Production Agreement Between Packaging Coordinators

Exhibit 10.16


PRODUCTION AGREEMENT
BETWEEN
PACKAGING COORDINATORS, INC.
AND
AVIRON


This Agreement made effective as of October 31, 1997 (the "Effective Date") by and between Packaging Coordinators, Inc., a Pennsylvania corporation with offices at 3001 Red Lion Road, Philadelphia, Pennsylvania 19114 (hereinafter called "PCI"); and Aviron, a Delaware corporation with offices at 297 N. Bernardo Avenue, Mountain View, CA 94043 (hereinafter called "Aviron"). PCI and Aviron may be referred to herein as a "Party" or, collectively, as "Parties."


WITNESSETH


WHEREAS, PCI specializes in packaging for the pharmaceutical industries and has certain technical and commercial information and know-how relating to, among other things, performing assembly functions and packaging of pharmaceutical products.


WHEREAS, Aviron is a corporation that develops, conducts stability trials, registers, and intends to market pharmaceutical products, and is the owner of certain proprietary technical and commercial information and know-how relating to, among other things, the formulation and development of such products.


WHEREAS, Aviron desires to engage PCI to provide certain services to Aviron in connection with the manufacture of certain of Aviron's products; and WHEREAS, Aviron desires to collaborate with PCI to construct and develop an appropriate site for such manufacture at PCI's facility;


NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein and intending to be legally bound hereby, the Parties agree as follows:


1. DEFINITIONS
-----------


The following terms as used in this Agreement shall have the meanings set forth in this Article unless otherwise specifically provided herein:


1.1 "Affiliate(s)" shall mean any corporation, firm, partnership or
other entity which controls, is controlled by or is under common
control with a Party. For purposes of this definition, "control"
shall mean the ownership of at least fifty (50%) percent of the
voting share capital of such entity or any other comparable
equity or ownership interest.


1.2 "Agency" shall mean any governmental regulatory authority
involved in regulating any aspect of the development,
Manufacture, Storage and sale of the Product.


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1.3 "Aviron Production Equipment" shall mean the [*] equipment
purchased by Aviron set forth in Appendix 1 attached hereto,
which may be amended from time to time.


1.4 "Aviron Area" shall mean the area reserved for [*] Production
pursuant to, and more fully described in, the Facility
Reservation Agreement.


1.5 "cGMP" shall mean all the laws, regulations and standards
relating to Primary and Secondary Production, including but not
limited to, the United States Food And Drug Administration (FDA)
current Good Manufacturing Practices, as set forth in the Code
Of Federal Regulations (CFR), and the EEC Good Manufacturing
Guidelines, Volume IV as such Regulations and Guidelines may be
revised from time to time, and any other applicable laws,
guidelines and regulations. If there should be a conflict
between the FDA and EEC standards, the more stringent of the two
shall apply. Aviron shall be responsible to advise PCI of cGMP
and other Agency requirements which shall apply to Primary and
Secondary Production conducted hereunder.


1.6 "Delivery Date" shall mean the date on which Product is
delivered to the carrier for shipment from PCI to Aviron
pursuant to Section 7.2.


1.7 "Facility" shall mean PCI's facility at [*] or other facility
that may be mutually agreed in writing by the Parties.


1.8 "Facility Reservation Agreement" shall mean that certain
agreement dated October 31, 1997 under which the Parties agreed
to construct and build-out the Aviron Area and reserve the
Aviron Area for Aviron.


1.9 "FDA" shall mean the United States Food and Drug Administration
and any successor agency having substantially the same function.


1.10 "Manufacture" shall mean the process of [*] Production.


1.11 "Materials" shall mean all components utilized in [*] Production
except for the Vaccine and Syringes.


1.12 "Michigan" shall mean the Regents of the University of Michigan,
a constitutional corporation of the State of Michigan with
offices located at Wolverine Tower, Room 2071, 3003 South State
Street, Ann Arbor, Michigan, 48109-1280, USA.


1.13 "Michigan Agreement" shall mean a certain Materials Transfer and
Intellectual Property Agreement between Aviron and Michigan
dated 24 February 1995.


1.14 "PCI Production Equipment" shall mean all of the [*] purchased
by PCI as set forth in Appendix 2, which may be amended from
time to time.


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1.15 [ * ] Production" shall mean the [ * ] as set forth in Appendix
3.


1.16 "Product" shall mean the product which is the result of [*]
Production.


1.17 "Proprietary Information" shall have the meaning set forth in
Article 12.


1.18 "[ * ] Production" shall mean [ * ] as set forth in Appendix 3.


