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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2000
REGISTRATION NO. 333-93135
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AVI BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
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OREGON 93-0797222
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258
(503) 227-0554
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
DENIS R. BURGER, PH.D.
PRESIDENT & CHIEF EXECUTIVE OFFICER
AVI BIOPHARMA, INC.
ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258
(503) 227-0554
(Name, address, including zip code, and telephone number,
including area code of agent for service)
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COPY TO:
BYRON W. MILSTEAD, ESQ.
ATER WYNNE LLP
222 S.W. COLUMBIA, SUITE 1800, PORTLAND, OR 97201-6618
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
(a) Common Stock, $.0001 par value(2)....... 2,857,147 $13.63 $38,942,914 $10,282
(b) Common Stock, $.0001 par value(3)(4).... 557,144 $13.63 $7,593,873 $2,005
TOTAL................................... $46,536,787 $12,286
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(1) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on January 20, 2000, which was approximately $13.63 per share.
(2) An indeterminate number of shares of Common Stock are registered under this
Registration Statement that may be issued, as provided in the Purchase
Agreement to prevent dilution resulting from stock splits, stock dividends
or similar transactions. No additional registration fee is included for
these shares.
(3) Issuable upon the exercise of Common Stock Purchase Warrants held by
existing shareholders of AVI BioPharma, Inc. who are the selling
shareholders under this Registration Statement.
(4) An indeterminate number of shares of Common Stock are registered under this
Registration Statement that may be issued, as provided in the Common Stock
Purchase Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. No additional registration fee is
included for these shares.
(5) Pursuant Rule 457(a) this amendment registers an additional number of
securities and a registration fee in the amount of $10,976 is enclosed with
respect to these additional securities.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THEIR COMMON SHARES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
SHARES AND IT IS NOT SOLICITING AN OFFER TO BUY COMMON SHARES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SELLING SHAREHOLDERS'
PROSPECTUS
AVI BIOPHARMA, INC.
3,414,291 COMMON SHARES
NASDAQ NATIONAL MARKET
AVII
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE RISK FACTORS
BEGINNING ON PAGE 10.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON SHARES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- This is an offering of Common Shares by existing shareholders of AVI
BioPharma, Inc.
- The selling shareholders will receive all of the proceeds from the sale of
the Common Shares, less any commissions or discounts paid to brokers or
other agents. We will not receive any of the proceeds from the sale of the
Common Shares.
- The selling shareholders may offer and sell the Common Shares on the
Nasdaq National Market at prevailing market prices, or in privately
negotiated transactions at prices other than the market price. On
January 20, 2000, the closing sale price for our Common Shares on the
Nasdaq National Market was $13.375.
- The Common Shares were obtained by the selling shareholders in
transactions that were exempt from the registration requirements of the
Securities Act of 1933, as amended, and represent approximately 21% of the
Company's outstanding Common Stock.
January 24, 1999
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TABLE OF CONTENTS
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PAGE
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 3
SUMMARY..................................................... 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 7
RISK FACTORS................................................ 9
INFORMATION ABOUT THE COMPANY............................... 15
PRIVATE PLACEMENT TO SELLING SHAREHOLDERS................... 19
OUR SELLING SHAREHOLDERS.................................... 20
PLAN OF DISTRIBUTION........................................ 21
DESCRIPTION OF CAPITAL SHARES............................... 23
LEGAL MATTERS............................................... 25
EXPERTS..................................................... 25
ADDITIONAL INFORMATION......................................
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2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which we filed with the Securities and Exchange
Commission are incorporated by reference in this Prospectus:
(1) our Annual Report on Form 10-KSB for the year ended December 31, 1998,
which we refer to in the rest of this document as our Annual Report; and
(2) our Report on Form 10-QSB dated November 12, 1999, for the quarter ended
September 30, 1999.
In addition, all documents which we file with the Securities and Exchange
Commission ("Commission") pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the
Registration Statement and before termination of the offering of Common Shares,
including all annual reports on Form 10-KSB, and all filings on Forms 10-QSB and
8-K, will be deemed to be incorporated by reference in this Prospectus and to be
a part of this Prospectus from the date those documents are filed. Any statement
contained in a document which is incorporated, or deemed to be incorporated, by
reference into this Prospectus, shall be considered modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
You may request a copy of any document incorporated by reference in this
Prospectus at no cost. To receive a copy, write or call us at
AVI BioPharma, Inc., One S.W. Columbia, Suite 1105, Portland, Oregon 97258,
Attention: Mr. Alan P. Timmins, (503) 227-0554.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, including the Registration
Statement on Form S-3 of which this Prospectus is a part, may be inspected and
copied at the public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Commission's telephone number is 1-800-SEC-0330. These materials may be
obtained electronically by visiting the Commission's web site on the Internet at
http://www.sec.gw. Our Common Stock is listed on the Nasdaq National Market.
Reports, proxy statements and other Company materials also can be inspected at
1735 K Street, N.W., Washington, D.C. 20006-1506.
3
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SUMMARY
MANY OF THE MATTERS SET FORTH IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH HEREIN. WE REFER YOU TO
CAUTIONARY INFORMATION CONTAINED ELSEWHERE HEREIN AND IN OTHER DOCUMENTS WE FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME.
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BUSINESS.................................. AVI BioPharma, Inc. (AVI) is an emerging
biopharmaceutical company developing therapeutic
products using two distinct platform technologies:
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Cancer Immunotherapy......... Avicine clinical
Xactin pre-clinical
Gene-targeted drugs
(NEUGENES)................. Resten-NG IND filed
Oncomyc-NG pre-clinical
</TABLE>
<TABLE>
<S> <C>
Our principal focus is the treatment of life-threatening
diseases, most notably cancer and heart disease.
Currently approved drugs or other therapies often prove
to be ineffective in treating advanced stages of these
diseases or produce numerous unwanted side-effects. Our
two leading platforms, Cancer Immunotherapy and
NEUGENEs, are specifically aimed at solving the
challenges faced by today's pharmaceutical products.
Each of these products represents large market
opportunities. It is estimated that the world-wide
market for therapeutic cancer vaccines exceeds
$2 billion.
CANCER IMMUNOTHERAPY (VACCINES)........... Avicine, a therapeutic vaccine, represents our most
advanced product opportunity, having completed a
Phase II human clinical trial for colorectal cancer.
Therapeutic cancer vaccines operate under the rationale
that active immunization can stimulate an immune
response that can be effective in fighting an existing
cancer. The therapeutic benefit of the vaccine hinges on
the existence of specific target sites, called tumor
antigens, on cancer cells.
The target for Avicine is human chorionic gonadotropin
(hCG). Not only is hCG responsible for stimulating fetal
development during pregnancy, but it is also a tumor
antigen on cancer cells of all major types including
cancer of the colon, pancreas, prostate, lung and
breast. It is believed that the role of hCG in pregnancy
and cancer is similar. In both cases, it (i) serves as a
growth factor encouraging rapid cell division,
(ii) fosters the formulation of blood vessels,
(iii) stimulates invasion of other tissues, and
(iv) dampens the immune system to allow the fetus, or
the tumor, to avoid rejection. Avicine is based on an
anti-hCG approach to treating cancer.
Avicine has completed five clinical studies in cancer,
in which a total of 172 patients received treatment.
From these studies, we believe that the vaccine is a
safe and essentially non-toxic therapy and capable of
producing a specific immune response in most patients.
Further, the patients who mounted an immune
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4
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response to hCG lived longer than patients treated with
other conventional therapies. We intend to investigate
further the use of Avicine alone or in conjunction with
other approved therapies in Phase II and Phase III
licensing trials.
CANCER IMMUNOTHERAPY
(XACTIN MONOCLONAL ANTIBODIES).......... We are also combating cancer by utilizing antibodies
that have activity against cancer cells that display the
hCG hormone marker. We licensed XenoMouse-TM- technology
from Abgenix Inc. and have produced human monoclonal
antibodies against critical hCG tumor antigen targets.
These high affinity, stable clones recognize the key
epitopes in our cancer vaccine. The Xactin antibodies
are both companion products to Avicine and independent
cancer therapeutics and are now in pre-clinical
development.
GENE-TARGETED DRUGS (NEUGENES)............ We have developed third generation gene-inactivating
compounds that we believe are more stable, specific,
efficacious, and cost effective than other antisense or
ribozyme agents. Our NEUGENE compounds are distinguished
by a novel backbone which replaces the natural or
modified backbones of competing antisense or ribozyme
technologies.
NEUGENE use synthetic polymers to block the function of
certain genetic sequences involved in the disease
process. Targeting specific genetic sequences provides
for greater selectivity than available through
conventional drugs. NEUGENEs have the potential to
provide safe and effective treatment for a wide range of
human diseases.
We have completed pre-clinical studies using our NEUGENE
compounds in the treatment of bone cancer and
restenosis, the blockage of arteries following balloon
angioplasty. We recently filed an IND with the FDA for
Resten-NG for restenosis and expect to begin a
Phase I/II clinical trial by year-end.
STRATEGY.................................. We have the experience and resources to initiate drug
discovery and development, and move drug candidates
through pre-clinical development and into early stage
clinical trials (Phase I and Phase II). Our strategy
for the near-term (2 to 5 years) is to license the
marketing rights for our product candidates to phar-
maceutical partners after Phase II clinical trials or
co-develop product candidates with strategic partners.
In this manner, expensive, late-stage clinical
development and marketing will be the responsibility of
the licensee. With adequate resources we may consider
assuming greater responsibility for the late-stage
clinical development and marketing opportunities of
future product candidates.
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5
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CLINICAL DEVELOPMENT PROGRAM
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PRODUCT CANDIDATE PRE-CLINICAL PHASE I PHASE II PHASE III
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Avicine
(Colorectal Cancer Vaccine).................. Completed Completed Completed 2000
Avicine
(Pancreatic Cancer Vaccine).................. Completed Completed In progress
Avicine
(Prostate Cancer Vaccine).................... Completed Completed 1999
Resten-NG
(Gene-Targeted Drug for Restenosis).......... Completed 1999 2000
Oncomyc-NG
(Gene-Targeted Drug for Cancer).............. Completed 2000
Xactin
(Human Monoclonal Antibody).................. In progress 2000
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6
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements regarding our plans,
expectations, estimates and beliefs. Our actual results could differ materially
from those discussed in, or implied by, these forward-looking statements.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may," and other similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-
looking statements. We have based these forward-looking statements largely on
our expectations. Forward-looking statements in this Prospectus include, but are
not necessarily limited to, those relating to:
- our intention to introduce new products
- FDA or other regulatrory approval for our products
- our expectations about the markets for our products
- acceptance of our products in the marketplace
- our future capital needs
- success of our patent applications
- the status of Year 2000 compliance efforts
Forward-looking statements are subject to risks and uncertainties, certain
of which are beyond our control. Actual results could differ materially from
those anticipated as a result of the factors described in the "Risk Factors,"
including among others:
- delays in obtaining, or our inability to obtain, approval by the FDA or
other regulatory authorities for our products
- delays in developing, or the failure to develop, our products
- the development of competing or more effective products by other parties
- uncertainty of market acceptance of our products
- problems that we may face in manufacturing, marketing, and distributing
our products
- our inability to raise additional capital when needed
- delays in the issuance of, or the failure to obtain, patents for certain
on our products and technologies
- problems with important suppliers and business partners
We do not undertake any obligation to update or revise any forward-looking
statements contained in this Prospectus or incorporated by reference, whether as
a result of new information, future events or otherwise. Because of these risks
and uncertainties, the forward-looking events and circumstances discussed in
this Prospectus might not transpire. Factors that cause actual results or
conditions to differ from those anticipated by these and other froward-looking
statements include those more fully described in the "Risk Factors" section and
elsewhere in this Prospectus.
7
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NOTES TO READERS OF THIS PROSPECTUS
We were incorporated in Oregon in 1980. When we refer to "us," "we," "our,"
"the Company" and "AVI" in this Prospectus, we mean AVI BioPharma, Inc., and its
consolidated subsidiaries. Our executive offices are located at One S.W.
Columbia, Suite 1105, Portland, Oregon 97258. Our telephone number at that
location is (503) 227-0554. Information contained on our websites does not
constitute part of this Prospectus.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, may be inspected and copied at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Commission's telephone number is 1-800-SEC-0330. These materials may be obtained
electronically by visiting the Commission's website on the Internet at
http://www.sec.gov. Reports, proxy statements and other Company materials also
can be inspected at 1735 K Street, N.W., Washington, D.C. 20006-1506 or obtained
directly from the Company at the address and telephone listed above.
This Prospectus includes our trademarks and registered trademarks, including
Avicine-TM-, NEUGENE-Registered Trademark-and Xactin-TM-. Each other trademark,
trade name or service mark appearing in this Prospectus belongs to its holder.
8
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RISK FACTORS
The Shares offered by this Prospectus are speculative and involve a high
degree of risk. Before making an investment, you should carefully read this
entire Prospectus and consider the following risk factors.
RISKS RELATING TO OUR BUSINESS
HISTORY OF OPERATING LOSSES AND ANTICIPATED FUTURE LOSSES
We incurred a net operating loss of $26.7 million in 1998, which included a
one-time charge of $19.5 million relating to our acquisition of ImmunoTherapy
Corporation. We incurred a $5.9 million loss for the first nine months of 1999.
"Net operating loss" represents the amount by which our expenses (other than
interest expense) exceed revenues. As of September 30, 1999, our accumulated
deficit was $48.7 million. Our losses have resulted principally from expenses
incurred in research and development of our technology and products and from
selling, general and administrative expenses that we have incurred while
building our business infrastructure. We expect to continue to incur significant
operating losses in the future as we continue our research and development
efforts and seek to obtain regulatory approval of our products. Our ability to
achieve profitability depends on our ability to complete development of our
products, obtain regulatory approvals and market our products. It is uncertain
when, if ever, we will become profitable.
EARLY STAGE OF PRODUCT DEVELOPMENT
Although we began operations in 1980, except for Avicine, we are only in the
early stages of the development of our pharmaceutical products. We have devoted
almost all of our time to research and development of our technology and
products, protecting our proprietary rights and establishing strategic
alliances. Our proposed products are in the pre-clinical or clinical stages of
development and will require significant further research, development, clinical
testing and regulatory clearances. We have no products available for sale,
except for research reagents, and we do not expect to have any products
available for sale for several years. Our proposed products are subject to
development risks. These risks include the possibilities that any of the
products could be found to be ineffective or toxic, or could fail to receive
necessary regulatory clearances. Although we have obtained favorable results in
Phase II using Avicine to treat colorectal cancer patients, we cannot assure
that we will obtain similar results in the contemplated Phase III protocol. We
have not received any significant revenues from the sale of products and we
cannot assure investors that we will successfully develop marketable products,
that our sales will increase or that we will become profitable. Third parties
may develop superior or equivalent, but less expensive, products.
LACK OF OPERATING EXPERIENCE
We have engaged solely in the development of pharmaceutical technology.
Although some of our management have experience in biotechnology company
operations, we have limited experience in manufacturing or selling
pharmaceutical products. We also have only limited experience in negotiating and
maintaining strategic relationships, and in conducting clinical trials and other
later-stage phases of the regulatory approval process. We cannot assure
investors that we will successfully engage in any of these activities.
NEED FOR FUTURE CAPITAL AND UNCERTAINTY OF ADDITIONAL FUNDING
Since we began operations, we have obtained operating funds primarily by
selling shares of our company. Based on our current plans, we believe that
current cash balances including the anticipated proceeds from this Offering will
be sufficient to meet our operating needs for approximately the next eighteen
months. Furthermore, the actual amount of funds that we will need will be
determined by many factors, some of which are beyond our control. These factors
include the success of our research and development efforts, the status of our
pre-clinical and clinical testing, costs relating to securing regulatory
9
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approvals and the costs and timing of obtaining new patent rights, regulatory
changes, competition and technological developments in the market. We may need
funds sooner than currently anticipated.
We anticipate that we will need to obtain additional funds during or at the
end of this eighteen-month period. If necessary, potential sources of additional
funding include strategic relationships, public or private sales of shares of
our common stock or debt or other arrangements. We do not have any committed
sources of additional financing at this time. It is uncertain whether we can
obtain additional funding when we need it on terms that will be acceptable to us
or at all. If we raise funds by selling additional shares of our common stock or
securities convertible into our common stock, the ownership interest of our
existing shareholders will be diluted. If we are unable to obtain financing when
needed, our business and future prospects would be materially adversely
affected.
