PROVISIONS
13.1 TAXES ON TENANT'S PROPERTY. Tenant shall pay before delinquency any and
all taxes, assessments, license fees, use fees, permit fees and public charges
of whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant's estate in this Lease, Tenant's ownership of property, improvements
made by Tenant to the Leased Premises or the Outside Areas, improvements made by
Landlord for Tenant's use within the Leased Premises or the Outside Areas,
Tenant's use (or estimated use) of public facilities or services or Tenant's
consumption (or estimated consumption) of public utilities, energy, water or
other resources (collectively, "Tenant's Interest"). Upon demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments. If
any such taxes, assessments, fees or public charges are levied against Landlord,
Landlord's property, the Building or the Property, or if the assessed value of
the Building or the Property is increased by the inclusion therein of a value
placed upon Tenant's Interest, regardless of the validity thereof, Landlord
shall have the right to require Tenant to pay such taxes, and if not paid and
satisfactory evidence of payment delivered to Landlord at least ten days prior
to delinquency, then Landlord shall have the right to pay such taxes on Tenant's
behalf and to invoice Tenant for the same. Tenant shall, within the earlier to
occur of (a) thirty (30) days of the date it receives an invoice from Landlord
setting forth the amount of such taxes, assessments, fees, or public charge so
levied, or (b) the due date of such invoice, pay to Landlord, as Additional
Rent, the amount set forth in such invoice. Failure by Tenant to pay the amount
so invoiced within such time period shall be conclusively deemed a default by
Tenant under this Lease. Tenant shall have the right to bring suit in any court
of competent jurisdiction to recover from the taxing authority the amount of any
such taxes, assessments, fees or public charges so paid.
13.2 HOLDING OVER. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable, except
that the Base Monthly Rent shall be increased to an amount equal to one hundred
fifty percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over. Tenant acknowledges that if Tenant
holds over without Landlord's consent, such holding over may compromise or
otherwise affect Landlord's ability to enter into new leases with prospective
tenants regarding the Leased Premises. Therefore, if Tenant fails to surrender
the Leased Premises upon the expiration or termination of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from and against all
claims resulting from such failure, including, without limiting the foregoing,
any claims made by any succeeding tenant founded upon such failure to surrender,
and any losses suffered by Landlord, including lost profits, resulting from such
failure to surrender.
13.3 SUBORDINATION TO MORTGAGES. This Lease is subject to and subordinate to
all ground
<PAGE> 27
leases, mortgages and deeds of trust which affect the Building or the Property
and which are of public record as of the Effective Date of this Lease, and to
all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to Tenant, Tenant shall, within ten (10) business days after
Landlord's request, execute, acknowledge and deliver any and all customary or
reasonable documents or instruments which Landlord and such lessor or lender
deems necessary or desirable to make this Lease prior thereto. Tenant hereby
consents to Landlord's ground leasing the land underlying the Building or the
Property and/or encumbering the Building or the Property as security for future
loans on such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of trust shall be subject to and subordinate to this Lease.
However, if any lessor under any such future ground lease or any lender holding
such future mortgage or deed of trust shall desire or require that this Lease be
made subject to and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within ten days after Landlord's written request
therefor, to execute, acknowledge and deliver to Landlord any and all documents
or instruments reasonably requested by Landlord or by such lessor or lender as
may be necessary or proper to assure the subordination of this Lease to such
future ground lease, mortgage or deed of trust, but only if such lessor or
lender agrees to recognize Tenant's rights under this Lease and agrees not to
disturb Tenant's quiet possession of the Leased Premises so long as Tenant is
not in default under this Lease. Landlord will use its best efforts to provide
Tenant with non-disturbance agreements reasonably acceptable to Tenant from any
ground lessors, mortgage holders or lien holders of Landlord. If Landlord
assigns the Lease as security for a loan, Tenant agrees to execute such
documents as are reasonably requested by the lender and to provide reasonable
provisions in the Lease protecting such lender's security interest which are
customarily required by institutional lenders making loans secured by a deed of
trust.
13.4 TENANT'S ATTORNMENT UPON FORECLOSURE. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.
13.5 MORTGAGEE PROTECTION. In the event of any default on the part of Landlord,
Tenant will give notice by registered mail to any Lender or lessor under any
underlying ground lease who shall have requested, in writing, to Tenant that it
be provided with such notice, and Tenant shall offer such Lender or lessor a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.
13.6 ESTOPPEL CERTIFICATE. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate substantially
in form attached as Exhibit C, (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, (ii) stating the date to which the rent and other charges are paid
in advance, if any, (iii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults if any are claimed, and (iv) certifying such other information
about this Lease as may be reasonably requested by Landlord, its Lender or
prospective lenders, investors or purchasers of the Building or the Property.
Tenant's failure to execute and deliver such estoppel certificate within ten
(10) business days after Landlord's request therefor shall be a material default
by Tenant under this Lease without any notice that might otherwise be required
pursuant to Section 12.1, and Landlord shall have all of the rights and remedies
available to Landlord as Landlord would otherwise have in the case of any other
material default by Tenant, including the right to terminate this Lease and sue
for damages proximately caused thereby, it being agreed and understood by Tenant
that Tenant's failure to so deliver such estoppel certificate in a timely manner
could result in Landlord being unable to perform committed obligations to other
third parties which were made by Landlord in reliance upon this covenant of
Tenant; notwithstanding anything to the contrary in Section 12.1, such a default
is deemed non-curable, and Landlord has no obligation to permit Tenant to cure
such default. Landlord and Tenant intend that any statement delivered pursuant
to this paragraph may be relied upon by any Lender or purchaser or prospective
Lender or purchaser of the Building,
<PAGE> 28
the Property, or any interest in them.
13.7 TENANT'S FINANCIAL INFORMATION. Tenant shall, within ten business days
after Landlord's request therefor, deliver to Landlord a copy of Tenant's (and
any guarantor's) current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) and any such other information reasonably
requested by Landlord regarding Tenant's financial condition. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such financial statement or other
information which is marked "confidential" or "company secrets" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph,
unless the same becomes a part of the public domain without the fault of
Landlord.
13.8 TRANSFER BY LANDLORD. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.
13.9 FORCE MAJEURE. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.
13.10 NOTICES. Any notice required or permitted to be given under this Lease
shall be in writing and (i) personally delivered, (ii) sent by United States
mail, registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by Federal Express or similar nationally recognized overnight courier
service, or (iv) transmitted by facsimile with a hard copy sent within one (1)
business day by any of the foregoing means, and in all cases addressed as
follows, and such notice shall be deemed to have been given upon the date of
actual receipt or delivery (or refusal to accept delivery) at the address
specified below (or such other addresses as may be specified by notice in the
foregoing manner) as indicated on the return receipt or air bill:
IF TO LANDLORD: MELP VII, L.P.
c/o Menlo Equities LLC
525 University Avenue
Suite 100
Palo Alto, California 94301
Attention: Henry Bullock/Richard Holmstrom
Facsimile: (650) 326-9300
with a copy to: Folger Levin & Kahn LLP
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attention: Adam Sachs
Facsimile: (415) 986-2827
IF TO TENANT: Aviron
4575 Patrick Henry Drive
Santa Clara, CA 95054
Attention: Chief Financial Officer
<PAGE> 29
Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.
13.11 ATTORNEYS' FEES. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.
13.12 DEFINITIONS. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:
(a) REAL PROPERTY TAXES. The term "Real Property Tax" or "Real Property
Taxes" shall each mean Tenant's Expense Share of (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all instruments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership or
new construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Property or any portion thereof, or Landlord's interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Property and located thereon, or Landlord's business of
owning, leasing or managing the Property or the gross receipts, income or
rentals from the Property, (ii) all charges, levies or fees imposed by any
governmental authority against Landlord by reason of or based upon the use of or
number of parking spaces within the Property, the amount of public services or
public utilities used or consumed (e.g. water, gas, electricity, sewage or waste
water disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property, and all costs and fees (including attorneys' fees)
reasonably incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If, at any time
during the Lease Term, the taxation or assessment of the Property prevailing as
of the Effective Date of this Lease shall be altered so that in lieu of or in
addition to any the Real Property Tax described above there shall be levied,
awarded or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate,
substitute, or additional use or charge (i) on the value, size, use or occupancy
of the Property or Landlord's interest therein or (ii) on or measured by the
gross receipts, income or rentals from the Property, or on Landlord's business
of owning, leasing or managing the Property or (iii) computed in any manner with
respect to the operation of the Property, then any such tax or charge, however
designated, shall be included within the meaning of the terms "Real Property
Tax" or "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is partly based upon property or rents unrelated to the Property, then only
that part of such Real Property Tax that is fairly allocable to the Property
shall be included within the meaning of the terms "Real Property Tax" or "Real
Property Taxes." Notwithstanding the foregoing, the terms "Real Property Tax" or
"Real Property Taxes" shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord's income from all sources. Tenant also shall not be required to pay any
portion of any tax or assessment expense (i) levied on Landlord's rental income,
unless such tax or assessment expense is imposed in lieu of real property taxes;
or (ii) imposed on land and improvements other than the Property (including the
Building and the Leased Premises).
(b) LANDLORD'S INSURANCE COSTS. The term "Landlord's Insurance Costs"
shall mean Tenant's Expense Share of the costs to Landlord to carry and maintain
the policies of fire and property damage insurance for the Building and the
Property and general liability and any other insurance required or permitted to
be carried by Landlord pursuant to Article 9, together with any deductible
amounts paid by Landlord upon the occurrence of any insured casualty or loss.
