Note 14 – Commitments and Contingencies

Operating Leases

The Company conducts its operations from leased facilities. The operating leases for these facilities have terms expiring through 2026, unless earlier terminated by the Company in 2023. The leases contain provisions for future rent increases. Also, the leases obligate the Company to pay building operating costs. The Company records a deferred rent liability to account for the funding under improvement allowances and to record rent expense on a straight-line basis for these operating leases.

Future minimum rental commitments under non-cancelable leases as of December 31, 2017 (excluding commitments for the Clopper Road Lease as described below as this lease was terminated in January 2018) are as follows (in thousands):

Year	Operating Leases
2018	$	6,695
2019		6,693
2020		5,416
2021		5,398
2022		5,515
Thereafter		6,801
Total minimum lease payments	$	36,518

Total rent expenses approximated $8.4 million, $7.0 million and $4.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

After re-evaluating its real estate needs, the Company amended its lease for approximately 147,000 square feet of facility space located at 1201 Clopper Road, Gaithersburg, Maryland (the “Clopper Road Lease”), allowing for, among other things, the ability to terminate the Clopper Road Lease upon the occurrence of certain events. In January 2018, the landlord terminated the Clopper Road Lease, and the Company paid a termination fee to the landlord of $5.3 million, which the Company believes is less than the potential total lease and operating expense cash obligations that could have been incurred over one year. The Company expects to record total expense, which includes the termination fee and write-down of the related leasehold improvements, and is partially offset by deferred rent expense previously recorded, of approximately $1 million in the first quarter of 2018 in connection with the termination of the Clopper Road Lease.

Contingencies

In 2007, the Company entered into an agreement to license certain rights from Wyeth Holdings Corporation, a subsidiary of Pfizer Inc. (“Wyeth”). The Wyeth license is a non-exclusive, worldwide license to a family of patents and patent applications covering VLP technology for use in human vaccines in certain fields, with expected patent expiration in early 2022. The Wyeth license provides for the Company to make an upfront payment (previously made), ongoing annual license fees, sublicense payments, milestone payments on certain development and commercialization activities and royalties on any product sales. Except in certain circumstances in which the Company continuously markets multiple products in a country within the same vaccine program, the milestone payments are one-time only payments applicable to each related vaccine program. At present, CPLB’s recombinant trivalent seasonal VLP influenza vaccine (“CadiFlu”) is the only program to which the Wyeth license applies. The license may be terminated by Wyeth only for cause and may be terminated by the Company only after it has provided ninety (90) days’ notice that the Company has absolutely and finally ceased activity, including through any affiliate or sublicense, related to the manufacturing, development, marketing or sale of products covered by the license. In September 2015, the Company entered into an amendment to the license agreement with Wyeth. Among other things, the amendment restructured the $3 million milestone payment (“Milestone”) owed as a result of CPLB’s initiation of a Phase 3 clinical trial for CadiFlu in 2014. Under the amendment, the Milestone, which has increased slightly over time, became due on December 31, 2017. The amendment also restructured the final milestone payment to apply to the initial seasonal influenza VLP vaccine candidate being developed outside India. Thus, the aggregate milestone payments for a seasonal influenza VLP vaccine candidate developed and commercialized was increased from $14 million to up to $15 million. In connection with the execution of the amendment, the Company agreed to pay a one-time only payment to Wyeth. The amendment also increased annual license maintenance fees associated with VLP vaccine candidates from $0.2 million to $0.3 million per year. Payments under the agreement to Wyeth as of December 31, 2017 aggregated to $7.6 million. At December 31, 2017, the Milestone is recorded in accrued expenses on the consolidated balance sheet and is expected to be paid in the first quarter of 2018. The Milestone was recorded as a research and development expense in 2014.