DEPENDENCE ON OTHERS FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
We do not intend to conduct late-stage (Phase III) human clinical trials
ourselves. We anticipate entering into relationships with larger pharmaceutical
companies to conduct later pharmaceutical trials and to market our products and
we also plan to continue to use contract manufacturing for our products. We may
be unable to enter into corporate partnerships that could impede our ability to
bring our products to market. We cannot assure investors that any corporate
partnerships, if entered, will be on favorable terms or will result in the
successful development or marketing of our products. If we are unsuccessful in
establishing advantageous clinical testing, manufacturing and marketing
relationships, we are not likely to generate significant revenues and become
profitable.
LIMITED MANUFACTURING CAPABILITY
While we believe that we can produce materials for clinical trials at our
existing facilities, we will need to expand our commercial manufacturing
capabilities for products in the future if we elect not to or cannot contract
with others to manufacture our products. This expansion may occur in stages,
each of which would require regulatory approval, and product demand could at
times exceed supply capacity. We have not selected a site for any expanded
facilities and cannot predict the amount we will expend for construction of such
facilities. We cannot assure if or when the FDA will determine that such
facilities comply with Good Manufacturing Practices. The projected location and
construction of any facilities will depend on regulatory approvals, product
development, pharmaceutical partners and capital resources, among other factors.
We have not obtained regulatory approvals for any productions facilities for our
products, nor can we assure investors that we will be able to do so.
GOVERNMENTAL REGULATION; LACK OF ASSURANCE OF REGULATORY APPROVALS
All of our products are subject to extensive regulation by the United States
Food and Drug Administration and by comparable agencies in other countries. The
FDA and comparable agencies require new pharmaceutical products to undergo
lengthy and detailed clinical testing procedures and other costly and
time-consuming compliance procedures. Except for Avicine, none of our products
have been tested in humans. We cannot predict when we will initiate and
complete our clinical trials or when we will be able to submit our products for
regulatory review. Even if we submit a new drug application, there may be delays
in obtaining regulatory approvals, if we obtain them at all. Sales of our
products outside the United States will also be subject to regulatory
requirements governing clinical trials and product approval. These requirements
vary from country to country and could delay introduction of our products in
those countries. We cannot assure you that any of our products will receive
marketing approval from the FDA or comparable foreign agencies.
10
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DEPENDENCE ON KEY PERSONNEL
Our success will depend to a large extent on the abilities and continued
service of several key employees, including Drs. Denis Burger, Patrick Iversen,
and Dwight Weller. The loss of any of these key employees could significantly
delay the achievement of our goals. Competition for qualified personnel in our
industry is intense, and our success will be dependent on our ability to attract
and retain highly skilled personnel.
COMPETITION
The biotechnology industry is highly competitive. We compete with companies
in the United States and abroad that are engaged in the development of
pharmaceutical technologies and products. They include:
- biotechnology, pharmaceutical, chemical and other companies;
- academic and scientific institutions;
- governmental agencies; and
- public and private research organizations.
Many of these companies and many of our other competitors have much greater
financial and technical resources and production and marketing capabilities than
we do. Our industry is characterized by extensive research and development and
rapid technological progress. Competitors may successfully develop and market
superior or less expensive products which render our products less valuable or
unmarketable.
PATENTS AND PROPRIETARY RIGHTS
Our success will depend on our existing patents and licenses, and our
ability to obtain additional patents in the future. We have filed 46 patent
applications in the United States, Canada, Europe, Australia and Japan and 43
patents have been issued. We license the composition, manufacturing and use of
Avicine in all fields except fertility regulation from The Ohio State
University.
We cannot assure investors that our pending patent applications will result
in patents being issued in the United States or foreign countries. In addition,
we cannot guarantee that patents which have been or will be issued will afford
meaningful protection for our technology and products. Competitors may develop
products similar to ours which do not conflict with our patents. Others may
challenge our patents and, as a result, our patents could be narrowed or
invalidated. The patent position of biotechnology firms generally is highly
uncertain, involves complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the United
States Patent and Trademark Office or the courts regarding the breadth of claims
allowed or the degree of protection afforded under biotechnology patents. In
addition, there is a substantial backlog of biotechnology patent applications at
the USPTOs and the approval or rejection of patents may take several years.
Our success will also depend partly on our ability to operate without
infringing upon the proprietary rights of others, as well as our ability to
prevent others from infringing on our proprietary rights. We may be required at
times to take legal action in order to protect our proprietary rights and,
despite our best efforts, we may be sued for infringing on the patent rights of
others. Patent litigation is costly and, even if we prevail, the cost of such
litigation could adversely affect our financial condition. If we do not prevail,
in addition to any damages we might have to pay, we could be required to stop
the infringing activity or obtain a license. We cannot be certain that any
required license would be available to us on acceptable terms, or at all. If we
fail to obtain a license, our business might be materially adversely affected.
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To help protect our proprietary rights in unpatented trade secrets, we
require our employees, consultants and advisors to execute confidentiality
agreements. However, we cannot guarantee that these agreements will provide us
with adequate protection if confidential information is used or disclosed
improperly. In addition, in some situations, these agreements may conflict with,
or be subject to, the rights of third parties with whom our employees,
consultants or advisors have prior employment or consulting relationships.
Further, others may independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to our trade secrets.
POTENTIAL PRODUCT LIABILITY
The use of our products will expose us to the risk of product liability
claims. Although we intend to obtain product liability insurance coverage, we
cannot guaranty that product liability insurance will continue to be available
to us on acceptable terms or that our coverage will be sufficient to cover all
claims against us. A product liability claim, even one without merit or for
which we have substantial coverage, could result in significant legal defense
costs, thereby increasing our expenses, lowering our earnings and, depending on
revenues, potentially result in additional losses.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT
In addition to obtaining regulatory approval, the successful
commercialization of our products will depend on our ability to obtain
reimbursement for the cost of the product and treatment. Government authorities,
private health insurers and other organizations, such as health maintenance
organizations are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed health care in the United
States, the growth of healthcare organizations such as HMOs, and legislative
proposals to reform healthcare and government insurance programs could
significantly influence the purchase of healthcare services and products,
resulting in lower prices and reducing demand for our products. The cost
containment measures that healthcare providers are instituting and any
healthcare reform could affect our ability to sell our products and may have a
material adverse effect on our operations. We cannot assure investors that
reimbursement in the United States or foreign countries will be available for
any of our products, that any reimbursement granted will be maintained, or that
limits on reimbursement available from third-party payors will not reduce the
demand for, or the price of, our products. The lack or inadequacy of third-party
reimbursements for our products would have a material adverse affect on our
operations. We cannot forecast what additional legislation or regulation
relating to the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect the legislation or regulation would
have on our business.
RISKS RELATED TO SHARE OWNERSHIP
OUR PREFERRED SHARES, CLASSIFIED BOARD OF DIRECTORS AND OREGON LAWS COULD
PROHIBIT TAKEOVERS
Our authorized capital consists of 50,000,000 shares of common stock and
2,000,000 preferred shares. The Board of Directors, without any further vote by
the shareholders, has the authority to issue preferred shares and to determine
the price, preferences, rights and restrictions, including voting and dividend
rights, of these shares. The rights of the holders of shares of common stock may
be affected by the rights of holders of any preferred shares that the Board of
Directors may issue in the future. For example, the Board of Directors may allow
the issuance of preferred shares with more voting rights, higher dividend
payments or more favorable rights upon dissolution, than the shares of common
stock. If preferred shares are issued in the future, it may also be more
difficult for others to acquire a majority of our outstanding voting shares. See
"Description on Capital Shares."
In addition, we have a "classified" Board of Directors, which means that
only one-half of our directors are eligible for election each year. Therefore,
if shareholders wish to change the composition of the Board of Directors, it
could take at least two years to remove a majority of the existing directors or
to change all
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<PAGE>
directors. Having a classified Board of Directors may, in some circumstances,
deter or delay mergers, tender offers or other possible transactions which may
be favored by some or a majority of our shareholders.
The Oregon Control Share Act and Business Combination Act limit parties who
acquire a significant amount of voting shares from exercising control over us.
The Act may lengthen the period for a proxy contest or for a person to vote
their shares to elect the majority of our Board.
VOLATILITY OF STOCK PRICE
Historically, the market price of our stock has been highly volatile. The
following types of announcements could have a significant impact on the price of
our common stock:
- positive or negative results of testing and clinical trials
- delays in entering into corporate partnerships
- technological innovations or commercial product introductions by ourselves
or competitors
- changes in government regulations
- developments concerning proprietary rights, including patents and
litigation matters
- public concern relating to the commercial value or safety of any of our
products
- general stock market conditions
Further, the stock market has in recent months experienced and may continue
to experience significant price and volume fluctuations. These fluctuations have
particularly affected the market prices of equity securities of many
biopharmaceutical companies that are not yet profitable. Often, the effect on
the price of such securities is unrelated or disproportionate to the operating
performance of such companies. These broad market fluctuations may adversely
affect the ability of a shareholder to dispose of his shares at a price equal to
or above the price at which the shares were purchased.
FUTURE SALE OF ELIGIBLE SHARES MAY LOWER THE PRICE OF OUR COMMON STOCK
We have outstanding 16,235,845 shares of common stock and 14,092,988 are
eligible for sale under Rule 144 or are otherwise freely tradeable. We intend to
promptly file a registration statement covering an additional 2,142,857 shares,
which will make those shares freely tradeable. In addition:
- Our employees and others hold options to buy a total of 144,277 shares of
common stock. The shares of common stock to be issued upon exercise of
these options, have been registered, and therefore may be freely sold when
issued;
- There are outstanding warrants to buy 5,826,554 shares of common stock.
The shares issuable upon exercise of 4,631,101 warrants are registered.
These shares may be freely sold when issued. We also intend to file a
registration statement covering an additional 342,857 warrants. The
holders of warrants covering 400,000 shares have incidental registration
rights to have the shares issuable upon the exercise of their warrants
registered. Once registered, those shares may be freely sold when issued,
for so long as the registration statement is effective and current. The
remaining warrants have no registration rights.
- We may issue options to purchase up to an additional 170,499 shares of
common stock under our stock option plans, which also will be fully
saleable when issued.
Sales of substantial amounts of shares into the public market could lower
the market price of our common stock.
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<PAGE>
RIGHTS OF CERTAIN HOLDERS TO ADDITIONAL STOCK OR REDEMPTION OF SHARES
Holders of 1,857,147 shares of our common stock enjoy the right to receive
additional shares of common stock from the Company without additional payment to
the Company if the Company sells shares of common stock, or engages in similar
financing transactions, at a price of less than $3.50 per share prior to
December 16, 2002, or 33 months have passed since the effective date of the
registration statement relating to this Prospectus. If additional shares of our
common stock are issued under this obligation, the ownership interest of other
existing shareholders will be diluted.
Under certain circumstances, the Company may be required to redeem shares to
be issued to the holders who enjoy this right. Specifically, if the holdings of
the Company's stock by any holder who enjoys this right will exceed their pro
rata share of 20 percent of the Company's outstanding common stock due to the
issuance of new shares, the Company must redeem the new shares to be issued at a
price equal to 110 percent of the price originally paid for these shares. This
redemption obligation could materially adversely affect the business and future
prospects of the Company if it arises.
ABSENCE OF DIVIDENDS
We have never paid dividends on our shares of common stock and do not intend
to pay dividends in the foreseeable future.
YEAR 2000 RISKS
Many currently installed operating systems and software products are coded
only to accept two digit entries in the date code field. Consequently, they are
unable to distinguish 21st century dates from 20th century dates. As a result,
the computer systems and software used by many companies may need to be upgraded
to prevent problems that would result from misreading the entries in the date
code field. Failure to correct systems to become "Year 2000 compliant" may
result in systems failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process data, send
invoices or engage in similar normal business activities.
We are currently reviewing the potential impact of Year 2000 issues on our
business and attempting to mitigate or eliminate those issues. The primary risks
to us are those of business continuity. We are determining which equipment we
own needs to be replaced. We have also begun communicating with our significant
suppliers, financial institutions, insurance companies and other parties that
provide us significant services, including clinical trial sites, to determine
whether they anticipate Year 2000 problems in their operations. If we or our
significant vendors or suppliers are unable to become Year 2000 compliant in
time, this could have a material adverse affect on our ability to continue our
operations.
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<PAGE>
INFORMATION ABOUT THE COMPANY
FOR A DETAILED DESCRIPTION OF OUR BUSINESS AND INFORMATION ABOUT OUR
MANAGEMENT, SEE OUR ANNUAL REPORT WHICH IS INCORPORATED INTO THIS PROSPECTUS BY
REFERENCE. THE FOLLOWING INFORMATION SUPPLEMENTS OR SUPERSEDES, AS MAY BE
APPROPRIATE, THE INFORMATION CONTAINED IN OUR ANNUAL REPORT:
PRODUCT DEVELOPMENT OVERVIEW
I. CANCER IMMUNOTHERAPY
A. AVICINE THERAPEUTIC CANCER VACCINE
TECHNICAL OVERVIEW
The therapeutic vaccine approach is among the newer strategies being
investigated for treating cancer. Historically, vaccines were developed and used
to induce an immune response in order to prevent a disease. This is contrasted
with a therapeutic vaccine where the disease entity is known or suspected to be
present at the time of vaccination. The rationale employed with a therapeutic
approach is that active immunization against a specific pathogenic agent can
stimulate an immune response against the existing disease.
In order for a therapeutic vaccine to be effective in fighting a disease
such as cancer, it is necessary to identify specific target sites on the tumor
cells, called tumor-associated antigens. The more selective that the antigen is
to the tumor, the greater likelihood of attacking only the cancer cells. The
identification of an appropriate target has been one of the greatest challenges
in the development of a useful cancer vaccine.
AVI BioPharma's therapeutic cancer vaccine, Avicine, is designed to produce
an immune response against a well-characterized target, human chorionic
gonadotropin (hCG). hCG is a hormone produced during pregnancy that plays a
variety of roles in fostering the development of a fetus. Through extensive
research, scientists found that hCG is also present in most cancers. In fact,
cancer is believed to be the only significant exception to the normal hCG
function during pregnancy. Given the selective production of hCG, we believe it
represents a highly specific target for a therapeutic cancer vaccine.
The use of hCG as a cancer vaccine target may offer advantages over other
potential tumor associated antigens.
- It is not usually found on normal cells with the exception of those
present during a pregnancy. This means that it is highly selective.
- It is widely expressed by and found on many types of cancer, including
colon, pancreas, prostate, lung and breast.
- hCG expression has been correlated with tumor aggressiveness. In other
words, the higher the level of hCG, the more aggressive the rate of growth
or spread of the cancer.
- Antibodies to hCG are believed to block the same hormonal functions that
hCG plays in pregnancy and cancer, including rapid cell division, the
formulation of blood vessels, invasion of other tissues, and dampening of
the immune responses.
Since hCG is a natural human protein, people will not mount an immune
response to it unless they are actively immunized. Once immunized, the mechanism
of action of an anti-hCG vaccine can be viewed as a two-pronged attack. First,
it directs an immune response against the tumor, and second, it neutralizes the
hormonal benefits provided by hCG.
The hCG component in Avicine is a small peptide from this hormone. The
peptide is joined to a carrier, diphtheria toxoid, to enhance the immune
response. Diphtheria toxoid was selected since most of the world's population
has been vaccinated against it and there is significant experience with it as a
vaccine
15
<PAGE>
component in man. The combination provides for an existing immune response to
the carrier which is believed to be important in stimulating an immune response
to the hCG peptide.
AVICINE DISTINGUISHING CHARACTERISTICS
- Fully-characterized synthetic vaccine
- Capable of being produced inexpensively in large quantities
- Targets a widely-expressed tumor antigen (hCG)
- Ready for Phase III clinical testing in colorectal patients
- Applicable to most cancer types in multiple clinical settings
- Twenty years of research and development and safety data
AVICINE CLINICAL TRIALS
We have completed three Phase I clinical trials using Avicine in 87 patients
with cancer. Overall, these studies showed Avicine to be safe and essentially
non-toxic. These early clinical trials showed the vaccine to be effective in
stimulating an immune response to hCG in most patients. Moreover, apparent
survival benefits and some tumor regressions were noted.
PANCREATIC AND PROSTATE CANCER TRIALS
We recently completed a pilot Phase II study using Avicine in 10 patients
with advanced pancreatic cancer. For the 10 patients treated, the median
survival was approximately 33 weeks. Patients with advanced pancreatic cancer
are currently treated with chemotherapy and have a median survival of
approximately 18 to 25 weeks. Although we believe these results to be
encouraging, we hesitate to draw conclusions from such a small study other than
to use these results to design additional trials.