<PAGE> 30
(c) PROPERTY MAINTENANCE COSTS. The term "Property Maintenance Costs"
shall mean Tenant's Expense Share of all costs and expenses (except Landlord's
Insurance Costs and Real Property Taxes) paid or incurred by Landlord in
protecting, operating, maintaining, repairing and preserving the Property and
all parts thereof, including without limitation, (i) market rate professional
management fees, (ii) any costs incurred by Landlord in the making of any
modifications, alterations or improvements required by any governmental
authority as set forth in Article 6, which are so amortized during the Lease
Term, and (iii) such other costs as may be paid or incurred with respect to
operating, maintaining, and preserving the Property, such as repairing and
resurfacing the exterior surfaces of the Building (including roofs), repairing
and resurfacing paved areas, repairing and replacing structural parts of the
Building, and repairing and replacing, when necessary, electrical, plumbing,
heating, ventilating and air conditioning systems serving the Building; with
respect to any items that are capital in nature, the cost of such items will be
amortized over the useful life of such items. Notwithstanding anything in this
paragraph to the contrary, Tenant will not be responsible for capital costs
associated with the foundation , structural exterior walls or structural roof
elements of the Building (excepting capital costs associated with the
non-structural roof elements, heating, ventilation, air conditioning, the
parking lot and landscaping) unless the cost was incurred as a result of
Tenant's activities or alterations. Notwithstanding anything to the contrary
contained in this Lease, in no event shall Tenant have any obligation to
perform, to pay directly, or to reimburse Landlord for, all or any portion of
the following repairs, maintenance, improvements, replacements, premiums,
claims, losses, fees, commissions, charges, disbursements, attorneys' fees,
experts' fees, costs and expenses (collectively, "Costs"): (i) Costs occasioned
by the act, omission or violation of law by Landlord, any other occupant of the
Building, or their respective agents, employees or contractors, or Costs to
correct any construction defect in the Leased Premises or the Building; (ii)
Costs occasioned by fire, acts of God or other casualties (but only to the
extent that Landlord receives insurance proceeds to cover such losses provided
that, to the extent that Landlord seeks to recover the deductible portion of an
insured loss as a portion of Property Maintenance Costs, Landlord may only
recover an amortized portion of such amount, as amortized at 12% over the useful
life of the restored, replaced or rebuilt item) or by the exercise of the power
of eminent domain; (iii) Costs which would properly be capitalized under
generally accepted accounting principles and which relate to repairs,
alterations, improvements, replacements, equipment and tools except to the
extent that Tenant's share of such Costs is amortized at 12% over the useful
life of the capital improvement in question in accordance with generally
accepted accounting principles; (iv) Costs which Tenant pays directly to a third
person; (v) Costs (A) arising from the mutually disproportionate use of any
utility or service supplied by Landlord to any other occupant of the Building;
or (B) associated with utilities and services of a type not provided to Tenant;
(vi) Costs incurred in connection with negotiations or disputes with other
occupant(s) of the Building or their agents, employees, contractors or invitees,
and Costs arising from the violation by Landlord or any occupant of the Building
(other than Tenant) of the terms and conditions of any lease or other agreement;
(vii) depreciation, amortization or other expense reserves (except as otherwise
permitted under this Lease), or (viii) Costs related to Hazardous Materials,
except to the extent the Cost is caused by the storage, use or disposal of the
Hazardous Material in question by Tenant, its agents, contractors or invitees.
(d) PROPERTY OPERATING EXPENSES. The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs.
(e) LAW. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).
(f) LENDER. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.
(g) PRIVATE RESTRICTIONS. The term "Private Restrictions" shall mean
(as they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.
<PAGE> 31
(h) RENT. The term "Rent" shall mean collectively Base Monthly Rent and
all Additional Rent.
13.13 GENERAL WAIVERS. One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.
13.14 MISCELLANEOUS. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The captions in this Lease are for convenience only and shall not be construed
in the construction or interpretation of any provision hereof. When the context
of this Lease requires, the neuter gender includes the masculine, the feminine,
a partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms "must,"
"shall," "will," and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord's consent is required hereunder, the
consent of any Lender shall also be required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord shall not become or be deemed a partner or a joint venturer with Tenant
by reason of any of the provisions of this Lease.
13.15 QUIET ENJOYMENT. Landlord covenants to Tenant that on Tenant's paying
rental and performing the covenants required to be performed under this Lease by
Tenant, Tenant shall and may quietly enjoy the Leased Premises without
interference by Landlord or any person claiming by through or under Landlord.
ARTICLE 14 CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT
14.1 CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing
this Lease on behalf of such corporation represents and warrants that Tenant is
validly formed and duly authorized and existing, that Tenant is qualified to do
business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, and that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant in
accordance with its terms. Tenant shall, within thirty days after receipt of
Landlords' request, deliver to Landlord a certified copy of the resolution of
its board of directors authorizing or ratifying the execution of this Lease and
if Tenant fails to do so, Landlord at its sole election may elect to terminate
this Lease.
14.2 BROKERAGE COMMISSIONS. Tenant represents, warrants and agrees that it has
not had any dealings with any real estate broker(s), leasing agent(s), finder(s)
or salesmen, other than the Brokers (as named in Article 1) with respect to the
lease of the Leased Premises pursuant to this Lease. Landlord and Tenant will
indemnify, defend with competent counsel, and hold the other
<PAGE> 32
harmless from any liability for the payment of any real estate brokerage
commissions, leasing commissions or finder's fees claimed by any other real
estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due
and payable by reason of the indemnifying party's agreement or promise (implied
or otherwise) to pay (or to have the other pay) such a commission or finder's
fee by reason of its leasing the Leased Premises pursuant to this Lease.
14.3 ENTIRE AGREEMENT. This Lease and the Exhibits (as described in Article 1),
which Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.
14.4 LANDLORD'S REPRESENTATIONS. Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relies solely upon its own investigations with
respect to such matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Exhibit attached hereto.
ARTICLE 15 OPTION TO EXTEND
15.1 OPTION. So long as Aviron or a permitted assignee (but not subtenant)
pursuant to Article 7 is the Tenant hereunder and occupies the entirety of the
Leased Premises, and subject to the condition set forth in clause (b) below,
Tenant shall have one option to extend the term of this Lease with respect to
the entirety of the Leased Premises, for a period of five (5) years from the
expiration of the Lease Term (the "Extension Period"), subject to the following
conditions:
(a) The option to extend shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not more than twelve months nor less than
nine months prior to the expiration of the Lease Term;
(b) Anything herein to the contrary notwithstanding, if Tenant is in
default, beyond the applicable cure period, under any of the terms, covenants or
conditions of this Lease, either at the time Tenant exercises the extension
option or on the commencement date of the Extension Period, Landlord shall have,
in addition to all of Landlord's other rights and remedies provided in this
Lease, the right to terminate such option to extend upon notice to Tenant.
15.2 TERMS. In the event the option is exercised in a timely fashion, the Lease
shall be extended for the term of the Extension Period upon all of the terms and
conditions of this Lease, provided that the Base Monthly Rent for the Extension
Period shall be the "Fair Market Rent" for the Leased Premises, increased as set
forth below. For purposes hereof, "Fair Market Rent" shall mean the Base Monthly
Rent determined pursuant to the process described below. In no event, however,
shall any adjustment of Base Monthly Rent pursuant to this paragraph result in a
decrease of the Base Monthly Rent for the Leased Premises below the amount due
from Tenant for the preceding portion of the initial Lease Term for which Base
Monthly Rent had been fixed.
15.3 NOTIFICATION. Within thirty (30) days after receipt of Tenant's notice of
exercise, Landlord shall notify Tenant in writing of Landlord's estimate of the
Base Monthly Rent (with applicable rental increase provisions) for the Extension
Period, based on the provisions of Paragraph 15.2 above. Within thirty (30) days
after receipt of such notice from Landlord, Tenant shall have the right either
to (i) accept Landlord's statement of Base Monthly Rent as the Base Monthly Rent
for the applicable extension period; or (ii) elect to arbitrate Landlord's
estimate of Fair Market Rent, such arbitration to be conducted pursuant to the
provisions hereof. Failure on the part of Tenant to require arbitration of Fair
Market Rent within such 30-day period shall constitute acceptance of the Base
Monthly Rent (with applicable rental increase provisions) for the Extension
Period as calculated by Landlord. If Tenant elects arbitration, the arbitration
shall be concluded within 90 days after the date of Tenant's election, subject
to extension for an additional 30-day period if a third arbitrator is required
and does not act in a timely manner. To the extent that arbitration has not been
completed prior to the expiration of any preceding period
<PAGE> 33
for which Base Monthly Rent has been determined, Tenant shall pay Base Monthly
Rent (with applicable rental increase provisions) at the rate calculated by
Landlord, with the potential for an adjustment to be made once Fair Market Rent
is ultimately determined by arbitration.
15.4 ARBITRATION. In the event of arbitration, the judgment or the award
rendered in any such arbitration may be entered in any court having jurisdiction
and shall be final and binding between the parties. The arbitration shall be
conducted and determined in the City and County of Santa Clara in accordance
with the then prevailing rules of the American Arbitration Association or its
successor for arbitration of commercial disputes except to the extent that the
procedures mandated by such rules shall be modified as follows:
(a) Tenant shall make demand for arbitration in writing within thirty
(30) days after service of Landlord's determination of Fair Market Rent given
under Paragraph 15.3 above, specifying therein the name and address of the
person to act as the arbitrator on its behalf. The arbitrator shall be qualified
as a real estate appraiser familiar with the fair market rent of similar
industrial, research and development, or office space in the Silicon Valley area
who would qualify as an expert witness over objection to give opinion testimony
addressed to the issue in a court of competent jurisdiction. Failure on the part
of Tenant to make a proper demand in a timely manner for such arbitration shall
constitute a waiver of the right thereto. Within fifteen (15) days after the
service of the demand for arbitration, Landlord shall give notice to Tenant,
specifying the name and address of the person designated by Landlord to act as
arbitrator on its behalf who shall be similarly qualified. If Landlord fails to
notify Tenant of the appointment of its arbitrator, within or by the time above
specified, then the arbitrator appointed by Tenant shall be the arbitrator to
determine the issue.
(b) In the event that two arbitrators are chosen pursuant to Paragraph
15.4(a) above, the arbitrators so chosen shall, within fifteen (15) days after
the second arbitrator is appointed determine the Fair Market Rent (with
applicable rental increase provisions; such Fair Market Rent will be based on
the fair market value for facilities comparable to the Leased Premises in
comparable locations within what is commonly referred to as the "Marriott
Business Park" in Santa Clara, California. If the two arbitrators shall be
unable to agree upon a determination of Fair Market Rent within such 15-day
period, they, themselves, shall appoint a third arbitrator, who shall be a
competent and impartial person with qualifications similar to those required of
the first two arbitrators pursuant to Paragraph 15.4(a). In the event they are
unable to agree upon such appointment within seven days after expiration of such
15-day period, the third arbitrator shall be selected by the parties themselves,
if they can agree thereon, within a further period of fifteen (15) days. If the
parties do not so agree, then either party, on behalf of both, may request
appointment of such a qualified person by the then Chief Judge of the United
States District Court having jurisdiction over the County of Santa Clara, acting
in his private and not in his official capacity, and the other party shall not
raise any question as to such Judge's full power and jurisdiction to entertain
the application for and make the appointment. The three arbitrators shall decide
the dispute if it has not previously been resolved by following the procedure
set forth below.
(c) Where an issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during the course of arbitration, the issue shall be resolved by the three
arbitrators within 15 days of the appointment of the third arbitrator in
accordance with the following procedure. The arbitrator selected by each of the
parties shall state in writing his determination of the Fair Market Rent
supported by the reasons therefor with counterpart copies to each party. The
arbitrators shall arrange for a simultaneous exchange of such proposed
resolutions. The role of the third arbitrator shall be to select which of the
two proposed resolutions most closely approximates his determination of Fair
Market Rent. The third arbitrator shall have no right to propose a middle ground
or any modification of either of the two proposed resolutions. The resolution he
chooses as most closely approximating his determination shall constitute the
decision of the arbitrators and be final and binding upon the parties.
