PRODUCTION AGREEMENT BETWEEN PACKAGING COORDINATORS

Exhibit 10.16



PRODUCTION AGREEMENT

PACKAGING COORDINATORS, INC.

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."





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

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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



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



1.17 "Proprietary Information" shall have the meaning set forth in

Article 12.



1.18 "[ * ]" 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



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



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

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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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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

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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



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

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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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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



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





(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

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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



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



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(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



(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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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

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