Two additional Phase II trials were scheduled for the fourth quarter of
1999. The first Phase II study of 50 patients with pancreatic cancer was
initiated in October 1999. In addition, we plan to initiate a Phase II clinical
trial in 24 patients with prostate cancer before year-end.
COLORECTAL CANCER TRIALS
A multicenter Phase II study of Avicine was conducted on in 77 patients with
advanced colorectal cancer. The objectives of this trial were to determine
whether administration of Avicine would induce an immune response in patients
with metastatic colorectal cancer and to measure safety and efficacy in these
patients. Overall, 51 of the 77 patients responded to our vaccine by producing
antibodies to hCG. The patients that were antibody responders had a median
survival of 42 weeks. Patients that did not respond immunologically had a median
survival of just 17 weeks.
Further analysis of the multicenter Phase II data showed that patients who
produced antibodies to two targets on the hCG peptide had a median survival of
66 weeks. Camptosar-Registered Trademark-, the current standard of care for
treating advanced colorectal cancer patients, produces a median survival of
37-40 weeks. Through additional research efforts, we believe we have learned how
to stimulate production of antibodies to the two hCG targets in most patients.
Overall, these clinical data suggest that the patients that received Avicine
and responded by making hCG antibodies had improved median survival compared to
patients treated with chemotherapeutic drugs. Avicine was found to be safe and
did not exhibit the toxicity associated with cytotoxic drug treatment. Based on
these data, we plan to initiate a Phase III pivotal trial in 500 patients with
metastatic colorectal cancer in 2000. This trial randomizes patients receiving
first-line therapy for metastatic colorectal cancer to
16
<PAGE>
one of two treatment arms: combination chemotherapy or combination chemotherapy
plus Avicine. The end points in the trial are time to disease progression and
median survival.
AVICINE CLINICAL TRIALS
<TABLE>
<CAPTION>
TRIAL DESCRIPTION & TYPE PATIENTS STATUS
- ----- ------------------ ---------- -----------
<C> <S> <C> <C>
1 Phase I safety study........................... 43 treated Completed
2 Phase I metastatic cancer...................... 21 treated Completed
3 Phase Ib metastatic cancer..................... 23 treated Completed
4 Phase II pancreatic and extension.............. 10 treated Completed
5 Phase II colorectal............................ 77 treated Completed
6 Phase II pancreatic............................ 50 In progress
7 Phase II prostate.............................. 24 1999
8 Phase III colorectal licensing trial........... 500 2000
</TABLE>
B. XACTIN--HUMAN MONOCLONAL ANTIBODY FOR CANCER
We are also combating cancer by administering antibodies that have activity
against cancer cells that display the hCG hormone marker. We licensed XenoMouse
technology from Abgenix Inc. and have produced human monoclonal antibodies
against critical hCG tumor antigen targets. These high affinity, stable clones
recognize the key epitopes in our cancer vaccine. The Xactin antibodies are both
companion products to Avicine and independent cancer therapeutics and are now in
pre-clinical development.
II. GENE-TARGETED DRUGS--NEUGENE TECHNOLOGY
TECHNICAL OVERVIEW
Most human diseases arise from the function or dysfunction of genes within
the body, either those of pathogens, such as viruses, or of one's own genes. New
techniques in molecular biology have led to the identification of the genes
associated with most of the major human diseases and to the determination of the
sequence of their genetic codes. Using modern methods of chemical synthesis,
compounds can be prepared that recognize target gene sequences in a pathogen or
pathogenic process. When these compounds bind tightly to the disease-causing
sequence, the genetic process is inhibited, and thus the pathogen or pathogenic
process is disabled. This is called ANTISENSE technology since the SENSE of the
genetic code is blocked.
Limitations of then-existing antisense technology in the late 1980s led us
to pursue a different approach than many of our competitors. This effort
culminated in our development of a class of third-generation agents, known as
NEUGENE compounds. In pre-clinical studies, our patented compounds display
advantageous pharmaceutical properties over second-generation compounds now in
clinical trials by others. Such improvements include stability, specificity,
potency, low toxicity and effectiveness.
NEAR-TERM PRODUCT DEVELOPMENT--CANCER AND RESTENOSIS
The first application of our antisense technology is designed to treat
diseases involving abnormal cell division, such as cancer, certain
cardiovascular and inflammatory diseases, psoriasis, polycystic kidney disease
and chronic graft rejection. The NEUGENE target for these diseases is the gene
component named c-myc. We have finished the pre-clinical development of two
NEUGENE compounds, Resten-NG and Oncomyc-NG, and hope to file an IND and
initiate a Phase I clinical trial in 1999 for restenosis and cancer.
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<PAGE>
The table below page summarizes our broader development program for NEUGENE:
NEUGENE ANTISENSE DEVELOPMENT PROGRAM
<TABLE>
<CAPTION>
ANTISENSE TARGET CLINICAL INDICATION
- ---------------- -------------------------------------------------
<S> <C>
Cancer, restenosis, psoriasis, chronic graft
C-myc.......................... rejection
Telomerase..................... Cancer
BCL2........................... Cancer
TNF alpha...................... Arthritis, septic shock, asthma
NF kappa B..................... Crohn's Disease, chronic inflammation
ICAM-1......................... Arthritis, chronic graft rejection
Hepatitis C virus.............. Hepatitis
</TABLE>
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<PAGE>
PRIVATE PLACEMENT TO SELLING SHAREHOLDERS
On December 17, 1999, certain of the Selling Shareholders bought 1,857,147
Shares and warrants to purchase an additional 557,144 Shares.
The purchase agreements and warrants contain protective provisions for the
Selling Shareholders if we sell any other Shares (with limited exceptions) at a
lower price than what the Selling Shareholders paid. The period during which
this provision is in effect runs until either 36 months from the closing date of
the purchase transaction or 33 months from the effective date of this
registration statement, whichever occurs later.
Under these protective provisions, the Selling Shareholders receive
additional shares and warrants to acquire additional Shares and a reduced strike
price for all Shares acquired with the warrants if we sell Shares for less than
the $3.50 price paid by Selling Shareholders.
The number of additional Shares received by a Selling Shareholder is
calculated by the following steps:
- aggregate purchase price by the Selling Shareholder for all Shares
purchased under the purchase agreement is divided by the new lower per
Share sales price causing the adjustment;
- from this new number of shares is subtracted the number of Shares already
delivered to the Selling Shareholder; and
- the difference is the number of additional Shares we will issue to the
Selling Shareholder.
The purchase agreements also contain the provision that if the Selling
Shareholder owns at least 250,000 of the Shares bought pursuant to the purchase
agreement, it receives the adjustment based on all the Shares it originally
bought. However, if the Selling Shareholder owns less than 250,000 of the
originally purchased Shares, it only receives an adjustment based on the number
of Shares it still owns.
Similarly, the warrants provide for an adjustment, both of the exercise
price and number of Shares subject to the warrants.
The Selling Shareholders received warrants to purchase three Shares for
every seven Shares of stock they purchased. The exercise price of the warrants
was set at 115% of the original per Share purchase price. That calculates to an
exercise price of $4.025, based on a $3.50 Share price.
If Shares are sold for less than the exercise price (again with certain
exceptions), then
- warrant price is reduced to 115% of the price of the newly sold Shares;
and
- the number of warrants is increased proportionately so that the Selling
Shareholders will still receive warrants for three Shares for every
10 Shares they either purchased or received because of the protective
provision adjustment.
The following chart sets forth an example of how this might work for a
hypothetical Selling Shareholder:
<TABLE>
<S> <C>
Original aggregate Share purchase price..................... $1,050,000
Original number of Shares purchased......................... 300,000
Original per Share price.................................... $ 3.50
Newly sold Share price...................................... $ 3.00
Original aggregate Share purchase price
divided by newly sold Share price
($1,050,000 DIVIDED BY $3.00)
= 350,000 Shares
Original number of Shares minus adjusted number equals new
Shares we will issue...................................... 50,000
</TABLE>
19
<PAGE>
For the options:
<TABLE>
<S> <C>
New Share price times 115% ($3.00 x 1.15) is new strike
price = $3.45
Original number of Shares covered by warrant was three for
ten shares
(3 X
30,000) = 90,000
The after adjustment number of Shares is 350,000 --
three warrant Shares for ten Shares is 3
x 35,000 = 105,000
That is, the Shares subject to the warrant now total 105,000
with a strike price of $3.45
</TABLE>
In addition to the Shares covered by this registration statement, we are
obligated to register any Shares issued pursuant to the adjustment described
above and any Shares issued following exercise of any new options granted
following an adjustment.
However, the purchase agreements and warrants do contain the restriction
that we may not issue any new Shares or warrants if that would cause a Selling
Shareholder to beneficially own more than 9.90% of the total outstanding Shares
of our common stock. The adjustment must be delayed until it can be done without
exceeding the 9.90% limitation.
OUR SELLING SHAREHOLDERS
The following table provides certain information with respect to the Shares
held by each Selling Shareholder as of December 31, 1999. Except as otherwise
noted, all of the Common Shares owned by each Selling Shareholder are registered
for sale pursuant to this Prospectus. The Selling Shareholders, however, are not
under any obligation to sell all of any portion of their Shares, nor are the
Selling Shareholders obligated to sell any of their Shares immediately under
this Prospectus. We will not receive any proceeds from any sales of Shares by
the Selling Shareholders.
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES SHARES OWNED
BENEFICIALLY AFTER OFFERING(1)
OWNED BEFORE SHARES -------------------
SELLING SHAREHOLDER OFFERING(1) OFFERED NUMBER PERCENT
- ------------------- --------------- --------- -------- --------
<S> <C> <C> <C> <C>
Castle Creek Healthcare Partners LLC........................ 557,141(2) 557,141 -- --
Michael T. Jackson Trust,
New Technologies Fund..................................... 185,718(3) 185,718 -- --
JALAA Equities LP........................................... 185,718(4) 185,718 -- --
The Tail Wind Fund, Ltd..................................... 928,572(5) 928,572
Resonance, Ltd.............................................. 557,142(6) 557,142
SuperGen, Inc............................................... 1,000,000 1,000,000
--------- --------- ------- -----
3,414,291 3,414,291 -- --
</TABLE>
- ------------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options and warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of December 31, 1999, are deemed beneficially
owned and outstanding for computing the percentage of the person holding
such securities, but are no considered outstanding for computing the
percentage of any other person.
(2) Includes 128,571 shares subject to warrants exercisable within 60 days of
December 31, 1999.
(3) Includes 42,858 shares subject to warrants exercisable within 60 days of
December 31, 1999.
(4) Includes 42,858 shares subject to warrants exercisable within 60 days of
December 31, 1999.
(5) Includes 214,286 shares subject to warrants exercisable within 60 days of
December 31, 1999.
(6) Includes 128,571 shares subject to warrants exercisable within 60 days of
December 31, 1999.
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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell the common stock:
- through one or more underwriters or dealers for public offering and sale,
- directly to investors, or
- through agents.
The selling stockholders may distribute the common stock from time to time
in one or more transactions at a fixed price or prices, which may be changed
from time to time:
- at market prices prevailing at the times of sale,
- at prices related to those prevailing market prices, or
- at negotiated prices.
We will not receive any proceeds from the sale of the common stock.
The distribution of the common stock may be effected in one or more of the
following methods:
- ordinary brokers' transactions, which may include long or short sales,
- transactions involving cross or block trades, or otherwise on the Nasdaq
National Market,
- purchases by brokers, dealers or underwriters as principal and resale by
those purchasers for their own accounts pursuant to this prospectus,
- "at the market" to or through market makers or into an existing market for
the common stock,
- in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise),
- pursuant to Rule 144 under the Securities Act, or
- any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of common stock in the course of hedging the positions they assume with
the selling stockholders. The selling stockholders or their successors in
interest may also enter into option or other transactions with broker-dealers
that require the delivery by those broker-dealers of the common stock, which
common stock may be resold thereafter pursuant to this prospectus. In connection
with any sales, the selling stockholders and any brokers or dealers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling stockholders and/or purchasers of the shares
offered hereby (and, if it acts as agent for the purchaser of those shares, from
that purchaser). Usual and customary brokerage fees will be paid by the selling
stockholders. Broker-dealers may agree with the selling stockholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
the broker-dealer is unable to do so acting as agent for a selling stockholders,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholders. Broker-dealers who acquire
shares as principal may thereafter resell the shares from time to time in
transactions (which may involve cross and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market
21
<PAGE>
prices prevailing at the time of sale or at negotiated prices, and in connection
with the resales may pay to or receive from the purchasers of those shares
commissions computed as described above.
We have advised the selling stockholders that Regulation M promulgated under
the Securities Exchange Act, may apply to their sales in the market, have
furnished the selling stockholders with a copy of this regulation and have
informed the selling stockholders of the need for delivery of copies of this
prospectus. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against
liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such
broker-dealers, and any profits received on the resale of those shares, may be
deemed to be underwriting discounts and commissions under the Securities Act if
any such broker-dealers purchase shares as principal. We have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act.
We are required by the Purchase Agreement and Registration Rights Agreement
to register for resale by the selling stockholders and keep registered the
number of shares of common stock they are purchasing or may receive because of a
price adjustment described above under heading "Private Placement to Selling
Shareholders" and 100% of the shares of common stock for which the warrants are
exercisable, including original warrants and warrants received following an
adjustment. We have agreed to and are paying the costs and fees of registering
the common stock. The selling stockholders will pay any brokerage commissions,
discounts or other expenses relating to the sale of the common stock.
Any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or all
of the shares of common stock offered by them hereunder.
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<PAGE>
DESCRIPTION OF CAPITAL SHARES
Our authorized capital consists of 50,000,000 shares of common stock, par
value $0.0001 per share, and 2,000,000 shares of preferred stock, par value
$0.0001 per share.
TRANSFER AGENT
Our transfer agent and registrar is ChaseMellon Shareholder Services, LLC.
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock. As of
December 31, 1999, 16,235,845 shares of common stock were outstanding and were
held of record by approximately 950 shareholders. Holders of common stock are
entitled to one vote for each share at all meetings of our shareholders. Subject
to preferences of Preferred Stockholders, common stockholders are entitled to
receive ratably dividends declared by our Board. Common Stockholders have no
preemptive, subscription, redemption or conversion rights. If we are liquidated
or dissolved, common stockholders would share equally in our assets remaining
after the payment of all our liabilities and the liquidation preference of any
preferred stockholders.
Holders of 1,857,147 shares of our common stock enjoy the right to receive
additional shares of common stock from the Company without additional payment to
the Company if the Company sells shares of common stock, or engages in similar
financing transactions, at a price of less than $3.50 per share prior to
December 16, 2002, or 33 months have passed since the effective date of the
registration statement relating to this Prospectus. Under certain circumstances,
the Company may be required to redeem shares to be issued to the holders who
enjoy this right. Specifically, if the holdings of the Company's stock by any
holder who enjoys this right will exceed their pro rata share of 20 percent of
the Company's outstanding common stock due to the issuance of new shares, the
Company must redeem the new shares to be issued at a price equal to 110 percent
of the price originally paid for these shares.
PREFERRED STOCK
Our Board of Directors is authorized to issue up to 2,000,000 shares of
undesignated preferred stock. No shares of preferred stock have been issued. Our
Board has the authority to issue preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of the preferred stock,
as well as fix the number of shares, without any further vote or action by the
shareholders. Our Board, without shareholder approval, may issue preferred stock
with voting and conversion rights superior to the voting rights of shares of
common stock. The preferred stock may also decrease the amount of earnings and
assets distributed to Common Stockholders. Issuance of preferred stock may delay
or prevent a change in control.
WARRANTS
IPO REPRESENTATIVES' WARRANTS. We issued Representatives' Warrants to the
underwriters of our initial public offering to purchase 400,000 shares of our
common stock. The Representatives' Warrants entitle the holder to acquire up to
200,000 units, each unit consisting of a share of common stock and a Warrant to
purchase a share of common stock for $10.80 per unit and are exercisable until
June 3, 2002. The warrant initially entitles the holder to purchase one share of
common stock at a price of $13.50.