(d) In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within fifteen (15) days after the appointment of the third arbitrator. Any
decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fee and expenses of its respective arbitrator and both
shall share the fees and expenses of the third
<PAGE> 34
arbitrator, if any, and the attorneys' fees and expenses of counsel for the
respective parties and of witnesses shall be paid by the respective party
engaging such counsel or calling such witnesses.
(e) The arbitrators shall have the right to consult experts and
competent authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.
ARTICLE 16 FIRST OFFER RIGHT
16.1 FIRST OFFER RIGHT. Landlord agrees to give Tenant a First Offer Right on
the adjacent space in the Building of approximately 32,500 square feet in the
Building, which is currently leased by DRS Precision Echo, Inc. and which is
designated on Exhibit A hereto (the "Offered Space").
If Landlord intends during the term of this Lease to lease all or any
portion of the Offered Space, and if Tenant is not then in default (beyond the
applicable cure period, but in no event more than thirty (30) days) under this
Lease, Landlord shall give written notice of such intention to Tenant,
specifying the material terms on which Landlord is willing to lease the Option
Space to Tenant, and shall offer to Tenant the opportunity to lease the Offered
Space on the terms specified in Landlord's notice. Tenant shall have five (5)
days after the date of giving of such notice by Landlord in which to accept such
offer by written notice to Landlord. Upon such acceptance by Tenant, the Offered
Space shall be leased to Tenant on the terms set forth in Landlord's notice and
on the additional terms and provisions set forth herein (except to the extent
inconsistent with the terms set forth in Landlord's notice) and the parties
shall promptly execute an amendment to this Lease adding the Offered Space to
the Leased Premises and making any appropriate amendments to provisions of this
Lease to reflect different rent and other obligations applicable to the Offered
Space under the terms of the Landlord's notice. If Tenant does not accept
Landlord's offer within the allotted time, Landlord shall thereafter have the
right to lease the Offered Space to a third party, at any time after Tenant's
failure to accept Landlord's offer, at a minimum rental and on other terms and
conditions determined by Landlord (which may be more or less favorable to the
tenant than the minimum rental and other terms offered to Tenant in Landlord's
notice).
Tenant's First Refusal Rights shall be subordinate to any rights of DRS
Precision Echo, Inc. with respect to the Offered Space.
ARTICLE 17 TELEPHONE SERVICE
Notwithstanding any other provision of this Lease to the contrary:
(a) So long as the entirety of the Leased Premises is leased to
Tenant:
(i) Landlord shall have no responsibility for providing
to Tenant any telephone equipment, including wiring, within the Leased Premises
or for providing telephone service or connections from the utility to the Leased
Premises; and
(ii) Landlord makes no warranty as to the quality,
continuity or availability of the telecommunications services in the Building,
and Tenant hereby waives any claim against Landlord for any actual or
consequential damages (including damages for loss of business) in the event
Tenant's telecommunications services in any way are interrupted, damaged or
rendered less effective, except to the extent caused by the sole active
negligent or willful act or omission by Landlord, its agents, contractors or
employees. Tenant accepts the telephone equipment (including, without
limitation, the INC, as defined below) in its "AS-IS" condition, and Tenant
shall be solely responsible for contracting with a reliable third party vendor
to assume responsibility for the maintenance and repair thereof (which contract
shall contain provisions requiring such vendor to inspect the INC periodically
(the frequency of such inspections to be determined by such vendor based on its
experience and professional judgment), and requiring such vendor to meet local
and federal requirements for telecommunications material and workmanship).
Landlord shall not be liable to Tenant and Tenant waives all claims against
Landlord whatsoever, whether for personal injury, property damage, loss of use
of the Leased Premises, or otherwise, due to the interruption or failure of
telephone services to the Leased Premises except to the extent caused by the
sole active negligence or willful misconduct of Landlord, its agents, employees
or contractors. Tenant hereby holds Landlord harmless and
<PAGE> 35
agrees to indemnify, protect and defend Landlord from and against any liability
for any damage, loss or expense due to any failure or interruption of telephone
service to the Leased Premises for any reason except to the extent caused by the
sole active negligence or willful misconduct of Landlord, its agents, employees
or contractors. Tenant agrees to obtain loss of rental insurance adequate to
cover any damage, loss or expense occasioned by the interruption of telephone
service.
(b) At such time as the entirety of the Leased Premise is no
longer leased to Tenant, Landlord shall in its sole discretion have the right,
by written notice to Tenant, to elect to assume limited responsibility for INC,
as provided below, and upon such assumption of responsibility by Landlord, this
subparagraph (b) shall apply prospectively.
(i) Landlord shall provide Tenant access to such
quantity of pairs in the Building intra-building network cable ("INC") as is
determined to be available by Landlord in its reasonable discretion. Tenant's
access to the INC shall be solely by arrangements made by Tenant, as Tenant may
elect, directly with Pacific Bell or Landlord (or such vendor as Landlord may
designate), and Tenant shall pay all reasonable charges as may be imposed in
connection therewith. Pacific Bell's charges shall be deemed to be reasonable.
Subject to the foregoing, Landlord shall have no responsibility for providing to
Tenant any telephone equipment, including wiring, within the Leased Premises or
for providing telephone service or connections from the utility to the Leased
Premises, except as required by law.
(ii) Tenant shall not alter, modify, add to or disturb
any telephone wiring in the Leased Premises or elsewhere in the Building without
the Landlord's prior written consent, which shall not be unreasonably withheld.
Tenant shall be liable to Landlord for any damage to the telephone wiring in the
Building due to the act, negligent or otherwise, of Tenant or any employee,
contractor or other agent of Tenant. Tenant shall have no access to the
telephone closets within the Building except for the telephone closet located
within the Leased Premises, except in the manner and under procedures
established by Landlord. Tenant shall promptly notify Landlord of any actual or
suspected failure of telephone service to the Leased Premises.
(iii) All costs incurred by Landlord for the
installation, maintenance, repair and replacement of telephone wiring in the
Building shall be a Property Maintenance Cost.
(iv) Landlord makes no warranty as to the quality,
continuity or availability of the telecommunications services in the Building,
and Tenant hereby waives any claim against Landlord for any actual or
consequential damages (including damages for loss of business) in the event
Tenant's telecommunications services in any way are interrupted, damaged or
rendered less effective, except to the extent caused by the grossly negligent or
willful act or omission by Landlord, its agents, contractors or employees.
Tenant acknowledges that Landlord meets its duty of care to Tenant with respect
to the Building INC by contracting with a reliable third party vendor to assume
responsibility for the maintenance and repair thereof (which contract shall
contain provisions requiring such vendor to inspect the INC periodically (the
frequency of such inspections to be determined by such vendor based on its
experience and professional judgment), and requiring such vendor to meet local
and federal requirements for telecommunications material and workmanship).
Subject to the foregoing, Landlord shall not be liable to Tenant and Tenant
waives all claims against Landlord whatsoever, whether for personal injury,
property damage, loss of use of the Leased Premises, or otherwise, due to the
interruption or failure of telephone services to the Leased Premises except to
the extent caused by the gross negligence or willful misconduct of Landlord, its
agents, employees or contractors. Tenant hereby holds Landlord harmless and
agrees to indemnify, protect and defend Landlord from and against any liability
for any damage, loss or expense due to any failure or interruption of telephone
service to the Leased Premises for any reason except to the extent caused by the
gross negligence or willful misconduct of Landlord, its agents, employees or
contractors. Tenant agrees to obtain loss of rental insurance adequate to cover
any damage, loss or expense occasioned by the interruption of telephone service.
<PAGE> 36
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.
TENANT:
Aviron, a
Delaware corporation
Dated: October 20, 1999 By: /s/ Fred Kurland
---------------------------------
Title: Senior Vice-President and
Chief Financial Officer
LANDLORD:
MELP VII, L.P. a California limited
partnership
By: Menlo Equities Associates VII LLC
----------------------------------
Its: General Partner
Dated: October 20, 1999 By: Menlo Equities LLC
------------------------------
Title: Managing Member
By: Menlo Equities, Inc.
--------------------------
Title: Managing Member
By: /s/ Henry D. Bullock
--------------------------
Henry D. Bullock
Its: President
<PAGE> 37
EXHIBIT A
SITE PLAN
<PAGE> 38
EXHIBIT B
WORK LETTER
<PAGE> 39
EXHIBIT C
FORM OF ESTOPPEL CERTIFICATE
__________________, 19____
- -----------------------------
- -----------------------------
- -----------------------------
Re
---------------------------
, California
---------------
Ladies and Gentlemen:
Reference is made to that certain Lease, dated as of October 20, 1999, between
MELP VII, L.P., a California limited partnership ("Landlord"), and the
undersigned (herein referred to as the "Lease"). A copy of the Lease [and all
amendment thereto] is [are] attached hereto as EXHIBIT A. At the request of
Landlord in connection with [ State reasons for request for estoppel certificate
], the undersigned hereby certifies to Landlord and to [ State names of other
parties requiring certification ] and each of your respective successors and
assigns as follows:
1. The undersigned is the tenant under the Lease.
2. The Lease is in full force and effect and has not been amended,
modified, supplemented or superseded except as indicated in Exhibit A.
3. There is no defense, offset, claim or counterclaim by or in favor of
the undersigned against Landlord under the Lease or against the obligations of
the undersigned under the Lease. The undersigned has no renewal, extension or
expansion option, no right of first offer or right of first refusal and no other
similar right to renew or extend the term of the Lease or expand the property
demised thereunder except as may be expressly set forth in the Lease.
4. The undersigned is not aware of any default now existing of the
undersigned or of Landlord under the Lease, nor of any event which with notice
or the passage of time or both would constitute a default of the undersigned or
of Landlord under the Lease.
5. The undersigned has not received notice of a prior transfer,
assignment, hypothecation or pledge by Landlord of any of Landlord's interest in
the Lease.
6. The monthly rent due under the Lease is $____________ and has been
paid through __________________, and all additional rent due and payable under
the Lease has been paid through _________________.
7. The term of the Lease commenced on __________________, and expires on
___________________, unless sooner terminated pursuant to the provisions of the
Lease. Landlord has performed all work required by the Lease for the
undersigned's initial occupancy of the demised property.
8. The undersigned has deposited the sum of $____________ with Landlord
as security for the performance of its obligations as tenant under the Lease,
and no portion of such deposit has been applied by Landlord to any obligation
under the Lease.
9. There is no free rent period pending, nor is Tenant entitled to any
Landlord's contribution.
The above certifications are made to Landlord and Lender knowing that Landlord
and Lender will rely thereon in accepting an assignment of the Lease.
Very truly yours,
- -----------------------------------
<PAGE> 40
Exhibit B
WORK LETTER
THIS WORK LETTER, dated October __, 1999, is entered into by and between
MELP VII, L.P., a California limited partnership ("Landlord"), and Aviron, a
Delaware corporation ("Tenant"). On or about the date hereof, Landlord and
Tenant entered into that certain Lease (the "Lease") for certain premises (the
"Leased Premises") commonly known as 4575 Patrick Henry Drive, Santa Clara,
California. This Work Letter sets forth the agreement of Landlord and Tenant
with respect to the improvements to be constructed in the Leased Premises. All
defined terms used in this Work Letter shall have the meaning set forth in the
Lease, unless otherwise defined in this Work Letter.
