<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1996
REGISTRATION NO. 333-3220
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AVIGEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 13-3647113
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
------------------------
1201 HARBOR BAY PARKWAY, #1000
ALAMEDA, CA 94502
(510) 748-7150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN MONAHAN, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AVIGEN, INC.
1201 HARBOR BAY PARKWAY, # 1000
ALAMEDA, CA 94502
(510) 748-7150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER; INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN C. MENDELSON, ESQ. E. MICHAEL GREANEY, ESQ.
ROBERT J. BRIGHAM, ESQ. GIBSON, DUNN & CRUTCHER
COOLEY GODWARD CASTRO 4 PARK PLAZA
HUDDLESON & TATUM IRVINE, CA 92714
FIVE PALO ALTO SQUARE (714) 451-3800
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(415) 843-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
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, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(o) 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. / /
------------------------
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 THAT 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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<PAGE> 2
AVIGEN, INC.
------------------
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING
IN FORM S-1 REGISTRATION STATEMENT CAPTION IN PROSPECTUS
- ---------------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus................................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus... Inside Front and Outside Back
Cover Pages
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges........................................... Prospectus Summary; The Company;
Risk Factors
4. Use of Proceeds........................................... Use of Proceeds
5. Determination of Offering Price........................... Underwriting
6. Dilution.................................................. Dilution
7. Selling Stockholders...................................... Inapplicable
8. Plan of Distribution...................................... Outside Front and Inside Front
Cover Page; Underwriting
9. Description of Securities to be Registered................ Description of Capital Stock
10. Interests of Named Experts and Counsel.................... Legal Matters
11. Information with Respect to the Registrant................ Outside Front and Inside Front
Cover Page; Prospectus Sum-
mary; The Company; Risk Fac-
tors; Dividend Policy;
Capitalization; Selected
Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Business;
Management; Certain
Transactions; Principal
Stockholders; Description of
Capital Stock; Shares Eligible
for Future Sale; Financial
Statements
12. Disclosure of Position on Indemnification for Securities
Act Liabilities......................................... Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 8, 1996
2,300,000 SHARES
LOGO
COMMON STOCK
All of the 2,300,000 shares of Common Stock are being sold by Avigen, Inc.
("Avigen" or the "Company"). Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $7.00 and $9.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Common Stock has been approved for
listing on the Nasdaq National Market under the symbol "AVGN".
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1)(2) COMPANY(2)
- -----------------------------------------------------------------------------------------------------
Per Share.......................... $ $ $
- -----------------------------------------------------------------------------------------------------
Total(4)........................... $ $ $
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Excludes additional compensation to the representatives (the
"Representatives") of the several Underwriters in the form of a
nonaccountable expense allowance of $150,000. Also excludes the value of
warrants to purchase 230,000 shares of Common Stock to be issued to the
Representatives.
(3) Before deducting expenses payable by the Company estimated at $800,000.
(4) The Company has granted to the Underwriters a 45-day option to purchase up
to 345,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
-----------------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996, at the office of the agent of
Wedbush Morgan Securities in Los Angeles, California.
WEDBUSH MORGAN SECURITIES SANDS BROTHERS & CO., LTD.
, 1996
<PAGE> 4
(Artwork depicting the Company's potential product and delivery mechanism.)
AVIGEN'S PRODUCT DEVELOPMENT PROGRAMS ARE AT AN EARLY STAGE. PRODUCTS, IF
ANY, RESULTING FROM SUCH PROGRAMS CANNOT BE MADE AVAILABLE FOR COMMERCIAL SALE
UNLESS AND UNTIL REGULATORY APPROVAL IS OBTAINED. THE COMPANY WILL BE REQUIRED
TO COMPLETE CLINICAL TRIALS TO DEMONSTRATE THE SAFETY AND EFFICACY OF ANY
POTENTIAL PRODUCTS PRIOR TO FILING FOR REGULATORY APPROVAL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus.
THE COMPANY
Avigen is a leader in the development of gene therapy products derived from
adeno-associated virus ("AAV") for the treatment of inherited and acquired
diseases. The Company's proposed gene therapy products are designed for in vivo
administration to achieve the production of therapeutic proteins within the
body. The Company is developing two broad-based proprietary gene delivery
technologies: AAV vectors and the Targeted Vector Integration ("TVI") system.
The Company believes AAV vectors can be used to deliver genes for the treatment
of brain, liver and prostate cancer, anemia, hemophilia, hyperlipidemia and
metabolic storage diseases. The Company also believes its TVI system will allow
it to pursue more effective treatments for blood cell-related diseases,
including sickle cell anemia, beta-thalassemia and human immunodeficiency virus
("HIV") infection.
AAV Vectors. The Company's gene therapy products are based on gene delivery
systems called vectors. AAV vectors are derived from AAV, a common
non-pathogenic human virus, and take advantage of the natural efficiency with
which viruses deliver genes to cells. To produce an AAV vector, the virus is
modified by removing the viral genes and replacing them with genes for
therapeutic proteins. The Company believes that AAV vectors combine desirable
properties of viral and non-viral vectors and may offer several potential
advantages over other gene therapy vectors. These advantages include efficient
delivery of genes to both dividing and non-dividing target cells, absence of
viral genes that may be responsible for causing an undesirable immune response,
in vivo administration to patients, higher levels of gene expression and
improved stability allowing AAV vectors to be manufactured, stored and handled
like more traditional pharmaceutical products. Avigen believes that its
proprietary manufacturing process will simplify manufacturing and purification
and achieve increased yield of high purity AAV vectors.
TVI System. The Company's proprietary TVI system utilizes components of AAV
to integrate large segments of DNA at a specific location on human chromosome
19. Integration is essential for certain gene therapy applications where the
genes must be passed on to the progeny of the cell. The Company believes gene
therapy vectors that integrate at a specific site, such as the site on
chromosome 19 where the non-pathogenic AAV normally integrates, will have an
increased safety profile relative to vectors that integrate randomly. The
Company also believes that the ability to integrate large segments of DNA could
lead to gene therapy applications involving the delivery of multiple genes or
requiring precise or controllable gene regulation.
Product Development. Based on encouraging results in animal models, the
Company has initiated two preclinical development programs using AAV vectors for
the treatment of brain tumors and anemia. Additionally, the Company has a number
of research programs and collaborations intended to generate product development
candidates for liver and prostate cancer, hemophilia, hyperlipidemia, metabolic
storage diseases, hemoglobin disorders and HIV infection. Avigen believes that
the number of potential applications for gene therapy will increase
significantly as advances are made in the area of genomics. These advances are
enabling scientists to link diseases to specific gene defects. As more genes are
discovered, the need for improved gene delivery technologies is expected to
increase. With the identification of new disease-related genes, the Company
believes that its AAV vectors and its TVI system will provide it with
significant opportunities for new gene therapy products.
Corporate Partnering Opportunities. The Company is actively seeking to
develop long-term strategic collaborations with pharmaceutical companies that
can provide funding for research and development activities and clinical trials
as well as access to complementary technologies, including gene sequences. The
Company believes that its broad-based proprietary gene delivery technologies can
be used to deliver a number of different genes, giving rise to multiple product
and corporate partnering opportunities.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,300,000 shares
Common Stock to be outstanding after the offering..... 6,829,015 shares(1)
Use of proceeds....................................... For repayment of certain
indebtedness, research and
development, leasehold improvements
and capital equipment, working
capital, and general corporate
purposes
Proposed Nasdaq National Market symbol................ AVGN
</TABLE>
- ---------------
(1) Based on shares outstanding as of March 31, 1996. Excludes 816,503 shares of
Common Stock issuable upon exercise of outstanding stock options as of March
31, 1996 at a weighted average exercise price of $0.51 per share; 257,880
shares of Common Stock issuable upon exercise of warrants outstanding at
March 31, 1996 at exercise prices ranging from $4.87 to $7.80 per share;
warrants to purchase 193,750 shares of Common Stock issued in connection
with a bridge financing completed in March 1996 (the "1996 Bridge
Financing") at an exercise price per share equal to the greater of $0.25 and
80% of the offering price; warrants to purchase 19,375 shares of Common
Stock issued to the placement agent in the 1996 Bridge Financing at an
exercise price per share equal to 110% of the greater of $0.25 and 80% of
the offering price, and warrants to purchase 230,000 shares of Common Stock
to be issued to the Representatives at the closing of this offering at an
exercise price equal to 120% of the offering price. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Description of Capital
Stock," "Underwriting" and Notes 5 and 9 of Notes to Financial Statements.
4
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
PERIOD FROM YEARS ENDED JUNE ENDED OCTOBER 22, 1992
OCTOBER 22, 1992 30, MARCH 31, (INCEPTION)
(INCEPTION) THROUGH ----------------- ----------------- THROUGH
JUNE 30, 1993 1994 1995 1995 1996 MARCH 31, 1996
------------------- ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Grant revenue................. $ -- $ -- $ 178 $ 90 $ 87 $ 265
Expenses:
Research and development.... 932 2,558 2,290 1,526 1,875 7,655
General and
administrative............ 538 1,283 1,334 983 708 3,863
------- ------- ------- ------- ------- --------
Total expenses.............. 1,470 3,841 3,624 2,509 2,583 11,518
------- ------- ------- ------- ------- --------
Loss from operations.......... (1,470) (3,841) (3,446) (2,419) (2,496) (11,253)
Other income (expense), net... (24) (8) 181 (2) (35) 114
------- ------- ------- ------- ------- --------
Net loss...................... $(1,494) $(3,849) $(3,265) $(2,421) $(2,531) $ (11,139)
======= ======= ======= ======= ======= ========
Pro forma net loss per
share(1).................... $ (0.62) $ (0.47)
======= =======
Shares used in computing pro
forma net loss per
share(1).................... 5,295 5,432
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
JUNE 30, 1995 ACTUAL AS ADJUSTED(2)
------------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... $ 203 $ 1,938 $ 16,221
Working capital (deficit).................................... (916) (829) 14,911
Total assets................................................. 1,841 3,636 17,730
Capital lease obligations, noncurrent portion................ 214 193 193
Deficit accumulated during the development stage............. (8,608) (11,139) (11,619)
Stockholders' equity (deficit)............................... 184 (120) 15,620
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements describing the shares used in
calculating pro forma net loss per share.
(2) Adjusted to give effect to (i) the receipt of the estimated net proceeds
from the sale of 2,300,000 shares of Common Stock offered by the Company
hereby at an assumed public offering price of $8.00 per share and (ii) the
repayment of the $1,937,500 principal amount of promissory notes relating to
a bridge financing completed in March 1996 and the corresponding charges to
operations of the unamortized debt discount of $291,781 and deferred
financing cost of $188,442. Such promissory notes will be repaid out of the
proceeds of this offering. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Except as otherwise noted, all information contained in this Prospectus:
(i) assumes the automatic conversion of all outstanding shares of Preferred
Stock into Common Stock upon the closing of this offering; (ii) reflects a
4.43-for-1 reverse stock split of the Company's outstanding Common Stock and
Preferred Stock effected in May 1996; (iii) reflects the amendment and
restatement of the Company's Certificate of Incorporation completed in May 1996;
and (iv) assumes no exercise of the Underwriters' over-allotment option. See
"Capitalization" and "Description of Capital Stock."
Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as those discussed elsewhere in this Prospectus.
Avigen(SM) is a service mark of the Company.
5
<PAGE> 8
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Common
Stock offered hereby:
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
Gene therapy is a new and rapidly evolving technology. To date, there has
been only limited research and development in gene therapy using AAV vectors.
The Company is not aware of any gene therapy products which have obtained
marketing approval from the United States Food and Drug Administration ("FDA").
Because there is only limited research regarding the safety and efficacy of AAV
vectors, the Company believes that clinical trials will proceed more slowly than
clinical trials involving traditional drugs and biologics.
Avigen is at an early stage of development. All of the Company's potential
products are in research or early preclinical development. There can be no
assurance that the Company's research and development activities will be
completed successfully or will support the initiation of clinical trials or that
any proposed products will prove to be efficacious or safe. Before obtaining
regulatory approval for the commercial sale of any of its products under
development, the Company must demonstrate through preclinical studies and
clinical trials that the proposed product is safe and efficacious for its
intended use. None of the Company's proposed products has been tested in humans.
There can be no assurance that the Company will not encounter problems with the
clinical trials which will require the Company to delay, suspend or terminate
such trials. All of the Company's products in research and development may prove
to have undesirable and unintended side effects or other characteristics that
may prevent or limit their commercial use. Even if successfully developed, there
can be no assurance that any potential products will be cleared for marketing by
United States or foreign regulatory authorities or that such products can be
manufactured at acceptable cost or that any approved products can be
successfully marketed. Products resulting from the Company's research and
development efforts, if any, are not expected to be commercially available and
revenues from the sale of any such products are not expected for at least the
next several years.
HISTORY OF LOSSES; WORKING CAPITAL DEFICIT; ACCUMULATED DEFICIT
To date, the Company has been engaged in research and development
activities and has not generated any revenues from product sales. As of March
31, 1996, the Company had a working capital deficit of $829,000 and an
accumulated deficit of $11.1 million. The process of developing the Company's
products will require significant research and development, preclinical testing
and clinical trials, as well as regulatory approval. These activities, together
with the Company's general and administrative expenses, are expected to result
in operating losses for the foreseeable future. The Company's ability to achieve
profitability is dependent, in part, on its ability to successfully complete
development of its proposed products, obtain required regulatory approvals and
manufacture and market its products directly or through partners. There can be
no assurance that the Company will achieve revenues or profitability in the
future.
GOING CONCERN QUALIFICATION IN INDEPENDENT AUDITORS' REPORT
The report by the Company's independent auditors included in this
Prospectus contains an explanatory paragraph regarding the Company's ability to
continue as a going concern. Such report states that the Company has incurred
cumulative net losses since inception and had a working capital deficit of
$916,000 as of June 30, 1995 that raise substantial doubt as of the date of such
report about the Company's ability to continue as a going concern. In the
opinion of management, existing funding together with the proceeds from this
offering will be sufficient to fund the Company's operating expenses and capital
requirements for at least the next twelve months.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funding after this offering
in order to complete the research and development activities currently
contemplated and to commercialize its proposed products. The Company anticipates
that its existing capital resources, including the net proceeds of this
offering, will be adequate to fund its capital needs for at least the next 12
months. The Company's future capital requirements will depend on many factors,
including continued scientific progress in research and development programs,
the scope and results of preclinical studies and clinical trials, the time and
costs involved in obtaining
6
<PAGE> 9
regulatory approvals, the costs involved in filing, prosecuting and enforcing
patent claims, competing technological developments, the cost of manufacturing
scale-up, the cost of commercialization activities and other factors which may
not be within the Company's control.
The Company intends to seek additional funding through public or private
equity or debt financing, when market conditions allow. If additional funds are
raised by issuing equity securities, further dilution to the existing
stockholders may result. There can be no assurance that the Company will be able
to enter into such collaborative or financing arrangements on acceptable terms
or at all. Without such additional funding, the Company may be required to
delay, reduce the scope of or eliminate one or more of its research or
development programs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
NEED FOR ESTABLISHMENT OF CORPORATE PARTNER RELATIONSHIPS
The Company does not currently have a corporate partner relationship with
respect to any of its technologies or potential products. Given the very high
cost of funding clinical trials and bringing a proposed product through the
governmental approval process to the commercial market, the Company believes
that successful development and commercialization of its technologies and
products will depend in large part on the establishment of one or more such
relationships. There can be no assurance that the Company will be able to
establish such relationships on favorable terms, if at all. In addition, the
failure to raise needed future capital could put the Company at a disadvantage
with respect to negotiating favorable terms with such potential corporate
partners.
NEED TO OBTAIN RIGHTS TO PROPRIETARY GENES AND TECHNOLOGY
A number of the gene sequences or proteins encoded by certain of those
sequences that the Company is investigating or may use in its products are or
may become patented by others. As a result, the Company may be required to
obtain licenses to such gene sequences or proteins or other technology in order
to test, use or market such products. For example, in connection with its anemia
program, the Company anticipates that it may need to obtain a license to a gene
for erythropoietin. There can be no assurance that the Company will be able to
obtain such a license on terms favorable to the Company, if at all. In
connection with the Company's efforts to obtain rights to such gene sequences or
proteins, the Company may find it necessary to convey rights to its technology
to others. See "Business -- Patents and Intellectual Property."
The Company has entered into agreements for the license from third parties
of certain technologies related to its gene therapy product development
programs. Certain of these license agreements provide for the achievement of
development milestones at various times beginning in February 1997. In the event
the Company fails to achieve such milestones or to obtain extensions, certain of
the license agreements may be terminated by the licensor with relatively short
notice to the Company. Termination of any of the Company's license agreements
could have a material adverse effect on the Company's business.
Some of the Company's gene therapy products may require the use of multiple
proprietary technologies. Consequently, the Company may be required to make
cumulative royalty payments to several third parties. Such cumulative royalties
could be commercially prohibitive. While the Company believes the third parties
will be motivated to adjust the royalty structure under such circumstances,
there can be no assurance that the Company will be able to successfully
negotiate such royalty adjustments. See "Business -- Licensing and Research
Agreements."
UNCERTAINTY OF MARKET ACCEPTANCE
The Company's success is dependent on acceptance of its gene therapy
products. The Company believes that recommendations by physicians and health
care payors will be essential for market acceptance of its gene therapy
products. In the past, concerns have arisen regarding the potential safety and
efficacy of gene therapy products derived from pathogenic viruses such as
retroviruses and adenoviruses. While the Company's proposed gene therapy
products are derived from AAV which is a non-pathogenic virus, there can be no
assurance that physicians and health care payors will conclude that the
technology is safe. In addition, health care payors can indirectly affect the
attractiveness of the Company's proposed products by regulating the maximum
amount of reimbursement they will provide for such proposed products. There can
be no assurance that the Company's products will achieve significant market
acceptance among patients, physicians or third
7
<PAGE> 10
party payors, even if necessary regulatory and reimbursement approvals are
obtained. Failure to achieve significant market acceptance will have a material
adverse effect on the Company's business, financial condition and results of
operations.
GOVERNMENT REGULATION
The production and marketing of the Company's proposed products and its
ongoing research and development activities are subject to extensive regulation
by governmental authorities in the United States and foreign countries. At the
present time, the Company believes that its products will be regulated as
biologics by the FDA and comparable foreign regulatory bodies. Gene therapy is,
however, a relatively new technology and has not been extensively tested in
humans. The regulatory requirements governing gene therapy products are
uncertain and are subject to change. No gene therapy products have been approved
to date in the United States or any foreign country. Failure to comply with
applicable FDA or other applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of products, total or
partial suspension of production or injunction, as well as other regulatory
action against the Company.
The Company is currently conducting preclinical studies and is planning
clinical trials of its AAV vectors. Prior to marketing in the United States, any
drug developed by the Company must undergo rigorous preclinical and clinical
testing and an extensive regulatory approval process implemented by the FDA
under the federal Food, Drug and Cosmetic Act. Satisfaction of such regulatory
requirements, which includes satisfying the FDA that the product is both safe
and efficacious, typically takes several years or more depending on the type,
complexity and novelty of the product, and requires a substantial commitment of
resources. The Company may encounter significant delays or excessive costs in
its efforts to secure regulatory approvals, particularly because gene therapy is
a novel method of treatment and regulatory requirements are evolving and
uncertain. Preclinical studies must be conducted in conformance with the FDA's
Good Laboratory Practices regulations. Before commencing clinical trials, the
Company must submit to and receive FDA authorization of an investigational new
drug application ("IND"). There can be no assurance that submission of an IND
would result in FDA authorization to commence clinical trials.
Clinical trials must meet FDA regulatory requirements for Institutional
Review Board ("IRB") oversight and informed consent and good clinical practice
regulations. The Company has limited experience in conducting preclinical
studies and no experience in conducting clinical trials necessary to obtain
regulatory approval. There can be no assurance that those clinical trials can be
conducted at preferred sites, sufficient test subjects can be recruited or
clinical trials will be started or completed successfully in a timely fashion,
if at all. Furthermore, the FDA may suspend clinical trials at any time if it
believes the subjects participating in such trials are being exposed to
unacceptable health risks or if it finds deficiencies in the IND or conduct of
the investigation. There can be no assurance that the Company will not encounter
problems in clinical trials which cause the Company or the FDA to delay, suspend
or terminate such trials.
In addition to the FDA requirements, the National Institutes of Health
("NIH") has established guidelines for research involving recombinant DNA
molecules, which are utilized by the Company in its research. These guidelines
apply to recombinant DNA research which is conducted at or supported by the NIH.
Under current guidelines, proposals to conduct clinical research involving gene
therapy at institutions supported by the NIH must be approved by the NIH's
Recombinant DNA Advisory Committee.