NASDAQ WARRANTS. We have outstanding warrants to purchase 2,300,000 shares
of common stock that were issued in our initial public offering and are traded
on the Nasdaq National Market under the symbol AVIIW. These warrants are
exercisable until June 3, 2002. We may redeem them at a price of $0.25 per
warrant if the closing bid price of our common stock has been at least 200% of
the warrant exercise price for twenty (20) consecutive trading days. The initial
exercise price of these warrants is $13.50.
23
<PAGE>
ITC MERGER WARRANTS. We have outstanding warrants to purchase 2,116,814
shares of the common stock that were issued in connection with our acquisition
of ImmunoTherapy Corporation. These warrants are exercisable after
September 15, 2000 and until May 15, 2003 at a price of $13.50. We may redeem
them at a price of $0.25 per warrant if the closing bid price of our common
stock has been at least 200% of the exercise price for twenty (20) consecutive
trading days and the warrants have been exercisable. These warrants will be
traded under the symbol AVIIZ.
OFFERING WARRANTS. We have issued certain investors 557,144 Warrants. Such
Warrants are exercisable until December 19, 2004 at a price of $4.025 per share
of Common Stock.
OTHER WARRANTS. We have also issued warrants to purchase 81,967 shares of
common stock. These warrants are currently exercisable and do not have a
termination date.
AGENT WARRANTS. We have issued to a Placement Agent 71,429 Warrants. Such
Agent Warrants have a term of five years and are exercisable at a price of $4.20
per share.
STOCK OPTIONS
A total of 2,200,000 shares of our common stock are reserved for issuance
under our 1992 Stock Incentive Plan. As of December 31, 1999, we had outstanding
26,941 options to purchase shares under the 1992 Stock Incentive Plan.
In 1998, we assumed the obligations under the 1997 Stock Option Plan of
ImmunoTherapy Corporation. After the acquisition of ImmunoTherapy Corporation
and as of December 31, 1999, 217,336 options to purchase shares of our common
stock were outstanding under the 1997 plan.
OREGON CONTROL SHARES AND BUSINESS COMBINATION STATUTES
We are subject to the Oregon Control Share Act (the "Control Share Act").
The Control Share Act generally provides that a person (the "Acquiring Person")
who acquires voting stock of an Oregon corporation in a transaction that results
in the Acquiring Person holding more than 20.0%, 33.3% or 50.0% of the total
voting power of the corporation (a "Control Share Acquisition") cannot vote the
shares it acquires in the Control Share Acquisition ("control shares") unless
voting rights are accorded to the control shares by (i) a majority of each
voting group entitled to vote and (ii) the holders of a majority of the
outstanding voting shares, excluding the control shares held by the Acquiring
Person and shares held by our officers and inside directors. The term "Acquiring
Person" is broadly defined to include persons acting as a group.
The Acquiring Person may, but is not required to, submit to us a statement
setting forth certain information about the Acquiring Person and its plans with
respect to us. The statement may also request that we call a special meeting of
shareholders to determine whether voting rights will be accorded to the control
shares. If the Acquiring Person does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, shareholders who do not vote in favor of voting rights
for the control shares will have the right to receive the appraised "fair value"
of their shares which may not be less than the highest price per share by the
Acquiring Person for the control shares.
We are subject to certain provisions of the Oregon Business Corporation Act
that govern business combinations between corporations and interested
shareholders (the "Business Combination Act"). The Business Combination Act
generally provides that if a person or entity acquires 15% or more of the voting
stock of an Oregon corporation (an "Interested Shareholder"), the corporation
and the Interest Shareholder, or any affiliated entity of the Interested
Shareholder, may not engage in certain business combination transactions for
three years following the date the person became an Interested Shareholder.
24
<PAGE>
Business combination transactions for this purpose include (a) a merger or plan
of share exchange, (b) any sale, lease, mortgage or other disposition of 10% or
more of the assets of the corporation, and (c) certain transactions that result
in the issuance of capital stock of the corporation to the Interested
Shareholder. These restrictions do not apply if (i) the Interested Shareholder,
as a result of the transaction in which such person became an Interested
Shareholder, owns at least 85% of the outstanding voting stock of the
corporation (disregarding shares owned by directors who are officers and certain
employee benefit plans), (ii) the Board of Directors approves the share
acquisition or business combination before the Interested Shareholder acquires
15% or more of the corporation's outstanding voting stock or (iii) the Board of
Directors and the holders of at least two-thirds of the outstanding voting stock
of the corporation (disregarding shares owned by the Interested Shareholder)
approve the transaction after the Interested Shareholder acquires 15% or more of
the corporation's voting stock. See "RISK FACTORS--Anti-Takeover Effects of
Certain Charter Provisions and Oregon Law."
LEGAL MATTERS
Ater Wynne LLP, 222 S.W. Columbia, Suite 1800, Portland, Oregon 97201, our
attorneys, have opined that the Common Shares are duly and validly issued, fully
paid and nonassessable.
EXPERTS
The audited financial statements in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
SEC Registration Fee........................................ $12,286
Nasdaq Listing Fee.......................................... 17,500
Accountant's Fees and Expenses.............................. 5,000
Legal Fees and Expense...................................... 5,000
Miscellaneous............................................... --
-------
Total....................................................... 39,786
=======
</TABLE>
- ------------------------
* Represents expenses related to the distribution by the Selling Shareholders
pursuant to the Prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by the Company on behalf of the
Selling Shareholders. All amounts are estimates except for the SEC
Registration Fee and the Nasdaq listing fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for indemnification of the
officers and directors of the Company to the fullest extent permitted by law.
The Oregon Business Corporation Act, permits a corporation to limit, under
certain circumstances, a director's liability for monetary damages in actions
brought by the corporation or its stockholders. As an Oregon corporation, the
Company is subject to the OBCA and the exculpation from liability and
indemnification provision contained therein. Pursuant to
Section 60.047(2)(d) of the OBCA, Article II of the Company's Fifth Restated
Articles of Incorporation (the "Articles") eliminates the liability of the
Company's directors to the Company or its stockholders for monetary damages,
except for any liability related to breach of the duty of loyalty, actions not
in good faith and certain other liabilities.
Section 60.387, ET SEQ., of the OBCA allows corporations to indemnify their
directors and officers against liability where the director or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporation or at least not adverse to the corporation's best
interests and, if in a criminal proceeding, the individual had not reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation but may indemnity against the reasonable
expenses associated with such claims. Corporations may not indemnify against
breached of the duty of loyalty. The OBCA mandates indemnification against all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claims was by or in the right of the corporation.
Finally, a court may order indemnification if it determines that the director or
officer is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances whether or not the director or officer met the good faith
and reasonable belief standards or conduct set out in the statute.
The OBCA also provides that the statutory indemnification provisions are not
deemed exclusive of any other rights to which directors or officers may be
entitled under a corporation's articles of incorporation or bylaws, any
agreement, general or specific action of the board of directors, voce of
stockholders or otherwise.
The Company's Articles also provide for the elimination of liability of
directors for monetary damages to the full extent permitted by the Oregon
Business Corporations Act.
The Company has entered into indemnification agreements with its directors
and certain of its officers.
26
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<C> <S>
4.1 Purchase Agreement, dated December 15, 1999, by and between
AVI BioPharma, Inc. and certain Investors+
4.2 Registration Rights Agreement, dated December 15, 1999, by
and between AVI BioPharma, Inc. and certain Investors+
4.3 Form of Common Stock Purchase Warrant+
4.4 Purchase Agreement, dated December 16, 1999, by and between
AVI BioPharma, Inc. and certain Investors
4.5 Registration Rights Agreement, dated December 16, 1999, by
and between AVI BioPharma, Inc. and certain Investors
4.6 Subscription Agreement, dated December 1, 1999, by and
between SuperGen, Inc. and AVI BioPharma, Inc.
5.1 Opinion of Ater Wynne LLP
23.1 Consent of Arthur Andersen LLP, independent public
accountants
23.2 Consent of Ater Wynne LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
</TABLE>
+ Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
changes to such information in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remains unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities shall be deemed to be in the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification is against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the
27
<PAGE>
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Beaverton,
State of Oregon, on January 24, 2000.
<TABLE>
<S> <C> <C>
AVI BIOPHARMA, INC.
By: /s/ DENIS R. BURGER
-----------------------------------------
Denis R. Burger, Ph.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Denis R. Burger and Alan P. Timmins, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendment to this Registration Statement
on Form S-3 and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ DENIS R. BURGER, PH.D. Officer and Chairman of the
------------------------------------------- Board (Principal Executive January 24, 2000
Denis R. Burger, Ph.D. Officer)
Chief Operating Officer,
/s/ ALAN P. TIMMINS Chief Financial Officer and
------------------------------------------- Director (Principal January 24, 2000
Alan P. Timmins Financial and Accounting
Officer)
Senior Vice President of
/s/ DWIGHT D. WELLER, PH.D. Chemistry and Manufacturing
------------------------------------------- And Development and January 24, 2000
Dwight D. Weller, Ph.D. Director
/s/ PATRICK L. IVERSON, PH.D. Senior Vice President of
------------------------------------------- Research and Development January 24, 2000
Patrick L. Iverson, Ph.D. and Director
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JEFFREY L. LILLARD
------------------------------------------- Vice President and Director January 24, 2000
Jeffrey L. Lillard
/s/ BRUCE L. A. CARTER, PH.D.
------------------------------------------- Director January 24, 2000
Bruce L. A. Carter, Ph.D.
/s/ NICK BUNICK
------------------------------------------- Director January 24, 2000
Nick Bunick
/s/ JOSEPH RUBINFELD
------------------------------------------- Director January 24, 2000
Joseph Rubinfeld
</TABLE>
30
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER
- ------
<C> <S>
4.1 Purchase Agreement, dated December 15, 1999, by and between
AVI BioPharma, Inc. and certain Investors+
4.2 Registration Rights Agreement, dated December 15, 1999, by
and between AVI BioPharma, Inc. and certain Investors+
4.3 Form of Common Stock Purchase Warrant+
4.4 Purchase Agreement, dated December 16, 1999, by and between
AVI BioPharma, Inc. and certain Investors
4.5 Registration Rights Agreement, dated December 16, 1999, by
and between AVI BioPharma, Inc. and certain Investors
4.6 Subscription Agreement, dated December 1, 1999, by and
between SuperGen, Inc. and AVI BioPharma, Inc.
5.1 Opinion of Ater Wynne LLP
23.1 Consent of Arthur Andersen LLP, independent public
accountants
23.2 Consent of Ater Wynne LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
</TABLE>
+ Previously filed.
31
<PAGE>
Exhibit 4.4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 16th
day of December, 1999 by and between Avi BioPharma, Inc., a corporation
organized under the laws of Oregon, with headquarters located at Portland,
Oregon (the "Company"), and the persons identified on the signature pages hereto
(each an "Investor" and collectively, the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended;
B. The Investors wish to purchase, and the Company wishes to
sell and issue to the Investors, upon the terms and conditions stated in this
Agreement, certain of the Company's shares of Common Stock, par value $.0001 per
share (the "Common Stock") and warrants to acquire shares of Common Stock in the
form attached hereto as EXHIBIT A (the "Warrants") for an aggregate purchase
price of $4.0 million; and
C. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as EXHIBIT B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws;
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
1.1 "AFFILIATE" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "AGREEMENTS" means this Agreement, the Registration Rights
Agreement, and the Warrants
<PAGE>
1.3 "CLOSING" means the consummation of the transactions
contemplated by this Agreement, and "CLOSING DATE" means the date of such
Closing.
1.4 "CONTROL" means the possession , direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
1.5 "MARKET PRICE" means the average of the lowest ten (10)
closing bid prices of the Common Stock over the immediately preceding thirty
(30) trading days as reported by NASDAQ National Market ("the Nasdaq Stock
Market").
1.6 "MATERIAL ADVERSE EFFECT" means a material adverse effect
on the (i) condition (financial or otherwise), business, assets, or results of
operations of the Company and its subsidiaries, taken as a whole; (ii) ability
of the Company to perform any of its material obligations under the Agreements;
or (iii) rights and remedies of the Investor under the Agreements.
1.7 "PERSON" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.8 "SEC FILINGS" has the meaning set forth in Section 4.6.
1.9 "SECURITIES" means the Shares, the Warrants and the
Warrant Shares (defined below).
1.10 "SHARES" means the shares of Common Stock being purchased
by the Investor hereunder.
1.11 "WARRANT SHARES" means the shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants.
1.12 "1933 ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.13 "1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF THE SHARES AND WARRANTS. Subject to the terms
and conditions of this Agreement, each Investor severally hereby agrees to
purchase and the Company hereby agrees to sell and issue to such Investor, the
number of Shares and Warrants to purchase the number of shares of Common Stock
set forth on such Investor's signature page attached hereto. The number of
Shares to be purchased by such Investor shall be determined by dividing such
Investor's aggregate purchase price (as the aggregate purchase price is set
forth on such Investor's signature page attached hereto), by an amount equal to
75% of the Market Price
<PAGE>
of the Common Stock on the date hereof (the "Purchase Price"); provided that the
Purchase Price shall not be less than $3.50 per share nor more than $4.00 per
share (subject to appropriate adjustment for stock splits, reverse splits,
dividends and distributions), and the aggregate Purchase Price shall not exceed
$5.0 million. The number of shares of Common Stock purchasable by the Investor
pursuant to the Warrants shall be equal to 30% of the number of Shares purchased
by the Investor, with an initial exercise price equal to 115% of the Market
Price on the date hereof.
3. CLOSING. On the date of this Agreement, the Purchase Price shall be
determined. The Company shall promptly deliver to Kleinberg, Kaplan, Wolff &
Cohen, P.C. ("KKWC"), on the date hereof, in trust, (i) the Warrants and a
certificate registered in such name or names as the Investor may designate,
representing all of the Shares, and (ii) payment in full of the fees and
expenses referred to in Section 10.5(b) and (c) below, with instructions that
such certificates, Warrants and dollar amounts are to be held for release to an
Investor only upon payment of the applicable Purchase Price by such Investor to
the Company. Upon receipt by KKWC of the certificates, the Warrants and dollar
amounts, each Investor shall promptly cause a wire transfer in same day funds to
be sent to the account of the Company as instructed in writing by the Company,
in amounts representing such Investor's aggregate Purchase Price. On the date
the Company receives funds from an Investor, the certificates evidencing the
Shares and the Warrants shall be released to such Investor and the allocable
dollar amounts shall be released to the payees as contemplated by Sections 10.5
(b) and (c)(and such date, as to such Investor, shall be deemed the "Closing
Date").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investors that:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of Oregon and has all requisite power and authority to carry on its
business and own its properties as now conducted and owned. The Company is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or licensing necessary
unless the failure to so qualify or be licensed would not have a Material
Adverse Effect. SCHEDULE 4.1 lists all subsidiaries of the Company. Except when
the context otherwise requires, representations and warranties in this Section 4
by the Company shall be deemed to include representations and warranties as to
its subsidiaries as well.
4.2 AUTHORIZATION. The Company has full power and authority
and has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Agreements, (ii) the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Agreements
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,
<PAGE>
moratorium and similar laws of general applicability, relating to or affecting
creditors' rights generally.
4.3 CAPITALIZATION. Set forth on SCHEDULE 4.3 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the number
of shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth on SCHEDULE 4.3, no Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company, including the Shares, the Warrants and the Warrant
Shares. Except as set forth on SCHEDULE 4.3, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind, and
except as contemplated by this Agreement, the Company does not have any present
plan or intention to issue any equity securities of any kind, or to transfer any
equity securities of any kind owned by it. Except as set forth on SCHEDULE 4.3,
the Company does not know of any voting agreements, buy-sell agreements, option
or right of first purchase agreements or other agreements of any kind among any
of the securityholders of the Company relating to the securities held by them.
Except as set forth on SCHEDULE 4.3, the Company has not granted any Person the
right to require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
4.4 VALID ISSUANCE. The Company has reserved a sufficient
number of shares of Common Stock for issuance pursuant to this Agreement and
upon exercise of the Warrants. The Company will take such steps as may be
necessary to reserve sufficient shares for issuance pursuant to Section 7 below
when such issuance is determinable. The Shares and Warrants are duly authorized,
and such Securities, along with the Warrant Shares when issued in accordance
herewith and with the terms of the Warrants, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws.
4.5 CONSENTS. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than (i) filings that have been
made pursuant to applicable state securities laws and the requirements of the
Nasdaq Stock Market and (ii) post-sale filings pursuant to applicable state and
federal securities laws and the requirements of the Nasdaq Stock Market which
the Company undertakes to file within the applicable time periods.