1. CONSTRUCTION OF TENANT IMPROVEMENTS. Tenant shall, through its general
contractor (the "Contractor"), furnish and install within the Leased Premises,
substantially in accordance with the plans and specifications to be approved by
Landlord and Tenant pursuant to paragraph 2 below, certain items of general
construction (the "Tenant Improvements"). The quantities, character and manner
of installation of all of the Tenant Improvements shall be subject to the
limitations imposed by any applicable governmental regulations relating to
conservation of energy and by applicable building codes and regulations. In
addition, Tenant agrees that the Tenant Improvements will not require work which
would (i) require changes to structural components of the Building or the
exterior design of the Building; (ii) require any material modification to the
Building's mechanical or electrical systems; or (iii) be incompatible with the
Building plans filed with the City of Santa Clara.
2. SPACE PLANNING.
(a) Tenant will prepare for Landlord's approval no later than fourteen days
prior to the date Tenant intends to submit its permit application, comprehensive
space planning documents (once approved by Landlord, the "Space Planning
Documents").
(b) All planning and interior design services relating to furniture and
equipment, such as selection of colors, finishes, fixtures, furnishings or floor
coverings, will be included in the cost of the Tenant Improvements, shall be
subject to prior written approval of Landlord, which shall not be unreasonably
withheld or delayed and shall be delivered within five (5) business days after
the request is received by Landlord. In connection with Landlord's approval of
the Space Plans and the Working Drawings, Landlord will notify Tenant of those
improvements it considers to be specialized improvements ("Special
Improvements") for Tenant's particular use of the Leased Premises, and will
notify Tenant which Special Improvements must be removed at the termination of
the Lease; not later than the termination of the Lease, Tenant shall remove all
such designated Special Improvements and restore the Leased Premises before the
termination of the Lease, in accordance with Section 2.6 of the Lease.
<PAGE> 41
3. APPROVAL OF WORKING DRAWINGS.
(a) Landlord and Tenant acknowledge that Tenant shall retain an architect and
engineers to prepare all architectural and engineering plans and specifications
required for the construction of the Tenant Improvements in conformance with the
base building and tenant improvement standard specifications of the Building
(the "Working Drawings"), and to prepare drawings and specifications for Changes
(as defined below), if any, pursuant to paragraph 5 below.
(b) Tenant shall submit the completed Working Drawings to Landlord for
Landlord's approval. Landlord will provide written approval of the Working
Drawings within five (5) business days after receipt of such submission. If
Landlord disapproves any part of the submission, the disapproval shall include
written instructions adequate for Tenant's architect and engineers to revise the
Working Drawings. Such revisions shall be subject to Landlord's approval, which
shall not be unreasonably withheld or delayed. Landlord will finally approve the
revised Working Drawings within five (5) business days after submission thereof
to Landlord.
(c) Upon Landlord's approval of the Working Drawings, Tenant shall be authorized
to cause the Contractor to proceed with the construction of the Tenant
Improvements in accordance with the Working Drawings.
4. COST OF TENANT IMPROVEMENTS. Unless specified otherwise herein, Landlord
shall bear and pay for the cost of the Tenant Improvements (which cost shall
include, without limitation, the costs of construction, the cost of permits and
permit expediting, and all architectural and engineering services obtained by
Landlord in connection with the Tenant Improvements, the Contractor's fees,
Landlord's fee for construction administration in an amount equal to 2.5% of
construction hard costs) up to a maximum of $180,000.00 (the "Tenant Improvement
Allowance"). While the Tenant Improvements are being constructed, Tenant may
submit to Landlord monthly invoices for the cost of the Tenant Improvements
completed in the preceding month together with lien waivers with respect to such
work; within thirty (30) days after such submission, Landlord will reimburse
Tenant for its costs for Tenant Improvements, less 2.5% in payment of Landlord's
construction administration fee, all subject to the $180,000 cap. The Tenant
Improvement Allowance shall be utilized only for building improvements to the
Building, and not for signage, furniture costs, any third party consulting or
contracting fees (except for Tenant's architect's fees), any telecom/cabling
costs, or any other purpose. Tenant shall bear and pay the cost of the Tenant
Improvements (including but not limited to all of the foregoing fees and costs)
in excess of the Tenant Improvement Allowance, if any. The cost of the Tenant
Improvements shall exclude the cost of furniture, fixtures and inventory and
other items of Tenant's Work (as defined below).
Notwithstanding anything to the contrary contained in this Lease, the
cost of the Tenant Improvements ("Tenant Improvements Cost") to be provided at
Landlord's sole expense shall not include (and Tenant shall have no
responsibility for) the following:
(i) Costs attributable to (A) building shell construction; (B)
improvements installed outside the demising walls of the Leased Premises unless
(1) necessitated by Tenant Improvements made inside the demising walls of the
Leased Premises; or (2) requested by Tenant or as shown in the approved working
drawings; and (C) improvements installed "off-site"
<PAGE> 42
(such as streets, curbs, gutters, traffic lights for parking and street
lighting);
(ii) Costs for improvements which are not shown on or described in the
approved working drawings unless otherwise approved by Tenant;
(iii) Costs incurred to remove Hazardous Materials from the Leased
Premises or the surrounding area unless the presence of such materials was
caused by Tenant or its contractors, employees or agents (including, without
limitation, Tenant's invitees and visitors), contractors, employees or invitees
in violation of Hazardous Materials laws; and
(iv) Landlord's loan fees, mortgage brokerage fees, interest and other
costs of financing construction costs.
5. CHANGES. Any request by Tenant for a change in the Tenant Improvements after
approval of the Working Drawings (a "Change") shall be accompanied by all
information necessary to clearly identify and explain the proposed Change.
Within five (5) business days after Landlord's receipt of such request, Landlord
shall notify Tenant whether it approves such Change, which approval will not be
unreasonably withheld or delayed.
6. PROCEDURES.
(a) The construction of Tenant Improvements shall not proceed until
Landlord has approved in writing: (i) Tenant's contractors, (ii) proof of the
amount and coverage of public liability and property damage insurance carried by
Tenant's contractors in the form of an endorsed insurance certificate naming
Landlord, the Contractor, and the agents of Landlord and the Contractor as
additional insureds, in an amount not less than two million dollars, and (iii)
complete and detailed plans and specifications for Tenant's Work.
(b) The construction of Tenant Improvements shall be performed in
conformity with a valid permit when required, a copy of which shall be furnished
to Landlord before such work is commenced. In any event, all work shall comply
with all applicable laws, codes and ordinances of any governmental entity having
jurisdiction over the Building. Landlord shall have no responsibility for
Tenant's failure to comply with such applicable laws.
(c) In connection with the construction of Tenant Improvements, (e.g.,
delivering or installing furniture or equipment to the second floor of the
Leased Premises), Tenant or its contractors shall arrange for any necessary
hoisting or elevator service with Landlord and shall pay such reasonable costs
for such services as may be charged by Landlord.
(d) Tenant shall promptly pay Landlord within twenty (20) days after
receipt of demand for any extra expense incurred by Landlord by reason of faulty
work done by Tenant or its contractors, by reason of damage to existing work
caused by Tenant or its contractors, or by reason of inadequate cleanup by
Tenant or its contractors.
7. TENANT IMPROVEMENT WORK.
Notwithstanding anything to the contrary contained in the Lease or this
Work Letter, the Tenant Improvements shall be constructed in substantial
conformity with the Working Drawings
<PAGE> 43
and all applicable rules, regulations, statutes, ordinances, laws and building
codes in a good and workmanlike manner, free of defects and using new materials
and equipment of good quality.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter
as of the respective dates set forth below.
LANDLORD:
MELP VII, L.P, a California limited
partnership
By: Menlo Equities Associates VII LLC
Its: General Partner
By: Menlo Equities LLC
Its: Managing Member
By: Menlo Equities, Inc.
Its: Managing Member
By: /s/ HENRY D. BULLOCK
--------------------------------
Its: President
-------------------------------
TENANT:
Aviron, a Delaware corporation
By: /s/ FRED KURLAND
---------------------------------
Its: Senior Vice President and
Chief Financial Officer
---------------------------------
<PAGE> 1
Exhibit 10.31
[AVIRON LETTERHEAD]
November 22, 1999
Mr. C. Boyd Clarke
7 Bellinghamshire Place
New Hope, PA 18938
Dear Boyd:
On behalf of the Aviron Board of Directors, I am delighted to offer you the
position of President, Chief Executive Officer and Member of the Board of
Aviron. You will report to the Board of Directors.
Your monthly salary will be $28,333.33, (equivalent to $340,000 on an annual
basis), less all required withholding for taxes and Social Security. You will be
eligible for an annual cash retention bonus of $100,000 per year for the first
five years of your employment and an annual cash performance bonus of up to
sixty percent of your salary, based on your performance and that of the company.
In the first year, your major objectives will be to lead the company to having a
BLA on file with the FDA, to be on track for timely pre-approval inspections by
the FDA, and to have developed the staff to be ready for our transition to a
commercial stage company. Success in achieving the last objective will include
review and optimization of Aviron's overall human resources strategy and
performance management systems including compensation programs.
The Board will grant to you an option to purchase six hundred thousand (600,000)
shares of stock in Aviron at an exercise price based on the closing price on the
day before your first day of work. The options on five hundred thousand shares
will vest on Aviron's standard vesting schedule of 2% per month, subject to a
one-year cliff, so that you will be vested in 24% of these options on your first
anniversary date. The options on one hundred thousand shares will vest up to ten
years after your start date (the actual time to be mutually agreed upon), or be
fully vested on the date that the FDA approves FluMist(TM).
In addition, Aviron will provide you and your family the relocation assistance
package as described in Attachment B, including a loan in the amount of $500,000
to assist you in purchasing your residence in the Bay Area. Terms in the event
of your severance from the company are provided in Attachment C, which will be
the basis of a formal severance agreement to be agreed between ourselves as soon
as practical.
If you wish to accept our offer under the terms described, please sign and date
one copy of this letter and each attachment and return to me by November 30,
1999.
<PAGE> 2
The Board and I are very much looking forward to working with you as Aviron
moves forward in a new stage of its corporate life.
Sincerely,
/S/ J. LEIGHTON READ, M.D.
J. Leighton Read, M.D.
Chairman and CEO
<TABLE>
<S> <C> <C>
/s/ C. BOYD CLARKE Nov. 24, 1999 Dec. 6, 1999
- ----------------------------------- --------------------- -------------------
C. Boyd Clarke Date Start Date
</TABLE>
2.
<PAGE> 3
ATTACHMENT A
Your offer is subject to the following conditions of employment:
- - You will be paid semi-monthly and will be eligible to participate in the
standard Company benefit programs (including vacation and medical,
dental, life insurance and long-term disability plans), in accordance
with Company policy.