There can be no assurance that any product developed by the Company will
prove to be safe and efficacious in clinical trials or will meet all of the
applicable regulatory requirements necessary to receive marketing approval. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent regulatory approvals. If
regulatory approval is granted for a product, such approval will be limited to
those disease states and conditions for which the product is useful, as
demonstrated through clinical trials. Furthermore, approval may require ongoing
requirements for postmarketing studies. Even if a product is approved for
marketing, the product, its manufacturer and its manufacturing facilities are
continuously subject to review and periodic inspections. Discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market.
In order to market its products outside of the United States, the Company
also must comply with numerous and varying foreign regulatory requirements,
implemented by foreign health authorities, governing
8
<PAGE> 11
the design and conduct of human clinical trials and marketing approval. The
approval procedure varies among countries and can involve additional testing,
and the time required to obtain approval may differ from that required to obtain
FDA approval. The foreign regulatory approval process includes all of the risks
associated with obtaining FDA approval set forth above, and approval by the FDA
does not ensure approval by the health authorities of any other country. See
"Business -- Government Regulation."
UNCERTAINTY OF PRODUCT PRICING AND THIRD PARTY REIMBURSEMENT
The business and financial condition of biotechnology companies such as the
Company are affected by the efforts of government and third party payors to
contain or reduce the cost of health care through various means. In the United
States, there have been and will continue to be a number of federal and state
proposals to implement government control on pricing. In addition, the emphasis
on managed care in the United States has increased and will continue to increase
the pressure on the pricing of pharmaceutical products. While the Company cannot
predict whether any legislative or regulatory proposals will be adopted or the
effect such proposals or managed care efforts may have on its business, the
announcement of such proposals or efforts could have a material adverse effect
on the Company's ability to raise capital, and the adoption of such proposals
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, in both the United States and
elsewhere, sales of medical products and treatments are dependent, in part, on
the availability of reimbursement to the consumer from third-party payors, such
as government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing its proposed products to the market, there can be no
assurance that these products will be considered cost-effective and that
reimbursement to the consumer will be available or will be sufficient to allow
the Company to sell its products on a competitive basis.
COMPETITION
The field of gene therapy is new and rapidly evolving and is expected to
undergo significant technological change in the future. Competition from fully
integrated pharmaceutical companies and more established biotechnology companies
is expected to increase. Most of these companies have significantly greater
financial resources and expertise than the Company in research and development,
preclinical studies and clinical trials, obtaining regulatory approvals,
manufacturing, marketing and distribution. Smaller companies may also prove to
be significant competitors, particularly through collaborative arrangements with
large pharmaceutical companies. Academic institutions, government agencies and
other public and private research organizations also conduct research, seek
patent protection and establish collaborative arrangements for product
development and marketing. In addition, these companies and institutions compete
with the Company in recruiting and retaining highly qualified scientific and
management personnel. There can be no assurance that the Company's competitors
will not develop more effective or more affordable products, or achieve earlier
product commercialization than the Company.
The Company is aware that other companies are conducting preclinical
studies and clinical trials for viral and non-viral gene therapy products. One
of these companies is supporting clinical studies for use of AAV vectors in the
treatment of cystic fibrosis.
Avigen believes the primary competitive factors for success in the gene
therapy field will be product efficacy, safety, manufacturing capability, the
timing and scope of regulatory approvals, the timing of market introduction,
marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not
develop more effective or more affordable products, or achieve earlier product
commercialization than the Company. See "Business -- Competition."
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY; POSSIBLE CLAIMS OF OTHERS
To date, the Company has filed a number of patent applications in the
United States relating to the Company's technologies. In addition, the Company
has acquired exclusive and non-exclusive licenses to certain issued patents and
pending patent applications. There is no assurance that patents will issue from
these applications or that any patent will issue on technology arising from
additional research or, if patents do issue, that claims allowed will be
sufficient to protect the Company's technologies.
9
<PAGE> 12
The patent application process takes several years and entails considerable
expense. The failure to obtain patent protection on the technologies underlying
the Company's proposed products may have a material adverse effect on the
Company's competitive position and business prospects. Important legal issues
remain to be resolved as to the scope of patent protection for biotechnology
products, and the Company expects that administrative proceedings, litigation or
both will be necessary to determine the validity and scope of its and others'
biotechnology products. Such proceedings or litigation may require a significant
commitment of the Company's resources in the future. If patents can be obtained,
there can be no assurance that any such patents will provide the Company with
any competitive advantage. For example, there can be no assurance that others
will not independently develop similar technologies, others will not duplicate
any technology developed by the Company, or any such patent will not be
invalidated in litigation.
There can be no assurance that third parties will not assert patent or
other intellectual property infringement claims against the Company with respect
to its products or technology or other matters. There may be third-party patents
and other intellectual property relevant to the Company's products and
technology which are not known to the Company. Although no third party has
asserted that the Company is infringing such third party's patent rights or
other intellectual property, there can be no assurance that litigation asserting
such claims will not be initiated, that the Company would prevail in any such
litigation, or that the Company would be able to obtain any necessary licenses
on reasonable terms, if at all. Any such claims against the Company, with or
without merit, as well as claims initiated by the Company against third parties,
can be time-consuming and expensive to defend or prosecute and to resolve. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the Patent and Trademark
Office to determine priority of invention, which could result in substantial
cost to the Company, even if the outcome is favorable to the Company. In
addition, to the extent outside collaborators apply technological information
developed independently by them or by others to the Company's product
development programs or apply Avigen's technologies to other projects, disputes
may arise as to the ownership of proprietary rights to such technologies.
The Company also relies on a combination of trade secret and copyright law,
employee and third-party nondisclosure agreements, and other protective measures
to protect intellectual property rights pertaining to its products and
technologies. There can be no assurance that these measures will provide
meaningful protection of the Company's trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
In addition, the laws of certain foreign countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. There can be no assurance that the Company will be able to protect its
intellectual property successfully. See "Business -- Patents and Intellectual
Property."
LACK OF MANUFACTURING AND SALES AND MARKETING EXPERIENCE
The Company has no experience in, and currently lacks the resources and
capability to, manufacture or market any of its proposed products on a
commercial basis. In addition, the Company's proprietary process for
manufacturing AAV vectors has not yet implemented the FDA's regulations
concerning Current Good Manufacturing Practices ("cGMP"). Initially, the Company
anticipates that it will be dependent to a significant extent on collaborative
partners or other entities for commercial scale manufacturing of its products.
In the event the Company decides to establish a commercial scale manufacturing
facility, the Company will require substantial additional funds and personnel
and will be required to comply with extensive regulations applicable to such
facility. There can be no assurance that the Company will be able to develop
adequate commercial manufacturing capabilities either on its own or through
third parties. In addition, the Company does not anticipate establishing its own
sales and marketing capabilities in the foreseeable future. There can be no
assurance that the Company will be able to develop adequate marketing
capabilities either on its own or through third parties. See
"Business -- Corporate Partnering Strategy" and "-- Manufacturing."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on certain members of its management and
research and development staff. The loss of any of these persons could have a
material adverse effect on the Company's business. In addition, the Company
relies on consultants and advisors to assist the Company in formulating its
research and
10
<PAGE> 13
development strategy. Recruiting and retaining qualified technical and
managerial personnel will also be critical to the Company's success. There can
be no assurance that the Company will be successful in attracting and retaining
skilled personnel who generally are in high demand in the pharmaceutical and
biotechnology industries. The loss of certain key employees or the Company's
inability to attract and retain other qualified employees could have a material
adverse effect on the Company's business. A majority of the Company's scientific
advisors are engaged by the Company on a consulting basis and are employed on a
full-time basis by employers other than the Company and some have consulting or
other advisory arrangements with other entities that may conflict or compete
with their obligations to the Company.
SIGNIFICANT PRODUCT LIABILITY RISK; LIMITED INSURANCE COVERAGE
The manufacture and sale of medical products entail significant risk of
product liability claims. The Company currently does not carry product liability
insurance although it intends to obtain such coverage prior to commencing
clinical trials. There can be no assurance that such coverage will be adequate
to protect the Company from any liabilities it might incur in connection with
the use or sale of the Company's products. In addition, the Company may require
increased product liability coverage as additional products are commercialized.
Such insurance is expensive and in the future may not be available on acceptable
terms, if at all. A successful product liability claim or series of claims
brought against the Company in excess of its insurance coverage could have a
material adverse effect on the Company's business and results of operations. The
Company must indemnify certain of its licensors against any product liability
claims brought against them arising out of products developed by the Company
under these licenses. See "Business -- Product Liability and Insurance."
HAZARDOUS MATERIALS
The Company's research and development efforts involve the use of hazardous
materials, chemicals and various radioactive compounds. The Company is subject
to federal, state and local laws and regulations governing the storage, use, and
disposal of such materials and certain waste products. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by federal, state and local regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of an accident, the Company could be held
liable for any damages that result and any such liability could exceed the
resources of the Company. The Company may incur substantial costs to comply with
environmental regulations if the Company develops its own commercial
manufacturing facility.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER
PROVISIONS AND DELAWARE LAW
After this offering, the Company's officers, directors and principal
stockholders will beneficially own approximately 17.83% of the Company's Common
Stock. As a result, such persons may have the ability to effectively control the
Company and direct its affairs and business. Such concentration of ownership may
also have the effect of delaying, deferring or preventing a change in control of
the Company. In addition, the Company's Board of Directors will have the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by the stockholders. The rights of the holders of Common
Stock will be subject to, and may be materially adversely affected by, the
rights of the holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue shares of
Preferred Stock. Furthermore, certain provisions of the Company's Restated
Certificate of Incorporation may have the effect of delaying or preventing
changes in control or management of the Company, which could adversely affect
the market price of the Company's Common Stock. In addition, the Company is
subject to the provisions of Section 203 of the Delaware General Corporation Law
(the "Delaware Law"), an anti-takeover law. See "Principal Stockholders" and
"Description of Capital Stock."
NO PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering there has been no public market for the Company's
Common Stock, and there can be no assurance that an active market will develop
or be maintained. The initial public offering price will be negotiated between
the Company and the Representatives of the Underwriters and may not be
indicative of
11
<PAGE> 14
future market prices. See "Underwriting" for information related to the method
of determining the initial public offering price. The Company believes that
various factors, including announcements of technological innovations or
regulatory approvals, results of clinical trials, announcements of new products
by the Company or by its competitors, healthcare or reimbursement policy changes
by governments or insurance companies, developments in relationships with
corporate partners or a change in securities analysts' recommendations, may
cause the market price of the Common Stock to fluctuate, perhaps substantially.
In addition, in recent years the stock market in general, and the shares of
biotechnology and healthcare companies in particular, have experienced extreme
price fluctuations. These broad market and industry fluctuations may materially
adversely affect the market price of the Company's Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
The initial public offering price is substantially higher than the book
value per share of the Common Stock. Investors purchasing shares of Common Stock
in this offering will therefore incur immediate and substantial dilution of
$5.71 per share. To the extent that outstanding options or warrants to purchase
the Company's Common Stock are exercised, there will be further dilution. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the offering made hereby could have a material adverse effect on the price of
the Common Stock. In addition to the 2,300,000 shares offered hereby,
immediately upon completion of this offering, approximately 526,002 shares will
be freely tradeable without restriction pursuant to Rule 144(k) promulgated
under the Securities Act of 1933, as amended. Beginning 90 days following the
date of the offering, 474,487 shares of Common Stock will be eligible for sale
in the public market, subject to compliance with Rule 144 or Rule 701. Beginning
180 days after the date of the offering, an additional 2,831,619 shares of
Common Stock will become eligible for sale subject to compliance with Rule 144
or Rule 701 upon the expiration of agreements not to sell such shares. In
addition, beginning 90 days after the date of the offering, 44,016 shares
subject to vested options will be available for sale subject to compliance with
Rule 701 and, beginning 180 days after the date of the offering, 317,195 shares,
subject to vested options, will be available for sale subject to compliance with
Rule 701 upon the expiration of agreements not to sell such shares.
After the offering, the holders of 3,424,535 shares and warrants to
purchase 655,731 shares are entitled to certain demand and piggyback
registration rights with respect to such shares. If such holders, by exercising
their demand registration rights, cause a large number of shares to be
registered and sold in the public market, such sales may have a material adverse
effect on the market price of the Common Stock. If the Company is required to
include in a Company-initiated registration shares held by such holders pursuant
to the exercise of their piggyback registration rights, such sales may have a
material adverse effect on the Company's ability to raise needed capital. See
"Description of Capital Stock -- Registration Rights" and "Shares Eligible for
Future Sale."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future. See "Dividend Policy."
12
<PAGE> 15
THE COMPANY
The Company's predecessor was incorporated in New York in July 1991 under
the name "Vestmark, Inc." Avigen, Inc. was incorporated in Delaware in October
1992. In December 1992 Vestmark, Inc., which had no operations, merged with and
into Avigen, Inc. pursuant to an Agreement and Plan of Merger, with Avigen, Inc.
as the surviving corporation. Unless the context otherwise requires, "Avigen"
and the "Company" refer to Avigen, Inc., a Delaware corporation and its
predecessor "Vestmark, Inc." The Company's executive offices are located at 1201
Harbor Bay Parkway, #1000, Alameda, California 94502 and its telephone number is
(510) 748-7150.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,300,000 shares of Common
Stock offered hereby are estimated to be $16.2 million ($18.8 million if the
over-allotment option is exercised in full) after deducting the estimated
underwriting discount and commissions and estimated offering expenses payable by
the Company.
The Company expects to use approximately $2.0 million of the net proceeds
from this offering to repay the entire principal amount and accrued interest of
the Company's outstanding notes issued in a bridge financing in March 1996. The
notes bear interest at the rate of 12% per year until March 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company intends to use
approximately $10.0 million of the net proceeds of the offering to fund research
and development activities and clinical trials in support of regulatory
approvals, approximately $1.0 million for leasehold improvements and capital
equipment, and the remainder for working capital and general corporate purposes.
In addition, a portion of the proceeds may be used for the acquisition of
complementary businesses, products or technologies. The Company has no present
understandings, commitments or agreements, nor is it currently engaged in any
negotiations with respect to any acquisition. Pending such uses, the Company
intends to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities. The Company believes that the net
proceeds from the sale of the Common Stock offered hereby, together with its
current cash balances and cash flow from future operations, will be sufficient
to meet its working capital and capital expenditure requirements for at least
the next 12 months.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth as of March 31, 1996, (i) the pro forma
capitalization of the Company giving effect to the conversion of all outstanding
shares of Preferred Stock to Common Stock and (ii) the pro forma capitalization
as adjusted to give effect to the receipt by the Company of the estimated net
proceeds from the sale of 2,300,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $8.00 per share, after deducting the
estimated underwriting discount and commissions and estimated offering expenses
payable by the Company, and the application of a portion of the net proceeds
therefrom to repay the 1996 Bridge Financing:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------
PRO FORMA(1) AS ADJUSTED
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable...................................................... $ 1,646 $ --
Capital lease obligations, noncurrent portion...................... 193 193
-------- --------
Stockholders' equity (deficit):.................................... 1,839 193
Preferred stock, $.001 par value; 5,000,000 shares authorized; no
shares issued and outstanding, pro forma and as adjusted...... -- --
Common stock, $.001 par value; 30,000,000 shares authorized;
4,529,015 shares issued and outstanding, pro forma; 6,829,015
shares issued and outstanding, as adjusted(2)................. 5 7
Additional paid-in capital......................................... 11,152 27,370
Deferred compensation.............................................. (138) (138)
Deficit accumulated during development stage(3).................... (11,139) (11,619)
-------- --------
Total stockholders' equity (deficit).......................... (120) 15,620
-------- --------
Total capitalization..................................... $ 1,719 $ 15,813
======== ========
</TABLE>
- ---------------
(1) See Note 10 of Notes to Financial Statements.
(2) Excludes 816,503 shares of Common Stock issuable upon exercise of
outstanding stock options as of March 31, 1996 at a weighted average
exercise price of $0.51 per share; 257,880 shares of Common Stock issuable
upon exercise of warrants outstanding at March 31, 1996 at exercise prices
ranging from $4.87 to $7.80 per share; warrants to purchase 193,750 shares
of Common Stock issued in connection with a bridge financing completed in
March 1996 (the "1996 Bridge Financing") at an exercise price per share
equal to the greater of $0.25 and 80% of the offering price; warrants to
purchase 19,375 shares of Common Stock issued to the placement agent in the
1996 Bridge Financing at an exercise price per share equal to 110% of the
greater of $0.25 and 80% of the offering price, and warrants to purchase
230,000 shares of Common Stock to be issued to the Representatives at the
closing of this offering at an exercise price equal to 120% of the offering
price. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Description of
Capital Stock," "Underwriting" and Notes 5 and 9 of Notes to Financial
Statements.
(3) Gives effect to the recognition, upon closing of the Offering, of charges to
operations of (i) the unamortized debt discount of $291,781 and (ii)
unamortized deferred financing costs of $188,442 relating to the 1996 Bridge
Financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Use of
Proceeds," and Note 9 of Notes to Financial Statement.
14
<PAGE> 17
DILUTION
As of March 31, 1996, the Company had a pro forma net tangible book value
of $(120,000) or $(0.03) per share of Common Stock. Pro forma net tangible book
value per share is determined by dividing pro forma tangible book value (total
tangible assets less total liabilities) by the number of shares of Common Stock
outstanding. Without taking into account any other changes in the net tangible
book value after March 31, 1996, other than to give effect to the receipt by the
Company of the estimated net proceeds from the sale of the 2,300,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $8.00 per share and the application of a portion of the net proceeds
therefrom to repay the 1996 Bridge Financing, the pro forma net tangible book
value of the Company as of March 31, 1996 would have been $15,620,000 or $2.29
per share. This represents an immediate increase in such pro forma net tangible
book value of $2.32 per share to existing stockholders and an immediate dilution
of $5.71 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $8.00
Pro forma net tangible book value per share before the
offering............................................... $(0.03)
Increase per share attributable to new investors.......... 2.32
------
Pro forma net tangible book value per share after the
offering.................................................. 2.29
-----
Dilution per share to new investors......................... $5.71
=====
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1996,
the difference between existing stockholders and purchasers of shares in the
offering (at an assumed initial public offering price of $8.00 per share) with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 4,529,015 66.3 $10,993,800 37.4 $2.43
New investors........................... 2,300,000 33.7 $18,400,000 62.6 $8.00
--------- ----- ---------- -----
Total................................... 6,829,015 100.0% $29,393,800 100.0%
========= ===== ========== =====
</TABLE>
The foregoing computations excludes 816,503 shares of Common Stock issuable
upon exercise of stock options outstanding as of March 31, 1996, at a weighted
average exercise price of $0.51 per share; 257,880 shares of Common Stock
issuable upon exercise of warrants outstanding at March 31, 1996 at exercise
prices ranging from $4.87 to $7.80 per share; warrants to purchase 193,750
shares of Common Stock issued in connection with the 1996 Bridge Financing at an
exercise price per share equal to the greater of $0.25 and 80% of the offering
price; warrants to purchase 19,375 shares of Common Stock issued to the
placement agent in the 1996 Bridge Financing at an exercise price per share
equal to 110% of the greater of $0.25 and 80% of the offering price; and
warrants to purchase 230,000 shares of Common Stock to be issued to the
Representatives at the closing of the offering at an exercise price equal to
120% of the offering price. To the extent that options or warrants are exercised
and shares of Common Stock are issued, there will be further dilution to new
investors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Description of
Capital Stock" and Notes 5 and 9 of Notes to Financial Statements.
15
<PAGE> 18
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The statement of operations data for the period
from October 22, 1992 (inception) to June 30, 1993 and for the years ended June
30, 1994 and 1995 and the balance sheet data at June 30, 1994 and 1995 are
derived from, and should be read in conjunction with, the Company's Financial
Statements and Notes thereto audited by Ernst & Young LLP, independent auditors,
included elsewhere in this Prospectus.(1) The balance sheet data at June 30,
1993 is derived from audited financial statements not included in this
Prospectus. The statement of operations data for the nine month periods ended
March 31, 1995 and 1996 and for the period from October 22, 1992 (inception)
through March 31, 1996 and the balance sheet data at March 31, 1996 have been
derived from unaudited interim financial statements included elsewhere in this
Prospectus and include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial position at, and results of operations for, such periods. The
operating results for the nine months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the full year or any future period.