4.6 DELIVERY OF SEC FILINGS; BUSINESS. The Company has
provided each Investor with copies of the Company's most recent Annual Report on
Form 10K for the fiscal
<PAGE>
year ended December 31, 1998, and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the Annual Report on Form 10K
(collectively, the "SEC Filings"). The Company is engaged only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description of the business of the Company. The Company has not provided to any
Investor (i) any information required to be filed under the 1934 Act that has
not been so filed or (ii) any non-public information.
4.7 USE OF PROCEEDS. The proceeds of the sale of the
Securities hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Since the filing of the
Company's most recent Annual Report on Form 10K or as otherwise identified and
described in subsequent reports filed by the Company pursuant to the 1934 Act,
there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the Company's most recent Report on Form
10Q, except changes in the ordinary course of business which have not had, in
the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether
or not covered by insurance to any assets or properties of the Company or any of
its subsidiaries;
(iv) any waiver by the Company of a valuable right or
of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company taken as a
whole (as such business is presently conducted and as it is proposed to be
conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is bound or subject;
(vii) any labor difficulties or labor union organizing
activities with respect to employees of the Company;
(viii) any transaction entered into by the Company
other than in the ordinary course of business; or
(ix) any other event or condition of any character that
might have a Material Adverse Effect.
<PAGE>
4.9 SEC FILINGS; MATERIAL CONTRACTS.
(a) As of its filing date, each report filed by the
Company with the SEC pursuant to the 1934 Act, complied as to form in all
material respects with the requirements of the 1934 Act and did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each registration statement and any amendment
thereto filed by the Company pursuant to the 1933 Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933
Act, as of its issue date and as of the closing of any sale of securities
pursuant thereto did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(c) Except as set forth on SCHEDULE 4.3 hereto, there
are no agreements or instruments currently in force and effect that constitute a
warrant, option, convertible security or other right, agreement or arrangement
of any character under which the Company is or may be obligated to issue any
material amounts of any equity security of any kind, or to transfer any material
amounts of any equity security of any kind.
4.10 FORM S-3 ELIGIBILITY.
The Company is currently eligible to register the resale of
its Common Stock on a registration statement on Form S-3 under the 1933 Act.
4.11 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. (a) The
execution, delivery and performance of the Agreements by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company's Certificate of Incorporation ("Articles") or Bylaws,
each as in effect on the date hereof, or (ii) except where it would not have a
Material Adverse Effect, (a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its properties, or (b) any agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of the properties of the Company are subject.
(b) Except as set forth on SCHEDULE 4.11 hereto, or
where it would not have a Material Adverse Effect, the Company (i) is not in
violation of any statute, rule or regulation applicable to the Company or its
assets, (ii) is not in violation of any judgment, order or decree applicable to
the Company or its assets; and (iii) is not in breach or violation of any
agreement, note or instrument to which it or its assets are a party or are
bound. The Company
<PAGE>
has not received notice from any Person of any claim or investigation that, if
adversely determined, would render the preceding sentence untrue or incomplete.
4.12 TAX MATTERS. The Company has correctly and timely
prepared and filed or timely obtained extensions for, all tax returns required
to have been filed by it with all appropriate governmental agencies and timely
paid all taxes owed by it. The charges, accruals and reserves on the books of
the Company in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments of the Company
nor, to the knowledge of the Company, any basis for the assessment of any
additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except such as which are not material.
All material taxes and other assessments and levies that the Company is required
to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party. There are no tax liens or
claims pending or threatened against the Company or any of its assets or
property. There are no outstanding tax sharing agreements or other such
arrangements between the Company and any other corporation or entity.
4.13 TITLE TO PROPERTIES. Except as disclosed in the SEC
Filings, the Company has good and marketable title to all real properties and
all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company holds any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or currently
planned to be made thereof by them.
4.14 CERTIFICATES, AUTHORITIES AND PERMITS. The Company
possesses adequate certificates, authorizations or permits issued by appropriate
governmental agencies or bodies necessary to conduct its business as presently
operated and has not received any written notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that, if
determined adversely to the Company, would individually or in the aggregate have
a Material Adverse Effect.
4.15 NO LABOR DISPUTES. No labor dispute with the employees of
the Company or any subsidiary exists or, to the knowledge of the Company, is
imminent.
4.16 INTELLECTUAL PROPERTY. The Company owns or possesses
adequate trademarks and trade names and have all other rights to inventions,
know-how, patents, copyrights, trademarks, trade names, confidential information
and other intellectual property (collectively, "Intellectual Property Rights"),
free and clear of all liens, security interests, charges, encumbrances, equities
and other adverse claims, necessary to conduct the business now operated by it,
or presently employed by it, and presently contemplated to be operated by it,
and has not received any notice of infringement of or conflict with asserted
rights of others with respect to any Intellectual Property Rights. SCHEDULE 4.16
sets forth a list by serial number and title of the patents and/or patent
applications owned or possessed by the Company. No proprietary technology of any
Person was used in the design or development by the Company of
<PAGE>
(or otherwise with respect to) any of the Intellectual Property Rights, which
technology was not properly acquired by the Company from such Person.
4.17 ENVIRONMENTAL MATTERS. The Company is not in violation of
any statute, rule, regulation, decision or order of any governmental agency or
body or any court, U.S. or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), does not own or operate any real property
contaminated with any substance that is subject to any Environmental Laws, is
not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.
4.18 LITIGATION. Except as disclosed in the SEC Filings, there
are no pending actions, suits or proceedings against or affecting the Company,
or any of its properties that, if determined adversely to the Company, would
individually or in the aggregate have a Material Adverse Effect or would
materially and adversely affect the ability of the Company to perform its
obligations under the Agreements, or which are otherwise material in the context
of the sale of the Securities; and to the Company's knowledge, no such actions,
suits or proceedings are threatened or contemplated.
4.19 FINANCIAL STATEMENTS. The financial statements included
in each SEC Filing present fairly and accurately the consolidated financial
position of the Company as of the dates shown and its results of operations and
cash flows for the periods shown, and such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. Except as set forth on SCHEDULE 4.19 or in the financial
statements of the Company included in the SEC Filings filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, except those
which individually or in the aggregate are not material to the financial
condition or operating results of the Company.
4.20 INSURANCE COVERAGE. The Company maintains in full force
and effect insurance coverage that is customary for comparably situated
companies for the business being conducted, and properties owned or leased, by
the Company, and the Company reasonably believes such insurance coverage to be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure.
4.21 COMPLIANCE WITH NASDAQ CONTINUED LISTING REQUIREMENTS.
The Company is in compliance with all applicable Nasdaq continued listing
requirements for the Nasdaq Stock Market and is listed in good standing on the
Nasdaq Stock Market. There are no proceedings pending or, to the Company's
knowledge, threatened against the Company relating to the continued listing of
the Company's Common Stock on the Nasdaq Stock Market and the Company has not
received any notice of, nor to the knowledge of the Company is there any basis
for, the delisting of the Common Stock from the Nasdaq Stock Market.
<PAGE>
4.22 ACKNOWLEDGEMENT OF DILUTION. The number of shares of
Common Stock issuable pursuant to this Agreement may increase significantly. The
Company's executive officers and directors have studied and fully understand the
nature of the transactions being contemplated hereunder and recognize that they
have a potential dilutive effect.
4.23 BROKERS AND FINDERS. The Investors shall have no
liability or responsibility for the payment of any commission or finder's fee to
any third party in connection with or resulting from this agreement or the
transactions contemplated by this Agreement by virtue of any agreement made by
the Company to a third party, and except as set forth in Section 10.5 below, the
Company shall have no such liability or responsibility for any such commission
or finder's fee.
4.24 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Neither the Company nor, to its knowledge, any Person acting on its behalf has
conducted any general solicitation or general advertising (as those terms are
used in Regulation D) in connection with the offer or sale of any of the
Securities.
4.25 NO INTEGRATED OFFERING. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would adversely affect reliance by
the Company on Section 4(2) for the exemption from registration for the
transactions contemplated hereby or would require registration of the Securities
under the 1933 Act; or would require the integration of this offering with any
other offering of securities for purposes of determining the need to obtain
shareholder approval of the transactions contemplated hereby under the rules of
the Nasdaq Stock Market.
4.26 DISCLOSURES. No representation or warranty made under any
Section hereof and no information furnished by the Company pursuant hereto, or
in any other document, certificate or statement furnished by the Company to the
Investors or any authorized representative of any of the Investors, pursuant to
the Agreements or in connection therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the respective
statements contained herein or therein, in light of the circumstances under
which the statements were made, not misleading.
4.27 CORPORATE PARTNER FINANCING. In the fourth quarter of
calendar year 1999 the Company closed a transaction with a strategic investor
which included the purchase by such investor of 1.0 million shares of Common
Stock at $5.00 per share. The Company has received the full $5 million
investment, and the 1.0 million shares have been issued and are outstanding.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Each Investor hereby
severally represents and warrants to the Company as to itself that:
5.1 ORGANIZATION AND EXISTENCE. The Investor is a validly
existing company and has all requisite corporate or limited liability company
power and authority to invest in the Securities pursuant to this Agreement.
<PAGE>
5.2 AUTHORIZATION. The execution, delivery and performance by
the Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
received by the Investor hereunder will be acquired for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of securities laws, and the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same in violation of securities laws. The Investor is
not a registered broker dealer or an entity engaged in the business of being a
broker dealer.
5.4 INVESTMENT EXPERIENCE. The Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 DISCLOSURE OF INFORMATION. The Investor has had an
opportunity to receive documents related to the Company and to ask questions of
and receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Securities. Neither such inquiries
nor any other due diligence investigation conducted by the Investor shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement or made pursuant to
this Agreement.
5.6 RESTRICTED SECURITIES. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 LEGENDS. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement or until sales under Rule
144 are permitted, certificates evidencing the Securities will bear one or all
of the following legends or legends substantially similar thereto:
"These securities have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be offered, sold,
pledged, hypothecated, assigned or transferred except (i) pursuant to a
registration statement under the Act which has become effective and is current
with respect to these securities, or (ii) pursuant to a specific exemption from
registration under the Act but only upon a holder hereof first having obtained
the written opinion of counsel to the Corporation, or other counsel reasonably
acceptable to the Corporation, that the proposed disposition is consistent with
all applicable provisions of the Act."
Upon registration for resale pursuant to the Registration
Rights Agreement, or when sales under Rule 144 are permitted, the Company shall
promptly cause certificates
<PAGE>
evidencing the Shares previously issued hereunder to be replaced with
certificates which do not bear such restrictive legends.
5.8 ACCREDITED INVESTOR. The Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.
5.9 NO GENERAL SOLICITATION. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
6. REGISTRATION RIGHTS AGREEMENT. The parties acknowledge and agree
that part of the inducement for the Investors to enter into this Agreement is
the Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
7.1 SUBSEQUENT SALE AT LOWER PRICE.
(a) REQUIRED ADJUSTMENTS. Subject to the exclusions
contained in Section 7.1(f) below, if during the period ending on the later of
(i) thirty-six (36) months following the Closing Date or (ii) thirty-three (33)
months following the effective date of the Registration Statement contemplated
by the Registration Rights Agreement (the "MFN Period"), the Company sells any
shares of its Common Stock at a per share selling price ("Per Share Selling
Price") lower than the Purchase Price per share set forth in Section 2 hereof,
the Purchase Price per share of the Shares originally sold to an Investor
hereunder shall be adjusted downward to equal such lower Per Share Selling Price
and such Investor shall be entitled to receive the additional shares as provided
by Section 7.1(c); provided, however, that in the event the Investor then owns
less than 51% of the Shares originally acquired by it hereunder, such Investor
shall be entitled to additional shares only with respect to the number of Shares
originally acquired and then owned by the Investor as provided in Section
7.1(c). For so long as such Investor owns 51% or more of the Shares originally
acquired by such Investor hereunder, the Investor shall be entitled to the full
benefit of the Purchase Price adjustment required by this Section 7.1. The
Company shall give to each Investor written notice of any such sale within 24
hours of the closing of any such sale and shall within such 24 hour period issue
a press release announcing such sale.
(b) DEFINITIONS.
(i) For the purposes of this Section 7.1, the term
"Per Share Selling Price" as used in this Section 7.1 shall mean the amount
actually paid by third parties for each share of Common Stock. A sale of shares
of Common Stock shall include the sale or issuance of rights, options, warrants
or convertible securities ("derivative securities") under which the Company is
or may become obligated to issue shares of Common Stock, and in such
circumstances the sale of Common Stock shall be deemed to have occurred at the
time of the issuance of the derivative securities and the Per Share Selling
Price of the Common Stock
<PAGE>
covered thereby shall also include the exercise or conversion price thereof (in
addition to the consideration per underlying share of Common Stock received by
the Company upon such sale or issuance of the derivative security, less the fee
amount as provided above). In case of any such security issued within the MFN
Period in a "Variable Rate Transaction" or an "MFN Transaction" (each as defined
below), the Per Share Selling Price shall be deemed to be the lowest conversion
or exercise price at which such securities are converted or exercised or might
have been converted or exercised in the case of a Variable Rate Transaction, or
the lowest adjustment price in the case of an MFN Transaction. If shares are
issued for a consideration other than cash, the per share selling price shall be
the fair value of such consideration as determined in good faith by the Board of
Directors of the Company.
(ii) The term "Variable Rate Transaction" shall mean
a transaction in which the Company issues or sells (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (x) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock (but
excluding standard stock split anti-dilution provisions), or (b) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean a
transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions (the "New Offering") which
grants to an investor (the "New Investor") the right to receive additional
shares based upon future transactions of the Company on terms more favorable
than those granted to the New Investor in the New Offering.
(iv) The term "MFN Period" shall have the meaning
set forth in Section 7.1(a), above.
(c) ADJUSTMENT MECHANISM. If an adjustment of the
Purchase Price is required pursuant to Section 7.1(a), the Company shall deliver
to the Investor within eight calendar days of the closing of the transaction
giving rise to the adjustment or by such other date as may be required by
Section 7.1(d) ("Delivery Date") the Investor's share of such number of
additional shares of Common Stock equal to (i) the aggregate Purchase Price paid
by the Investor divided by the adjusted Per Share Purchase Price as required
under Section 7.1(a), minus (ii) the total number of shares of Common Stock
previously delivered to the Investor hereunder; PROVIDED HOWEVER, that the
Company shall delay effecting such adjustment, in whole or in part, to the
extent required by Section 7.1(d). In the event the Company fails to deliver the
additional shares by the applicable Delivery Date, the Company shall be liable
to the Investor for a delay payment equal to 2% of the Purchase Price per month
payable in Common Stock or cash, at the Investor's election. If at the time of
any adjustment the proviso of the first sentence of Section 7.1(a) is
applicable, then the number of additional shares otherwise determined as
deliverable under this Section
<PAGE>
7.1(c) shall be adjusted so that it is equal to such number, multiplied by a
fraction, the numerator of which is the number of Shares acquired on the Closing
Date and still owned at the time of the adjustment and the denominator is the
total number of Shares acquired on the Closing Date.
(d) LIMITATION ON NUMBER OF SHARES.
(i) If by way of any adjustment required by this
Section 7.1, the Investor would receive a number of shares of Common Stock such
that the total number of such shares beneficially owned (within the meaning of
Section 13(d) of the 1934 Act) by the Investor as of the date of such adjustment
would be greater than 9.90% but less than 13.0% of the total outstanding Common
Stock of the Company, then the Company shall not effect the adjustment required
by this Section to the extent necessary to avoid causing the aforesaid
limitation to be exceeded until 120 days following the date such adjustment
would have otherwise been made.
(ii) If by way of any adjustment required by this
Section 7.1, the Investor would receive a number of shares of Common Stock such
that the total number of such shares held by the Investor as of the date of such
adjustment would equal or exceed 13.0% of the total outstanding Common Stock of
the Company, then the Company shall not effect the adjustment required by this
Section to the extent necessary to avoid causing the aforesaid limitation to be
exceeded until 180 days following the date such adjustment would have otherwise
been made.