1.19 "Specifications" shall mean the procedures, test results,
requirements, quality standards data and other documentation
with respect to Materials, Syringes, [*] Production,
[*] Production, Product, Production Equipment, and Vaccine
and Storage of the Vaccine and the Product to be determined by
the parties as set forth in Section 6.7, and, once completed, to
be appended hereto as Appendix 3, as may be amended from time to
time.


1.20 "Store" or "Storage" shall mean the storage of [ * ] as set
forth in the Specifications.


1.21 "Syringe" shall mean the unfilled syringe and holder supplied to
PCI by Aviron as set forth in the Specifications.


1.22 "Vaccine" shall mean the bulk cold-adapted multivalent influenza
vaccine provided to PCI by Aviron as set forth in the
Specifications.


2. FACILITY
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2.1 CONSTRUCTION AND RESERVATION OF AVIRON AREA. The Parties agree
to collaborate on the construction, build-out and reservation of
the Aviron Area pursuant to the Facility Reservation Agreement
attached as Appendix 4 hereto.


3. PRODUCTION EQUIPMENT
--------------------


3.1 INSTALLATION AND QUALIFICATION. Each Party will, at its sole
expense, provide, install in the Aviron Area and qualify its
respective Production Equipment in compliance with cGMP.


3.2 MAINTENANCE. PCI agrees to maintain and operate the Aviron and
PCI Production Equipment used, directly or indirectly, for
[ * ] Production, in all material respects, in accordance with
(i) cGMPs, (ii) applicable Agency requirements and (iii) the
Specifications. PCI shall be responsible for routine maintenance
in accordance with the equipment manufacturers' guidelines,
cGMPs and other applicable laws and regulations, and for other
repairs required as a result of the negligence or intentional
misconduct of PCI or its employees. Aviron shall bear all other
expenses incurred for the maintenance (other than routine
maintenance), repair and/or replacement, as needed of the Aviron
Production Equipment. For the purpose of this Agreement,
"routine


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3.


maintenance" shall mean preventive maintenance as set forth in
the Specifications.


3.3 OWNERSHIP. Aviron shall at all times hold all right, title and
interest in the Aviron Production Equipment. PCI shall not, at
any time during the term of this Agreement, encumber the Aviron
Production Equipment. PCI shall at all times hold all right,
title and interest in the PCI Production Equipment. Aviron shall
not, at any time during the term of this Agreement, encumber the
PCI Production Equipment. Prior to the commencement of [ * ]
Production, each Party shall provide evidence to the other
Party's reasonable satisfaction indicating that Party's
Production Equipment is insured and that such insurance covers
the other Party (as an additional insured) for any loss or
damage to the other Party, or its property or employees, except
where such loss or damage is a result of the negligence or
intentional misconduct of the other Party or its employees.


4. SUPERVISION WITHIN THE AVIRON AREA
----------------------------------


4.1 AVIRON TECHNICAL REPRESENTATIVE. Aviron shall have the right to
have one or more representatives in the Aviron Area during
[ * ] Production to (i) review Production Equipment and [ * ]
Production, (ii) review any relevant records in connection with
such [ * ] Production and assess its compliance with cGMP and
quality assurance standards set forth in the Specifications and
(iii) discuss any related issues with PCI's management. Aviron's
technical representatives, when on-site, shall comply with PCI's
rules and regulations. Aviron shall indemnify and hold PCI and
its Affiliates harmless from all liability, including claims by
Aviron's technical representatives for workers' compensation,
resulting from the presence of Aviron's technical
representatives at the Facility except for claims resulting from
the negligent or willful misconduct on the part of PCI and its
employees.


4.2 RESPONSIBILITIES. Aviron's technical representative, if present,
shall not have responsibility for the supervision of PCI's
personnel conducting [ * ] Production. However, if at any time
Aviron's technical representatives feel that PCI is operating in
a manner inconsistent with this Agreement, he/she is to notify
PCI immediately to cease operations until such condition is
remedied. PCI will immediately cease operations and will not
recommence [ * ] Production operations without Aviron's
approval. PCI shall use its best efforts to remedy any such
condition and Aviron shall authorize PCI to resume [ * ]
Production upon reasonable satisfaction that such condition has
been remedied. Nothing herein shall amend or alter the status of
PCI as an independent contractor.


5. FORECAST, PURCHASE AND SUPPLY OF PRODUCT
----------------------------------------


5.1 PURCHASE AND SUPPLY. During the term of this Agreement, Aviron
shall purchase and PCI shall supply such quantities of Product
as may be set forth on purchase orders placed by Aviron under
this Agreement. All purchases of Product hereunder shall be
governed by the terms of this Agreement which shall


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4.


supersede any inconsistent provisions in any purchase order
delivered by Aviron to PCI.