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
PERIOD FROM YEARS ENDED JUNE ENDED OCTOBER 22, 1992
OCTOBER 22, 1992 30, MARCH 31, (INCEPTION)
(INCEPTION) THROUGH ----------------- ----------------- THROUGH
JUNE 30, 1993 1994 1995 1995 1996 MARCH 31, 1996
------------------- ------- ------- ------- ------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Grant revenue..................... $ -- $ -- $ 178 $ 90 $ 87 $ 265
Expenses:
Research and development....... 932 2,558 2,290 1,526 1,875 7,655
General and administrative..... 538 1,283 1,334 983 708 3,863
------- ------- ------- ------- ------- --------
Total expenses................. 1,470 3,841 3,624 2,509 2,583 11,518
------- ------- ------- ------- ------- --------
Loss from operations.............. (1,470) (3,841) (3,446) (2,419) (2,496) (11,253)
Other income (expense), net....... (24) (8) 181 (2) (35) 114
------- ------- ------- ------- ------- --------
Net loss.......................... $(1,494) $(3,849) $(3,265) $(2,421) $(2,531) $ (11,139)
======= ======= ======= ======= ======= ========
Pro forma net loss per share(2)... $ (0.62) $ (0.47)
======= =======
Shares used in computing pro forma
net loss per share(2).......... 5,295 5,432
======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------
1993 1994 1995 MARCH 31, 1996
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 666 $ 244 $ 203 $ 1,938
Working capital (deficit)............................. 199 (1,615) (916) (829)
Total assets.......................................... 1,920 2,133 1,841 3,636
Capital lease obligations, noncurrent portion......... -- 27 214 193
Deficit accumulated during the development stage...... (1,494) (5,343) (8,608) (11,139)
Stockholders' equity (deficit)........................ 1,441 (69) 184 (120)
</TABLE>
- ---------------
(1) The report of Ernst & Young LLP, which also appears herein, contains a
paragraph that explains the uncertainty as to the ability of the Company to
continue as a going concern. See Note 1 of Notes to the Financial
Statements. The Company anticipates that its existing capital resources,
including the net proceeds of this offering, will be adequate to fund its
capital needs for at least the next 12 months.
(2) See Note 1 of Notes to Financial Statements for a description of the shares
used in calculating pro forma net loss per share.
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception, the Company has devoted substantially all of its
resources to research and development activities. The Company is a development
stage company and has not received any revenue from the sale of products. The
Company does not anticipate generating revenue from the sale of products in the
foreseeable future. The Company expects its source of revenue, if any, for the
next several years to consist of government grants and payments under
collaborative arrangements. The Company has incurred losses since its inception
and expects to incur substantial losses over the next several years due to
ongoing and planned research and development efforts, including preclinical
studies and clinical trials. At March 31, 1996, the Company had an accumulated
deficit of $11.1 million.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors."
RESULTS OF OPERATIONS
PERIOD FROM OCTOBER 22, 1992 (INCEPTION) THROUGH JUNE 30, 1993, AND YEARS
ENDED JUNE 30, 1994, AND 1995
Grant revenue increased from zero for the period ended June 30, 1993 and
the year ended June 30, 1994 to $178,000 for the year ended June 30, 1995. Grant
revenue for 1995 consisted of reimbursements under a NIH grant. Revenues earned
under research grants are determined by the timing of the award from the issuing
agency. As a result, research grant revenue earned in one period is not
predictive of research grant revenue to be earned in future periods.
The Company's research and development expenses increased from $932,000 for
the period ended June 30, 1993, to $2.6 million for the year ended June 30,
1994, and decreased to $2.3 million for the year ended June 30, 1995. The
increase from fiscal 1993 to fiscal 1994 is attributable to the commencement of
research studies and activities to expanded research and development, including
the initial purchase of supplies and payments under licensing arrangements. The
decrease from fiscal 1994 to fiscal 1995 was due primarily to the concentration
of costs associated with startup in 1994. The Company expects research and
development spending to increase significantly over the next several years as
the Company expands research and product development efforts.
General and administrative expenses increased from $538,000 for the period
ended June 30, 1993, to $1.3 million for the year ended June 30, 1994, and
remained constant at $1.3 million for the year ended June 30, 1995. The increase
from fiscal 1993 to fiscal 1994 was primarily due to increases in personnel and
support costs, legal expenses, and business development activities. General and
administrative expenses are expected to continue to increase as the level of the
Company's activities increases but to decrease as a percentage of total
expenses.
NINE MONTHS ENDED MARCH 31, 1995, AND MARCH 31, 1996
Grant revenue was $90,000 for the nine months ended March 31, 1995 and
$87,000 for the nine months ended March 31, 1996. For both periods grant revenue
consisted of reimbursements under a NIH grant.
Research and development expenses increased from $1.5 million for the nine
months ended March 31, 1995 to $1.9 million for the nine months ended March 31,
1996 primarily due to expansion of research and development activities.
General and administrative expenses decreased from $983,000 for the nine
months ended March 31, 1995, to $708,000 for the nine months ended March 31,
1996. The decrease was primarily due to lower personnel and support costs and
the write-off in 1994 of unamortized organization costs.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through private
placements of Common Stock and Preferred Stock and the 1996 Bridge Financing
which was completed on March 29, 1996. Through March 31, 1996, the Company had
raised approximately $11.0 million, net of financing costs, from the sale of
Common Stock and Preferred Stock and $1.9 million from the 1996 Bridge
Financing.
At March 31, 1996, the Company had cash and cash equivalents of
approximately $1.9 million. In March 1996, the Company completed the 1996 Bridge
Financing in which the Company issued $1,937,500 principal amount of promissory
notes (the "Notes") and warrants to purchase 193,750 shares of Common Stock at
an exercise price per share equal to the greater of $0.25 per share and 80% of
the offering price. The Notes accrue interest at the rate of 12% per year until
March 1997 and are due and payable upon the earlier of ten days following the
closing of this offering or other equity financing with gross proceeds to the
Company exceeding $2,500,000 or March 1997. If the amounts due under the Notes
are not paid by the maturity date, 10% of the original principal amount of the
Notes become convertible into shares of Common Stock at a price of $0.04 per
share. In addition, in the event of any default under the Notes the remaining
balance continues to accrue interest at the rate of 18% per year. In connection
with the 1996 Bridge Financing, the Company agreed to pay the placement agent a
commission equal to 10% of the gross proceeds and warrants to purchase 19,375
shares of Common Stock at an exercise price per share equal to 110% of the
greater of $0.25 and 80% of the offering price. The Company intends to use a
portion of the net proceeds of this offering to repay the entire principal
amount of the Notes, plus accrued interest. The warrants expire in March 2001.
The warrants were assigned a value of $300,000. This amount is reflected as a
discount on the Notes and will be accreted as additional financing (interest)
expense over the term of the Notes. The Company will incur, during the quarter
in which the anticipated offering is completed and the Notes are repaid, a
non-recurring charge representing the unamortized portion of the $300,000 Notes
discount and the $193,750 of deferred financing costs relating to these Notes.
(See Note 9 of notes to financial statements.)
The Company expects its cash requirements to increase significantly in
future periods. The Company will require substantial funds to conduct the
research and development activities and preclinical studies and clinical testing
of its potential products and to market any products that are developed. To the
extent the Company decides to expand its existing facilities, the Company would
require substantial additional capital. The Company's cash requirements may vary
materially from those now planned because of the results of research,
development and clinical trials, the time and costs involved in obtaining
regulatory approvals, the cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights, competing technological
and market developments, changes in the Company's existing research
relationships, the ability of the Company to establish collaborative
arrangements, the development of commercialization activities and arrangements
and the purchase of additional capital equipment.
The Company believes that the net proceeds from this offering, together
with available cash and cash equivalents and short-term investments, will be
sufficient to meet the Company's operating expenses and capital requirements for
at least the next 12 months. See "Use of Proceeds." The Company will be required
to seek additional funds through public or private financings or collaborative
arrangements with corporate partners. Issuances of additional equity securities
could result in substantial dilution to stockholders. There can be no assurance
that additional funding will be available on terms acceptable to the Company, if
at all. The failure to fund its capital requirements would have a material
adverse effect on the Company's business. See "Risk Factors -- Future Capital
Needs; Uncertainty of Additional Funding."
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BUSINESS
Avigen is a leader in the development of gene therapy products derived from
adeno-associated virus ("AAV") for the treatment of inherited and acquired
diseases. The Company's proposed gene therapy products are designed for in vivo
administration to achieve the production of therapeutic proteins within the
body. The Company is developing two broad-based proprietary gene delivery
technologies: AAV vectors and the Targeted Vector Integration ("TVI") system.
The Company believes AAV vectors can be used to deliver genes for the treatment
of brain, liver and prostate cancer, anemia, hemophilia, hyperlipidemia and
metabolic storage diseases. The Company also believes its TVI system will allow
it to pursue more effective treatments for blood cell-related diseases,
including sickle cell anemia, beta-thalassemia and human immunodeficiency virus
("HIV") infection.
AAV Vectors. The Company's gene therapy products are based on gene delivery
systems called vectors. AAV vectors are derived from AAV, a common
non-pathogenic human virus, and take advantage of the natural efficiency with
which viruses deliver genes to cells. To produce an AAV vector, the virus is
modified by removing the viral genes and replacing them with genes for
therapeutic proteins. The Company believes that AAV vectors combine desirable
properties of viral and non-viral vectors and may offer several potential
advantages over other gene therapy vectors. These advantages include efficient
delivery of genes to both dividing and non-dividing target cells, absence of
viral genes that may be responsible for causing an undesirable immune response,
in vivo administration to patients, higher levels of gene expression and
improved stability allowing AAV vectors to be stored and handled like more
traditional pharmaceutical products. Due to the complex replication cycle of the
natural virus, AAV vectors have been difficult to produce. Avigen believes that
its proprietary manufacturing process will simplify manufacturing and
purification and achieve increased yield of high purity AAV vectors.
In spite of the potential advantages, the use of AAV vectors for gene
therapy also presents potential disadvantages. Since the genome of the natural
AAV virus is relatively small, the amount of the genetic material that can be
included in an AAV vector is limited. Therefore, large genes cannot be delivered
by AAV vectors. In addition, in vivo administration of AAV vectors may result in
the production of antibodies which may limit the effectiveness of repeat dosing
of these vectors. Furthermore, direct administration of AAV vectors may result
in their distribution to inappropriate tissues.
TVI System. The Company's proprietary TVI system utilizes components of AAV
to integrate large segments of DNA at a specific location on human chromosome
19. There are 23 pairs of chromosomes in human cells. Integration is essential
for certain gene therapy applications where the genes must be passed on to the
progeny of the cell. The Company believes gene therapy vectors that integrate at
a specific site, such as the site on chromosome 19 where the non-pathogenic AAV
normally integrates, will have an increased safety profile relative to vectors
that integrate randomly. The Company also believes that the ability to integrate
large segments of DNA could lead to gene therapy applications involving the
delivery of multiple genes or requiring precise or controllable gene regulation.
Product Development. Based on encouraging results in animal models, the
Company has initiated two preclinical development programs using AAV vectors for
the treatment of brain tumors and anemia. Additionally, the Company has a number
of research programs and collaborations intended to generate product development
candidates for liver and prostate cancer, hemophilia, hyperlipidemia, metabolic
storage diseases, hemoglobin disorders and HIV infection. Avigen believes that
the number of potential applications for gene therapy will increase
significantly as advances are made in the area of genomics. These advances are
enabling scientists to link diseases to specific gene defects. As more genes are
discovered, the need for improved gene delivery technologies is expected to
increase. With the identification of new disease-related genes, the Company
believes that its AAV vectors and its TVI system will provide it with
significant opportunities for new gene therapy products.
Corporate Partnering Opportunities. The Company is actively seeking to
develop long-term strategic collaborations with pharmaceutical companies that
can provide funding for research and development activities and clinical trials
as well as access to complementary technologies, including gene sequences. The
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Company believes that its broad-based proprietary gene delivery technologies can
be used to deliver a number of different genes, giving rise to multiple product
and corporate partnering opportunities.
GENE THERAPY BACKGROUND
Gene therapy is an approach to the treatment of inherited and acquired
diseases whereby genes are delivered into patients' cells in order to direct the
cells to produce therapeutic proteins. Genes are regions of DNA that contain the
instructions that direct cells to produce proteins, one of the basic building
blocks of all cells. Each cell in the body has the ability to produce proteins
necessary for cellular structure, growth and function. The process that results
in protein production by the cell is known as gene expression. By directing the
cells to produce proteins, gene therapy offers the opportunity to correct
defects or diseases at the molecular level.
All gene therapy approaches contain three key components: (i) the vector,
(ii) the gene cassette, and (iii) the target cell. See Figure 1. The vector is
the vehicle used to deliver the gene cassette to target cells. The gene cassette
is the segment of DNA containing the gene for the therapeutic protein and the
necessary control elements. The vector containing the gene cassette is delivered
to the target cell capable of producing the therapeutic protein.
Figure 1. [A graphic representation of vectors, gene cassettes, and target
cells appear here.]
Vectors. One of the most critical factors for the success of gene therapy
products is the development of vectors that can practically, efficiently and
safely deliver genes into cells. The process of gene transfer may be
accomplished in vivo (by administering the vector directly to patients) or ex
vivo (by removing patients' cells and combining them with vector). Viral vectors
are derived from naturally occurring viruses. Non-viral vectors are produced by
standard recombinant DNA techniques.
Viral vectors take advantage of the natural efficiency with which viruses
transport their own genetic information into cells. Viral vectors are
constructed by removing some or all of the viral genes and replacing them with a
gene cassette. Viral vectors have been the most extensively studied method of
gene delivery, and most gene therapy applications currently undergoing clinical
evaluation involve the use of viral vectors. However, viral vectors currently
under clinical investigation have limitations which may affect their safety or
efficacy. Viral vectors based on retroviruses ("retroviral vectors"), for
example, require that target cells be dividing or multiplying to achieve gene
delivery. Because most target cells in the body are not dividing or divide very
slowly and because retroviruses become rapidly inactivated in the blood, most
clinical applications currently under evaluation employing retroviral vectors
involve a complex and expensive procedure whereby patient cells are removed and
the gene is delivered to these cells ex vivo.
Another type of viral vector is derived from adenovirus. Adenoviral vectors
are capable of efficiently delivering genes to several dividing and non-dividing
cell types. However, adenoviral vectors contain and express genes from the
naturally occurring virus, and as a result, the body's immune system is
triggered
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following their administration. This immune response is believed to limit the
length of time that gene expression can be maintained in the target cell.
Additional safety issues have been raised by the use of retroviral and
adenoviral vectors since both vectors are derived from pathogenic viruses.
During the manufacture of these vectors, there is a possibility of generating a
small amount of the natural virus. Although considered a low risk, such a
possibility necessitates additional costly product testing. In addition,
retroviral vectors randomly integrate the gene cassette into the target cell.
Any gene therapy approach that involves the random integration of genetic
material into the target cell's DNA could, theoretically, cause the activation
of another gene involved in the development of cancer or the inactivation of a
beneficial gene. It is generally believed that such events would be rare.
Non-viral vectors are produced by standard recombinant DNA techniques and
are delivered to target cells either unmodified ("naked DNA") or combined with
lipids (e.g., liposomes) or proteins designed to facilitate the entry of DNA
into the cells. Because they have no components derived from viruses, they are
perceived to be safer. In addition, non-viral vectors are capable of delivering
large segments of DNA to target cells. However, non-viral vectors are relatively
inefficient at delivering genes to cells, and in general, have resulted in
temporary or low levels of gene expression in target cells.
In contrast to retroviral and adenoviral vectors, AAV vectors are derived
from a non-pathogenic human virus to which the majority of the population has
been exposed. In spite of its name, AAV is genetically unrelated to adenovirus.
AAV, as it exists in nature, can only reproduce in the presence of another
virus. AAV vectors are derived from AAV by removing all of the viral genes and
replacing them with an appropriate gene cassette. The Company believes that AAV
vectors offer several potential advantages over other viral and non-viral
vectors. These advantages include efficient delivery of genes to both dividing
and non-dividing target cells, absence of viral genes that may be responsible
for causing an undesirable immune response, in vivo administration to patients,
higher levels of gene expression and improved stability allowing AAV vectors to
be manufactured, stored and handled like more traditional pharmaceutical
products. The Company believes that AAV vectors combine the desired properties
of viral and non-viral vectors and may offer a safer and more practical
alternative to the other gene therapy vectors. Two clinical trials evaluating
AAV vectors manufactured by another company for the treatment of cystic fibrosis
are currently being conducted.
Gene Cassette. Packaged inside a gene therapy vector is the gene cassette,
containing the gene for a desired therapeutic protein and the control elements
which direct protein production by the cell. The design of the gene cassette
depends on the therapeutic application. The gene may be a naturally occurring
gene for a therapeutic protein (e.g., erythropoietin or factor VIII), one that
sensitizes cancer cells to chemotherapy (a "suicide gene") or a man-made gene
with novel anti-viral properties. The control elements that regulate expression
of the delivered genes are equally important in the success of gene therapy
products. Certain control elements permit gene expression in many cell types
while other cell-specific control elements direct expression only in a
particular type of cell. The Company believes that inclusion of the
cell-specific control elements in a gene therapy vector may increase safety in
certain gene therapy applications by limiting gene expression to a desired organ
or tissue.
Target Cells. The three major types of cell targets for gene therapy are
differentiated cells, cancer cells and stem cells. Differentiated cells
constitute the majority of cells in the body, including cells in muscle, heart,
skin, brain and liver. The Company's research has demonstrated that AAV vectors
are well-suited for gene delivery to specific differentiated cell types. These
cell types have limited, if any, capacity to divide or multiply. To be effective
in clinical applications involving differentiated cells, a gene therapy vector
must be capable of efficiently delivering genes to a sufficiently large number
of non-dividing cells to produce appropriate levels of the therapeutic protein.
Similarly, for cancer cells, an effective gene therapy vector must be able to
efficiently deliver genes to a significant number of cells within a tumor. The
Company believes that AAV vectors may be useful for the treatment of several
cancer types. Stem cells are cells that give rise to differentiated cells. Bone
marrow stem cells, which give rise to the mature red and white cells in the
blood, are the most extensively studied stem cell target for gene therapy. To be
effective for gene therapy applications involving stem cells, a gene therapy
vector must be capable of integrating or inserting its gene cassette into the
genome of the stem cell. Therefore, as the stem cells multiply and divide, the
gene cassette will be passed on
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to subsequent generations of cells. The Company believes the shortcomings of
current gene therapy approaches limit their applications to stem cells, and is
developing its TVI system to address these needs.
AVIGEN TECHNOLOGY
AAV VECTORS
AAV vectors are emerging as a promising gene delivery system because they
combine the efficiency with which viral vectors deliver their DNA to cells with
a potential safety profile closer to that of non-viral vectors. A major
limitation in the development of clinical applications for AAV vectors has been
the lack of an efficient production method. Current methods, in general, result
in low yields of AAV vectors and require the input of an infectious virus, most
commonly adenovirus, to initiate vector replication. The Company has developed a
proprietary manufacturing process which allows for the more efficient production
of larger quantities of AAV vectors and does not require the use of an
infectious virus, thereby eliminating some potentially harmful contaminants. The
Company believes that its process will simplify manufacturing and purification
of AAV vectors for clinical trials. In addition, the Company believes that its
proprietary process will result in a product that will be safer and, as a
result, more commercially viable than AAV vectors produced by commonly employed
methods.
Figure 2. [A graphic representation of the elements of AAV vectors appears
here.]
AAV, as it occurs in nature, has a single-stranded DNA genome which is
encased in a protein coat. The AAV genome consists of three elements. See Figure
2a. The first is the "rep" gene which directs production of the proteins that
enable the virus to replicate its genome and integrate into a specific site on
human chromosome 19. The second is the "cap" gene which directs production of
the protein coat. These two viral genes are bound by two short identical
stretches of DNA called inverted terminal repeats ("ITRs") that are also
required for integration and genome replication. In addition, the ITRs contain
the instructions for insertion of the viral genome into the protein coat. AAV
vectors are derived from the naturally occurring virus by recombinant DNA
techniques. The viral genome extracted from the virus is "cloned" into a plasmid
to facilitate its modification. The viral rep and cap genes are then removed,
and a gene cassette is inserted in their place between the viral ITRs. See
Figure 2b. In order to produce AAV vectors, the resulting "vector plasmid" is
introduced into "packaging cells" in tissue culture along with a "helper
plasmid" containing the rep and cap genes. Previous methods for AAV vector
production also required infection of the packaging cells with a "helper virus,"
most typically adenovirus, in order to trigger AAV vector production by these
cells. The Company's proprietary manufacturing process eliminates the need for a
helper virus. This eliminates the risk
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of adenovirus contamination of the final product, rather than depending on the
inactivation of the virus during the manufacturing process. The Company's
manufacturing process also results in substantially increased yield of AAV
vector. The result of this effort is a versatile method suitable for the
production of high grade and high titer AAV vector preparations that the Company
is currently using to support its preclinical studies and research. The Company
is in the process of scaling up this process in anticipation of clinical trials
and believes that it can be readily adapted to the FDA's current Good
Manufacturing Practice regulations ("cGMP").