(iii) In no event shall the Company issue to an
Investor additional shares pursuant to an adjustment required by this Section
7.1 such that the total number of shares issued to such Investor (when added to
the Warrant Shares actually received upon exercise of Warrants by such Investor)
would exceed such Investor's "pro rata" share of 2,861,361 shares of Common
Stock (the "allocation") (subject to appropriate adjustment for stock splits or
stock dividends). Instead, the Company shall redeem excess shares at 110% of the
Per Share Purchase Price, as adjusted. At such time as an Investor owns neither
any Shares that were originally acquired pursuant to this Agreement nor any
Warrants, it shall notify the Company, who then shall notify the other
Investors. At such time, to the extent such Investor's allocation has not been
exhausted, it shall be divided, pro rata, among the remaining Investors. An
Investor's pro rata share shall be the portion determined by dividing its
aggregate Purchase Price by the total Purchase Price of all Investors holding
shares at the time the pro rata share is being determined. Each Investor's
initial allocation is listed on the signature page for such Investor. Only
shares acquired pursuant to this Agreement or upon exercise of Warrants will be
included in determining whether the limitations would be exceeded for purposes
of this Section 7.1(d)(iii).
(iv) The time periods in paragraphs (i) (120 days)
and (ii) (180 days) above shall be extended one (1) day for each day, prior to
the time that sales under Rule
<PAGE>
144(k) would be permitted, that sales under the Registration Statement
contemplated by the Registration Rights Agreement may not be made.
(e) CAPITAL ADJUSTMENTS. In case of any stock split or
reverse stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of Section 7.1 shall be applied
in a fair, equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof.
(f) EXCLUSIONS. Section 7.1(a) shall not apply to (i)
sales of shares of Common Stock by the Company upon conversion or exercise of
any convertible securities, options or warrants outstanding prior to the date
hereof; or (ii) sales of shares of Common Stock by the Company pursuant to the
provisions of any shareholder-approved option or similar plan heretofore adopted
by the Company.
(g) RULE 144. The Company agrees to take the position
that, for purposes of determining the holding period under Rule 144 for shares
of Common Stock issued pursuant to Section 7.1(a), the holding period of such
shares shall be tacked to the holding period of the Shares.
7.2 LIMITATION ON TRANSACTIONS.
(a) Until the expiration of the MFN Period, without the
prior written consent of the Investors (which consent may be withheld in the
Investor's discretion), the Company shall not (i) issue or sell or agree to
issue or sell any securities for cash in a non-public MFN Transaction; or (ii)
issue or sell, or agree to issue or sell, any securities for cash in a
non-public Variable Rate Transaction.
(b) During the period after effectiveness of the
registration statement contemplated by the Registration Rights Agreement and
until the expiration of the MFN Period, without the prior written consent of the
Investor (which consent may be withheld in the Investor's discretion), the
Company shall not (i) issue or sell or agree to issue or sell any securities for
cash in a non-public MFN Transaction; or (ii) issue or sell, or agree to issue
or sell, any securities for cash in a non-public Variable Rate Transactions.
(c) Except as contemplated by paragraph (e) below, the
Company shall not issue any securities in any transaction that would be
integrated with the Securities issued pursuant to this Agreement.
(d) The Company may issue securities pursuant to
"equity line" financing (as described in Section 7.1(b)(ii) above) provided the
number of common shares issued does not exceed 8% of the number of common shares
outstanding on the initiation of the equity line.
(e) The Company may issue additional equity securities,
for an aggregate purchase price equal to $3.0 million. There can be no more than
four institutional
<PAGE>
investors ("other investors") in such transaction, who shall be identified to
Tail Wind Inc. If the Company issues such equity with six (6) months of the date
hereof, the allocation provided for in Section 7.1(d)(iii) above shall be
proportionally reduced in a manner acceptable to all the Investors, and each
Investor shall be notified of its new allocation. No more than six institutional
investors will be approached in connection with such transaction. The
transaction with the "other investors" will be on the terms, conditions and
provisions as set forth in the documents supplied to KKWC and Tail Wind Inc. on
December 15, 1999. The Company will supply each Investor with complete copies of
all of the transaction documents applicable to the investment by the other
investors at the time such documents are agreed to by the Company.
7.3 RIGHT OF INVESTOR TO PARTICIPATE IN FUTURE TRANSACTIONS.
The Company agrees that during the MFN Period the Investor will have a right to
participate in future non-public capital raising transactions as set forth in
this Section 7.3. The Company shall give advance written notice to each Investor
prior to any offer or sale of any of its equity securities or any securities
convertible into or exchangeable or exercisable for such securities in a
non-public capital raising transaction. Prior to the closing of any such
transaction, each Investor shall have the right to participate in its pro rata
share of up to 50% of such new offering (or in the case of a Variable Rate
Transaction, up to 75% of such new offering) and purchase such securities for
the same consideration and on the same terms and conditions as contemplated for
such third-party sale. In order to exercise this right, an Investor must give
written notice to the Company of the Investor's election to participate and such
notice must be given within ten (10) days following receipt of the notice from
the Company. In the event the Company gives notice to the Investor of an
expected transaction pursuant to this Section 7.3 but cannot consummate such
transaction, the Company will give the Investor prompt written notice of the
cancellation of such transaction. If, subsequent to the Company giving notice to
the Investor hereunder, the terms and conditions of the proposed third-party
sale are changed in any way, the Company shall be required to provide a new
notice to the Investor hereunder and the Investor shall have the right to
participate in the offering on such changed terms and conditions as provided
hereunder.
7.4 OPINION OF COUNSEL. On or prior to the Closing Date, the
Company will deliver to the Investor the opinions of independent legal counsel
to the Company, in form and substance reasonably acceptable to the Investor,
addressing those legal matters set forth in SCHEDULE 7.4 hereto.
7.5 RESERVATION OF COMMON STOCK PURSUANT TO SECTION 7.1 AND
EXERCISE OF WARRANTS. The Company hereby agrees, at all times with respect to
shares issuable upon exercise of the Warrants, and at all appropriate times with
respect to shares issuable pursuant to Section 7.1, to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the additional issuance(s) of Common Stock pursuant
to Section 7.1 and exercise of the Warrants, such number of shares of Common
Stock as shall from time to time equal the number of shares sufficient to permit
the issuance, if any, required pursuant to Section 7.1 plus the number of shares
of Common Stock as shall be necessary to permit the exercise of the Warrants in
accordance with the terms of the Warrants.
<PAGE>
7.6 REPORTS. Within one week of filing the following reports
with the SEC, or in the absence of such filing within the time periods specified
below, the Company shall send a copy of the following reports to each Investor
by regular mail:
(a) QUARTERLY REPORTS. As soon as available the
Company's quarter-annual report on Form 10-Q or, in the absence of such report,
consolidated balance sheets of the Company and its subsidiaries as at the end of
such period and the related consolidated statements of operations, stockholders'
equity and cash flows for such period and for the portion of the Company's
fiscal year ended on the last day of such quarter, all in reasonable detail and
certified by a principal financial officer of the Company to have been prepared
in accordance with generally accepted accounting principles, subject to year-end
and audit adjustments.
(b) ANNUAL REPORTS. As soon as available after the end
of each fiscal year of the Company, the Company's Form 10K or, in the absence of
a Form 10K, consolidated balance sheets of the Company and its subsidiaries as
at the end of such year and the related consolidated statements of earnings,
stockholders' equity and cash flows for such year, all in reasonable detail and
accompanied by the report on such consolidated financial statements of an
independent certified public accountant selected by the Company and reasonably
satisfactory to the Investor.
(c) SECURITIES FILINGS. As promptly as practicable and
in any event within one week after the same are issued or filed, copies of (i)
all notices, proxy statements, financial statements, reports and documents as
the Company or any subsidiary shall send or make available generally to its
stockholders or to financial analysts, and (ii) all periodic and special
reports, documents and registration statements which the Company or any
subsidiary furnishes or files, or any officer or director of the Company or any
of its subsidiaries (in such person's capacity as such) furnishes or files with
the SEC.
(d) OTHER INFORMATION. Such other information relating
to the Company or its subsidiaries as from time to time may reasonably be
requested by the Investor provided the Company produces such information in its
ordinary course of business, and further provided that the Company, solely in
its own discretion, determines that such information is not confidential in
nature and disclosure to the Investor would not be harmful to the Company.
(e) RULE 144. The Company agrees to make publicly
available on a timely basis the information necessary to enable Rule 144 to be
available for resale.
7.7 PRESS RELEASES. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this Agreement
shall be submitted to the Investor for comment at least two (2) business days
prior to issuance, unless the release is required to be issued within a shorter
period of time by law or pursuant to the rules of a national securities
exchange. The Company shall issue a press release concerning the fact and
material terms of this Agreement within one business day of the Closing.
7.8 NO CONFLICTING AGREEMENTS. The Company will not, and will
not permit its subsidiaries to, take any action, enter into any agreement or
make any commitment that would
<PAGE>
conflict or interfere in any material respect with the obligations to the
Investor under the Agreements.
7.9 INSURANCE. For so long as any Investor beneficially owns
any of the Securities, the Company shall, and shall cause each subsidiary to,
have in full force and effect (a) insurance reasonably believed to be adequate
on all assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed to be adequate protection against all liabilities, claims
and risks against which it is customary for companies similarly situated as the
Company and the subsidiaries to insure.
7.10 COMPLIANCE WITH LAWS. For so long as any Investor
beneficially owns any of the Securities, the Company will use reasonable
efforts, and will cause each of its subsidiaries to use reasonable efforts, to
comply with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities, except to the extent non-compliance (in one instance
or in the aggregate) would not have a Material Adverse Effect.
7.11 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. The
Company hereby agrees, promptly following the Closing of the transactions
contemplated by this Agreement, to take such action to cause the Shares, the
Warrant Shares and the shares of Common Stock issuable under Section 7.1(a)
hereof to be listed on the Nasdaq Stock Market as promptly as possible but no
later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Common Stock underlying the Warrants, and will take such other action as is
necessary to cause such Common Stock to be so listed. The Company will take all
action necessary to continue the listing and trading of its Common Stock on the
Nasdaq Stock Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
exchange, as applicable, to ensure the continued eligibility for trading of the
Shares and the Warrant Shares thereon.
7.12 CORPORATE EXISTENCE. So long as any Investor beneficially
owns any of the Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (a) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith,
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to fulfill
its obligations hereunder and effect the exercise in full of all Warrants
outstanding as of the date of such transaction; (b) has no legal, contractual or
other restrictions on its ability to perform the obligations of the Company
hereunder and under the agreements and instruments entered into in connection
herewith; and (c) (i) is a publicly traded corporation whose common stock and
the shares of capital stock issuable upon exercise of the Warrants are (or would
be upon issuance thereof) listed for trading on the Nasdaq Stock Market, New
York Stock Exchange or American Stock Exchange, or (ii) if not such a publicly
traded corporation, then the buyer agrees that it will, at
<PAGE>
the election of the Investor, purchase such Investor's Shares (and Warrant
Shares) at a price equal to 120% of the Per Share Purchase Price of such Shares.
8. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement.
9. ARBITRATION.
9.1 SCOPE. Resolution of any and all disputes arising from or
in connection with the Agreements, whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise ("Disputes"), shall be
exclusively governed by and settled in accordance with the provisions of this
Section 9; provided, that the foregoing shall not preclude equitable or other
judicial relief to enforce the provisions hereof or to preserve the status quo
pending resolution of Disputes hereunder.
9.2 BINDING ARBITRATION. The parties hereby agree to submit
all Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in New York, New
York by a sole arbitrator selected by agreement of the parties not later than 10
days after delivery of the Arbitration Demand, or, failing such agreement,
appointed pursuant to the Commercial Arbitration Rules of the America
Arbitration Association, as amended from time to time (the "AAA Rules"). If the
arbitrator becomes unable to serve, his successor(s) shall be similarly selected
or appointed.
9.3 PROCEDURE. The arbitration shall be conducted pursuant to
the Federal Arbitration Act and such procedures as the parties may agree or, in
the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing, (a) each party shall have the right to conduct
limited discovery of information relevant to the Dispute; (b) each party shall
provide to the other, reasonably in advance of any hearing, copies of all
documents that a party intends to present in such hearing; (c) all hearings
shall be conducted on an expedited schedule; and (d) all proceedings shall be
confidential, except that either party may at its expense make a stenographic
record thereof.
9.4 TIMING. The arbitrator shall use best efforts to complete
all hearings not later than 90 days after his or her selection or appointment,
and shall use best efforts to make a final award not later than 30 days
thereafter. The arbitrator shall apportion all costs and expenses of the
arbitration, including the arbitrator's fees and expenses, and fees and expenses
of experts ("Arbitration Costs") between the prevailing and non-prevailing party
as the arbitrator shall deem fair and reasonable. In circumstances where a
Dispute has been asserted or defended against on grounds that the arbitrator
deems manifestly unreasonable, the arbitrator may assess all Arbitration Costs
against the non-prevailing party and may include in the award the prevailing
party's attorney's fees and expenses in connection with any and all proceedings
under this Section 9. Notwithstanding the foregoing, in no event may the
arbitrator award multiple or punitive damages
<PAGE>
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by a party hereto without the prior written consent of the other party
hereto, except that without the prior written consent of the Company, but after
notice duly given, an Investor may assign its rights hereunder in whole or in
part to any purchaser of Securities from the Investor. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
10.2 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.3 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.4 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of the electronically
generated confirmation of delivery, or (iii) a recognized overnight air courier,
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days' advance written notice to
the other party:
If to the Company:
Avi BioPharma, Inc.
One SW Columbia Street, Suite 1105
Portland, Oregon 97258
Telephone: (503) 227-0554
Telefax: (503) 227-0751
Attention: Alan P. Timmins
Chief Financial Officer
<PAGE>
with a copy to:
Ater Wynne
222 SW Columbia, Suite 1800
Portland, Oregon 97201
Attention: Byron Milstead
Telephone: (503) 226-1191
Facsimile: (503) 226-0079
If to the Investor:
To the address specified therefor on the applicable
signature pages.
and with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
10.5 FEES AND EXPENSES.
(a) Except as set forth below, the parties hereto shall
pay their own costs and expenses in connection herewith.
(b) European American Securities, Inc. (EASI), a member
firm of the NASD, and a regulated entity of the Securities and Futures Authority
of Great Britain, will act as agent for the Investor in the transaction. EASI
shall be entitled to a fee equal to $0.28 per share, which shall be paid by the
Company at the Closing.
(c) Tail Wind Inc. shall receive an expense allowance
to cover due diligence expenses and legal expenses, in an amount equal to 1% of
the aggregate Purchase Price (not to exceed $40,000) less the portion of the
expense allowance previously paid ($13,000). Such expense allowance shall be
paid by the Company at the Closing.
10.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and 75% in interest
(based upon pro rata share) of the Investors. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
Securities purchased under this Agreement at the time outstanding, each future
holder of all such securities, and the Company.
<PAGE>
10.7 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits
and Schedules hereto, and the Registration Rights Agreement constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
10.9 FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
10.10 APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
10.11 REMEDIES.
(a) The Investors shall be entitled to specific
performance of the Company's obligations under the Agreements.
(b) The Company shall indemnify each Investor and each
such Investor's officers, directors, partners, agents and employees
(collectively, "Indemnitees") and hold the Indemnitees harmless from any loss,
cost, expense or fees (including attorneys' fees and expenses) arising out of
(i) any breach of any representation, warranty, covenant or agreement in any of
the Agreements, (ii) any cause of action, suit or claim brought or made against
such Indemnitee (other than directly by the Company solely for breach of this
Purchase Agreement, the Warrant, or the Registration Rights Agreement by the
Indemnitee or by governmental or regulatory authorities), and arising out of or
resulting from (whether in whole or in part) the execution, delivery,
performance or enforcement of the Agreements or any other instrument, document
or agreement executed pursuant hereto or thereto or contemplated hereby or
thereby (including without limitation the acquisition of the Warrants and/or the
Warrant Shares), any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
the status of the purchaser as an investor in the Company, except to the extent
that such actual loss or damage directly results from a breach by such
Indemnitee of the Agreements or from a violation of law, or (iii) arising out of
the enforcement of this Section 10.11. The right to indemnification shall
include the right to advancement of expenses as they are incurred.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company:
AVI BIOPHARMA, INC.
By:_________________________
Name:
Title:
The Investor: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Aggregate Purchase Price: $2,500,000
Number of Shares of Common Stock: 714,286
Number of Warrants: 214,286
Effective per share Purchase Price of Shares: $3.50
Exercise price of Warrants: $4.03
Share Allocation 1,788,351 (per Section 7.1(d)(iii))
Address for Notice:
The Tail Wind Fund, Ltd. With copies to:
Windermere House
404 East Bay Street Tail Wind, Inc
P.O. Box SS-5539 C/o European American Securities, Inc.