5.2 FORECASTS. On or before September 30 and March 31 of each year
during the term of this Agreement, Aviron will provide PCI with
a written eighteen (18) month rolling forecast, to be updated in
six (6) month intervals, of the quantity of Product which Aviron
expects to require from PCI during each of the next eighteen
(18) months. The first six (6) months of the first such rolling
forecast shall be binding upon Aviron. Aviron's first forecast
shall include (i) the required Delivery Date for the binding
portion of the forecast and (ii) the quantity of Product to be
delivered.


5.3 ORDERS. Following the Effective Date, Aviron will provide PCI
with one or more purchase orders at six month intervals. Each
such purchase order will set forth (i) the quantity of Product
ordered for delivery during the six months after the date on
which the purchase order is deemed to be received, (ii) the
requested Delivery Date for such order, (iii) the quantity of
Product to be delivered to Aviron as a quality control sample,
(iv) the quantity of Product to be delivered on the Delivery
Date in each form of packaging and (v) the lot numbers to be
applied to such Product. Such purchase order shall be delivered
no later than ninety (90) days prior to the earliest requested
Delivery Date.


5.4 CONFIRMATION; ORDERS GREATER THAN FORECAST. Within fifteen (15)
days of receipt of any purchase order, PCI shall confirm in
writing such order and the Delivery Date therefor. PCI shall use
reasonable commercial efforts to supply the quantity of Product
ordered, regardless of the quantity forecast by Aviron, subject
to the capacity limitations of the Aviron and PCI Production
Equipment. In the event that PCI is unable to fill any order,
PCI shall so notify Aviron in its written confirmation.


5.5 AMENDMENT OF PURCHASE ORDERS. PCI will use best efforts to
accommodate a request to amend a purchase order to increase or
decrease the quantity of Product to be delivered.


5.6 CANCELLATIONS. Aviron may cancel any purchase order by providing
PCI written notice at least ninety (90) days prior to the
confirmed Delivery Date. In the event that Aviron cancels any
order for Product, Aviron shall reimburse PCI for non-
cancellable direct costs reasonably incurred by PCI in
connection with performance of such purchase order up to the
time of receipt of such notice.


5.7 SUPPLY COMMITMENTS. Subject to the limitations set forth in
Section 5.4, PCI represents and warrants that it has the ability
to, and hereby covenants that it will, supply the quantity of
Product ordered by Aviron.


5.8 LIMITED WARRANTY. PCI WARRANTS THAT PRODUCT DELIVERED HEREUNDER
WILL (i) BE MANUFACTURED BY PCI IN ACCORDANCE WITH cGMP AND
OTHER APPLICABLE FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS,
INCLUDING BUT NOT LIMITED TO FDA REGULATIONS, (ii) BE
MANUFACTURED IN ACCORDANCE WITH THE SPECIFICATIONS AND


5.


(iii) CONFORM TO THE APPLICABLE SPECIFICATIONS, AS THEN IN
EFFECT, AS OF THE DELIVERY DATE. EXCEPT AS SET FORTH HEREIN, PCI
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
PRODUCTS, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR ANY PARTICULAR PURPOSE.


6. SUPPLY AND PROCESSING OF VACCINE, SYRINGES, HOLDERS AND MATERIALS
-----------------------------------------------------------------


6.1 LICENSE; INVENTIONS. (a) Aviron hereby grants to PCI, during the
term of this Agreement, a non-exclusive, non-transferable,
royalty-free license during the term of this Agreement to use
the data, information and technology provided by Aviron related
to the Vaccine for the limited purpose of assisting PCI in
carrying out its obligations set forth in this Agreement. (b)
PCI agrees that any and all ideas, improvements, inventions and
works of authorship conceived, written or first reduced to
practice in the performance of this Agreement whether by PCI's
employees alone or in conjunction with Aviron, that are related
to the Vaccine or [ * ] Production (the "Aviron Inventions")
shall be the sole and exclusive property of Aviron and PCI
hereby assigns to Aviron all right, title and interest in and to
any and all such Aviron Inventions. (c) Aviron agrees that any
and all ideas, improvements, inventions and works of authorship
conceived, written or first reduced to practice in the
performance of this Agreement that are related to [ * ]
Production (the "PCI Inventions") shall be the sole and
exclusive property of PCI and Aviron assigns all right, title
and interest in and to any and all such PCI Inventions. PCI
hereby grants to Aviron a non-exclusive, worldwide, royalty-free
license to use and practice such PCI Inventions for the
manufacture, by or for Aviron of any of Aviron's products. Such
license shall survive the termination or expiration of this
Agreement.