TARGET VECTOR INTEGRATION (TVI) SYSTEM
The Company's proprietary TVI system utilizes components of AAV to
integrate large segments of DNA at a specific location on human chromosome 19.
See Figure 3. Integration is essential for gene therapy applications where the
gene cassette is delivered to a cell which is capable of multiplying and
dividing and where the gene cassette must be passed on to the progeny of the
cell. In addition, the ability to target integration of a gene cassette to a
specific site on a chromosome may increase the predictability of therapeutic
protein production and the product safety profile. Delivering large segments of
DNA is important for gene therapy applications that require the delivery of
several genes or regulatory elements too large to be accommodated in the current
generation of gene therapy vectors.
The Company's TVI system utilizes the AAV ITR and Rep proteins to achieve
site-specific integration of DNA segments. The Company believes that no current
gene therapy vectors are capable of achieving site-specific integration. Avigen
scientists have demonstrated that large segments of DNA attached to an AAV ITR
can be targeted for integration into human chromosome 19 in the presence of Rep
proteins; however, these results have not been independently verified.
Development of TVI technology is at an early stage and several issues
remain to be addressed. The Company is currently developing methods to
incorporate TVI into novel gene therapy vectors for the delivery of genes into
target cells. Because several genes and control elements could be incorporated
into a single gene therapy vector, the Company believes gene therapy
applications could be developed involving precise gene regulation or complex
control systems, such as gene activation with orally active drugs (so-called
"gene switches"). Initially, the Company is focusing on developing TVI vectors
to deliver genes to bone marrow stem cells for the treatment of
hemoglobinopathies (sickle cell anemia and beta-thalassemia) and Acquired Immune
Deficiency Syndrome ("AIDS").
Figure 3. [A graphic representation of the Company's TVI system appears here.]
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PRODUCT DEVELOPMENT PROGRAMS
The Company has selected its product development programs based on
experimental data that demonstrate the feasibility of gene delivery to specific
target cells. The Company believes that its technologies may be used with
several different genes, giving rise to multiple product and corporate
partnering opportunities. Avigen believes that further advances in genomics,
including the sequencing, mapping and identification of genes linked to
diseases, may offer other product opportunities. The following table summarizes
the Company's current product development programs:
- --------------------------------------------------------------------------------
AAV VECTOR-BASED GENE THERAPY PROGRAMS
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
PROGRAM INDICATION TARGET CELL STATUS(1)
Cancer Brain Tumors Tumor Preclinical
Hepatocellular Tumor Research
Carcinoma
Prostate Cancer Tumor Research
Blood Diseases Anemia(2) Muscle Preclinical
Hemophilia Muscle/Liver Research
Metabolic Diseases Hyperlipidemia Muscle Research
Storage Diseases Muscle Research
- --------------------------------------------------------------------------------------------
TVI-BASED GENE THERAPY PROGRAMS
- --------------------------------------------------------------------------------------------
PROGRAM INDICATION TARGET CELL STATUS(1)
Blood Diseases Anemia(3) Bone Marrow Stem Research
Cells
Infectious Diseases HIV Bone Marrow Stem Research
Cells
- --------------------------------------------------------------------------------------------
</TABLE>
(1) "Research" indicates activities related to designing, constructing and
testing vectors in specific target cell types in order to evaluate gene
expression. "Preclinical" indicates in vitro and animal studies to evaluate
efficacy, pharmacology and toxicology.
(2) Includes programs utilizing delivery of an erythropoietin gene for the
treatment of renal failure, sickle cell anemia and beta-thalassemia.
(3) Includes programs utilizing delivery of a hemoglobin gene for the treatment
of sickle cell anemia and beta-thalassemia.
CANCER
Avigen has focused on the treatment of cancer as one of its earliest
applications of AAV gene therapy. Cancer is currently the second-leading cause
of death in the United States with 1.2 million cases diagnosed each year and
more than 500,000 deaths annually. Greater than 2.3 million cases are diagnosed
each year worldwide. Conventional strategies for treatment of cancer include
surgery, radiation therapy and chemotherapy. Potential gene therapy strategies
for cancer include the delivery of genes to tumor cells which increase the
susceptibility of these cells to the cytotoxic effect of drugs ("suicide gene
therapy"), the delivery of genes to tumor cells to enhance their destruction by
the body's immune system ("immunotherapy") and the delivery of genes to tumor
cells that directly promote cell death. The Company is in the process of
developing AAV vectors to treat solid tumors in the brain, liver and prostate.
Brain Tumors. Primary brain tumors represent a significant health problem
with an incidence estimated to be approximately 18,000 new cases in 1996 in the
United States. Glioblastoma multiforme ("GBM"), a type of brain tumor,
represents 20-30% of all such tumors. Patients with GBM have a particularly grim
prognosis, with a median survival rate of approximately ten months after surgery
and high-dose radiation.
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Systemically administered chemotherapy has not significantly increased either
survival or quality of life. After recurrence of GBM, the median survival rate
is approximately nine months even with treatment.
In collaboration with investigators in the Department of Neurosurgery at
Nagoya University, Japan, the Company has demonstrated the efficacy of AAV
vector-based gene therapy for GBM in an experimental animal model. For this
initial study, the Company designed and produced an AAV vector containing the
gene for the enzyme, thymidine kinase ("TK"). When expressed in dividing cells
such as tumor cells, the TK gene renders these cells sensitive to the toxic
effect of the FDA-approved antiviral drug, ganciclovir ("GCV"). TK converts the
relatively non-toxic GCV into by-product which is toxic to the dividing tumor
cells. Following a single injection of an AAV-TK vector into brain tumors
arising from human glioma cells implanted in the brains of mice, a significant
reduction in tumor size was observed in all animals that also received GCV. In
addition, there was evidence of a "bystander effect" whereby tumor cells that
did not receive the TK gene but that were in contact with cells that did were
also killed. The Company believes that the bystander effect significantly
contributes to the efficacy of this therapeutic strategy.
The Company believes that this approach offers the potential for increased
efficacy and decreased toxicity as compared to the systemic administration of
chemotherapeutic agents. The AAV vector can be injected directly into the tumor
or applied to the surgical field following removal of the tumor. In addition,
the toxic by-product of GCV only kills dividing cells, sparing the surrounding
non-dividing brain cells, and is produced only in response to the systemic
administration of GCV. Therefore, the Company believes that potential side
effects can be reduced or eliminated by controlling the administration of GCV.
Clinical trials are currently being performed by investigators at several
academic institutions in collaboration with another gene therapy company to
evaluate suicide gene therapy using retroviral vectors to deliver the TK gene.
However, since retroviral vectors generally are ineffective when administered
directly into the body, these protocols involve the delivery of mouse cells that
produce the retroviral vectors into the brains of patients. The Company believes
that its AAV vector approach offers a safer and potentially more effective
alternative with greater potential for commercialization.
The Company is also investigating the utility of combining the suicide gene
strategy with immunotherapy. The Company through its collaborators at Nagoya
University has demonstrated that AAV vectors can be used to deliver and achieve
the simultaneous expression of both the TK gene and an immunostimulatory
lymphokine gene in tumor cells in vitro. The Company's collaborators are
currently evaluating the effects of using AAV vectors to deliver the genes for
immunostimulatory factors to mice with experimentally-induced brain tumors. The
Company believes that this combined approach may increase the efficacy and the
potential utility of AAV vectors for the treatment of brain tumors.
Hepatocellular Carcinoma. Hepatocellular carcinoma, or liver cancer, is
among the most common form of cancer worldwide. Based on industry sources, the
Company believes that there are over 10,000 new cases of liver cancer in the
United States each year. Current therapeutic modalities include surgical
resection, regional chemotherapy or tumor embolization. Long-term survival rates
are poor.
An Avigen collaborator and scientific advisor at the University of
California, San Francisco ("UCSF") has demonstrated that AAV vectors can deliver
the TK gene to human hepatoma cells in tissue culture and sensitize them to the
toxic effects of GCV. In addition, those studies employed a hepatoma-specific
promoter which restricted expression of the TK gene to hepatoma cells. This
collaborator is currently evaluating the efficacy of the Company's AAV-TK
vectors in animal models of hepatoma. As part of this collaboration, the Company
has also constructed and produced an AAV vector containing both the TK gene and
the gene for the immunostimulatory lymphokine, interleukin-2 ("IL-2"), under
control of the hepatoma-specific promoter. It is believed that the inclusion of
IL-2 may increase the effectiveness of this approach by initiating a systemic
immune response to the tumor. Residual tumor can then be eliminated by the
administration of GCV.
Prostate Cancer. Prostate cancer is the most common cancer among American
men and is second only to lung cancer as a cause of male cancer deaths. The
American Cancer Society has estimated that there will be 300,000 cases diagnosed
in the United States in 1996 and 40,000 deaths. Currently, prostate cancer is
responsible for about 3% of all deaths in men over 55 years of age. Because the
incidence of prostate cancer
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increases more rapidly with age than any other form of cancer and the average
age of American men is rising, the number of United States patients with
prostate cancer is expected to rise steadily over the next decade.
Present therapy for prostate cancer depends on the stage or extent of
disease at the time of diagnosis. Until recently, the diagnosis of prostate
cancer was generally made by the detection of a nodule or mass on routine rectal
examination or during evaluation for difficulty with urination. The development
of sensitive blood tests to detect prostate cancer and the utilization of
sonogram detection systems have increased the diagnosis of prostate cancer,
particularly in individuals with early stage disease. Approximately 50% of
patients are diagnosed when the disease is still localized to the prostate. Such
patients generally have the option of surgical removal of the prostate or
externally applied radiation therapy. Although either of these treatment options
results in long-term survival rates equal to or approaching age-matched
individuals without prostate cancer, these costly procedures may result in
significant treatment-related side effects, including impotence, urinary
incontinence and even death. Some clinicians recommend no treatment in older
patients because of the morbidity and cost.
The Company is pursuing gene therapy as a treatment for early stage
prostate cancer. The Company's AAV vectors are well suited for treatment of
prostate cancer because prostate tumor cells divide extremely slowly and tumors
are frequently localized to a particular site. In addition, prostate tumors can
be easily accessed by direct injection.
In collaboration with investigators at Baylor College of Medicine, the
Company is evaluating the use of AAV vectors for the treatment of prostate
cancer. These investigators have demonstrated that following injection of an AAV
vector containing a "marker" gene directly into the prostate in mice, expression
of the marker protein is observed within the prostate epithelium. Recently, they
have also developed a model of prostate cancer in mice. Currently, these
investigators are evaluating the antitumor effects of direct injection of an AAV
vector containing the TK and IL-2 genes into these tumors. They are also
developing other strategies using AAV vectors containing tumor suppressor genes.
These vectors will incorporate a prostate-specific promoter designed to limit
gene expression to the prostate cells.
Blood Diseases
Anemia. Anemia results from a variety of inherited and acquired conditions
resulting in a reduction of the number of red blood cells and hemoglobin, the
red blood cell protein that carries oxygen. In the case of sickle cell anemia
and beta-thalassemia, two inherited diseases, anemia results from the production
of inadequate or abnormal hemoglobin molecules. In acquired cases such as renal
failure, AIDS or as the result of the administration of chemotherapy for cancer,
anemia is generally due to the inadequate production of red blood cells.
Erythropoietin ("EPO") is the protein produced by the kidney that
stimulates cells in the bone marrow to produce red blood cells and is involved
in the production of hemoglobin. Recombinant human EPO, a drug first developed
by Amgen, Inc., is administered several times a week by injection for the
treatment of anemia secondary to renal failure, AIDS or chemotherapy. Currently,
there are approximately 140,000 renal failure patients receiving dialysis in the
United States and an equivalent number in Europe. It is estimated that about
85,000 renal failure patients receiving dialysis are presently receiving EPO
worldwide. In addition, it is estimated that approximately 50,000 AIDS patients
are also currently being treated with EPO. The incidence of anemia in the
approximately 1 million cancer patients in the United States is estimated at
14%, providing a potential additional 140,000 patients who also may be
candidates for EPO therapy.
There are an estimated 60,000 patients with sickle cell anemia in the
United States. The Company believes that there are approximately 8,000 to 10,000
cases of beta-thalassemia in the United States. Currently, there is no effective
and widely available therapy for beta-thalassemia and sickle cell anemia.
Studies in animals and clinical trials in a small number of patients suggest
that administration of large doses of EPO, either alone or in combination with
other agents, in certain individuals with beta thalassemia and sickle cell
anemia can increase the production of functional hemoglobin molecules and
perhaps ameliorate the symptoms of disease.
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Avigen scientists have demonstrated that biologically active levels of EPO
can be achieved in mice following a single intramuscular administration of an
AAV vector containing a gene for human EPO. Mice treated in this study showed a
dose-dependent increase in the amount of EPO in their serum and a proportional
increase in red blood cells. In this ongoing study, increased EPO levels and red
blood cell production have persisted undiminished for greater than five months.
The results of this study have not been independently verified. Preclinical
studies are currently planned to evaluate the efficacy of intramuscularly
administered AAV vectors containing the EPO gene in animal models of renal
failure and beta-thalassemia.
The Company is also developing a separate approach for the treatment of
sickle cell anemia and beta-thalassemia by delivering normal hemoglobin genes to
patients' defective bone marrow stem cells using TVI technology. Company
scientists are developing vectors to deliver large regions of the hemoglobin
gene "locus," containing the hemoglobin gene and the surrounding control
regions, for integration into human chromosome 19. All current applications for
treating bone marrow cells involve removing cells from the body. The Company
believes that potential treatments arising from this work will involve exposure
of patients' bone marrow stem cells ex vivo employing currently available
clinical procedures. The Company has entered into a collaboration with
Children's Hospital Los Angeles and Children's Hospital Oakland Research
Institute to develop an animal model for sickle cell anemia which will be useful
for testing vectors which incorporate the TVI system for the treatment of this
disease.
Hemophilia. Hemophilia is a hereditary disorder characterized by the
decrease or absence of clotting factor activity in the plasma. The most common
forms are caused by a defect or deficiency in protein coagulation factor VIII
("hemophilia A") or factor IX ("hemophilia B"). Approximately 10,000
individuals, mostly male, were treated for hemophilia A and about 2,800
individuals were treated for hemophilia B in the United States in 1994.
Worldwide, there are about 80,000 hemophiliacs. Patients with either disease
experience acute and often life-threatening bleeding episodes and can also
suffer joint deformities from repeated bleeding into joints. Depending on the
severity of disease, treatment consists of either intermittent or chronic
administration of clotting factor which has either been purified from plasma or,
more recently, is in the form of a recombinant DNA-derived protein.
Transmissions of viral agents have been significantly reduced with the increased
use of highly purified or recombinant clotting factors.
The Company believes that AAV vectors may be useful to deliver the genes
for factor VIII or factor IX and achieve long-term expression in vivo. The
Company intends to initiate collaborations to evaluate the use of AAV vectors to
deliver the gene for factor VIII to muscle or liver in animals. In addition, the
Company intends to initiate parallel animal studies to evaluate the use of AAV
vectors to deliver the gene for factor IX.
Metabolic Diseases
Hyperlipidemia. Disorders of lipid metabolism contribute to a number of
common human diseases. Hyperlipidemia, characterized by elevation of cholesterol
or triglycerides in the blood, is a risk factor for atherosclerosis which leads
to heart attacks, strokes and peripheral vascular disease. Elevation of
triglycerides ("hypertriglyceridemia") often accompanies diabetes and may
contribute to the acceleration of atherosclerosis observed in that patient
population. In addition, high triglyceride levels, resulting from an underlying
genetic disease, can also lead to life-threatening pancreatitis, which is
frequently unresponsive to current therapies.
Treatment of elevated lipids has been shown to decrease the risk of
atherosclerosis. There is evidence that elevated triglycerides, particularly in
combination with low HDL cholesterol ("good cholesterol") in the blood is a
substantial risk factor associated with coronary artery disease. While dietary
control and exercise are important methods to treat high cholesterol, many
individuals do not achieve adequate results with these conservative measures.
Drug therapy for high cholesterol has been successful at reducing the
complications of atherosclerosis. Although drugs to lower blood triglycerides
are widely available, medical management of this condition is often problematic
and treatment regimens are often poorly tolerated by patients. The lack of a
uniformly effective therapy for hypertriglyceridemia provides a rationale for
development of novel, alternative treatments, including gene therapy.
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Deficiency of the enzyme lipoprotein lipase ("LPL") is believed to be
common in patients with hypertriglyceridemia, and there may be a correlation
between decreased expression of LPL, which is normally produced in the muscle
and fat, and hypertriglyceridemia. Based on the Company's research demonstrating
that AAV vectors efficiently deliver genes to muscle resulting in sustained
protein production, the Company is working with a collaborator who intends to
conduct studies in animals to evaluate the effectiveness of delivering an AAV
vector containing the LPL gene to muscle to lower triglyceride levels.
Storage diseases. Storage diseases are a diverse set of inherited disorders
characterized by a deficiency of one of several proteins that are necessary for
the function of cellular lysosomes. Lysosomes are the compartments in all cells
that process macromolecules as a part of normal turnover and tissue remodeling.
Storage diseases are characterized by abnormal cell function and cell death
resulting in a variety of clinical manifestations such as progressive neurologic
dysfunction, including mental retardation, enlarged organs or skeletal
abnormalities. Gaucher's disease and Tay-Sachs disease are two of the more
well-known examples of this class of disease.
Based on the finding that long-term production of therapeutic proteins can
be obtained following the intramuscular injection of an AAV vector containing
the relevant gene, the Company has entered into two collaborations to evaluate
this approach for the treatment of storage diseases. In collaboration with
investigators at The Johns Hopkins School of Medicine, the Company is initiating
studies to evaluate gene therapy for the treatment of Pompe's disease. This
disease, caused by deficient production of the enzyme, acid maltase, leads to
lethal skeletal and cardiac abnormalities in affected individuals. These
investigators intend to determine whether, following the intramuscular
administration of an AAV vector containing the acid maltase gene, the muscle
will produce a sufficient amount of this enzyme to reverse or prevent the
manifestations of this disease. In collaboration with an investigator at
Childrens Hospital Los Angeles, the Company is currently evaluating a similar
approach for the treatment of deficiency of the enzyme alpha-iduronidase
(Hurler's disease). Although these conditions are rare, there is currently no
available treatment for these devastating diseases. In addition, the Company
believes that research on such conditions will benefit the Company's product
development efforts because the clinical endpoints are relatively clear and
measurable and the results are expected to be sufficiently generalizable to
allow for the design of AAV vector gene therapy for several other diseases.
Infectious Diseases
HIV. The Center for Disease Control estimates that as of the middle of
1995 there were 460,000 cases of AIDS in the United States and 4.5 million cases
worldwide. HIV, the cause of AIDS, is spread by a transfer of bodily fluids
primarily through sexual contact, blood transfusions, sharing intravenous
needles, accidental needle sticks or transmission from infected mothers to
newborns.
The Company is developing vectors incorporating TVI to deliver genes to
bone marrow stem cells. These cells can also be used as target cells for the
delivery of genes designed to protect blood cells from infection with HIV. As in
the case of thalassemia and sickle cell anemia, the Company believes that
potential treatments arising from this work will involve exposure of patients'
bone marrow stem cells to vector ex vivo. The Company is also participating in a
National Cooperative Drug Discovery Grant program with Johns Hopkins and The
University of Alabama at Birmingham to utilize capsid targeted viral
inactivation technology for the treatment of AIDS. This technology, for which
the Company holds a worldwide exclusive license from Johns Hopkins, involves the
development of hybrid genes designed to inactivate replicating viruses. An
anti-viral effect has been demonstrated in tissue culture for a virus (Moloney
murine leukemia virus) related to HIV. The Company believes such research may
lead to the development of proprietary hybrid genes that can be delivered to
bone marrow stem cells using its gene therapy vectors.
CORPORATE PARTNERING STRATEGY
The Company is actively seeking to develop long-term strategic
collaborations with pharmaceutical companies that can provide funding for
research and development activities and clinical trials. The Company
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believes that its technologies are proprietary and broad-based and can be used
with several different genes, giving rise to multiple product and corporate
partnering opportunities.
The Company has initiated discussions with a number of pharmaceutical
companies in the United States, Europe and Asia. The Company has not entered
into any definitive agreements with respect to any corporate partnering
arrangements. Avigen's strategy is to contribute both technology and expertise
in the gene therapy field while seeking corporate partners who can provide
access to complementary technologies, including gene sequences. In addition, the
Company intends to rely on corporate partners, licensees or other entities for
marketing of its products, when and if such products achieve regulatory
approval. There can be no assurance, however, that the Company will be able to
reach satisfactory arrangements with such parties or that such arrangements will
be successful.