- - As an Aviron employee, you will be expected to abide by Company rules
and regulations and sign and comply with a Proprietary Information and
Inventions Agreement, which prohibits unauthorized use or disclosure of
Aviron proprietary information.
- - All grants to purchase shares of Aviron stock are subject to the
approval of the Aviron Board of Directors. The terms of your option will
be governed in all respects by the terms of the Plan and the stock
option agreement, which will be provided to you.
- - As a new employee, you will be required to provide a baseline blood
sample before commencing your employment with Aviron and upon leaving
Aviron. Only if an issue arises related to health status will this
sample be tested, and then only with your consent or with the approval
of the Chairman of the Board.
- - You will provide to Aviron, on your first date of employment, a copy of
your college and graduate school diplomas.
- - In accordance with Federal Law, all new employees are required to
present evidence of their identity and eligibility to be employed in the
United States. Accordingly, we request that you provide us, on your
first date of employment, with appropriate document(s) for this purpose.
Agreed and accepted:
/s/ C. BOYD CLARKE Nov. 24, 1999
- ---------------------------------- ------------------------------------
C. Boyd Clarke Date
3.
<PAGE> 4
ATTACHMENT B
RELOCATION PACKAGE
Your employment offer includes the following relocation benefits and conditions:
- - Three house hunting trips, including reasonable expenses for: round-trip
travel for you and your spouse, hotel accommodations, rental car, meal
expenses and incidental expenses.
- - Reimbursement of the actual reasonable cost of moving you, your family
and household goods to the new work location ("grossed up" to be tax
free to you, as regulated by the IRS). We will arrange for a mover to
contact you to initiate the move or use the mover selected by you.
Travel will be arranged by our travel vendor.
- - Aviron will provide marketing assistance to sell your current home.
- - Reimbursement of the actual reasonable cost of temporary housing for up
to 6 months.
- - Reimbursement of the actual reasonable cost of storage of your household
goods for up to 60 days (if needed).
- - Reimbursement for normal and customary closing costs associated with the
sale of your current home and for normal and customary closing costs
associated with the purchase of a home in the Bay Area intended to be
your primary residence including point up to 1% of the mortgage. You
will have up to eighteen months from your first date of employment to
request reimbursement for this expense.
- - If, within two years of your first date of employment, your employment
with Aviron terminates either due to your voluntary resignation for any
reason, or because of a termination for "cause" (as defined in the
Executive Severance Benefits Agreement), you agree to repay to Aviron
the relocation expenses described above which were paid to you or on
your behalf ("Relocation Expenses"), as follows: If your employment
termination occurs within one year after your first date of employment,
you agree to promptly repay the total amount of Relocation Expenses; if
your employment termination occurs within your second year with Aviron,
you agree to promptly repay one-half of the total amount of Relocation
Expenses. If your employment terminates for
4.
<PAGE> 5
any other reason or after the end of your second year of employment with
Aviron, you will not be expected to repay the Relocation Expenses.
- - Aviron will provide you with an interest free loan in the amount of
$500,000.00 to be used toward the purchase of a home in the Bay Area
(the "Loan"). The term of this Loan will be as follows: Depending on how
you apply the Loan's proceeds the Internal Revenue Service may require
that Aviron treat the imputed interest portion as income to you. In
order to meet this requirement, if necessary, your year-end W-2 income
will reflect an interest rate of prime, plus 2% as income to you. This
rate will also apply to any period in which the loan is outstanding and
you are not employed by Aviron. You should consult your tax advisor
regarding the deductibility of this income on your tax return. The Loan
will be secured by a second deed of trust on your principal residence.
The maximum period of the loan is five years. Documents specifying the
terms of the Loan and its repayment will be sent to you within the next
few days.
- - If, within five years of your first date of employment, your employment
with Aviron terminates either due to your voluntary resignation for any
reason, or because of a termination for "cause", the balance of the Loan
including interest will become due and payable 90 days after your last
date of employment with Aviron. In the event of employment termination
for any other reason (such as termination by the Company without cause,
or by reason of death or permanent disability) the repayment of the Loan
will not be accelerated.
AGREED AND ACCEPTED:
/s/ C. BOYD CLARKE Nov. 24, 1999
- ---------------------------------- ------------------------------------
C. Boyd Clarke Date
5.
<PAGE> 6
ATTACHMENT C
TERMS TO BE INCLUDED IN EXECUTIVE SEVERANCE BENEFITS AGREEMENT
In the event of involuntary termination for any reason other than "cause" (which
is defined for this purpose as serious misconduct, such as fraud, embezzlement,
excessive unauthorized absences, or other serious acts of impropriety), you will
receive a severance payment equal to the amount of your annual salary (inclusive
of the "Retention Bonus" and exclusive of the "Performance Bonus"). If such an
involuntary termination occurs, the Company will continue to provide medical
coverage to you for one year following such termination and your
then-outstanding stock options will continue to vest and remain exercisable
during such one-year period.
In the event that your employment is terminated by the Company for any reason
other than your death, disability or for "cause" (to be defined to cover serious
misconduct), or if you resign for "good reason" (to be defined in the Agreement
to cover a downgrading of your role or non-fulfillment by the Company of certain
contractual commitments), within two years following a "change in control" in
the ownership of the Company (to be defined in the Agreement generally as
control of 50% or more of the voting securities of Aviron by a single person
(including a corporation) or group of related persons), the Company will make a
lump sum severance payment equal to the product determined by multip0lying the
sum of the annual compensation paid or payable to you with respect to the two
calendar years in which your annual compensation is the highest (including the
year in which the date of termination occurs), by the number of years (including
any fraction of a year) remaining in the two-year period commencing with the
date of change of control. The compensation base on which such payment is
calculated includes "Retention and Performance" bonuses as well as salary. In
the event of such change of control and termination, all of your unvested
options would vest at the time of termination.
Payments required to be made under the Executive Severance Agreement will be
adjusted only according to the "best after-tax results" clause previously
provided to you.
AGREED AND ACCEPTED:
/s/ C. BOYD CLARKE Nov. 24, 1999
- ---------------------------------- ------------------------------------
C. Boyd Clarke Date
6.
<PAGE> 7
EXHIBIT C
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "Agreement") is entered
into effective as of the 6th day of December, 1999 between C. BOYD CLARKE,
("Executive") and AVIRON, a Delaware corporation (the "Company"). This Agreement
is intended to provide Executive with the severance benefits described herein
upon the occurrence of specific events. Certain capitalized terms used in this
Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 Upon execution of the offer letter of even date herewith (the "Offer
Letter"), Executive shall be employed as President and Chief Executive Officer
of the Company.
1.2 The Company and Executive wish to set forth the severance benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company terminates under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's agreeing to the terms of the
Offer Letter with the Company, Executive's employment with the Company, and
Executive's execution of the general waiver and release described in Section
4.2.
1.4 This Agreement shall remain in full force and effect so long as
Executive is employed by the Company; provided, however, that Executive's rights
to payments and benefits under Article 2 or Article 3 shall continue until the
Company's obligation to provide such payments and benefits is satisfied.
ARTICLE 2
SEVERANCE BENEFITS
2.1 TERMINATION EVENTS. If Executive's employment involuntarily
terminates for any reason other than for Cause, Executive shall be entitled to
receive the following benefits set forth in Sections 2.2, 2.3 and 2.4.
2.2 SALARY CONTINUATION. Executive shall receive Base Salary that has
accrued but is unpaid as of the date of a Covered Termination, and, within
thirty (30) days following such Covered Termination, Executive shall also
receive a lump sum payment equal to one (1) year of Base Salary and, if the date
of a Covered Termination occurs within five (5) years of the date of this
Agreement, one (1) year of his annual cash retention bonus, all of which shall
be subject to applicable tax withholding.
<PAGE> 8
2.3 HEALTH INSURANCE COVERAGE.
Provided that Executive makes a timely election to continue
coverage under the Company's group health plan pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") in connection with
Executive's Covered Termination, the Company will pay Executive's COBRA premiums
for a maximum period of one (1) year following the date of such Covered
Termination (the "COBRA Continuation Period"). In addition, if Executive's
spouse and/or dependents were enrolled in the Company's group health plan on the
date of the Covered Termination, the Company will pay the COBRA premiums for
Executive's dependents during the COBRA Continuation Period, but only to the
same extent that such dependents' premiums under such plan were paid by the
Company prior to the date of such Covered Termination. No provision of this
Agreement will affect the continuation coverage rules under COBRA, except that
the Company's payment of any applicable premiums during the COBRA Continuation
Period will be credited as payment by Executive for purposes of the Executive's
payment required under COBRA. Therefore, the period during which Executive must
elect to continue the Company's group health coverage at his or her own expense
under COBRA, the length of time during which COBRA coverage will be made
available to Executive, and all other rights and obligations of the Executive
under COBRA (except the obligation to pay premiums that the Company pays during
the COBRA Continuation Period) will be applied in the same manner that such
rules would apply in the absence of this Agreement. At the conclusion of the
COBRA Continuation Period, Executive will be responsible for the entire payment
of premiums required under COBRA for the remaining duration of eligibility for
COBRA, if any.
Notwithstanding the foregoing, the Company's obligation to make
COBRA payments for Executive as described above shall cease immediately if
Executive becomes eligible for other health insurance benefits at the expense of
a new employer. Executive agrees to notify a duly authorized officer of the
Company, in writing, immediately upon acceptance of any employment following his
termination which provides Executive with eligibility for health insurance
benefits.
2.4 VESTING OF OUTSTANDING OPTIONS. Outstanding, unvested stock options
to purchase common stock of the Company granted to Executive prior to the date
of the Covered Termination, either pursuant to the terms of the Offer Letter or
under the Company's discretionary stock compensation plans shall continue to
vest according the vesting schedule(s) in effect immediately prior to the date
of the Covered Termination for a period of up to one (1) year. Any stock options
that remain unvested one (1) year after the date of the Covered Termination
shall terminate. All outstanding, vested stock options at the time of
termination shall remain exercisable for one year after the date of the Covered
Termination. Options vesting through the "continuation" period shall remain
exercisable for up to 90 days after its conclusion.
<PAGE> 9
ARTICLE 3
CHANGE OF CONTROL
3.1 TERMINATION EVENTS. If Executive's employment terminates under
circumstances constituting a Covered Termination upon or within two (2) years
following a Change of Control of the ownership of the Company, Executive shall
be entitled to receive the following benefits set forth in Sections 3.2, 3.3 and
3.4 and shall not receive any benefits under Article 2.
3.2 SALARY CONTINUATION. Executive shall receive Base Salary that has
accrued but is unpaid as of the date of such Covered Termination, and, within
thirty (30) days following such Covered Termination, Executive also shall
receive a lump sum payment equal to the product determined by multiplying the
sum of the annualized Base Salary, targeted annual cash performance bonus and
annual cash retention bonus paid or payable to Executive with respect to the two
(2) calendar years in which annualized Base Salary is the highest (including the
year in which the date of termination occurs), by a fraction, the numerator of
which is the number of years (including any fraction of a year) remaining in the
two-year period commencing with the date of the Change of Control, and the
denominator of which is 2, all of which shall be subject to applicable tax
withholding.