Nassau, Bahamas One Regent Street, 4th Floor
Attn: J. McCarroll London SW1Y 4NS
Telephone: 242/393-8777 England
Facsimile: 242/393-9021 Attn: David Crook
Telephone: 44-171-468-7660
Facsimile: 44-171-468-7657
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
[PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company:
AVI BIOPHARMA, INC.
By:_________________________
Name:
Title:
The Investor: RESONANCE LTD.
By:_________________________
Name: Mo Bodner
Title:
Aggregate Purchase Price: $1,500,000
Number of Shares of Common Stock: 428,571
Number of Warrants: 128,571
Effective per share Purchase Price of Shares: $3.50
Exercise price of Warrants: $4.03
Share Allocation 1,073,010 (per Section 7.1(d)(iii))
Address for Notice:
Resonance Ltd.
c/o International Securities Corporation
551 Fifth Avenue
Suite 1425
New York, New York 10176
Attn: Mo Bodner
Telephone: (212) 986-7811
Facsimile:
[PURCHASE AGREEMENT]
<PAGE>
EXHIBIT 7.2(e)
TERMS FOR PRIVATE PLACEMENT OF COMMON STOCK
OF AVI BIOPHARMA, INC.
ISSUE SIZE: $3.0 million.
PRICING: A 25% discount off the
market price prior to the
close of the transaction,
with the "Market Price"
defined as the average of
the lowest 10 closing bid
prices out of a 30 trading
day period; however, in no
event will the purchase
price be below $3.50 or
above $4.00.
WARRANTS: 30% coverage in 5 year
warrants with a strike
price at a 15% premium to
the Market Price prior to
the close of the
transaction.
ANTI DILUTION PROTECTION: MFN provision no more
favorable to the investors
than those included in the
agreement with The Tail
Wind Fund Ltd.
REGISTRATION: The company will file a
registration statement for
resale for the shares
issued, and if this is not
declared effective within 3
months, penalties will
accrue at the rate of 2%
per month.
FEE: To be agreed between the
parties.
<PAGE>
SCHEDULE 4.1
AntiVirals Acquisition Corp., a California corporation, a wholly-owned
subsidiary if AVI BioPharma, Inc.
<PAGE>
SCHEDULE 4.11
No items to report
<PAGE>
SCHEDULE 4.19
No items to report.
<PAGE>
SCHEDULE 4.3
(a) 50,000,000 shares of Common Stock authorized 2,000,000 shares of
Preferred Stock authorized
(b) 14,378,698 shares of Common Stock issued and outstanding no shares of
Preferred Stock issued and outstanding
(c) 2,144,277 shares of Common Stock issuable pursuant to stock option
plans
(d) 4,898,681 shares of Common Stock issuable pursuant to warrant
agreements
<PAGE>
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered as of this 16th day of December, 1999 by and between Avi BioPharma,
Inc., a corporation organized under the laws of Oregon (the "Company"), and the
persons identified as Investors pursuant to the Purchase Agreement of even date
herewith by and between the Company and such persons (the "Purchase Agreement").
The parties hereby agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings:
"ADDITIONAL REGISTRABLE SECURITIES" shall mean the shares
of Common Stock, if any, issued to the Investors pursuant to Section 7.1 of the
Purchase Agreement.
"COMMON STOCK" shall mean the Company's shares of Common
Stock, par value $.0001 per
share.
"INVESTOR" shall mean each person so identified in the
Purchase Agreement, and andsubsequent holder of any Common Stock, Warrant or
Registrable Securities.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities and Additional Registrable Securities covered by such Registration
Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference
in such prospectus.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration made by preparing and filing a registration statement or similar
document in compliance with the 1933 Act (as defined below), and the declaration
or ordering of effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" shall mean the shares of Common
Stock issued and issuable to the Investors pursuant to the Purchase Agreement
(other than additional shares of Common Stock issuable pursuant to Section 7.1
of the Purchase Agreement) and issuable upon the exercise of the Warrants, and
any securities issued with respect to, or in exchange for, such securities
<PAGE>
"REGISTRATION STATEMENT" shall mean any registration
statement filed under the 1933 Act of the Company that covers the resale of any
of the Registrable Securities or Additional Registrable Securities pursuant to
the provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"WARRANTS" mean the warrants to purchase shares of Common
Stock issued to the Investor pursuant to the Purchase Agreement.
Other capitalized terms used herein but not defined herein
shall have the meaning provided therefor in the Purchase Agreement.
2. REGISTRATION.
(a) REGISTRATION STATEMENT. Promptly following the closing
of the transactions contemplated by the Purchase Agreement (the "Closing Date")
(but no later than 45 days after the Closing Date), the Company shall prepare
and file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is
not then available to the Company, on such form of registration statement as is
then available to effect a registration for resale of the Registrable
Securities, subject to the Investor's consent) covering the resale of the
Registrable Securities. Such Registration Statement shall cover, to the extent
allowable under the 1933 Act and the Rules promulgated thereunder (including
Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. No securities shall be included in the
Registration Statement without the consent of the Investors other than the
Registrable Securities. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to (and subject to the
approval of) the Investors and their counsel prior to its filing or other
submission, which approval shall not be unreasonably withheld or delayed.
(b) EXPENSES. The Company will pay all expenses associated
with the registration and in addition shall pay the reasonable fees of single
counsel to the Investors relating thereto in an amount of $5,000, excluding
discounts, commissions, fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals.
2
<PAGE>
(c) EFFECTIVENESS.
(i) The Company shall use its best efforts to have the
Registration Statement declared effective as soon as practicable. If (A) the
Registration Statement is not declared effective by the SEC within 90 days
following the Closing Date (the "Registration Date"), or (B) after the
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to the Registration Statement for any reason but except as excused
pursuant to subparagraph (ii) below, then the Company will make payments to each
Investor, as damages and not as a penalty, for any 30 day period or portion
thereof following the Registration Date during which any of the events described
in (A) or (B) above occurs and is continuing (the "Blackout Period") in an
amount equal to 2% of the aggregate Purchase Price paid by such Investor to the
Company on the Closing Date. The amounts payable as damages pursuant to this
paragraph shall be payable in lawful money of the United States and shall be
paid on demand from time to time following the commencement of the Blackout
Period until the termination of the Blackout Period. The same remedy shall be
available in the case of any failure to timely issue Warrant Shares upon
exercise of the Warrant, or in the case of any suspension from trading or
delisting from the Nasdaq Stock Market. If at any time a payment due hereunder
remains unpaid for more than sixty (60) days after demand, the rate of damage
payments shall thereafter be increased for all purposes to a rate equal to 3%
per 30 day period. The remedies set forth in this section are not intended to be
exclusive, and shall be in addition to any other remedies available at law or in
equity. Amounts payable as damages hereunder to an Investor shall cease when the
Investor no longer holds Warrants or Registrable Securities, or Additional
Registrable Securities, as applicable.
(ii) The Company may suspend the use of a prospectus
under the Registration Statement contemplated by this Section for up to two (2)
periods of not more than twenty (20) days in the aggregate in any consecutive 12
months, if the Company shall deliver to the Investor a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would (A) be seriously detrimental to the
business of the Company for such registration to be effected or remain effective
at such time, (B) interfere with any proposed or pending material corporate
transaction involving the Company or any of its subsidiaries, or (C) result in
any premature disclosure thereof. In such a case, the Company shall not disclose
to the Investor any facts or circumstances constituting material non-public
information, without the prior written consent of Investor. The duration of the
MFN Period provided for in the Purchase Agreement will be extended by the number
of days of any termination or suspension of the effectiveness of any
registration or suspension of the use of any prospectus contemplated by this
Section 2.
(d) UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investor shall have the right to select an investment banker and
manager to administer the offering, which investment banker or manager shall be
reasonably satisfactory to the Company. An underwritten offering will not be
conducted without the consent of all Investors.
3
<PAGE>
(e) Promptly following the issuance of any Additional
Registrable Securities, the Company shall file a Registration Statement and use
its best efforts to have such Registration Statement covering the Additional
Registrable Securities declared effective as soon as possible. All time periods,
provisions and remedies covering the registration of Registrable Securities
shall apply, MUTATIS MUTANDIS, to the registration of the Additional Registrable
Securities.
3. COMPANY OBLIGATIONS. The Company will use its best efforts
to effect the registration of the Registrable Securities and Additional
Registrable Securities in accordance with the terms hereof, and pursuant thereto
the Company will, as expeditiously as possible:
(a) use its best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of the date on which all Registrable
Securities or Additional Registrable Securities, as the case may be, covered by
such Registration Statement, as amended from time to time, have been sold or
until such time as they become eligible for distribution pursuant to Rule
144(k), or any successor provision thereof, under the 1933 Act (the
"Registration Period") (however, the Registration Statement shall be continued
effective for so long on the as the Warrants remain outstanding);
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the 1933 Act and
the 1934 Act with respect to the distribution of all Registrable Securities and
Additional Registrable Securities; provided that, at a time reasonably prior to
the filing of a Registration Statement or Prospectus, or any amendments or
supplements thereto, the Company will furnish to the Investor copies of all
documents proposed to be filed, which documents will be subject to the comments
of the Investor;
(c) permit a single firm of counsel designated by the
Investors to review the Registration Statement and all amendments and
supplements thereto no fewer than ten (10) days prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects;
(d) furnish to all of the Investors and their legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and each amendment
or supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities and
Additional Registrable Securities owned by such Investor;
4
<PAGE>
(e) in the event the Investors select underwriters for the
offering, the Company shall enter into and perform its reasonable obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) at the request of the Investor, the Company shall
furnish, on the date that Registrable Securities or Additional Registrable
Securities, as applicable, are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) an opinion, dated as of such
date, from counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the underwriter and the Investor and
(ii) a letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters and the Investors;
(g) make reasonable effort to prevent the issuance of any
stop order or other suspension of effectiveness and, if such order is issued,
obtain the withdrawal of any such order at the earliest possible moment;
(h) furnish to the Investors at least five copies of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules by courier pursuant to the notice
requirements of Section 10.4 of the Purchase Agreement;
(i) prior to any public offering of Registrable Securities
or Additional Registrable Securities, use its best efforts to register or
qualify or cooperate with the Investors and its counsel in connection with the
registration or qualification of such Registrable Securities or Additional
Registrable Securities, as applicable, for offer and sale under the securities
or blue sky laws of all U.S. jurisdictions and do any and all other reasonable
acts or things necessary or advisable to enable the distribution in such
jurisdictions of the Registrable Securities or Additional Registrable Securities
covered by the Registration Statement;
(j) cause all Registrable Securities or Additional
Registrable Securities covered by the Registration Statement to be listed on
each securities exchange, interdealer quotation system or other market on which
similar securities issued by the Company are then listed;
(k) immediately notify the Investors, at any time when a
Prospectus relating to the Registrable Securities or Additional Registrable
Securities is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the Prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such holder,
promptly prepare and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such
5
<PAGE>
Registrable Securities or Additional Registrable Securities, as applicable, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and
(l) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities and Additional Registrable Securities
hereunder.
4. OBLIGATIONS OF THE INVESTORS.
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities or Additional Registrable Securities of an
Investor, if applicable, that such Investor shall furnish in writing to the
Company such information regarding itself, the Registrable Securities or
Additional Registrable Securities, as applicable, held by it and the intended
method of disposition of the Registrable Securities or Additional Registrable
Securities, as applicable, held by it as shall be reasonably required to effect
the registration of such Registrable Securities or Additional Registrable
Securities, as applicable, and shall execute such documents in connection with
such registration as the Company may reasonably request. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify the Investors of the information the Company
requires from the Investors if the Investors elect to have any of the
Registrable Securities or Additional Registrable Securities included in the
Registration Statement.
(b) Each Investor, by its acceptance of the Registrable
Securities and Additional Registrable Securities, if any, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities or Additional Registrable Securities, as applicable,
from the Registration Statement.
(c) In the event the Investors determine to engage the
services of an underwriter, the Investors agree to enter into and perform their
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
dispositions of the Registrable Securities or Additional Registrable Securities,
as applicable.
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event rendering the Registration
Statement no longer effective, the Investor will immediately discontinue
disposition of Registrable Securities or Additional Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities or
Additional Registrable Securities until the Investor's receipt of the copies of
the supplemented or amended prospectus filed with the SEC and declared effective
and, if so
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<PAGE>
directed by the Company, the Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in the Investor's possession of the prospectus covering
the Registrable Securities or Additional Registrable Securities, as applicable,
current at the time of receipt of such notice.
(e) No Investors may participate in any underwritten
registration hereunder unless it (i) agrees to sell the Registrable Securities
or Additional Registrable Securities, as applicable, on the basis provided in
any underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to the terms of this Agreement.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law each
Investor, its officers, directors, partners and employees and each person who
controls the Investor (within the meaning of the 1933 Act) against all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses caused by (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or any preliminary prospectus or any amendment or supplement thereto or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon any information furnished in writing
to the Company by such Investor, expressly for use therein, or (ii) any
violation by the Company of any federal, state or common law, rule or regulation
applicable to the Company in connection with any Registration Statement,
Prospectus or any preliminary prospectus, or any amendment or supplement
thereto, and shall reimburse in accordance with subparagraph (c) below, each of
the foregoing persons for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claims. The foregoing is
subject to the condition that, insofar as the foregoing indemnities relate to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any preliminary prospectus or Prospectus that is eliminated or remedied
in any Prospectus or amendment or supplement thereto, the above indemnity
obligations of the Company shall not inure to the benefit of any indemnified
party if a copy of such corrected Prospectus or amendment or supplement thereto
had been made available to such indemnified party and was not sent or given by
such indemnified party at or prior to the time such action was required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities and Additional Registrable Securities.
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<PAGE>
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In
connection with any registration pursuant to the terms of this Agreement, each
Investor severally will furnish to the Company in writing such information as
the Company reasonably requests concerning the holders of Registrable Securities
and Additional Registrable Securities or the proposed manner of distribution for
use in connection with any Registration Statement or Prospectus and severally
agrees to indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees, stockholders and each person
who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable
attorney's fees) resulting from any untrue statement of a material fact or any
omission of a material fact required to be stated in the Registration Statement
or Prospectus or preliminary prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent that such untrue statement or omission is contained in any
information furnished in writing by such holder of Registrable Securities or
Additional Registrable Securities to the Company specifically for inclusion in
such Registration Statement or Prospectus or amendment or supplement thereto and
that such information was substantially relied upon by the Company in
preparation of the Registration Statement or Prospectus or any amendment or
supplement thereto. In no event shall the liability of a holder of Registrable
Securities or Additional Registrable Securities be greater in amount than the
dollar amount of the proceeds (net of all expense paid by such holder and the
amount of any damages such holder has otherwise been required to pay by reason
of such untrue statement or omission) received by such holder upon the sale of
the Registrable Securities or Additional Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person
entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; PROVIDED that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
PROVIDED, FURTHER, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any
8
<PAGE>
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) CONTRIBUTION. If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be
entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities or Additional Registrable Securities be greater in amount
than the dollar amount of the proceeds (net of all expenses paid by such holder
and the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities or
Additional Registrable Securities giving rise to such contribution obligation.
6. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. This Agreement may be amended
only by a writing signed by the parties hereto. The Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of the Investor.
(b) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made as set forth in Section 10.4 of the
Purchase Agreement.
(c) ASSIGNMENTS AND TRANSFERS BY INVESTOR. This Agreement
and all the rights and obligations of the Investors hereunder may not be
assigned or transferred to any transferee or assignee except as set forth
herein. An Investor may make such assignment or transfer to any transferee or
assignee of any Common Stock, Warrant or Registrable Securities, or Additional
Registrable Securities, PROVIDED, that (i) such transfer is made expressly
subject to this Agreement and the transferee agrees in writing to be bound by
the terms and conditions hereof, and (ii) the Company is provided with written
notice of such assignment.
(d) ASSIGNMENTS AND TRANSFERS BY THE COMPANY. This
Agreement may not be assigned by the Company without the prior written consent
of Investor, except that without the prior written consent of the Investor, but
after notice duly given, the Company shall assign its rights and delegate its
duties hereunder to any successor-in-interest corporation, and such
successor-in-interest shall assume such rights and duties, in the event of a
merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets.
9
<PAGE>
(e) BENEFITS OF THE AGREEMENT. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(i) FURTHER ASSURANCES. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
(j) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(k) APPLICABLE LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Company: AVI BIOPHARMA, INC.
By:_________________________
Name:
Title:
The Investor: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Company: AVI BIOPHARMA, INC.