LICENSING AND RESEARCH AGREEMENTS
Research Corporation Technologies. In May 1992, the Company entered into a
license agreement with Research Corporation Technologies, Inc. ("RCT") for
rights to a patent and patent application relating to a cell-specific promoter
in AAV vectors. The license is exclusive and worldwide. In consideration for the
license, the Company paid an initial license fee and issued 247,949 shares of
its Common Stock. In addition, the Company is required under the agreement to
pay RCT royalties based on net sales of products which utilize the licensed
technology, with certain minimum annual royalty payments due beginning in 1999.
Avigen must exercise its best efforts to commercially develop, promote and sell
products covered by the licensed patent rights, and is obligated to file an IND
by the end of 1997 and a product license application or a new drug application
by the end of 2000. In the event the Company fails to achieve any of these
milestones by their applicable deadlines, the Company has the right to pay RCT
additional fees of up to $250,000 to extend certain of the deadlines for
specified periods. RCT may terminate the agreement if the Company becomes
insolvent or bankrupt or fails to perform any of its obligations under the
agreement.
The University of Manitoba. In February 1994, the Company entered into an
agreement with the University of Manitoba for an exclusive, worldwide license to
patent applications relating to a prostate-specific promoter for use in gene
therapy. Under this agreement, the Company paid an initial license fee and has
agreed to make additional cash payments on achievement of certain development
milestones and to make royalty payments based on net sales of products which
utilize the licensed technology. The Company is required to diligently pursue
clinical studies by February 1997 and to diligently pursue commercialization of
licensed products as soon as practicable. The Company currently is negotiating a
one year extension of the development milestone dates, and there can be no
assurance that an extension can be obtained on acceptable terms, if at all. The
University of Manitoba may terminate the agreement if the Company becomes
insolvent or bankrupt or fails to perform any of its obligations under the
agreement.
The Johns Hopkins University. In November 1992, the Company entered into
an agreement with The Johns Hopkins University under which it issued an
aggregate of 152,702 shares of its Common Stock and agreed to make certain cash
payments in exchange for an exclusive, worldwide, royalty bearing license to a
patent application relating to certain synthetic genes which direct the
production of proteins with specific antiviral properties and which the Company
believes may be useful in its infectious disease programs. Under the agreement,
Johns Hopkins has control over the prosecution and maintenance of the licensed
patent application. The Company is obligated to exercise its best efforts to
develop and commercialize products which utilize the subject technology. Under
the terms of the agreement, as amended, the Company is required to meet the
following development milestones: initiation of large animal studies for a
licensed potential product by the end of 1997, submission to the FDA of at least
one clinical protocol utilizing a licensed potential product by the end of 1998,
initiation of at least one clinical study utilizing a licensed potential product
by the end of 1999 and receipt of FDA approval to market a licensed product by
the end of 2002. If the Company fails to perform any of its obligations under
the agreement, Johns Hopkins may terminate the agreement upon 60 days' written
notice.
The Company has entered into other exclusive and nonexclusive license
agreements with certain research institutions and their representatives.
Although specific terms of the licenses vary, all of such licenses require the
Company to achieve certain development milestones. In addition, the agreements
require Avigen to pay
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certain license fees and royalties to the licensors. All of the licenses provide
for a term which extends for the life of the underlying patent.
The failure to achieve any required development milestones or to negotiate
appropriate extensions of any of the Company's license agreements or to make all
required milestone and royalty payments when due and the subsequent decision of
any such institution to terminate such license could have a material adverse
effect on the Company.
The Company has also entered into agreements with certain research
institutions and corporate entities with respect to its research and development
efforts. Under such agreements the Company has provided specific vectors and
other materials for research purposes conducted at the direction of a principal
investigator. Generally, the agreements also provide that: (i) the Company
remains the sole and exclusive owner of the transferred materials; (ii)
ownership of improvements will be determined under patent law principles, based
upon the parties' relative contributions to the improvements; and (iii) the
Company has the right to prosecute patents on jointly-owned improvements.
Although specific terms of each agreement vary, the Company is generally
granted, with respect to jointly owned improvements, an irrevocable,
nonexclusive, royalty-free license and an option to negotiate in good faith an
exclusive license at royalty rates to be mutually agreed upon. There can be no
assurance that exclusive rights to any such improvements can be obtained on
terms acceptable to the Company, if at all. In addition, the Company engages
from time to time in discussions with other prospective academic partners
regarding potential research and development projects and may, in the future,
enter into arrangements in addition to those described above.
MANUFACTURING
The Company has developed a proprietary manufacturing process for AAV
vectors. The Company believes it currently has the capacity to manufacture AAV
vectors in amounts sufficient to conduct clinical trials, but it will be
required to implement cGMP policies and procedures prior to manufacturing
material for preclinical studies and clinical trials. The Company believes that
its manufacturing process will simplify manufacturing and purification and will
allow the Company to produce amounts of AAV vector required for clinical trials.
The processes used by the Company are new, however, and there can be no
assurance that such processes will be feasible or cost-effective.
Avigen currently does not operate manufacturing facilities for commercial
production of its gene therapy products. Avigen's strategy for the manufacture
of its gene therapy products may be to enter into alliances with pharmaceutical
and other biotechnology companies. In addition, the Company does not have, and
has no intention of developing, the facilities necessary to perform cell
processing which may be required for TVI. The Company intends to rely on
corporate partners or others for such cell processing. There can be no assurance
that the Company will be able to negotiate satisfactory arrangements with such
parties, that such arrangements will be successful or that its corporate
partners will be able to develop adequate manufacturing capabilities for
commercial scale production. In the event the Company decides to establish a
commercial scale manufacturing facility, the Company will require substantial
additional funds and personnel and will be required to comply with extensive
regulations applicable to such facility.
GOVERNMENT REGULATION
The production and marketing of the Company's proposed products and its
research and development activities are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the United States
and other countries. In the United States, pharmaceutical products are subject
to rigorous regulation by the FDA under the federal Food, Drug, and Cosmetic
Act. Biological products, in addition to being subject to certain provisions of
this act, are also regulated under the Public Health Service Act. These laws and
the regulations promulgated thereunder govern, among other things, testing,
manufacturing, safety, efficacy, labeling, storage, record keeping, advertising
and promotional practices and import and export of drugs and biological
products. In general, the Center for Biologics Evaluation and Research holds
primary responsibility for the regulation of biological products and has handled
the IND submissions of most gene therapy products to date. At the present time,
the Company believes that its products will be regulated as
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biologics by the FDA and comparable foreign regulatory bodies. Gene therapy is,
however, a relatively new technology and has not been extensively tested in
humans. The regulatory requirements governing gene therapy products are
uncertain and are subject to change. No gene therapy products have been approved
to date in the United States or any foreign country.
Under the NIH Guidelines for Research Involving Recombinant DNA Molecules,
clinical protocols involving recombinant DNA and conducted at institutions
receiving NIH funds must be reviewed by the Recombinant DNA Advisory Committee
("RAC") and approved by the NIH Director. The NIH has established the RAC to
advise the NIH Director concerning approval of research involving the use of
recombinant DNA. A proposal will be considered by the RAC only after the
protocol has been approved by the Institutional Review Board ("IRB") at the
institution where the study will be conducted. This process can be conducted in
parallel with the IND review process but may add considerable time and expense.
The Company intends to submit its gene therapy clinical protocols to the RAC for
review and approval even when it may not be subject to the NIH review process.
The steps required before a new drug, including a biologic, may be marketed
in the United States generally include (i) preclinical laboratory tests and
preclinical animal studies, (ii) the submission to the FDA of an IND for human
clinical testing, which must become effective before human clinical trials
commence, (iii) adequate and well-controlled human clinical trials to establish
the safety and efficacy of the product, (iv) the submission to the FDA of a
Product License Application and Establishment License Application ("PLA/ELA")
for a biologic and (v) FDA approval of the PLA/ELA prior to any commercial sale
or shipment of the biologic. The FDA has proposed regulations that would
eliminate the separate requirement for an ELA for certain biotechnology
products, including certain recombinant DNA products, that satisfy the
regulatory definition of a "well-characterized product." The FDA, however, has
indicated that gene therapy products are not considered "well-characterized" at
this time.
Domestic manufacturing establishments are subject to inspections at any
time by the FDA and must comply with cGMP regulations enforced by the FDA
through its facilities inspection program. Manufacturers of biological products
also must comply with FDA general biological product standards. In addition, the
Company must obtain a drug manufacturing license from the State of California
for any of its products administered to humans, including products intended for
clinical trials.
Preclinical safety studies include laboratory evaluation of the product, as
well as animal studies to assess the potential safety and, if possible, efficacy
of the product. Preclinical studies must be conducted by laboratories that
comply with FDA regulations regarding Good Laboratory Practices. The results of
the preclinical tests, together with manufacturing information and analytical
data, are submitted to the FDA as part of an IND, which must become effective
before human clinical trials may be commenced. The IND will become automatically
effective 30 days after its receipt by the FDA unless the FDA indicates prior to
the end of the 30-day period that it does not wish the trials to proceed as
outlined in the IND. In such case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.
Clinical trials must be conducted in accordance with FDA's Good Clinical
Practice regulations and must be approved by the IRB at the institution where
the study will be conducted. The IRB will consider, among other things, safety
and ethical issues, proper informed consent of the human subjects, possible
issues relating to health care costs and potential liability of the institution.
The IRB may require changes in a protocol, and there can be no assurance that an
IRB will permit any given study to be initiated or completed.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. Phase I typically involves the initial introduction of the
drug into patients primarily to determine the drug's metabolism,
pharmacokinetics and pharmacological actions in humans and the side effects
associated with increasing doses. Phase II typically involves studies in a
limited patient population to (i) determine the efficacy of the drug for
specific indications, (ii) determine dosage tolerance and optimal dosage and
(iii) further identify possible adverse effects and safety risks. If the drug is
found to be effective and to have an acceptable safety profile in Phase II
evaluations, Phase III trials are undertaken to evaluate efficacy and safety
within an expanded patient population typically at geographically dispersed
clinical study sites. There can be
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no assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specific time period, if at all, with respect to any of
the Company's products subject to such testing. Furthermore, the FDA may suspend
clinical trials at any time on various grounds, including a finding that
patients are being exposed to an unacceptable health risk. FDA regulations also
subject sponsors of clinical investigations to numerous regulatory requirements
related to, among other things, selection of qualified investigators, proper
monitoring of investigations, record keeping and record retention and notice to
investigators and FDA of any death or adverse serious reaction. In addition, the
FDA may require post marketing clinical studies (Phase IV) which will require
extensive patient monitoring and recordkeeping and may result in restricted
marketing of the product for an extended period of time.
The results of the pharmaceutical development, preclinical studies and
clinical trials are submitted to the FDA in the form of a PLA/ELA for approval
of the manufacture, marketing and commercial shipment of the biologic. The
testing and approval process is likely to require substantial time and effort
and there can be no assurance that any approval will be granted on a timely
basis, if at all. The FDA may deny a PLA/ELA if applicable regulatory criteria
are not satisfied, require additional testing or information, or require
postmarketing testing and surveillance to monitor the safety or efficacy of a
product. Moreover, if regulatory approval of a biologic is granted, such
approval may entail limitations on the indicated uses for which it may be
marketed. Finally, product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial
marketing. Among the conditions for PLA/ELA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to cGMP, which must be followed at all times. In complying with standards set
forth in these regulations, manufacturers must continue to expend time,
financial resources and effort in the area of production and quality control.
In accordance with the Orphan Drug Act, the FDA may grant Orphan Drug
status to certain drugs intended to treat a "rare disease or condition" defined
as a disease or condition which affects fewer than 200,000 people in the United
States, or which affects more than 200,000 people for which the cost of
developing and marketing the drug will not be recovered from sales of the drug
in the United States. An approved Orphan Drug may provide certain benefits
including exclusive marketing rights in the United States to the drug for the
approved indication for seven years following marketing approval and federal
income tax credits for certain clinical trial expenses. The Company believes
that some of its future products may qualify for Orphan Drug status but there
can be no assurance that such products will receive FDA approval. In addition,
there is no assurance that potential benefits provided by the Orphan Drug Act
will not be significantly limited by amendment by the United States Congress
and/or reinterpretation by the FDA.
For clinical investigation and marketing outside the United States, the
Company is also subject to foreign regulatory requirements governing clinical
trials and marketing approval for pharmaceutical products. In Europe, the
approval process for the commencement of clinical trials varies from country to
country. The foreign regulatory approval process includes all of the risks
associated with FDA approval set forth above.
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other federal, state and local regulations. The Company's
research and development activities involve the controlled use of hazardous
materials, chemicals, biological materials and various radioactive compounds.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, it could be held liable for any damages that result from
accidental contamination or injury and any such liability could exceed the
resources of the Company.
COMPETITION
The field of gene therapy is new and rapidly evolving, and is expected to
undergo significant technological change in the future. The Company believes its
primary competitors in the AAV gene therapy market are Genetic Therapy, Inc.
(recently acquired by Sandoz, Ltd.), Genzyme Corporation, Somatix Therapy
Corporation and Targeted Genetics Corporation. In addition, competition from
fully integrated pharmaceutical companies and other biotechnology companies is
expected to increase, particularly as large pharmaceutical
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companies acquire smaller gene therapy companies. Most of these companies have
significantly greater financial resources and expertise than the Company in
research and development, preclinical studies and clinical trials, obtaining
regulatory approvals, manufacturing, marketing and distribution. One of these
companies is supporting clinical studies for use of AAV vectors in the treatment
of cystic fibrosis. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
pharmaceutical companies. Academic institutions, governmental agencies and other
public and private research organizations also conduct research, seek patent
protection and establish collaborative arrangements for product development and
marketing. In addition, these companies and institutions compete with the
Company in recruiting and retaining highly qualified scientific and management
personnel.
The Company is aware that other companies are conducting clinical trials
and preclinical studies for viral and non-viral gene therapy products. These
companies include Cell Genesys, Inc., GeneMedicine, Inc., Systemix, Inc.,
Viagene, Inc. (recently acquired by Chiron Corporation) and Vical Incorporated.
Avigen believes the primary competitive factors for success in the gene therapy
field will be product efficacy, safety, manufacturing capability, the timing and
scope of regulatory approvals, the timing of market introduction, marketing and
sales capability, reimbursement coverage, price and patent position. There can
be no assurance that the Company's competitors will not develop more effective
or more affordable products, or achieve earlier product commercialization than
the Company.
PATENTS AND INTELLECTUAL PROPERTY
Patents and other proprietary rights are important to the Company's
business. The Company's policy is to file patent applications and protect
technology, inventions and improvements to inventions that are commercially
important to the development of its business. The Company also relies on trade
secrets, know-how, continuing technology innovations and licensing opportunities
to develop and maintain its competitive position.
The Company has filed six United States patent applications and has one
exclusive worldwide license to an issued patent and two nonexclusive licenses to
two issued patents for use in the United States. In addition, the Company has
acquired exclusive worldwide licenses to four patent applications. There is no
assurance that patents will issue from these applications or that any patent
will issue on technology arising from additional research or, if patents do
issue, that claims allowed will be sufficient to protect the Company's
technology. The patent application process takes several years and entails
considerable expense. The failure to obtain patent protection on the Company's
technologies or proposed products may have a material adverse effect on the
Company's competitive position and business prospects.
The patent positions of pharmaceutical and biotechnology firms are
generally uncertain and involve complex legal and factual questions. To date,
there has emerged no consistent policy regarding the breadth of claim allowed in
biotechnology patents. Patent applications in the United States are maintained
in secrecy until a patent issues, and the Company cannot be certain that others
have not filed applications for technology covered by the Company's patent
applications or that the Company was first to file patent applications for such
technology. Competitors may have filed applications for, or may have received
patents and may obtain additional patents and proprietary rights relating to
compounds or processes that block or compete with those of the Company.
There can be no assurance that third parties will not assert patent or
other intellectual property infringement claims against the Company with respect
to its products or technology or other matters. There may be third-party patents
and other intellectual property relevant to the Company's products and
technology which are not known to the Company. A number of the gene sequences or
proteins encoded by certain of those sequences that the Company is investigating
or may use in its products are or may become patented by others. As a result,
the Company may be required to obtain licenses to such gene sequences or other
technology in order to test, use or market products that contain proprietary
gene sequences or encode proprietary proteins. For example, in connection with
its anemia program, the Company anticipates that it may need to obtain a license
to a gene for human erythropoietin. There can be no assurance that the Company
will be able to obtain this or any other license on terms favorable to the
Company, if at all.
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Patent litigation is becoming more widespread in the biotechnology
industry. Litigation may be necessary to defend against or assert claims of
infringement, to enforce patents issued to the Company, to protect trade secrets
owned by the Company, or to determine the scope and validity of proprietary
rights of third parties. Although no third party has asserted that the Company
is infringing such third party's patent rights or other intellectual property,
there can be no assurance that litigation asserting such claims will not be
initiated, that the Company would prevail in any such litigation, or that the
Company would be able to obtain any necessary licenses on reasonable terms, if
at all. Any such claims against the Company, with or without merit, as well as
claims initiated by the Company against third parties, can be time-consuming and
expensive to defend or prosecute and to resolve. If competitors of the Company
prepare and file patent applications in the United States that claim technology
also claimed by the Company, the Company may have to participate in interference
proceedings declared by the Patent and Trademark Office to determine priority of
invention, which could result in substantial cost to the Company, even if the
outcome is favorable to the Company. In addition, to the extent outside
collaborators apply technological information developed independently by them or
by others to the Company's product development programs or apply Avigen's
technologies to other projects, disputes may arise as to the ownership of
proprietary rights to such technologies.
The Company also relies on a combination of trade secret and copyright law,
employee and third-party nondisclosure agreements, and other protective measures
to protect intellectual property rights pertaining to its products and
technology. There can be no assurance, however, that these agreements will
provide meaningful protection of the Company's trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
In addition, the laws of certain foreign countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. There can be no assurance that the Company will be able to protect its
intellectual property successfully.
PRODUCT LIABILITY INSURANCE
The manufacture and sale of medical products entail significant risk of
product liability claims. The Company currently does not carry product liability
insurance, although it intends to obtain such coverage prior to beginning
clinical trials. There can be no assurance that such coverage will be adequate
to protect the Company from any liabilities it might incur in connection with
the sale of the Company's products. In addition, the Company may require
increased product liability coverage as products are commercialized. Such
insurance is expensive and in the future may not be available on acceptable
terms, if at all. A successful product liability claim or series of claims
brought against the Company in excess of its insurance coverage could have a
material adverse effect on the Company's business and results of operations.
EMPLOYEES
As of March 31, 1996, the Company had 15 full-time employees, 7 of whom
have Ph.D. or M.D. degrees, including 11 employees in research and development,
and 4 in general administration and finance. The Company also relies on several
part-time employees and consultants. None of the Company's employees is
represented by a collective bargaining agreement nor has the Company ever
experienced a work stoppage. The Company believes that its relationship with its
employees is good.
FACILITIES
The Company's facility, located in Alameda, California, is an approximately
23,000 square foot facility leased through May 2003. The Company believes that
it will be able to renew the lease of this facility or find suitable alternate
facilities in the same general area without a material disruption of its
operations.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board, consisting of
experts in the field of medicine, genetics and molecular biology, which reviews
and evaluates the Company's research programs and advises the Company with
respect to technical matters in fields in which the Company is involved. The
members of
34
<PAGE> 37
the Scientific Advisory Board are prominent scholars in their field and, as a
result, may serve as consultants to a wide variety of companies. The Company's
Scientific Advisory Board includes:
Gary J. Kurtzman, M.D., is Chairman of the Scientific Advisory Board. Dr.
Kurtzman serves as Vice President, Research and Development for the Company.
"See Management -- Directors and Executive Officers."
Jef D. Boeke, Ph.D., co-invented capsid targeted viral inactivation
technology that provides a basis for Avigen's infectious disease product
development program. Dr. Boeke is a professor of Molecular Biology and Genetics
at The Johns Hopkins University School of Medicine, and has authored more than
100 publications.
Jerome E. Groopman, M.D. serves as chief of Hematology/Oncology at Harvard
University's New England Deaconess Hospital in Boston and holds the Dina and
Raphael Recantati Chair at Harvard Medical School. In addition, Dr. Groopman
serves on the Board of Directors of the American Foundation for AIDS Research
and is a member of the FDA Biological Response Modifiers Advisory Committee.
Yuichi Iwaki, M.D., Ph.D. serves as a director of the Company. "See
Management -- Directors and Executive Officers."