3.3 HEALTH INSURANCE COVERAGE IN THE EVENT OF CHANGE OF CONTROL:
Provided that Executive makes a timely election to continue
coverage under the Company's group health plan pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") in connection with
Executive's Covered Termination, the Company will pay Executive's COBRA premiums
for a maximum period of two (2) years following the date of such Covered
Termination (the "COBRA Continuation Period"). In addition, if Executive's
spouse and/or dependents were enrolled in the Company's group health plan on the
date of the Covered Termination, the Company will pay the COBRA premiums for
Executive's dependents during the COBRA Continuation Period, but only to the
same extent that such dependents' premiums under such plan were paid by the
Company prior to the date of such Covered Termination. No provision of this
Agreement will affect the continuation coverage rules under COBRA, except that
the Company's payment of any applicable premiums during the COBRA Continuation
Period will be credited as payment by Executive for purposes of the Executive's
payment required under COBRA. Therefore, the period during which Executive must
elect to continue the Company's group health coverage at his or her own expense
under COBRA, the length of time during which COBRA coverage will be made
available to Executive, and all other rights and obligations of the Executive
under COBRA (except the obligation to pay premiums that the Company pays during
the COBRA Continuation Period) will be applied in the same manner that such
rules would apply in the absence of this Agreement. [At the conclusion of the
COBRA Continuation Period, Executive will be responsible for the entire payment
of premiums required under COBRA for the remaining duration of eligibility for
COBRA, if any.]
In addition to the foregoing, beginning eighteen (18) months
after the date of the Covered Termination and ending on the date two (2) years
after the Covered Termination, the Company will pay the premiums for an
individual health plan as comparable as possible, but not
<PAGE> 10
superior to, the coverage provided under the Company's group health plan as of
the date of the Covered Termination. Provided further that, if Executive's
spouse and/or dependents were enrolled in the Company's group health plan on the
date of the Covered Termination, the individual health plan provided pursuant to
this paragraph shall include coverage for Executive's spouse and/or dependents,
but only the same extent that such dependents' premiums under the Company's
group health plan were paid by the Company prior to the date of the Covered
Termination.
Notwithstanding the foregoing, the Company's obligation to make
COBRA payments for Executive and to provide an individual health plan as
described above shall cease immediately if Executive becomes eligible for other
health insurance benefits at the expense of a new employer. Executive agrees to
notify a duly authorized officer of the Company, in writing, immediately upon
acceptance of any employment following the Covered Termination which provides
Executive with eligibility for health insurance benefits.
3.4 ACCELERATION OF VESTING OF OUTSTANDING OPTIONS. The vesting of
outstanding stock options to purchase common stock of the Company granted to
Executive prior to the date of termination of employment, either pursuant to the
terms of the Offer Letter or under the Company's discretionary stock
compensation plans shall accelerate as of the date of such Covered Termination
so that all outstanding options are one hundred percent (100%) vested and
immediately exercisable. Such acceleration of vesting of outstanding options
also shall apply to any unvested option shares that were acquired by Executive
on or before the date of the Covered Termination and that were subject to a
repurchase option by the Company as of such date.
3.5 PARACHUTE PAYMENTS. In the event that the acceleration of the
vesting provided for in Section 3.4 and benefits otherwise payable to Executive
(i) constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, (the "Code"), or any comparable
successor provision, and (ii) but for this section would be subject to the
excise tax imposed by Section 4999 of the Code, or any comparable successor
provision (the "Excise Tax"), then Executive's benefits hereunder shall be
either
(i) provided to Executive in full, or
(ii) provided to Executive as to such lesser extent which
would result in no portion of such benefits being
subject to the Excise Tax,
whichever of the foregoing amounts, when taking into account applicable federal,
state, local and foreign income and employment taxes, the Excise Tax, and any
other applicable taxes, results in the receipt by Executive, on an after-tax
basis, of the greatest amount of benefits, notwithstanding that all or some
portion of such benefits may be taxable under the Excise Tax. Unless the Company
and Executive otherwise agree in writing, any determination required under this
section shall be made in writing in good faith by the Accountants. In the event
of a reduction of benefits hereunder, benefits payable in cash shall be reduced
first. For purposes of making the calculations required by this section, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of the Code, and other applicable legal authority.
The Company and Executive shall furnish to the Accountants such information and
documents
<PAGE> 11
as the Accountants may reasonably request in order to make a determination under
this section. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this section.
If, notwithstanding any reduction described in this section, the
IRS determines that Executive is liable for the Excise Tax as a result of the
receipt of the payment of benefits as described above, then Executive shall be
obligated to pay back to the Company, within thirty (30) days after a final IRS
determination or in the event that Executive challenges the final IRS
determination, a final judicial determination, a portion of the payment equal to
the "Repayment Amount." The Repayment Amount with respect to the payment of
benefits shall be the smallest such amount, if any, as shall be required to be
paid to the Company so that Executive's net after-tax proceeds with respect to
any payment of benefits (after taking into account the payment of the Excise Tax
and all other applicable taxes imposed on such payment) shall be maximized. The
Repayment Amount with respect to the payment of benefits shall be zero if a
Repayment Amount of more than zero would not result in Executive's net after-tax
proceeds with respect to the payment of such benefits being maximized. If the
Excise Tax is not eliminated pursuant to this paragraph, Executive shall pay the
Excise Tax.
Notwithstanding any other provision of this Section 3.5, if (i)
there is a reduction in the payment of benefits as described in this section,
(ii) the IRS later determines that Executive is liable for the Excise Tax, the
payment of which would result in the maximization of Executive's net after-tax
proceeds (calculated as if Executive's benefits had not previously been
reduced), and (iii) Executive pays the Excise Tax, then the Company shall pay to
Executive those benefits which were reduced pursuant to this section
contemporaneously or as soon as administratively possible after Executive pays
the Excise Tax so that Executive's net after-tax proceeds with respect to the
payment of benefits is maximized.
ARTICLE 4
LIMITATIONS AND CONDITIONS ON BENEFITS
4.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate
federal, state, local (and foreign, if applicable) income and employment taxes
from any payments hereunder.
4.2 RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the occurrence of a
Covered Termination, and prior to the receipt of any benefits under this
Agreement on account of the occurrence of such Covered Termination, Executive
shall execute a release (the "Release") in the form incorporated herein and
attached hereto as Attachment I. Such Release shall specifically relate to all
of Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information agreement. It is understood that Executive has
twenty-one (21) days to consider whether to execute such Release, and Executive
may revoke such Release within seven (7) business days after execution. In the
event Executive does not execute such Release within the twenty-one (2l)-day
period, or if Executive revokes such Release within the subsequent seven (7)
business day period, no benefits shall be payable under this Agreement and this
Agreement shall be null and void. Notwithstanding the foregoing, in addition to
or in lieu of the release contained in Attachment I, Executive may be required
to execute and deliver an effective release in such other
<PAGE> 12
form as the Company may, in its sole discretion, determine to be necessary or
appropriate in order to comply with the requirements of the laws of any
jurisdiction applicable to Executive in order to make a general release of
claims effective and enforceable.
ARTICLE 5
OTHER RIGHTS AND BENEFITS
5.1 NONEXCLUSIVITY. Except as otherwise expressly provided herein,
nothing in the Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plans, programs,
policies or practices provided by the Company and for which Executive may
otherwise qualify, nor shall anything herein limit or otherwise affect such
rights as Executive may have under other agreements with the Company. Except as
otherwise expressly provided herein, amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan, policy, practice or
program of the Company at or subsequent to the date of a Covered Termination
shall be payable in accordance with such plan, policy, practice or program.
5.2 NON-DUPLICATION OF BENEFITS. Notwithstanding any other provision of
the Agreement to the contrary, any benefits payable to Executive under this
Agreement shall be in lieu of any severance benefits payable by the Company to
such individual under any other arrangement covering the individual, unless
expressly otherwise agreed to by the Company in writing.
ARTICLE 6
DEFINITIONS
For purposes of the Agreement, the following terms are defined as
follows:
6.1 "ACCOUNTANTS" means the independent public accountants of the
Company.
6.2 DEFINITION OF BASE SALARY: Base Salary means the Executive's base
salary (exclusive of bonuses and other forms of supplemental compensation) at
the rate in effect during the last regularly scheduled payroll period
immediately preceding the date of Executive's Covered Termination or prior to
the Change of Control, unless a different time period for establishing Base
Salary is expressly set forth in this Agreement.
6.3 "CAUSE" Executive's dismissal or discharge for fraud,
misappropriation, embezzlement or intentional misconduct on the part of
Executive which resulted in material loss, damage or injury to the Company.
6.4 "CHANGE OF CONTROL" means a (i) dissolution or liquidation of the
Company; (ii) a sale, lease or other disposition of all or substantially all of
the assets of the Company; (iii) a merger or consolidation in which the Company
is not the surviving corporation and in which beneficial ownership of securities
of the Company representing at least forty percent (40%) of the combined voting
power entitled to vote in the election of the members of the Board of Directors
has changed; (iv) a reverse merger in which the Company is the surviving
corporation but the
<PAGE> 13
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, and in which beneficial ownership of
securities of the Company representing at least forty percent (40%) of the
combined voting power entitled to vote in the election of the member of the
Board of Directors has changed; (v) an acquisition by any entity (other than (A)
a controlled affiliate of the Company, (B) any employee benefit plan, or related
trust, sponsored or maintained by the Company or subsidiary of the Company or
other entity controlled by the Company, or (C) any company owned directly or
indirectly by stockholders of the Company in substantially the same proportions
as their ownership of Common Stock interest of the Company, immediately prior to
the occurrence with respect to which the evaluation of the Change in Control is
being made) of the beneficial ownership, directly or indirectly, of securities
of the Company representing at least forty percent (40%) of the combined voting
power of the Company's then outstanding securities; or (vi) in the event that
the individuals who, as of the date of adoption of the Plan, are members of the
Company's Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least forty percent (40%) of the Board of Directors. (If the
election, or nomination for election by the Company's stockholders, of any new
Director is approved by a vote of at least forty percent (40%) of the Incumbent
Board, such new Director shall be considered to be a member of the Incumbent
Board in the future.)
6.5 "CODE" means the Internal Revenue Code of 1986, as amended.