By:_________________________
Name:
Title:
The Investor: RESONANCE LTD.
By:_________________________
Name: Mo Bodner
Title:
<PAGE>
Exhibit 4.6
SUBSCRIPTION AGREEMENT
This Subscription Agreement is made this 1st day of December, 1999,
by and between SUPERGEN, INC., a Delaware corporation ("SuperGen"), and AVI
BIOPHARMA, INC., an Oregon corporation ("AVI"), in connection with the
subscription by SuperGen for 1,000,000 shares of the common stock of AVI (the
"AVI Securities"), par value .0001, for a price of Five Dollars ($5.00) per
share.
1. SUBSCRIPTION. SuperGen subscribes for the AVI Securities.
1.1 CASH CONSIDERATION. At closing, SuperGen shall pay to
AVI the amount of Two Million Five Hundred Dollars ($2,500,000) in
immediately available funds.
1.2 STOCK CONSIDERATION. At closing, SuperGen shall deliver
to AVI 100,000 shares of the common stock of SuperGen, .001 par value,
registered in the name of AVI (the "SuperGen Securities"), which shares shall
be deemed to have a value of Two Million Five Hundred Thousand Dollars
($2,500,000).
2. REPRESENTATIONS OF SUPERGEN.
2.1 INVESTMENT INTENT. SuperGen represents and warrants to AVI
that SuperGen is purchasing the AVI Securities for SuperGen's own account and
investment and not with a view to, or for sale in connection with, any
distribution, and that SuperGen can withstand the loss of SuperGen's entire
investment and has no need for liquidity in the investment the Securities
represent.
2.2 QUALIFIED INVESTOR. SuperGen warrants and represents to
AVI that SuperGen is an accredited investor within the meaning of Regulation
501, as promulgated under the Securities Act of 1933, as amended, and warrants
that all information there presented is materially accurate.
2.3 INVESTMENT EXPERIENCE. SuperGen is experienced in
evaluating and investing in companies in the development stage, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the AVI Securities.
2.4 AUTHORIZATION. The execution, delivery and performance of
this Agreement by SuperGen does not (i) require the consent, approval or
authorization of any governmental or regulatory authority having jurisdiction
and (ii) will not violate any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority applicable to
SuperGen.
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PAGE 1 - SUBSCRIPTION AGREEMENT
<PAGE>
2.5 AUTHORITY TO EXECUTE AGREEMENT. SuperGen has full power
and authority and legal right to make this Agreement and to incur and perform
its obligations hereunder and the performance by SuperGen of this Agreement has
been duly authorized by all necessary action of SuperGen.
2.6 ACCESS TO INFORMATION. SuperGen represents and warrants
that SuperGen and its Board of Directors has received copies of AVI's filings
under the Securities and Exchange Act of 1934, as amended, including, without
limitation, the risk factors they contain; SuperGen further understands that
forward-looking statements in such filings are not warranted and must be
regarded as highly speculative and uncertain. SuperGen has had such opportunity
to ask questions and to examine the operations of AVI as SuperGen wishes, and
has availed themselves of such opportunity as SuperGen deems appropriate.
2.7 RESTRICTED SECURITIES, LEGEND. SuperGen understands that
the AVI Securities have not been registered under the Securities Act of 1933, as
amended, in reliance upon an exemption from registration. Such exemption depends
upon, among other things, the bona fide nature of SuperGen's investment intent
stated in this Subscription Agreement. SuperGen understands that the AVI
Securities must be held indefinitely, unless the Securities subsequently are
registered under the Securities Act of 1933 or unless an exemption from
registration is otherwise available. SuperGen understands that AVI is not
obligated to register the Securities, except as hereafter provided. SuperGen
agrees that the AVI Securities may not be offered, sold, transferred, pledged,
or otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933 and applicable state securities laws or an
opinion of counsel acceptable to AVI that such registration is not required.
SuperGen understands that the documentation representing the Securities will be
imprinted with substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED WITHOUT A VIEW TO
DISTRIBUTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SHARES UNDER THE ACT AND UNDER ANY APPLICABLE SECURITIES LAWS, OR
AN OPINION OF COUNSEL FOR THE HOLDER (CONCURRED IN BY LEGAL COUNSEL FOR
THE CORPORATION) THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH
OFFER OR SALE. THE STOCK TRANSFER AGENT HAS BEEN ORDERED TO EFFECTUATE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTION.
3. REPRESENTATIONS OF AVI.
3.1 INVESTMENT INTENT. AVI represents and warrants to SuperGen
that AVI is purchasing the SuperGen Securities for AVI's own account and
investment and not with a view
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PAGE 2 - SUBSCRIPTION AGREEMENT
<PAGE>
to, or for sale in connection with, any distribution, and that AVI can withstand
the loss of AVI's entire investment and has no need for liquidity in the
investment the Securities represent.
3.2 QUALIFIED INVESTOR. AVI warrants and represents to
SuperGen that AVI is an accredited investor within the meaning of Regulation
501, as promulgated under the Securities Act of 1933, as amended, and warrants
that all information there presented is materially accurate.
3.3 INVESTMENT EXPERIENCE. AVI is experienced in evaluating
and investing in companies in the development stage, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the SuperGen Securities.
3.4 AUTHORIZATION. The execution, delivery and performance of
this Agreement by AVI does not (i) require the consent, approval or
authorization of any governmental or regulatory authority having jurisdiction
and (ii) will not violate any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority applicable to
AVI.
3.5 AUTHORITY TO EXECUTE AGREEMENT. AVI has full power and
authority and legal right to make this Agreement and to incur and perform its
obligations hereunder and the performance by AVI of this Agreement has been duly
authorized by all necessary action of AVI.
3.6 ACCESS TO INFORMATION. AVI represents and warrants that
AVI and its Board of Directors has received copies of SuperGen's filings under
the Securities and Exchange Act of 1934, as amended, including, without
limitation, the risk factors they contain; AVI further understands that
forward-looking statements in such filings are not warranted and must be
regarded as highly speculative and uncertain. AVI has had such opportunity to
ask questions and to examine the operations of SuperGen as AVI wishes, and has
availed themselves of such opportunity as AVI deems appropriate.
3.7 RESTRICTED SECURITIES, LEGEND. AVI understands that the
SuperGen Securities have not been registered under the Securities Act of 1933,
as amended, in reliance upon an exemption from registration. Such exemption
depends upon, among other things, the bona fide nature of AVI's investment
intent stated in this Subscription Agreement. AVI understands that the SuperGen
Securities must be held indefinitely, unless the Securities subsequently are
registered under the Securities Act of 1933 or unless an exemption from
registration is otherwise available. AVI understands that SuperGen is not
obligated to register the Securities, except as hereafter provided. AVI agrees
that the SuperGen Securities may not be offered, sold, transferred, pledged, or
otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933 and applicable state securities laws or an
opinion of counsel acceptable to SuperGen that such registration is not
required. SuperGen understands that the documentation representing the
Securities will be imprinted with substantially the following legend:
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PAGE 3 - SUBSCRIPTION AGREEMENT
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED WITHOUT A VIEW TO
DISTRIBUTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SHARES UNDER THE ACT AND UNDER ANY APPLICABLE SECURITIES LAWS, OR
AN OPINION OF COUNSEL FOR THE HOLDER (CONCURRED IN BY LEGAL COUNSEL FOR
THE CORPORATION) THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH
OFFER OR SALE. THE STOCK TRANSFER AGENT HAS BEEN ORDERED TO EFFECTUATE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTION.
4. CLOSING. The closing of the transaction contemplated hereunder shall
take place at a place and time mutually agreed by SuperGen and AVI not more than
fifteen (15) days after the date hereof.
5. EXCLUSIVE RIGHT TO NEGOTIATE. SuperGen and AVI presently are
negotiating the terms and conditions of a definitive agreement wherein SuperGen
shall enjoy the rights to market and sell AVICINE, AVI's anti-cancer therapeutic
vaccine. For and in consideration of this Subscription, SuperGen and AVI agree
that between the date of this Subscription Agreement and the earlier of (a)
termination of negotiations with respect to the Definitive Agreement by mutual
agreement of SuperGen and AVI, or (b) February 28, 2000, AVI shall not, and
shall use its best efforts to insure that its directors, officers and advisors
do not, directly or indirectly, institute, pursue or enter into any discussions,
negotiations, or agreements (whether preliminary or definitive) with any person
or entity other than SuperGen contemplating or providing for the marketing and
sale of AVICINE by any party other than SuperGen. In addition, AVI shall suspend
and not resume during such time period any discussions or negotiations described
above which were initiated prior to the execution of this Subscription
Agreement. AVI further agrees that any definitive agreement entered into between
SuperGen and AVI to market and sell AVICINE, contemplated by this section, shall
include provisions, mutually agreed by the parties, whereby SuperGen shall enjoy
a first option on AVI's portfolio of anti-cancer therapeutic products.
6. REGISTRATION RIGHTS.
6.1 REGISTRATION OF AVI SECURITIES. At the closing, AVI shall
enter into a Registration Rights Agreement with SuperGen providing Super Gen
"piggyback" registration rights with respect to the AVI Securities but providing
further for the registration of the AVI Securities not later than ninety (90)
days after the closing date hereof.
6.2 REGISTRATION OF SUPERGEN. At the closing, SuperGen shall
enter into a Registration Rights agreement with AVI providing AVI "piggyback"
registration rights with
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PAGE 4 - SUBSCRIPTION AGREEMENT
<PAGE>
respect to the SuperGen Securities but providing further for the registration of
the SuperGen Securities not later than ninety (90) days after the closing date
hereof.
7. OTHER MATTERS.
7.1 SEVERABILITY. Each clause of this agreement is severable.
If any clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
7.2 NON-WAIVER. A waiver of one or more breaches of any clause
of this agreement shall not act to waive any other breach, whether of the same
or different clauses.
7.3 GOVERNING LAW, JURISDICTION. This agreement is governed by
the laws of the state of Oregon, and is enforceable only in the state or federal
courts located in Oregon, in which both parties consent to jurisdiction.
7.4 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees.
7.5 AMENDMENTS. This agreement may be modified only in writing
signed by the original parties hereto, their successors, or by their authorized
representatives.
IN WITNESS WHEREOF, the parties have heretofore signed this
Subscription Agreement.
SUPERGEN, INC., a Delaware corporation AVI BIOPHARMA, INC. an Oregon
corporation
By: /s/ Joseph Rubinfeld By: /s/ Alan Timmins
-------------------- ----------------
Title: Chief Executive Officer & President Title: Chief Operating Officer
& Chief Financial Officer
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PAGE 5 - SUBSCRIPTION AGREEMENT
<PAGE>
AMENDMENT 1 TO SUBSCRIPTION AGREEMENT
This amendment to Section 1 of the Subscription agreement is an addition to the
terms previously agreed to.
1.3 RE-EXCHANGE OF CASH CONSIDERATION. SuperGen and AVI each have the
right, but not the obligation, to demand a re-exchange of AVI's 500,000
shares and SuperGen's $2.5 million in cash if an arrangement, under the
general terms of the Letter of Intent between the two companies, is not
agreed to by the date contemplated therein. This right shall last for
30 days from the termination date of the Letter of Intent and will be
completed within 180 days of such date.
IN WITNESS WHEREOF, the parties have heretofore signed this Amendment.
AVI BIOPHARMA, INC., an Oregon corporation
By: /s/ Alan Timmins
----------------
Title: Chief Operating Officer & Chief Financial Officer
SUPERGEN, INC., a Delaware corporation
By: /s/ Joseph Rubinfeld
--------------------
Title: Chief Executive Officer & President
<PAGE>
AMENDMENT TO SUBSCRIPTION AGREEMENT
This Amendment (the "AMENDMENT") is made as of December 15, 1999 by and
between SuperGen, Inc., a Delaware corporation ("SUPERGEN") and AVI BioPharma,
Inc., an Oregon corporation ("AVI").
BACKGROUND
A. SuperGen and AVI entered into a Subscription Agreement dated as of
December 1, 1999 (the "SUBSCRIPTION AGREEMENT") providing for SuperGen to pay
AVI $2.5 million in cash (the "CASH CONSIDERATION") and issue to AVI 100,000
shares of SuperGen common stock in exchange for 1,000,000 shares of AVI common
stock and the exclusive right from the date of the Subscription Agreement until
February 28, 2000 to negotiate an agreement for SuperGen to market and sell
Avicine and have a right of first option with respect to AVI's portfolio of
anti-cancer therapeutic compounds.
B. Pursuant to Section 7.5 of the Subscription Agreement, SuperGen and
AVI previously amended the Subscription Agreement and desire to further amend
the Subscription Agreement to clarify the conditions under which there may be a
redemption of 500,000 shares of AVI common stock. Unless defined in this
Amendment, all capitalized terms shall have the meanings set forth in the
Subscription Agreement.
NOW, THEREFORE, SuperGen and AVI agree as follows:
Section 1.3 of the Agreement shall be deleted and replaced in its
entirety by the following:
1.3 REDEMPTION. In the event that by February 28, 2000 (the "EXPIRATION
DATE") SuperGen and AVI have not entered into a definitive agreement for
SuperGen to market and sell Avicine and for SuperGen to have a right of first
option with respect to AVI's portfolio of anti-cancer therapeutic compounds, all
on substantially the terms as set forth in the letter of intent attached to this
Amendment, SuperGen and AVI shall each have the right, but not the obligation,
to request in writing a redemption of 500,000 shares of AVI common stock in
exchange for return to SuperGen of the Cash Consideration (the "REDEMPTION").
(a) NOTICE PERIOD. For a period of 30 calendar days following
the Expiration Date (the "NOTICE PERIOD"), SuperGen and AVI may each deliver
written notice to the other of their desire to cause the Redemption.
(b) EXCHANGE DATE. The Redemption shall occur on a date (the
"REDEMPTION DATE") no later than 180 calendar days after the Expiration Date.
(c) DELIVERY. AVI shall deliver to SuperGen the full amount of
the Cash Consideration, along with any interest earned thereon, and SuperGen
shall deliver 500,000 shares of AVI common stock on the Redemption Date.
(d) SECURITY. To ensure AVI's obligations under this Section
1.3, AVI shall establish an account for the receipt of the Cash Consideration.
The account will be owned by AVI and will require the signature of an officer of
AVI and an officer of SuperGen before any funds can be disbursed from this
account. Once established, there will be no changes of any nature whatsoever to
the account without the written consent of an officer from both SuperGen and
AVI. SuperGen agrees to terminate this security arrangement promptly after the
earlier of (i) the expiration of the Notice Period (if a Redemption was not
requested) or (ii) AVI's full performance of its obligations under the
Redemption provisions of Section 1.3.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
SUPERGEN, INC.
By: /s/ Joseph Rubinfeld
--------------------
Joseph Rubinfeld
Chief Executive Officer and President
AVI BIOPHARMA, INC.
By: /s/ Alan P. Timmins
-------------------
Alan P. Timmins
Chief Operating Officer and
Chief Financial Officer
<PAGE>
EXHIBIT 5.1
ATER WYNNE LLP
LETTERHEAD
January 24, 2000
Board of Directors AVI BioPharma, Inc.
One S.W. Columbia Street, Suite 1105
Portland, OR 97258
Gentlemen:
In connection with the registration of 2,857,147 shares of common
stock, $.0001 par value (the "Common Stock"), and 557,144 shares of common
stock, .0001 par value, underlying certain Warrants (the "Warrant Shares"), of
AVI BioPharma, Inc., an Oregon corporation (the "Company"), under the
Registration Statement on Form S-3 to be filed with the Securities and Exchange
Commission on January 24, 2000, and the proposed offer and sale of the Common
Stock and Warrant Shares pursuant to the Registration Statement, we have
examined such corporate records, certificates of public officials and officers
of the Company and other documents as we have considered necessary or proper for
the purpose of this opinion.
Based on the foregoing and having regard to legal issues which we deem
relevant, it is our opinion that the shares of Common Stock are validly issued,
fully paid and nonassessable. It is our further opinion that the Warrant Shares,
when such shares have been delivered against payment therefor as contemplated by
the Warrants, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
above-mentioned registration statement.
Very truly yours,
/s/ Ater Wynne LLP
ATER WYNNE LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3/A Registration Statement of our report dated
January 27, 1999, included in the Company's Form 10-KSB for the year ended
December 31, 1998 and to all references to our firm included in this
registration statement.
/s/ Arthur Andersen LLP
Portland, Oregon
January 25, 2000