Y.W. Kan, M.D., D.Sc. is the Louis K. Diamond Professor of Hematology at
the University of California at San Francisco. He also is an Investigator of the
Howard Hughes Medical Institute. Dr. Kan was the 1991 recipient of the Albert
Lasker Clinical Medical Research Award and is noted as a leader in the fields of
sickle cell anemia and thalassemia.
Keiya Ozawa, M.D., Ph.D. is a professor of Molecular Biology, Institute of
Hematology, at Jichi Medical School in Japan, where he has established a
research and preclinical program in gene therapy. Dr. Ozawa is regarded as one
of the leading authorities on gene therapy in Japan and is responsible for
drafting the Japanese government's gene therapy guidelines. Dr. Ozawa holds both
a M.D. and a Ph.D. from the University of Tokyo and is the author of more than
90 publications regarding virology, hematology and gene therapy.
Jeffrey M. Rosen, Ph.D. is a professor of Cell Biology at Baylor College of
Medicine. Dr. Rosen is an internationally recognized expert in the field of gene
expression. His research has focused primarily on the mechanisms of
tissue-specific gene expression in the mammary and prostate glands. Dr. Rosen
has served on the editorial board of the Journal of Biological Chemistry,
Molecular and Cellular Endocrinology, Molecular Endocrinology and as executive
editor of Nucleic Acids Research.
35
<PAGE> 38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of
March 31, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- --------------------------------
<S> <C> <C>
Philip J. Whitcome, Ph.D.......... 47 Chairman of the Board and acting
Chief Financial Officer
John Monahan, Ph.D................ 49 President, Chief Executive
Officer and Director
Wanda deVlaminck.................. 54 Vice President, Clinical and
Regulatory Affairs and Secretary
Gary J. Kurtzman, M.D............. 41 Vice President, Research and
Development
Zola Horovitz, Ph.D.(1)(2)........ 61 Director
Yuichi Iwaki, M.D., Ph.D.......... 46 Director
Richard T. Pratt(1)(2)............ 59 Director
John K.A. Prendergast, Ph.D.(1)... 42 Director
Lindsay A. Rosenwald, M.D.(1)..... 40 Director
Leonard P. Shaykin(2)............. 52 Director
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Philip J. Whitcome, Ph.D. has served as a director of the Company since
December 1992. In April 1995, Dr. Whitcome was elected Chairman of the Board and
in March 1996 he was appointed acting Chief Financial Officer. From 1988 to
1994, Dr. Whitcome was President and Chief Executive Officer of Neurogen
Corporation, a biopharmaceutical company. From 1981 to 1988, Dr. Whitcome was
employed at Amgen Inc. ("Amgen"), a biopharmaceutical company, serving most
recently as Director of Strategic Planning. Prior to joining Amgen, he served as
Manager of Corporate Development for Medical Products at Bristol-Myers Squibb
Co. ("Bristol-Myers"), a pharmaceutical and health care products company, and
held research and marketing management positions with the Diagnostics Division
of Abbott Laboratories, a pharmaceutical and medical products company. Dr.
Whitcome received a Ph.D. in Molecular Biology from the University of California
at Los Angeles, an M.B.A. from the Wharton School at the University of
Pennsylvania and a B.S. in Physics from Providence College.
John Monahan, Ph.D. has served as President, Chief Executive Officer and a
director of the Company since its inception in 1992. Prior to joining Avigen,
Dr. Monahan was Vice President of Research and Development at Somatix Therapy
Corporation ("Somatix"), a gene therapy company, from 1989 to 1992, where he was
responsible for the initiation and development of all research programs. From
1983 to 1988, he was Director of Molecular and Cell Biology at Berlex
Laboratories, a pharmaceutical company. From 1981 to 1983, he was Group Research
Chief at Hoffmann La Roche, a pharmaceutical company. Dr. Monahan received his
Ph.D. in biochemistry from McMaster University, Hamilton, Canada and his B.S.
degree in science from University College, Dublin, Ireland.
Wanda deVlaminck has served as Vice President, Clinical and Regulatory
Affairs of the Company since its inception in 1992 and in March 1996 she was
appointed as Secretary. From 1989 to 1992, Ms. deVlaminck was Vice President,
Regulatory Affairs at Somatix. In this position, she was responsible for
Somatix's compliance with all local, state and federal regulations pertaining to
environmental issues, personnel safety and products that come under the
jurisdiction of the FDA. In addition, Ms. deVlaminck managed intellectual
property and license agreements at Somatix. From 1988 to 1989, Ms. deVlaminck
worked on assignments in Israel, Japan, and the United States as a regulatory
affairs consultant. From 1983 to 1988, she was Senior Director Regulatory
Affairs at Cetus Corporation, a biotechnology company. Ms. deVlaminck
36
<PAGE> 39
received a B.S. degree in microbiology from the University of California at
Berkeley and is a licensed Public Health Microbiologist in California.
Gary J. Kurtzman, M.D. has served as Vice President, Research and
Development since October 1994. From December 1993 to October 1994, Dr. Kurtzman
served as Senior Director of Research and Development of the Company. From 1991
to 1993, Dr. Kurtzman was the Virology Group Leader at Gilead Sciences, Inc, a
biotechnology company, where he was responsible for research related to drug
discovery and preclinical development of antiviral compounds. From 1989 to 1993,
he served as Associate at the Howard Hughes Medical Institute at Stanford
University. From 1984 to 1988, Dr. Kurtzman was employed by, the National
Institutes of Health, initially as a medical staff fellow and later as a senior
staff fellow in the Hematology Branch of the National Heart, Lung and Blood
Institute. Dr. Kurtzman received his M.D. degree from Washington University, St.
Louis, Missouri and completed his internship and residency in internal medicine
at Barnes Hospital in St. Louis, Missouri. Dr. Kurtzman is board-certified in
internal medicine, with a hematology subspecialty, and is a licensed medical
practitioner in California.
Zola Horovitz, Ph.D. has served as a director of the Company since November
1994. From 1991 through May 1994, Dr. Horovitz served as Vice President,
Business Development and Planning and from 1990 to 1991 as Vice President,
Licensing at Bristol-Myers. Prior to this, Dr. Horovitz served from 1959 through
1989 in various positions at the Squibb Institute for Medical Research,
including Vice President, Research, Planning & Scientific Liaison, Vice
President, Drug Development, and Vice President, Biological and Pharmaceutical
R&D. Dr. Horovitz currently serves on the Board of Directors of Biocryst
Pharmaceuticals, Diacrin, Inc., InfoMed Corp., Magainin Pharmaceuticals, Procept
Corp. and Synaptic Pharmaceuticals and formerly served as a Commissioner of the
New Jersey Cancer Research Commission. From 1975 through 1993 Dr. Horovitz
served on the Scientific Advisory Council at Princeton University and from 1976
through 1989 on the Advisory Board of Rutgers University College of Pharmacy.
Dr. Horovitz received a Ph.D. in Pharmacology, and both an M.S. in Pharmacology
and B.S. in Pharmacy from the University of Pittsburgh.
Yuichi Iwaki, M.D., Ph.D. has served as a director of the Company since
November 1994. Since 1992, Dr. Iwaki has held two professorships at the
University of Southern California School of Medicine in the Departments of
Urology, and Pathology and is Director of the Transplantation Immunology and
Immunogenetic Laboratory. In addition, he holds visiting professorships at Tokai
University School of Medicine and Nihon University School of Medicine in Japan
and at the University of Pittsburgh School of Medicine and is the author of more
than 170 publications. Prior to joining the University of Southern California
Medical School faculty, Dr. Iwaki held professorships at the University of
Pittsburgh in the Departments of Urology and Pathology from 1989 through 1991.
Dr. Iwaki received an M.D. and a Ph.D. from Sapporo Medicine School in Sapporo,
Japan.
Richard T. Pratt has served as a director of the Company since January 1994
and served as Chairman of the Board of Directors from January 1994 to April
1995. Since 1993, Mr. Pratt has held a faculty position at the University of
Utah, where he teaches graduate and undergraduate courses in corporate finance,
banking and real estate. From 1983 through 1993, Mr. Pratt was employed at
Merrill Lynch & Co., a financial services company, first as Chairman of Merrill
Lynch Mortgage Capital Inc. and later as Managing Director, Financial
Institutions Group. Mr. Pratt is also Chairman of Richard T. Pratt Associates, a
financial consulting company. From 1981 to 1983, Mr. Pratt served as Chairman of
the Federal Home Loan Bank Board in Washington D.C. as chief federal regulator
of all federally insured savings and loan associations. Mr. Pratt has a D.B.A.
degree in Finance from Indiana University and M.B.A. and B.S. degrees from the
University of Utah.
John K.A. Prendergast, Ph.D. is a co-founder of the Company and has served
as a director of the Company since December 1992. From December 1992 to March
1996, Dr. Prendergast also served as a Vice President and the Treasurer of the
Company. Dr. Prendergast has also served as a Managing Director of The Castle
Group, Ltd. ("Castle"), a medical technology venture capital firm, since 1991.
Dr. Prendergast is a director of Xenometrix, a medical technology company, and
Atlantic Pharmaceuticals, Inc., a medical technology company. Dr. Prendergast
received M.Sc. and Ph.D. degrees from the University of New South Wales, Sydney,
Australia and a C.S.S. in Administration and Management from Harvard University.
37
<PAGE> 40
Lindsay A. Rosenwald, M.D. is a co-founder of the Company and has served as
a director since its inception in 1992. Dr. Rosenwald has served as the
President and Chairman of the Board of Directors of both Castle and Paramount
Capital Incorporated, an investment banking firm specializing in biomedical
technology companies since their respective inceptions in 1990 and 1992. Dr.
Rosenwald also serves as the Chairman of the Board of Directors and founder of
Interneuron Pharmaceuticals, Inc., a biotechnology company. In addition, Dr.
Rosenwald serves on the Board of Directors of Ansan, Inc., Atlantic
Pharmaceuticals, Inc., Biocryst Pharmaceuticals, Inc., Boston Life Sciences,
Inc., Neose Technologies, Inc., Sparta Pharmaceuticals, Inc., and Xenometrix,
Inc., all of which are medical technology companies. Dr. Rosenwald received an
M.D. from Temple University School of Medicine and a B.A. in finance from
Pennsylvania State University.
Leonard P. Shaykin has served as a director of the Company since June 1995.
Mr. Shaykin is a principal of Shaykin & Co., LLC, a private investment and
management holding company. From 1983 to 1994, Mr. Shaykin was a managing
partner of Adler & Shaykin, an investment partnership organized to sponsor
leveraged buyouts. Prior to forming Adler & Shaykin in 1983, Mr. Shaykin was
Vice President, director and a member of the Investment Committee of Citicorp
Venture Capital Ltd. and Citicorp Capital Investors, Inc., where he was
responsible for establishing and subsequently managing a $100 million equity
fund dedicated to management leveraged buyouts. Mr. Shaykin is Chairman of the
Board of Directors of NaPro BioTherapeutics, Inc. He also serves as Chairman of
The Neuroblastoma Foundation, is a governing trustee of The Jackson Laboratory
and a trustee of the University of Chicago's Graduate School of Business. Mr.
Shaykin received an M.B.A., M.A., and B.A. from the University of Chicago.
The Company intends to recruit a Chief Financial Officer after the closing
of the offering. Each officer serves at the discretion of the Board of
Directors. Each of the Company's officers and directors, other than non-employee
directors, devotes substantially full time to the affairs of the Company. The
Company's Chairman of the Board and the other non-employee directors devote such
time to the affairs of the Company as is necessary to discharge their duties.
There are no family relationships among any of the directors, officers or key
employees of the Company.
BOARD COMPOSITION
The Company currently has authorized 8 directors. In accordance with the
terms of the Company's Amended and Restated Certificate of Incorporation,
effective upon the closing of this offering, the terms of office of the Board of
Directors will be divided into three classes: Class I, whose term will expire at
the annual meeting of stockholders to be held in 1996; Class II, whose term will
expire at the annual meeting of stockholders to be held in 1997; and Class III,
whose term will expire at the annual meeting of stockholders to be held in 1998.
The Class I directors are Drs. Monahan, Horovitz and Iwaki, the Class II
directors are Drs. Whitcome and Prendergast and Mr. Pratt, and the Class III
directors are Dr. Rosenwald and Mr. Shaykin. At each annual meeting of
stockholders after the initial classification, the successors to directors whose
term will then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election. In addition,
the Company's Amended and Restated Certificate of Incorporation provides that
the authorized number of directors may be changed only by resolution of the
Board of Directors. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. This
classification of the Board of Directors may have the effect of delaying or
preventing changes in control or management of the Company. Although directors
of the Company may be removed for cause by the affirmative vote of the holders
of a majority of the Common Stock, the Company's Amended and Restated
Certificate of Incorporation provides that holders of two-thirds of the Common
Stock must vote to approve the removal of a director without cause.
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews the internal
accounting procedures of the Company and consults with and reviews the services
provided by the Company's independent auditors. The Compensation Committee of
the Board of Directors reviews and recommends to the Board the compensation and
benefits of all officers of the Company and reviews general policy relating to
compensation and benefits of
38
<PAGE> 41
employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's stock plans.
DIRECTOR COMPENSATION
After completion of this offering, directors will receive no cash
compensation but will be reimbursed for certain expenses in connection with
attendance at Board and Committee meetings. In February 1996, the Board granted
options to Drs. Iwaki and Horovitz and Messrs. Shaykin and Pratt to purchase
1,975, 1,693, 846 and 9,969 shares, respectively, of Common Stock at an exercise
price of $0.71 per share. In September 1995, the Board granted an option to Dr.
Monahan to purchase 11,286 shares of Common Stock at an exercise price of $0.49
per share. In July 1995, the Board granted an option to Dr. Whitcome to purchase
515,248 shares of Common Stock at an exercise price of $0.49 per share in
connection with his services as Chairman of the Board. In November 1994, the
Board granted options to purchase 6,772 shares of Common Stock to Dr. Horovitz
and 6,772 shares of Common Stock to Dr. Iwaki at an exercise price of $0.44 per
share. In January 1994, the Board granted an option to purchase 33,860 shares of
Common Stock to Mr. Pratt at an exercise price of $0.66 per share. In April 1995
this option expired without being exercised.
In March 1996, the Board of Directors adopted and in April 1996 the
stockholders approved the 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") and reserved 200,000 shares of Common Stock for issuance
under the Directors' Plan. The Directors Plan provides for automatic grants of
options to purchase shares of Common Stock to non-employee directors of the
Company ("Non-Employee Directors"). Pursuant to the terms of the Directors'
Plan, each Non-Employee Director elected after completion of this offering will
automatically be granted an option to purchase 15,000 shares of Common Stock on
the date of his election to the Board. In addition, at each annual meeting of
the Company's stockholders, each Non-Employee Director who has continuously
served as a director since the last annual meeting of the Company's stockholders
shall be granted an option to purchase 5,000 shares of Common Stock. A
Non-Employee Director who has not served for a full year shall be granted an
option to purchase a pro-rated number of shares. As of March 31, 1996, no
options have been granted under the Directors' Plan.
Outstanding options under the Directors' Plan will vest at the rate of 33%
of the shares subject to the option on the first anniversary of the date of
grant, 34% of the shares subject to the option on the second anniversary of the
date of grant and 33% of the shares subject to the option on the third
anniversary of the date of grant. The exercise price of options granted under
the Directors' Plan must equal the fair market value of the Common Stock on the
date of grant. No option granted under the Directors' Plan may be exercised
after the expiration of ten years from the date it was granted. Options granted
under the Directors' Plan are generally non-transferable. The Directors' Plan
will terminate in March 2006, unless earlier terminated by the Board.
In the event of a merger or consolidation, or a reverse merger or
reorganization in which the Company is not the surviving corporation, options
outstanding under the Directors' Plan will automatically become fully vested and
will terminate if not exercised prior to such event.
39
<PAGE> 42
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the fiscal year ended June 30, 1995 to its President and Chief
Executive Officer and the Company's other executive officers who earned more
than $100,000 during the year ended June 30, 1995 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) ($)(1)
------------------------------------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C>
John Monahan, Ph.D......................... 159,935 -- -- 576
President and Chief Executive Officer
Wanda deVlaminck........................... 127,200 -- 7,900 491
Vice President, Clinical and Regulatory
Affairs
Gary J. Kurtzman, M.D...................... 120,000 -- 22,573 461
Vice President, Research and Development
</TABLE>
- ---------------
(1) Represents insurance premiums paid by the Company with respect to term life
insurance for the benefit of the named executive.
1993 STOCK OPTION PLAN
The Company's 1993 Stock Option Plan (the "1993 Stock Plan") was adopted by
the Board of Directors in October 1993 and approved by its stockholders in
November 1993. The 1993 Stock Plan provides for grants of incentive stock
options to key employees (including officers and employee directors) and
nonstatutory stock options to key employees (including officers and employee
directors) and consultants of the Company. A total of 338,600 shares of Common
Stock have been reserved for issuance under the 1993 Stock Plan. As of March 31,
1996, the Company has granted or agreed to grant options to purchase an
aggregate of 301,255 shares of Common Stock at exercise prices ranging from
$0.44 to $0.71 per share. A total of 37,345 shares of Common Stock are available
for future issuance under the 1993 Stock Plan, and shares subject to options
which expire, are cancelled or terminate without having been exercised may again
be subject to options under the 1993 Stock Plan. However, the Board of Directors
has determined that no further options will be granted under the 1993 Stock Plan
after the completion of this offering. The 1993 Stock Plan is administered by
the Compensation Committee of the Board of Directors, which determines
recipients and types of awards to be granted, including the exercise price,
number of shares subject to the award and the exercisability thereof.
The term of a stock option granted under the 1993 Stock Plan generally may
not exceed 10 years. Options granted pursuant to the 1993 Stock Plan become
exercisable at a rate of at least twenty percent (20%) per year of the total
number of shares granted over a period of no more than five years from the date
of grant. The exercise price of options granted under the 1993 Stock Plan is
determined by the Board of Directors; provided that, in the case of an incentive
stock option, the exercise price cannot be less than 100% of the fair market
value of the Common Stock on the date of grant or, in the case of 10%
stockholders, not less than 110% of the fair market value of the Common Stock on
the date of grant. No option may be transferred by the optionee other than by
will or the laws of descent or distribution. An optionee whose employment with
the Company ceases for any reason (other than by death or permanent and total
disability) may exercise options in the 90 day period following such termination
(unless such options terminate or expire sooner by their terms).
The 1993 Stock Plan will terminate in September 2003, unless terminated
sooner by the Board of Directors.
40
<PAGE> 43
1996 EQUITY INCENTIVE PLAN
In March 1996, the Board of Directors adopted and in April 1996 the
stockholders approved the 1996 Equity Incentive Plan (the "Incentive Plan") and
reserved 600,000 shares of Common Stock for issuance under the Incentive Plan.
The Incentive Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options,
restricted stock purchase awards, stock bonuses and stock appreciation rights to
employees (including officers and employee directors) and consultants of the
Company. As of March 31, 1996, no options, restricted stock awards, stock
bonuses or stock appreciation rights had been granted under the Incentive Plan.
The Incentive Plan is administered by the Compensation Committee, which
determines recipients and types of awards to be granted, including the exercise
price, number of shares subject to the award and the exercisability thereof.
The term of a stock option granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors; provided that, in the case of a
nonstatutory stock option the exercise price cannot be less than 85% of the fair
market value on the date of grant, and in the case of an incentive stock option,
cannot be less than 100% of the fair market value of the Common Stock on the
date of grant or, in the case of 10% stockholders, not less than 110% of the
fair market value of the Common Stock on the date of grant. No option may be
transferred by the optionee other than by will or the laws of descent or
distribution or, in certain limited instances, pursuant to a qualified domestic
relations order. An optionee whose relationship with the Company or any related
corporation ceases for any reason (other than by death or permanent and total
disability) may exercise options in the three-month period following such
cessation (unless such options terminate or expire sooner by their terms) or in
such longer period as may be determined by the Board of Directors.
Shares subject to options which have expired or terminated may again be
subject to options granted under the Incentive Plan. Furthermore, the Board of
Directors may offer to exchange new options for existing options, with the
shares subject to the existing options again becoming available for grant under
the Incentive Plan. In the event of a decline in the value of the Company's
Common Stock, the Board of Directors has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new lower priced
options.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule determined by the Board. The purchase price of such
awards will be at least 85% of the fair market value of the Common Stock on the
date of grant. Stock bonuses may be awarded in consideration for past services
without a purchase payment. Stock appreciation rights authorized for issuance
under the Incentive Plan may be tandem stock appreciation rights, concurrent
stock appreciation rights or independent stock appreciation rights.