6.6 "COVERED TERMINATION" means involuntary termination by the Company
of Executive's employment with the Company for any reason other than death,
disability or for Cause or upon or within two (2) years following a Change of
Control of the ownership of the Company, Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or
responsibilities which result in a material diminution or adverse change of
Executive's position, status or circumstances of employment;
(b) a reduction by the Company in Executive's Base Salary;
(c) any failure by the Company to continue in effect any benefit
plan or arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect Executive's participation in or reduce Executive's benefits
under any Benefit Plans or deprive Executive of any fringe benefit then enjoyed
by Executive; provided, however, a Covered Termination shall not exist under
this subsection 6.6(c) if the Company offers a range of benefit plans and
programs which, taken as a whole, are comparable to the Benefit Plans provided
to Executive as of the date of this Agreement, as determined in good faith by
the Company;
(d) a relocation of Executive or the Company's principal
business offices to a location more than fifty (50) miles from either one of two
locations (Philadelphia, Pennsylvania and Mt. View, California) at which
Executive has performed duties, except for required travel by
<PAGE> 14
Executive on the Company's business to an extent substantially consistent with
Executive's business travel obligations as of the date of this Agreement;
(e) any material breach by the Company of any provision of this
Agreement which is not cured by the Company within twenty (20) days of delivery
of written notice from Executive of such breach; or
(f) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
ARTICLE 7
GENERAL PROVISIONS
7.1 EMPLOYMENT STATUS. This Agreement, the Offer Letter, nor any
attachment or exhibit to the Offer Letter do not constitute a contract of
employment or impose on Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment; or (iv) to be
unable to terminate Executive's employment with the Company at any time, with or
without notice, for any reason or no reason.
7.2 NOTICES. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including delivery by facsimile) or the third day
after mailing by first class mail, to the Company at its primary office location
and to Executive at Executive's address as listed in the Company's payroll
records. Any payments made by the Company to Executive under the terms of this
Agreement shall be delivered to Executive either in person or at the address as
listed in the Company's payroll records.
7.3 SEVERABILITY. If a legal authority of competent jurisdiction
determines that any term or provision of this Agreement is invalid or
unenforceable, in whole or in part, then the remaining terms and provisions
hereof shall be unimpaired. Such legal authority will have the authority to
modify or replace the invalid or unenforceable term or provision with a valid
and enforceable term or provision that most accurately embodies the parties'
intention with respect to the invalid or unenforceable term or provision.
7.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 COMPLETE AGREEMENT. This Agreement, including Attachment I, and any
other written agreements referred to in this Agreement, constitutes the entire
agreement between Executive and the Company and it is the complete, final, and
exclusive embodiment of their agreement with regard to this subject matter. It
is entered into without reliance on any promise or representation other than
those expressly contained herein.
<PAGE> 15
7.6 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed
or terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Company's Board of Directors.
7.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
7.8 HEADINGS. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning hereof.
7.9 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.10 ATTORNEYS' FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
7.11 CHOICE OF LAW. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 NON-PUBLICATION. The parties mutually agree not to disclose
publicly the terms of this Agreement except to the extent that disclosure is
mandated by applicable law or to respective personal advisors.
7.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the
text of this Agreement and any summary, description or other information
regarding this Agreement, the text of this Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
AVIRON C. BOYD CLARKE
By: /s/ J. LEIGHTON READ /s/ C. BOYD CLARKE
------------------------------- ------------------------------------
Name: J. Leighton Read
Title: Chairman
<PAGE> 16
ATTACHMENT I
RELEASE
Certain capitalized terms used in this Release are defined in the
Executive Severance Benefits Agreement (the "Agreement") which I have executed
and of which this Release is a part.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
Except as otherwise set forth in this Release, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed (other than any
claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Release, including, but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of disputed compensation; claims pursuant to
any federal, state or local law or cause of action including, but not limited
to, the federal Civil Rights Act of 1964, as amended; the federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal
Employee Retirement Income Security Act of 1974, as amended; the federal
Americans with Disabilities Act of 1990; tort law; contract law; statutory law;
common law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this paragraph shall be construed in any way
to release the Company from its obligation to indemnify me pursuant to the
Company's indemnification obligation pursuant to agreement or applicable law.
In giving this release, which includes claims that may be unknown to me
at present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to my release of any unknown or unsuspected claims I
may have against the Company.
<PAGE> 17
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Agreement for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the
ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I have the right to
consult with an attorney prior to executing this Release; (C) I have twenty-one
(21) days to consider this Release (although I may choose to voluntarily execute
this Release earlier); (D) I have seven (7) days following the execution of this
Release by the parties to revoke the Release; and (E) this Release shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Release is executed by me.
C. BOYD CLARKE
------------------------------------
Date:
-------------------------------
<PAGE> 1
Exhibit 10.32
NON-OFFICER CHAIRMAN
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of December 6, 1999, is entered into by and
between Aviron, a Delaware corporation ("Employer"), and J. Leighton Read, M.D.
("Chairman"), an individual.
RECITALS
WHEREAS, with the approval of the Board of Directors of Employer,
Chairman has successfully carried out his executive succession plan with the
recruitment of a new Chief Executive Officer of Employer effective as of
December 6, 1999;
WHEREAS, Employer desires to retain the continued services of Chairman
and Chairman desires to perform such services for Employer initially as a
non-officer employee and Chairman of the Board of Directors of Employer, on the
terms and conditions as set forth in this Agreement; and
WHEREAS, Chairman and Employer wish to establish a framework for
Chairman's continued services to Employer during the initial term of this
Agreement and possibly thereafter as an employee of, or a consultant to,
Employer as may be agreed upon by the parties;
NOW, THEREFORE, in consideration of the foregoing and of the material
promises and conditions contained in this Agreement, the parties agree as
follows.
TERMS OF AGREEMENT
1. TERM OF EMPLOYMENT.
Subject to the provisions of Section 7, the term of this Agreement shall
be for a period commencing on December 6, 1999, and terminating on December 31,
2000, which period may be shortened or extended by the parties as provided in
Section 7.
2. EMPLOYMENT AND DUTIES.
During the term of this Agreement, Employer shall employ Chairman as a
non-officer employee and the Chairman of the Employer's Board of Directors and
Chairman hereby accepts such employment. Chairman's responsibilities shall
include the duties previously performed by Chairman as the chairman of the Board
of Directors of Employer, and such other duties the Board may delegate to the
Chairman from time to time. This Agreement is personal to Chairman and he may
not assign or delegate any of his rights or obligations hereunder without first
obtaining the written consent of Employer.
3. COMPENSATION.
In consideration for Chairman's services to Employer during the time
period in which this Agreement is effective, Chairman shall receive a base
salary at the rate of three hundred
1.
<PAGE> 2
thousand dollars ($300,000) per year to be paid in equal installments according
to Employer's regular payroll policy, from which Employer shall withhold and
deduct all applicable federal and state income, social security and disability
taxes as required by applicable laws.
4. ADDITIONAL COMPENSATION AND BENEFITS.
As an employee of Employer, Chairman shall continue to be eligible for a
regular employee benefits provided to the employees under the terms of the
applicable employee benefit plans, and, for purposes of determining his
eligibility for the plans Chairman is expected to work not less than twenty (20)
hours per week for Employer except for vacation leave, sick leave or any other
approved leaves of absences.
(a) STOCK OPTIONS. Chairman will continue to vest in, and be eligible to
exercise, all of his currently outstanding stock options according to the terms
of the applicable plan or plans under which they are granted (such as but not
limited to the Aviron 1996 Equity Incentive Plan) and the stock option
agreements executed under those plans based on his continued service as provided
under this Agreement, provided, that such stock options agreements shall be
amended to provide for the immediate vesting of one hundred percent (100%) of
his unvested stock options in the event of a "Change of Control" of Employer or
in the event of the termination of Chairman's employment under this Agreement as
a result of his death, "Disability," or involuntary termination without "Cause"
(as these capitalized terms are defined in this Section 4(a) and in Section 7
below).
(i) Notwithstanding the foregoing, the provisions of Section
4(a) above providing for immediate vesting of Chairman's stock options upon a
change of control will not apply to any transaction in which substantially all
of the Company's Common Stock is exchanged for Common Stock of the acquiring
Corporation, if such transaction is initiated in any manner prior to July 6,
2000.
(ii) As used herein a "Change of Control," shall mean: (1) a
sale, lease or other disposition of substantially all of the assets of Employer;
or (2) any consolidation or merger of Employer with or into any other
corporation or other entity or person, or any other corporate reorganization, in
which stockholders of Employer immediately prior to such consolidation, merger
or reorganization, own less than fifty percent (50%) of Employer's voting power
immediately after such consolidation, merger or reorganization, or any
transaction or series of related transactions in which in excess of fifty
percent (50%) of Employer's voting power is transferred.
(b) BONUS. Subject to the terms of the bonus plan or agreement, Chairman
shall be entitled to participate in any bonus plan or agreement which Employer
may maintain or establish for the executives of Employer on the terms that apply
to the executives of Employer.
(c) SECTION 401(k) PLAN. As an employee of Employer, Chairman will
continue to be eligible to participate in the Aviron 401(k) Plan, subject to the
terms of that plan.
(d) INSURANCE. Subject to the terms of the plan, Chairman will continue
to be eligible to receive such other benefits or rights as may be provided under
any employee benefit plan
2.
<PAGE> 3
provided by Employer that is now or hereafter will be in effect, including
participation in life, medical, disability and dental insurance plans.
(e) VACATION AND SICK LEAVE. Chairman shall be entitled to accrue up to
a maximum of four (4) weeks' paid vacation each year of employment under this
Agreement and sick leave on the same basis as all other executives of Employer.
(f) OFFICE FACILITIES AND SECRETARIAL SUPPORT. As soon as practicable on
or after January 1, 2000, Employer shall provide Chairman with reasonable and
appropriate office space and equipment to be selected by Chairman and
secretarial support in a location separate from Employer's current premises
solely to allow Chairman to perform his duties under this Agreement during the
term of this Agreement at a cost to be paid by Employer.
(g) BUSINESS EXPENSES. Chairman shall be entitled to reimbursement by
Employer for such customary, ordinary and necessary business expenses as are
incurred by him in the performance of his duties and activities associated with
promoting or maintaining the business of Employer. All expenses as described in
this paragraph will be reimbursed only upon presentation by Chairman of such
documentation as may be reasonably necessary to substantiate that all such
expenses were incurred in the performance of his duties.
5. OUTSIDE ACTIVITIES.
During the term of this Agreement, Chairman shall not, directly or
indirectly, either as an Chairman, employer, consultant, agent, principal,
partner, shareholder, corporate officer, director, or in any other capacity,
engage or assist any third party in engaging in any business competitive with
the business of Employer.
6. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.
Chairman shall continue to be bound by the terms and conditions of the
"Proprietary Information and Inventions Agreement" which he has signed and which
is made a part hereof by this reference.
7. TERMINATION OF EMPLOYMENT.
(a) EXPIRATION OF THE TERM OF AGREEMENT. Unless this Agreement is
extended by a written agreement or modification by the parties, this Agreement
shall be automatically terminated upon the expiration of the term of the
Agreement set forth in Section 1 of this Agreement. Upon such termination,
Employer shall have no further liability to Chairman for any payment,
compensation or benefit under this Agreement whatsoever except as provided
herein or under the terms of an applicable employee benefit plan or the Aviron
1996 Equity Incentive Plan (and any stock option grants made under such plan as
may be amended under this Agreement). The provisions of this Section 7(a) shall
not affect any rights or benefits that Chairman may be entitled to as the
Chairman or a director of the Board of Directors of Employer.