6.2 SUPPLY OF VACCINE AND SYRINGES. Aviron shall, at Aviron's
expense, deliver or cause to be delivered, sufficient quantities
of Vaccine and Syringes meeting the Specifications to the
Facility such that PCI can fill purchase orders for the
Manufacture of the Product submitted pursuant to Section 5.3.


6.3 RISK OF LOSS OF VACCINE AND SYRINGE. PCI shall bear all risk of
loss for Vaccine and Syringes delivered to PCI under Section 6.2
which results from PCI's failure to comply with the
Specifications or from the negligence or intentional misconduct
of PCI or its employees. If, for any purpose under this
Agreement, PCI is required to obtain Vaccine or Syringes from
Aviron at PCI's expense, Aviron's charges to PCI for such
Vaccine or Syringes will be equal to Aviron's direct costs to
deliver such Vaccine or Syringes to PCI.


6.4 SUPPLY OF MATERIALS. Unless otherwise notified by Aviron, PCI
shall purchase all Materials, including but not limited to those
set forth in the Specifications, required to complete the
[ * ] Production of the Product. PCI shall provide Aviron
with a monthly inventory of all Vaccine, Syringes and Materials.
Detailed Material usage reports will be provided to Aviron by
PCI each month. In the event Aviron desires to obtain the
Materials from sources other than PCI, it shall have the right
to do so, at its own expense, provided Aviron notifies PCI
ninety


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6.


(90) days in advance. In the event Aviron purchases such
Materials itself, the price for Product shall be adjusted as set
forth in Section 13.


6.5 LABELS AND [ * ] PRODUCTION.


(a) Thirty (30) days prior to the intended date of
commencement of commercial production, Aviron shall
provide PCI with: (i) any particular Specifications it
may have with respect to labels and packaging materials
and (ii) camera-ready artwork for reproduction on the
labels, package inserts and packaging materials. Such
information shall include, but need not be limited to,
the quality, weight and color of the packaging materials
and labels, the type and colors of ink to be used in
printing the labels or packaging materials and any
special requirements for the labels or packaging for the
Product to be delivered to specific countries. The
method to assign lot numbers will be set forth in the
Specifications.


(b) PCI shall reproduce the artwork on the labels, packages
inserts and packaging materials and imprint the
appropriate lot number on each individual unit and each
carton of Product in accordance with the lot numbers
designated on the applicable purchase order. PCI shall
conduct all [ * ] Production in accordance with the
Specifications and the applicable purchase order (to the
extent not inconsistent with the Specifications).


(c) In the event that Aviron desires to change any label,
packaging insert or packaging Material for all or any
portion of the Product, Aviron shall supply PCI with new
camera-ready artwork and work with PCI to promptly
coordinate the use of such new artwork into [ * ]
Production process. In such event, Aviron shall purchase
from PCI, at a price equal to PCI's cost, all Materials
in PCI's inventory made obsolete by such changes.


6.6 [ * ] PRODUCTION OF PRODUCT.


(a) PCI shall conduct [ * ] Production of the Vaccine in
accordance with the Specifications and applicable
federal, state and local laws and regulations
including, without limitation, cGMP. PCI shall notify
Aviron of any difficulty in meeting Specifications or
any deviation therefrom as soon as reasonably possible.
PCI shall not conduct [ * ] Production nor Store
Materials or Product at any other location other than
the Facility without the prior written approval of
Aviron. Before, during and after [ * ] Production of
each batch of Vaccine, PCI shall monitor the
Manufacturing environment and keep such records as all
of the foregoing are required by the Specifications and
cGMP. Both Parties shall promptly notify the other of
any new instructions or specifications required by the
FDA or the United States Federal Food, Drug and Cosmetic
Act, and of other applicable rules and regulations, and
shall confer with each other with respect to the best


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7.


means to comply with such requirements and shall [ * ]
of implementing such changes on an [ * ]


(b) The Parties agree that it is their intention to identify
ways in which to enhance efficiencies in the [ * ]
Production and the [ * ] Production and so reduce
production costs ("Cost Reduction Measures") In the
event PCI expends amounts in undertaking Cost Reduction
Measures, including, for example, the purchasing of
additional production equipment and provided such costs
are agreed upon in advance by the parties in writing,
Aviron shall reimburse PCI for such amounts. Any
additional equipment paid for by Aviron under this
Section 6.6(b) shall be deemed Aviron Equipment.


6.7 PRODUCT SPECIFICATIONS; TESTING.


(a) The Parties agree and acknowledge that the
Specifications will be developed and defined by Aviron
after the Effective Date and following validation and
qualification, subject to input, review and approval by
PCI. Each Party agrees to act in good faith in defining
and finalizing the Specifications. Once finalized, the
Specifications will be appended to this Agreement as
Appendix 3. The Parties further agree ...