Upon any merger, consolidation or similar transaction in which the Company
is not the surviving corporation, all outstanding awards under the Incentive
Plan shall either be assumed or substituted by the surviving entity. If the
surviving entity determines not to assume or substitute such awards, the time
during which such awards may be exercised shall be accelerated and the awards
terminated if not exercised prior to the transaction. The Incentive Plan will
terminate in March 2006, unless terminated sooner by the Board of Directors.
41
<PAGE> 44
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1995, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------- STOCK
NUMBER OF PERCENTAGE OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED IN EXERCISE OPTION TERM(4)
OPTIONS FISCAL YEAR PRICE EXPIRATION -------------------
NAME GRANTED(#)(1) (%)(2) ($/SH)(3) DATE 5%($) 10%($)
- ------------------------------ ------------- ------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Wanda deVlaminck.............. 7,900 7.3 $ 0.44 9/15/04 $ 99,516 $160,188
Gary J. Kurtzman, M.D......... 22,573 20.8 $ 0.44 9/15/04 $284,352 $457,713
</TABLE>
- ---------------
(1) Options granted become exercisable at the rate of 6.25% of the shares
subject to the option each quarter for four years. The options expire 10
years from the date of grant, or earlier upon termination of employment.
(2) Based on an aggregate of 108,465 options granted to employees and directors
of, and consultants to, the Company during fiscal year ended June 30, 1995,
including the Named Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(4) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the public
offering price of $8.00 per share appreciates from the date of grant at the
indicated annual rate compounded annually for the entire term of the option
and the option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term.
AGGREGATE OPTION EXERCISES IN FISCAL 1995 AND JUNE 30, 1995 OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended June 30, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at June 30,
1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 30, 1995(#) JUNE 30, 1995($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
Wanda deVlaminck............. -- -- 1,482/6,418 $ 11,204/$48,520
Gary J. Kurtzman, M.D........ -- -- 11,004/29,627 $ 83,190/$223,980
</TABLE>
- ---------------
(1) Value realized and value of unexercised in-the-money options is based on a
value of $8.00 per share of the Company's Common Stock, the estimated public
offering price, even though at the time of grant the fair market value of
the Common Stock was determined by the Board of Directors to be $0.44 per
share. Amounts reflected are based on the assumed value minus the exercise
price multiplied by the number of shares acquired on exercise and do not
indicate that the optionee sold such stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware Law, the Company's Amended and Restated
Certificate of Incorporation provides that no director of the Company will be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or to its stockholders, (ii)
for acts or omissions not made in good faith or which involved intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware Law, relating to prohibited dividends or distributions or the
repurchase or redemption of stock, or (iv) for any transaction from which the
director derives an improper personal benefit. In addition, the
42
<PAGE> 45
Company's Certificate of Incorporation provides that any director or officer who
was or is a party or is threatened to be made a party to any action or
proceeding by reason of his or her services to the Company will be indemnified
to the fullest extent permitted by the Delaware Law.
The Company has entered into indemnification agreements with each of its
directors and officers under which the Company has indemnified each of them
against expenses and losses incurred for claims brought against them by reason
of their being a director or officer of the Company, and the Company maintains
directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
CERTAIN TRANSACTIONS
In March 1996, in connection with the 1996 Bridge Financing, the Company
entered into a Placement Agency Agreement with Paramount Capital Incorporated
("Paramount"), pursuant to which the Company agreed to pay Paramount a selling
commission of 7% of the gross proceeds from the financing, and a non-accountable
expense allowance of 3% of the gross proceeds and warrants to purchase a number
of newly issued shares of Common Stock equal to 10% of the warrants issued in
the offering to Paramount and its designees at an exercise price of 110% of the
exercise price of the warrants in connection with its services as placement
agent. Dr. Rosenwald, a director of the Company, is the Chairman of the Board,
President and sole stockholder of Paramount. In addition, Mr. Shaykin, a
director of the Company, purchased $25,000 aggregate principal amount of notes
in the 1996 Bridge Financing and received a warrant to purchase 2,500 shares of
Common Stock at an exercise price equal to the greater of $.25 per share and 80%
of the offering price. The warrant is exercisable until March 2001.
In March 1996, the Company completed a private placement of its Series D
Preferred Stock ("Series D Private Placement"). Pursuant to a March 1995
Engagement Agreement between the Company and Dr. Yuichi Iwaki, a director of the
Company, Dr. Iwaki will receive a fee for identifying investors in the amount of
$25,279. In addition, the Company issued warrants to purchase up to 45,272
shares of Series D Preferred Stock at an exercise price of $7.80 per share,
which equaled 110% of the purchase price of the Series D Preferred Stock. The
warrants are exercisable until March 2001.
In October 1995, the Company entered into an agreement with The Aries Trust
pursuant to which The Aries Trust extended a bridge loan in the principal amount
of $80,000. The loan bore interest at the rate of 12% per year and was due and
payable on the earlier of April 1996 or the receipt by the Company of an equity
investment in excess of $500,000. In December 1995, the Company paid the
principal amount of $80,000 plus accrued interest in the amount of $1,707 and
issued warrants to purchase 1,805 shares of Common Stock at an exercise price of
$7.09 per share. The warrants are exercisable until November 2005. Dr. Rosenwald
is the President of Aries Financial Services, which serves as the investment
manager for The Aries Trust.
In September 1995, the Company entered into an agreement with the Aries
Domestic Fund pursuant to which the Aries Domestic Fund extended a bridge loan
in the principal amount of $120,000. Dr. Rosenwald is President of the sole
general partner to the Aries Domestic Fund. Dr. Iwaki is a director of the Aries
Domestic Fund. The loan bore interest at the rate of 12% and was due and payable
on the earlier of March 1996 or the receipt by the Company of an equity
investment in excess of $500,000. In December 1995, the Company paid the
principal amount of $120,000, accrued interest in the amount of $2,880 and
issued warrants to purchase 2,708 shares of Common Stock at an exercise price of
$7.09. The warrants are exercisable until October 2005.
In July 1995, the Company granted to Dr. Whitcome an option to purchase
515,248 shares of Common Stock at $0.49 per share, exercisable for ten years
from the date of grant. The shares vest in equal monthly installments over
thirty-six months. The shares issuable upon exercise of such option are subject
to repurchase at the original price per share upon cessation of service prior to
vesting in such shares. Such grant was made outside of the 1993 Stock Plan.
43
<PAGE> 46
In July 1995, the Company completed a private placement of shares of its
Series C Preferred Stock in which Paramount acted as placement agent. Under the
agreement, Paramount received (i) a commission of 9% of gross proceeds received
by the Company from investors, (ii) a nonaccountable expense allowance equal to
4% of the gross proceeds and (iii) warrants to purchase 10% of the Series C
Preferred Shares sold by Paramount. For a period of eighteen months from the
final closing date, Paramount was entitled to receive a commission of 9% and a
non accountable expense allowance equal to 4% of any securities sold by the
Company, other than in a public offering, to individuals or entities who
purchased the Series C Preferred Stock through Paramount prior to the final
closing date. As of March 31, 1996, Paramount had received cash payments in the
amount of $156,024 and warrants to purchase 24,471 shares of Series C Preferred
Stock, at an exercise price of $5.36 per share. The warrants are exercisable
until June 2005. In addition, Mr. Shaykin, a director of the Company, and an
immediate family member purchased a total of 47,198 shares of Series C Preferred
Stock at a price of $4.87 per share in the private placement.
In May 1995, Dr. Rosenwald extended a bridge loan to the Company in the
principal amount of $38,000. The loan accrued interest at the prime rate of
National Westminster Bank USA plus 1% per year. In June 1995, the Company issued
7,797 shares of Series C Preferred Stock as payment in full of the outstanding
principal under the loan.
In May 1995, Dr. Rosenwald extended a bridge loan to the Company in the
principal amount of $135,000. The loan accrued interest at the prime rate of
National Westminster Bank USA plus 1% per year and was due and payable on
demand. In June 1995, the Company issued 27,703 shares of Series C Preferred
Stock as payment in full of the outstanding principal under the loan.
In January 1995, the Company entered into an Introduction Agreement with
Paramount for the purpose of introducing the Company to potential strategic
alliance partners in Korea. Under the terms of the agreement, the Company agreed
to pay Paramount 4% of the aggregate investment received by Avigen upon the
closing of each investment. In addition, the Company agreed to issue: (i) a
warrant to purchase a number of securities equal to 4% of the securities sold
pursuant to the Introduction Agreement at an exercise price equal to 110% of the
price paid by the introduced parties, and (ii) an option to purchase a number of
shares of Common Stock approximately equal to 4% of the number of shares issued
pursuant to the Introduction Agreement at an exercise price of 110% of the fair
market value of Common Stock at the time the option is granted. Both the
warrants and the options will be exercisable for 10 years from the date of
grant. The Introduction Agreement expired in January 1996. However, if the
Company receives an investment during the 12 months following the date of the
termination, Paramount will be entitled to receive the compensation described
above. As of March 31, 1996, the Company had made no payments and issued no
options or warrants to Paramount under the agreement.
In July 1994, the Company entered into a non-exclusive Engagement Agreement
("the 1994 Engagement Agreement") with Maxzen Medical Technologies ("Maxzen")
for the purpose of identifying potential investors in Japan. Dr. Iwaki has been
affiliated with Maxzen from its inception in 1992. The 1994 Engagement Agreement
replaced an expired agreement between Maxzen and the Company, dated May 1993
(the "1993 Engagement Agreement") and provided for Maxzen to assist the Company
in identifying potential investors in Japan during an initial one year term. The
1994 Engagement Agreement provided for (a) the payment of a fee by Avigen equal
to 5% of the gross proceeds of investments in the Company initiated by Maxzen
and (b) the grant of warrants to purchase the same kind of securities as were
purchased by such investors equal to 10% of the number of securities so
purchased. Such warrants are to be exercisable at a price equal to 110% of the
price at which such shares were sold for a period of five years from the
respective closings of such investments. As of March 31, 1996, the Company paid
to Maxzen and its designees under the 1993 Engagement Agreement and the 1994
Engagement Agreement cash payments totaling $271,561 and warrants for the
purchase of: (i) 61,014 shares of Series A Preferred Stock at an exercise price
of $4.87 per share, 30,507 of which are currently held by Dr. Iwaki, (ii) 12,802
shares of Series B Preferred Stock at an exercise price of $6.11 per share and
(iii) 53,594 shares of Series C Preferred Stock at an exercise price of $5.36
per share. The warrants are exercisable until December 1998, March 1999 and June
2000, respectively.
In June 1994, the Company entered into a Business Development Agreement
with Maxzen pursuant to which Maxzen agreed to assist the Company in specified
corporate partnering efforts in certain countries in Asia. The Company was
obligated under the Business Development Agreement to pay certain out-of-pocket
44
<PAGE> 47
expenses of Maxzen and to compensate Maxzen for any investment in the Company by
one of the specified corporate partners by payment of a fee equal to 7% of the
total amount of such investment and the grant of warrants to purchase a number
of shares of Common Stock equal to 10% of the total amount of such investment.
Such warrants were to be exercisable at a price of $4.87 per share for a period
of five years from the date of issuance. The agreement expired in June 1995, and
the Company had made no payments under the agreement.
In April 1994, the Company entered into a credit facility agreement with
Dr. Rosenwald. The credit facility provided that Dr. Rosenwald would assist in
obtaining or providing, for the benefit of the Company, a credit facility in an
amount up to $1,000,000, either in the form of a direct loan or a personal
guaranty, to finance ordinary working capital requirements of the Company. In
October 1994, the Company repaid the principal amount of $880,000 received under
the credit facility, plus interest at the rate of 7.25% per year.
In February 1994, the Company received a $100,000 loan from National
Westminster Bank USA guaranteed by Dr. Rosenwald. The loan accrued interest at
the rate of 10% and was repaid in March 1994.
In January 1994, Paramount introduced a certain party to the Company with a
view to a potential investment in the Company. In connection with this
introduction, the Company entered into an Agreement of Introduction with
Paramount pursuant to which the Company agreed to pay a commission ranging from
5% to 10% of any investment in the Company by the introduced party. In addition,
the agreement provided that Paramount was entitled to receive warrants to
purchase securities of the Company equal to 7% of the amount of securities
purchased by the introduced party at an exercise price equal to 110% of the
price paid by the introduced party. The agreement expired in January 1996 and
the Company had made no payments and issued no warrants to Paramount under the
agreement.
In November 1993, the Company completed a private placement of its Series A
Preferred Stock in which Paramount acted as placement agent. Under the
agreement, Paramount received (i) a commission of $442,110; (ii) an advance
accountable expense allowance of $50,000; and (iii) warrants to purchase 47,569
shares of Series A Preferred Stock at an exercise price of $4.87 per share,
13,337 of which are currently held by Dr. Rosenwald. The warrants are
exercisable until May 1998 and December 1998, respectively.
In February 1993, National Westminster Bank USA extended to the Company two
loans in the amounts of $90,000 and $100,000 that were guaranteed by Dr.
Rosenwald. The loans accrued interest at the rate of 7% per year and were repaid
in June 1993.
In March 1993, Dr. Rosenwald personally extended to the Company a loan in
the amount of $130,000. The loan accrued interest at the rate of 10% per year
and was repaid in April 1993.
In November 1992, The Castle Group, Ltd. ("Castle") extended the Company a
$300,000 line of credit to finance the Company's license issue fees and ordinary
working capital needs. In April 1993, the Company repaid the loan with interest
at the rate of 7% per year. Dr. Rosenwald is President and Chairman of the Board
of Castle. Dr. Prendergast, a director of the Company, is also a Managing
Director of Castle.
In October 1992, the mother of Dr. Rosenwald's spouse loaned $250,000 to
the Company pursuant to a promissory note issued by the Company. The loan was
converted with accrued interest of $15,902, into 68,991 shares of Series A
Preferred Stock in September 1995. The lender also received warrants to purchase
6,899 shares of Series A Preferred Stock at an exercise price of $4.87 per
share. The warrants are exercisable until November 1998.
Dr. Rosenwald has personally guaranteed the Company's five-year lease with
1201 Harbor Bay Partnership, the landlord of the Company's office and laboratory
facilities at 1201 Harbor Bay Parkway, Alameda, California. The Company has
agreed to indemnify Dr. Rosenwald for any losses or expenses that he may incur
as a result of this guarantee.
The Company has entered into indemnification agreements with its directors
and executive officers for the indemnification of and advancement of expenses to
such persons to the full extent permitted by law. The Company intends to execute
such agreements with its future directors and executive officers. See
"Management -- Limitation of Liability and Indemnification Matters."
45
<PAGE> 48
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1996 and as adjusted to
reflect the sale of the Common Stock being offered hereby by: (i) each
stockholder who is known by the Company to own beneficially more than 5% of the
Common Stock; (ii) each Named Executive Officer of the Company; (iii) each
director of the Company; and (iv) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING(1) AFTER OFFERING(1)
-------------------- --------------------
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Lindsay A. Rosenwald, M.D.(2)...................... 569,241 12.49% 569,241 8.30%
c/o The Castle Group Ltd.
375 Park Ave.
New York, NY 10152
John Monahan, Ph.D.(3)............................. 232,714 5.14% 232,714 3.41%
c/o Avigen, Inc.
1201 Harbor Bay Parkway, #1000
Alameda, CA 94502
Philip J. Whitcome, Ph.D.(4)....................... 162,311 3.47% 162,311 2.33%
Yuichi Iwaki, M.D., Ph.D.(5)....................... 107,239 2.32% 107,239 1.55%
Wanda deVlaminck(6)................................ 65,050 1.43% 65,050 *
John K. A. Prendergast, Ph.D. ..................... 58,608 1.29% 58,608 *
Leonard P. Shaykin(7).............................. 42,914 * 42,914 *
Gary J. Kurtzman, M.D.(8).......................... 20,737 * 20,737 *
Richard T. Pratt(9)................................ 9,969 * 9,969 *
Zola Horovitz, Ph.D.(10)........................... 4,232 * 4,232 *
All directors and executive officers as a group
(10 persons)(11)................................. 1,273,015 26.30% 1,273,015 17.83%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Percentage of beneficial ownership is based on
4,529,015 shares of Common Stock outstanding as of March 31, 1996 and
6,829,015 shares of Common Stock outstanding after completion of this
offering.
(2) Includes warrants to purchase 23,877 shares of Common Stock held by Dr.
Rosenwald. Also includes 160,573 shares held by Dr. Rosenwald's immediate
family members and 66,914 shares held in trust for the benefit of Dr.
Rosenwald's immediate family members, which he disclaims beneficial
ownership of except to the extent of his pecuniary interest therein. Also
includes 5,130 shares of Common Stock and warrants to purchase 3,221 shares
of Common Stock held by the Aries Domestic Fund. Dr. Rosenwald is President
of the sole general partner to the Aries Domestic Fund and disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. Also includes 5,130 shares of Common Stock and warrants
to purchase 2,318 shares of Common Stock held by the Aries Trust. Dr.
Rosenwald is President of the sole investment advisor to the Aries Trust
and disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein. Includes 89,606 shares of Common Stock held
by Huntington Street Co. and June Street Co. Dr. Rosenwald is the sole
proprietor of both entities.
(3) Includes 1,410 shares granted in September 1995 and issuable upon the
exercise of options held by Dr. Monahan that are exercisable within 60
days.
46
<PAGE> 49
(4) Includes 143,124 shares granted in July 1995 and issuable upon the exercise
of options held by Dr. Whitcome that are exercisable within 60 days.
(5) Includes 4,514 shares issuable upon the exercise of options and warrants to
purchase 89,244 shares of Common Stock held by Dr. Iwaki that are
exercisable within 60 days. Also includes 5,130 shares of Common Stock and
a warrant to purchase 2,708 shares of Common Stock exercisable within 60
days held by the Aries Domestic Fund. Dr. Iwaki is a director of the Aries
Domestic Fund and disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(6) Includes 5,079 shares issuable upon the exercise of options held by Ms.
deVlaminck that are exercisable within 60 days.
(7) Includes 846 shares issuable upon the exercise of options held by Mr.
Shaykin that are exercisable within 60 days.
(8) Includes 20,737 shares issuable upon the exercise of options held by Dr.
Kurtzman that are exercisable within 60 days.
(9) Includes 9,969 shares issuable upon the exercise of options held by Mr.
Pratt that are exercisable within 60 days.
(10) Includes 4,232 shares issuable upon the exercise of options held by Dr.
Horovitz that are exercisable within 60 days.
(11) Includes 311,279 shares issuable upon the exercise of options and warrants
held by all directors and executive officers that are exercisable within 60
days.
47
<PAGE> 50
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, $.001 par value, and
5,000,000 shares of Preferred Stock, $.001 par value ("Preferred Stock").
COMMON STOCK
As of March 31, 1996, there were 4,529,015 shares of Common Stock
outstanding held of record by approximately 210 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
As of March 31, 1996, the Company had outstanding warrants to purchase
257,880 shares of Common Stock (excluding warrants issued pursuant to the 1996
Bridge Financing) at exercise prices ranging from $4.87 per share to $7.80 per
share. The warrants expire at various times from May 1998 to November 2000. Each
warrant contains provisions for the adjustment of the exercise price and the
aggregate number of shares issuable upon the exercise of the warrant under
certain circumstances, including stock dividends, stock splits, reorganizations,
reclassification, consolidations and certain dilutive sales of the securities
for which the warrant is exercisable below the then existing exercise price.
Each warrant may be exercised, without the payment of cash, for the number of
shares of Common Stock purchasable, at the current market value of the Common
Stock, by the difference between the aggregate exercise price of the warrant and
the value, at the current market price per share of Common Stock of the
aggregate number of shares purchasable under the warrant.
In connection with the 1996 Bridge Financing, the Company issued warrants
to purchase 213,125 shares of Common Stock in March 1996 at an exercise price
equal to the greater of $0.25 per share and 80% of the offering price. The
warrants expire in March 2001. Each warrant contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant under certain circumstances, including stock
dividends, stock splits, reorganizations, reclassification, and consolidations.
In addition, the warrant to purchase 19,375 shares granted to the Placement
Agent provides that such warrant may be exercised, without the payment of cash,
for the number of shares of Common Stock purchasable, at the current market
value of the Common Stock, by the differences between the aggregate exercise
price of the warrant and the value, at the current market price per share of
Common Stock of the aggregate number of shares purchasable under the warrant.
48
<PAGE> 51
Holders of warrants have certain rights to require the Company to register
the shares of Common Stock issued or issuable upon exercise of the warrants.