(b) BY DEATH. In the event of the death of Chairman prior to the end of
the term of this Agreement, Employer shall pay Chairman's surviving spouse and,
if she does not survive him, his designated beneficiary, estate or heirs at law,
the amounts payable under this Agreement
3.
<PAGE> 4
including for the period of the remainder of the term of this Agreement. In such
event, Chairman shall also become vested in his outstanding unvested stock
options to the extent provided in Section 4(a) above. In such event, Employer's
total liability under this Agreement shall be limited to payment of Chairman's
salary and benefits (subject to the terms of any applicable employee benefit
plan) in regular payroll installments through the end of the term of this
Agreement and any acceleration of the vesting of Chairman's outstanding stock
options.
(c) BY DISABILITY. In the event of a Disability of Chairman prior to the
end of the term of this Agreement which prevents Chairman from performing his
duties under this Agreement with reasonable accommodation by Employer as
reasonably determined by the Board of Directors, Employer shall pay Chairman, or
his guardian, conservator or legal representative, the amounts payable under
this Agreement including for the period of the remainder of the term of this
Agreement. In such event, Chairman shall also become vested in his outstanding
unvested stock options to the extent provided in Section 4(a) above. In such
event, Employer's total liability under this Agreement shall be limited to
payment of Chairman's salary and benefits (subject to the terms of any
applicable employee benefit plan) in regular payroll installments through the
end of the term of this Agreement and any acceleration of the vesting of
Chairman's outstanding stock options. For purposes of this Agreement, the
capitalized term "Disability" means any medically determinable physical or
mental impairment of Chairman which interferes with the Chairman's ability to
perform his duties under this Agreement.
(d) BY EMPLOYER. Employer reserves the right to terminate this Agreement
for any reason whatsoever upon ten (10) days' written notice to Chairman (or
payment of compensation and benefits payable to Chairman for the same number of
days in lieu of written notice).
(i) WITHOUT CAUSE. If Chairman's employment under this Agreement
is involuntarily terminated by Employer without "Cause," then upon such
termination, Chairman shall receive payment of an amount equal to Chairman's
base salary and benefits for the remaining term of this Agreement. In such
event, Chairman shall become vested in his outstanding unvested stock options to
the extent provided in Section 4(a) above. Employer's total liability under this
Agreement in such event shall be limited to payment of Chairman's salary and
benefits (subject to the terms of any applicable employee benefit plan) in
regular payroll installments through the end of the term of this Agreement and
any acceleration of the vesting of Chairman's outstanding stock options.
(ii) WITH CAUSE. If Chairman's employment under this Agreement
is involuntarily terminated by Employer with "Cause," then upon such
termination, Employer's total liability to Chairman shall be limited to the
payment of Chairman's salary and benefits through the effective date of
termination.
(iii) CAUSE DEFINED. For purposes of this Agreement, the
capitalized term "Cause" means fraud, misappropriation, embezzlement or
intentional misconduct on the part of Chairman which results in a material loss,
damage or injury to Employer.
(e) MUTUAL CONSENT. This Agreement may be terminated upon mutual written
consent of Employer and Chairman. Employer's total liability to Chairman in the
event of termination of employment under this subsection shall be limited to the
payment of Chairman's
4.
<PAGE> 5
salary and benefits through the effective date of termination or such other
terms negotiated by Employer and Chairman.
(f) BY CHAIRMAN. Chairman may terminate this Agreement for any reason
upon ten (10) days' written notice to Employer. Employer's total liability to
Chairman under this Agreement in the event of termination of Chairman's
employment under this subsection shall be limited to the payment of Chairman's
salary and benefits (subject to the terms of any applicable employee benefit
plan) through the effective date of termination; provided, however, that
Chairman shall have the right to elect to convert this Agreement into a
consulting agreement under which Chairman would continue to provide such
consulting services requested by the Board of Directors of Employer during the
remaining term of this Agreement and under which Chairman shall be paid a
consulting fee in the amount of the base salary set forth in Section 3 above
(which amount will be payable semi-monthly) and reimbursement of his reasonable
business expense but shall not be provided any of the benefits set forth in
Section 4 above. Such consulting agreement may be amended or extended by a new
written agreement by and between the parties.
(g) RESIGNATION OF POSITIONS. Upon termination of his employment for any
reason whatsoever, Chairman shall be deemed to have resigned from all offices
then held with Employer but not his seat or chairmanship on Employer's Board of
Directors.
8. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall, nevertheless, continue in full force and effect without being impaired or
invalidated in any way, or reformed and applied as reformed to such extent and
in such manner as to make this Agreement valid and enforceable.
9. GOVERNING LAW.
This Agreement and the rights and obligations hereunder shall be
governed by the laws of California, and the parties to this Agreement
specifically consent to the jurisdiction of the courts of the District Court of
the federal Northern District of California or the Superior Court of the County
of Santa Clara, California, over any action arising out of or related to this
Agreement.
10. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between Employer and
Chairman, pertaining to the subject matter hereof, and supersedes all prior or
contemporaneous written or verbal agreements and understandings with Chairman in
connection with the subject matter hereof. Any modification of this Agreement
will be effective only if it is in writing and signed by the parties to be bound
thereby.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates below written to be effective as of the date first above written.
AVIRON
Dated: December 6, 1999 /s/ PAUL H. KLINGENSTEIN
---------------------------- ------------------------------------
By Paul H. Klingenstein
Chair of Compensation Committee of
Board of Directors
CHAIRMAN
Dated: December 6, 1999 /s/ J. LEIGHTON READ, M.D.
---------------------------- ------------------------------------
J. Leighton Read, M.D.
6.
<PAGE> 1
Exhibit 10.33
AMENDMENT NO. 1 TO STOCK TRANSFER AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK TRANSFER AGREEMENT entered into as of the
16th day of February, 2000, by and among AVIRON, a Delaware corporation
("Company") and the REGENTS OF THE UNIVERSITY OF MICHIGAN ("University").
RECITALS
WHEREAS, the Company and the University are parties to that certain
Materials Transfer and Intellectual Property Agreement dated February 24, 1995
and that certain Stock Transfer Agreement dated February 24, 1995 (the "Transfer
Agreement").
WHEREAS, pursuant to Section 5 of the Transfer Agreement, Aviron agreed
to deliver to University a warrant for the purchase of Aviron Common Stock equal
to one and twenty-five one-hundredths percent (1.25%) of the total number of
issued and outstanding shares of the Company's Common Stock on the Issue Date
(as defined therein).
WHEREAS, the parties desire to amend the Transfer Agreement in order to
issue a warrant as of the date hereof and amend the calculation of the number of
shares to be issued pursuant to the warrant to be issued to the University on
the Issue Date as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. ISSUANCE OF WARRANT.
1.1 Promptly upon execution of this Agreement, the Company will issue to
University a warrant to purchase three hundred forty thousand (340,000) shares
of the Company Common Stock at an exercise price per share of Ten Dollars
($10.00) (the "Initial Exercise Price" and the "New Warrant"). The New Warrant
shall be in substantially the form attached as Exhibit B to the Transfer
Agreement, except that: (i) the term of the New Warrant shall be for seven (7)
years from the date hereof; and (ii) the section entitled "Right to Convert
Warrant into Stock," shall be amended so that the University may elect to
convert the entire New Warrant or any portion thereof from time to time during
the term of the New Warrant.
1.2 The Company represents and warrants that the Initial Exercise Price
is properly calculated according to Section 5.3 of the Transfer Agreement.
1.3 In the event that the calculation of the Warrant Shares (as defined
in the Transfer Agreement and as amended below), is negative or zero, then
University shall retain the New Warrant and there shall be no adjustment of the
number of shares exercisable under the New Warrant.
1.4 If the University exercises/converts the Warrant in full or portion
prior to the date of the First Commercial Sale of any Product (as defined in the
Transfer Agreement) and is not able to sell the Warrant Shares pursuant to Rule
144 under the Securities Act of 1933, as
1.
<PAGE> 2
amended, then the Company agrees to register (this agreement is for one such
registration) the Warrant Shares for resale on a Form S-3 Registration Statement
(if such form is available for use by the Company) with the Securities and
Exchange Commission and both parties agree that such registration shall be on
terms and conditions substantially similar to those registration rights granted
to American Home Products Corporation pursuant to Section 5 of that certain
Common Stock Purchase Agreement by and between American Home Products
Corporation and the Company dated February 3, 2000.
SECTION 2. AMENDMENT OF CALCULATION FOR FURTHER ISSUANCE OF WARRANT.
2.1 The first paragraph of Section 5.2 of the Transfer Agreement is
amended in its entirety as follows:
"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) less three
hundred forty thousand (340,000) shares of the Company Common Stock (as
adjusted for recapitalizations, stock splits, dividends and the like).
If such number is negative or zero then no Warrant shall be issued. 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:"
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT NO.
1 TO STOCK TRANSFER AGREEMENT as of the date set forth in the first paragraph
hereof.
AVIRON THE REGENTS OF THE
UNIVERSITY OF MICHIGAN
By: /s/ FRED KURLAND By: /s/ NORMAN G. HERBERT
----------------------------- --------------------------------------
Fred Kurland
Senior Vice President and Name: Norman G. Herbert
Chief Financial Officer ------------------------------------
Title: Associate Vice President
and Treasurer
-----------------------------------
By: /s/ L. ERIK LUNDBERG
-------------------------------------
Name: L. Erik Lundberg
------------------------------------
Title: Chief Investment Officer
-----------------------------------
2.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8, No. 333-17029, 333-58955, 333-87183 and 333-91607) pertaining to the
1996 Equity Incentive Plan, Employee Stock Purchase Plan, 1996 Non-Employee
Directors' Stock Option Plan, Non-Plan Option Grants and the 1999 Non-Officer
Equity Incentive Plan and in the Registration Statements (Forms S-3, No.
333-41649, 333-50505 and 333-87185) of Aviron of our report dated February 17,
2000, with respect to the financial statements of Aviron included in this Annual
Report (Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Palo Alto, California
March 7, 2000
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 28,081
<SECURITIES> 24,235
<RECEIVABLES> 3,241
<ALLOWANCES> 0
<INVENTORY> 2,082
<CURRENT-ASSETS> 58,648
<PP&E> 35,363
<DEPRECIATION> 9,728
<TOTAL-ASSETS> 91,694
<CURRENT-LIABILITIES> 16,433
<BONDS> 115,447
0
0
<COMMON> 17
<OTHER-SE> (39,636)
<TOTAL-LIABILITY-AND-EQUITY> 91,694
<SALES> 0
<TOTAL-REVENUES> 22,232
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 81,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,364
<INCOME-PRETAX> (61,870)
<INCOME-TAX> 0
<INCOME-CONTINUING> (61,870)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,870)
<EPS-BASIC> (3.90)
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