REGISTRATION RIGHTS
Following this offering, holders of 3,271,839 shares of Common Stock and
warrants to purchase 212,608 shares of Common Stock (excluding warrants issued
pursuant to the 1996 Bridge Financing) will be entitled to certain rights with
respect to the registration of their shares under the Securities Act. Under the
terms of their respective subscription agreements or warrants, if the Company
proposes to register any of its securities under the Securities Act at any time
commencing 12 months after the closing of this offering, either for its own
account or the account of others, the holders are entitled to notice of such
registration and are entitled to include their shares of Common Stock; provided,
among other conditions, that the underwriters of any offering have the right to
limit the number of such shares included in such registration. The holders may
also require the Company to file a registration statement under the Securities
Act at the Company's expense with respect to their shares of Common Stock, and
the Company is required to use its best efforts to effect such registration.
No later than 180 days following the closing of this offering, the Company
will also be required to register under the Securities Act 213,125 shares of
Common Stock issuable upon exercise of warrants issued in the 1996 Bridge
Financing. The Company is required to keep such registration effective until all
holders have completed the distribution which will be described in such
registration statement.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
Law, an anti-takeover law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation and Bylaws also require that,
effective upon the closing of this offering any action required or permitted to
be taken by stockholders of the Company must be effected at a duly called annual
or special meeting of the stockholders and may not be effected by a consent in
writing. In addition, special meetings of the stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer of the Company or by any person or persons holding shares
representing at least 10% of the outstanding capital stock. The Company's
Certificate of Incorporation also provides for a classified Board and specifies
that the authorized number of directors may be changed only by resolution of the
Board of Directors. See "Management -- Board Composition." These provisions may
have the effect of deterring hostile takeovers or delaying changes in control or
management of the Company.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock.
49
<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and assuming no exercise of outstanding
options or warrants and no exercise of the Underwriters over-allotment option,
the Company will have outstanding 6,829,015 shares of Common Stock. Of these
shares, the 2,300,000 shares sold in this offering will be freely tradeable
without restriction or further registration under the Securities Act, except for
any shares held by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act ("Affiliates"), which shares will be subject to the
resale limitations of Rule 144. The remaining 4,529,015 shares of Common Stock
held by existing stockholders (the "Restricted Shares") were issued and sold by
the Company in reliance on exemptions from the registration requirements of the
Securities Act. These shares may be sold in the public market only if registered
or pursuant to an exemption from registration such as Rules 144, 144(k), or 701
under the Securities Act, which are summarized below.
In the absence of the restrictions contained in the agreements not to sell
described below, approximately 526,002 of these Restricted Shares will be
eligible for sale in the public market upon the date of this offering pursuant
to Rule 144(k). In the absence of the restrictions contained in the agreements
not to sell described below, approximately 474,487 additional Restricted Shares
will be eligible for sale beginning 90 days after the date of this offering
pursuant to Rule 144 and Rule 701. Holders of approximately 3,375,571 of the
Restricted Shares are subject to agreements not to sell or otherwise transfer
their shares for a certain period of time following the date of this offering
(the "Lock-up Shares"). Of such Lock-up Shares, 2,831,619 will become available
for sale in the public market 180 days after the date of this offering, although
1,700,513 of the Lock-up Shares will still be subject to certain volume and
other restrictions on resale under Rule 144 at the expiration of such lock-up
period. Wedbush Morgan Securities may, in its sole discretion and at any time
without notice, release any or all of the holders of the Lock-up Shares from any
or all of their obligations under their respective agreements not to sell.
As of March 31, 1996, there were 816,503 shares of Common Stock issuable
upon exercise of outstanding options. The Company intends to file registration
statements under the Securities Act to register shares of Common Stock reserved
for issuance under the 1993 Stock Plan, the 1996 Equity Incentive Plan the
Directors' Plan and pursuant to an option granted to a director of the Company
outside of the Plan, thus permitting the sale of such shares by non-affiliates
in the public market without restriction under the Securities Act. Such
registration statements will become effective immediately upon filing. Upon
effectiveness of such registration statements, holders of vested options to
purchase approximately 124,299 shares will be entitled to exercise such options
and immediately sell such shares. Holders of options to purchase 648,166 shares
of Common Stock have entered into agreements not to sell any shares of Common
Stock received upon exercise of such options for 180 days following the date of
this offering. Wedbush Morgan Securities, in its sole discretion and at any time
without notice, may release any or all of such option holders from any or all of
their obligations under their respective agreements not to sell.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding shares
of the Company's Common Stock (approximately 68,290 shares immediately after
this offering) or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or person whose shares are
aggregated) who is not deemed to have been an Affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has beneficially
owned Restricted Shares for at least three years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with the
Rule 144 holding period restrictions, in each case
50
<PAGE> 53
commencing 90 days after the date of this Prospectus. In addition,
non-Affiliates may sell Rule 701 shares without complying with the public
information, volume and notice provisions of Rule 144.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
Sales of substantial amounts of Common Stock of the Company in the public market
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
51
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Wedbush Morgan
Securities, and Sands Brothers & Co., Ltd. (the "Representatives"), have
severally agreed to purchase from the Company the following respective number of
shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------ ---------
<S> <C>
Wedbush Morgan Securities.........................................
Sands Brothers & Co., Ltd. .......................................
---------
Total................................................... 2,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and its
independent accountants. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Company has agreed to issue to the Representatives of the Underwriters,
warrants to purchase 230,000 shares of Common Stock at an exercise price equal
to 120% of the initial public offering price (the "Underwriters' Warrants"). The
Underwriters' Warrants are exercisable at any time from 1997 to
2001. The transferability of the Underwriters' Warrants is
subject to compliance with applicable securities laws and is restricted for one
year after the date of issuance. The Underwriters' Warrants will contain
provisions for appropriate adjustments in the event of stock splits, stock
dividends, combination, reorganizations or recapitalizations. In addition, the
Company has granted certain rights to the holder of the Underwriters' Warrants
to register the Common Stock underlying under the Securities Act.
The Company has granted to the Underwriters an option, exercisable no later
than 45 days after the date of this Prospectus, to purchase up to 345,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof. The
Company has also agreed to pay to the Representatives an expense allowance on a
nonaccountable basis of $150,000.
The Company's directors, officers and certain other stockholders of the
Company, who will own in the aggregate 1,273,015 shares of Common Stock after
the offering, have agreed that they will not, without the prior written consent
of the Representatives of the Underwriters, offer, sell or otherwise dispose of
any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or
52
<PAGE> 55
convertible into shares of Common Stock owned by them during the 180-day period
following the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of Wedbush Morgan Securities, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock during the 180-day period following the date of this Prospectus,
except that the Company may issue shares upon the exercise of options and
warrants granted prior to the date hereof, and may grant additional options
under its 1993 Stock Plan, Incentive Plan, and Directors' Plan.
The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover of this
preliminary Prospectus is subject to change as a result of market conditions and
other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto, California.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Gibson, Dunn & Crutcher, Irvine, California.
EXPERTS
The financial statements of Avigen as of June 30, 1994 and 1995 and for the
period from October 22, 1992 (inception) through June 30, 1993, the years ended
June 30, 1994 and 1995 and for the period from October 22, 1992 (inception)
through June 30, 1995 appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young, LLP, independent auditors, as set forth in
their report thereon (which contains an explanatory paragraph with respect to
the uncertainty surrounding the Company's ability to continue as a going
concern, as discussed in Note 1 of Notes to Financial Statements) appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Commission, Washington, D.C. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits and schedules thereto. A copy of the
Registration Statement may be inspected by anyone without charge at the
Commission's principal office in Washington, D.C. and copies of all or any part
thereof may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission.
53
<PAGE> 56
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... F-2
Audited Financial Statements
Balance Sheets......................................................................... F-3
Statements of Operations............................................................... F-4
Statements of Stockholders' Equity (Deficit)........................................... F-5
Statements of Cash Flows............................................................... F-7
Notes to Financial Statements.......................................................... F-8
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Avigen, Inc.
We have audited the accompanying balance sheets of Avigen, Inc. (a
development stage company) as of June 30, 1994 and 1995 and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
period from October 22, 1992 (inception) through June 30, 1993, the years ended
June 30, 1994 and 1995 and for the period from October 22, 1992 (inception)
through June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Avigen, Inc. at June 30,
1994 and 1995, and the results of its operations and its cash flows for the
period from October 22, 1992 (inception) through June 30, 1993, the years ended
June 30, 1994 and 1995 and for the period from October 22, 1992 (inception)
through June 30, 1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
Avigen, Inc. will continue as a going concern. As more fully discussed in Note 1
to the financial statements, the Company is in the development stage, has
incurred losses since inception through June 30, 1995 of $8.6 million and
expects to incur substantial and increasing losses over the next several years.
At June 30, 1995, the Company had a working capital deficit of $916,000. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans as to these matters are also described in Note
1. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of Avigen, Inc. to continue as a going concern.
Ernst & Young LLP
Walnut Creek, California
September 8, 1995, except Note 10
as to which the date is
May 7, 1996
F-2
<PAGE> 58
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1994 1995
----------- ----------- MARCH 31, UNAUDITED
1996 PRO FORMA
------------ STOCKHOLDERS'
EQUITY AT
(UNAUDITED) MARCH 31,
1996
------------
(NOTE 10)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 243,537 $ 203,400 $ 1,938,189
Stock subscription receivable.......................... 50,000 135,081 --
Prepaid offering costs................................. 151,403 -- 355,528
Deferred debt financing costs, net..................... -- -- 188,442
Other current assets................................... 22,523 12,603 --
----------- ----------- ------------
Total current assets............................ 467,463 351,084 2,482,159
Property and equipment, net.............................. 1,485,348 1,455,337 1,118,642
Organization costs, net.................................. 145,741 -- --
Deposits and other assets................................ 34,077 34,128 35,172
----------- ----------- ------------
Total assets.................................... $ 2,132,629 $ 1,840,549 $ 3,635,973
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 655,023 $ 615,199 $ 662,852
Accrued compensation and related expenses.............. 95,389 70,583 104,125
Accrued liabilities.................................... 437,333 577,944 880,995
Current portion of capital lease obligations........... 4,564 3,761 17,241
Notes payable.......................................... 889,800 -- 1,645,719
----------- ----------- ------------
Total current liabilities....................... 2,082,109 1,267,487 3,310,932
Accrued rent............................................. 92,412 174,556 252,222
Capital lease obligations, less current portion.......... 26,687 214,250 192,803
Commitments
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 30,000,000 shares
authorized (5,000,000 pro forma), issuable in series:
1,294,171, 2,069,326 and 2,338,293 shares issued and
outstanding at June 30, 1994, June 30, 1995 and
March 31, 1996 (none pro forma); aggregate
liquidation preference of $10,313,121 and
$12,497,531 at June 30, 1995 and March 31, 1996,
respectively....................................... 1,294 2,069 2,338 $ --
Common stock:
Class A, $.001 par value, 100,000,000 shares
authorized (30,000,000 pro forma), 1,942,653 shares
issued and outstanding at June 30, 1994 and 1995,
2,173,262 shares issued and outstanding at March
31, 1996 (4,529,015 shares issued and outstanding
pro forma)......................................... 1,942 1,942 2,173 4,529
Class B convertible, $.001 par value, 500,000 shares
authorized (none pro forma), 90,293 shares issued
and outstanding at June 30, 1994 and 1995, none
issued and outstanding at March 31, 1996 (none pro
forma)............................................. 90 90 -- --
Additional paid-in capital............................. 5,270,995 8,788,046 11,151,893 11,151,875
Deferred compensation.................................. -- -- (137,604) (137,604)
Deficit accumulated during the development stage....... (5,342,900) (8,607,891) (11,138,784) (11,138,784)
----------- ----------- ------------ ------------
Total stockholders' equity (deficit)............ (68,579) 184,256 (119,984) $ (119,984)
============
----------- ----------- ------------
Total liabilities and stockholders' equity
(deficit)..................................... $ 2,132,629 $ 1,840,549 $ 3,635,973
=========== =========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 59
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 22, 1992 OCTOBER 22, 1992 OCTOBER 22, 1992
(INCEPTION) (INCEPTION) NINE MONTHS ENDED (INCEPTION)
THROUGH YEARS ENDED JUNE 30, THROUGH MARCH 31, THROUGH
JUNE 30, ------------------------- JUNE 30, ------------------------- MARCH 31,
1993 1994 1995 1995 1995 1996 1996
---------------- ----------- ----------- ---------------- ----------- ----------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Grant revenue......... $ -- $ -- $ 177,804 $ 177,804 $ 90,402 $ 87,402 $ 265,206
Expenses:
Research and
development....... 932,143 2,557,698 2,289,881 5,779,722 1,526,506 1,875,348 7,655,070
General and
administrative.... 537,889 1,283,727 1,333,756 3,155,372 982,746 707,955 3,863,327
----------- ----------- ----------- ----------- ----------- ------------
1,470,032 3,841,425 3,623,637 8,935,094 (2,509,252) 2,583,303 11,518,397
----------- ----------- ----------- ----------- ----------- ------------
Loss from
operations.......... (1,470,032) (3,841,425) (3,445,833) (8,757,290) (2,418,850) (2,495,901) (11,253,191)
Interest expense,
net................. (23,742) (7,701) (8,579) (40,022) (10,483) (38,907) (78,929)
Other income.......... -- -- 189,421 189,421 8,822 3,915 193,336
----------- ----------- ----------- ----------- ----------- ------------
Net loss.............. $ (1,493,774) $(3,849,126) $(3,264,991) $ (8,607,891) $(2,420,511) $(2,530,893) $(11,138,784)
=========== =========== =========== =========== =========== ============
Pro forma net loss per
share............... $ (0.62) $ (0.47)
=========== ============
Shares used in
computing pro forma
net loss per
share............... 5,295,064 5,432,384
=========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 60
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM OCTOBER 22, 1992 (INCEPTION) THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------- DEFICIT
ACCUMULATED TOTAL
PREFERRED STOCK CLASS A CLASS B ADDITIONAL DURING THE STOCKHOLDERS
------------------ ------------------ ------------------ PAID-IN DEFERRED DEVELOPMENT EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE (DEFICIT)
--------- ------ --------- ------ --------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
October 22,
1992
(inception)... -- $ -- -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of
Class A
common
stock at
$.004 per
share in
November
and
December
1992 in
connection
with
merger
with
Vestmark,
Inc...... -- -- 896,062 896 -- -- 4,074 -- -- 4,970
Issuance of
Class A
common
stock at
$.554 per
share
from
January
to June
1993 for
services
rendered... -- -- 20,316 20 -- -- 11,230 -- -- 11,250
Issuance of
Class A
common
stock at
$.004 to
$.222 per
share
from
November
1992 to
March
1993 for
cash and
certain
license
rights... -- -- 1,003,406 1,003 -- -- 54,267 -- -- 55,270
Issuance of
Class B
common
stock at
$.004 per
share in
December
1992 for
cash..... -- -- -- -- 90,293 90 310 -- -- 400
Issuance of
Series A
preferred
stock at
$4.43 per
share
from
March to
June 1993
for cash
(net of
issuance
costs of
$410,900)... 678,865 679 -- -- -- -- 2,595,922 -- -- 2,596,601
Issuance of
Series A
preferred
stock at
$3.85 per
share in
March
1993 for
cancellation
of note
payable
and
accrued
interest... 68,991 69 -- -- -- -- 265,833 -- -- 265,902
Net loss... -- -- -- -- -- -- -- -- (1,493,774) (1,493,774)
--------- ------ --------- ------ ------ ---- ---------- -------- ------------- -----------
Balance at
June 30,
1993....... 747,856 748 1,919,784 1,919 90,293 90 2,931,636 -- (1,493,774) 1,440,619
Issuance of
Class A
common
stock at
$.004 per
share in
November
1993
pursuant
to
antidilution
rights... -- -- 22,869 23 -- -- 78 -- -- 101
Issuance of
Series A
preferred
stock at
$4.43 per
share
from July
to
November
1993 for
cash and
receivable
(net of
issuance
costs of
$187,205)... 418,284 418 -- -- -- -- 1,665,377 -- -- 1,665,795
Issuance of
Series B
preferred
stock at
$5.54 per
share in
March
1994 for
cash (net
of
issuance
costs of
$34,968)... 128,031 128 -- -- -- -- 673,904 -- -- 674,032
Net loss... -- -- -- -- -- -- -- -- (3,849,126) (3,849,126)
--------- ------ --------- ------ ------ ---- ---------- -------- ------------- -----------
Balance at
June 30,
1994....... 1,294,171 1,294 1,942,653 1,942 90,293 90 5,270,995 -- (5,342,900) (68,579)
Issuance of
Series C
preferred
stock at
$4.87 per
share
from
August
1994 to
June 1995
for cash
and
receivables
(net of
issuance
costs of
$259,620)... 739,655 740 -- -- -- -- 3,344,086 -- -- 3,344,826
Issuance of
Series C
preferred
stock at
$4.87 per
share in
June 1995
for
cancellation
of notes
payable... 35,500 35 -- -- -- -- 172,965 -- -- 173,000
Net loss... -- -- -- -- -- -- -- -- (3,264,991) (3,264,991)
--------- ------ --------- ------ ------ ---- ---------- -------- ------------- -----------
Balance at
June 30,
1995....... 2,069,326 2,069 1,942,653 1,942 90,293 90 8,788,046 -- (8,607,891) 184,256
</TABLE>
F-5
<PAGE> 61
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -- (CONTINUED)
PERIOD FROM OCTOBER 22, 1992 (INCEPTION) THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------- DEFICIT
ACCUMULATED TOTAL
PREFERRED STOCK CLASS A CLASS B ADDITIONAL DURING THE STOCKHOLDERS'
------------------ ------------------ ------------------ PAID-IN DEFERRED DEVELOPMENT EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE (DEFICIT)
--------- ------ --------- ------ --------- ------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance
of
Series C
preferred
stock at
$4.87
per
share in
July
1995 for
cash
(net of
issuance
costs of
$26,000)
(unaudited)... 41,042 41 -- -- -- -- 173,959 -- -- 174,000
Issuance
of
Series D
preferred
stock at
$7.09
per
share
from
October
1995 to
February
1996 for
cash
(net of
issuance
costs of
$25,279)
(unaudited)... 205,351 205 -- -- -- -- 1,430,005 -- -- 1,430,210
Issuance of
Series D
preferred
stock at
$7.09 per
share in
March 1996
in
settlement
of
accounts
payable... 22,574 23 -- -- -- -- 160,027 -- -- 160,050
Issuance of
Class A
common
stock at
$.004 per
share in
March 1996
pursuant
to
antidilution
rights.... -- -- 17,630 18 -- -- 60 -- -- 78
Conversion
of Class
B common
stock to
Class A
common
stock
(unaudited).. -- -- 231,304 231 (90,293) (90 ) (141) -- -- --
Repurchase
of
common
stock
(unaudited)... -- -- (18,325) (18 ) -- -- (63) -- -- (81)
Issuance
of stock
options
in
settlement
of
certain
accrued
liabilities... -- -- -- -- -- -- 137,396 -- -- 137,396
Issuance
of
warrants
to
purchase
Class A
common
stock in
connection
with
1996
Bridge
Financing... -- -- -- -- -- -- 300,000 -- -- 300,000
Deferred
compensation
(unaudited)... -- -- -- -- -- -- 162,604 (137,604) -- 25,000
Net loss
(unaudited)... -- -- -- -- -- -- -- -- (2,530,893) (2,530,893)
--------- ------ --------- ------ ------ ---- ---------- -------- ------------- -----------
Balance at
March 31,
1996
(unaudited)... 2,338,293 $2,338 2,173,262 $2,173 -- $ -- $11,151,893 $ (137,604) $(11,138,784) $ (119,984)
========= ====== ========= ====== ====== ==== ========== ======== ============= ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 62
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 22, 1992 OCTOBER 22, 1992 OCTOBER 22, 1992
(INCEPTION) (INCEPTION) NINE MONTHS (INCEPTION)
THROUGH YEAR ENDED JUNE 30, THROUGH ENDED MARCH 31, THROUGH
JUNE 30, ------------------------- JUNE 30, ------------------------- MARCH 31,
1993 1994 1995 1995 1995 1996 1996
---------------- ----------- ----------- ---------------- ----------- ----------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING
ACTIVITIES
Net loss.......... $ (1,493,774) $(3,849,126) $(3,264,991) $ (8,607,891) $(2,420,511) $(2,530,893) $(11,138,784)
Adjustments to
reconcile net
loss to net cash
used in
operating
activities:
Depreciation
and
amortization... 26,951 309,783 367,710 704,444 275,783 323,063 1,027,507
Amortization
of deferred
compensation.. -- -- -- -- -- 25,000 25,000
Write-off of
organizational
costs....... -- -- 145,741 145,741 145,741 -- 145,741
Class A common
stock issued
for
services.... 11,250 -- -- 11,250 -- -- 11,250
Noncash
interest
expense..... 15,902 -- -- 15,902 -- -- 15,902
Changes in
operating
assets and
liabilities:
Prepaids,
deposits
and
other
assets.. (444,697) 388,097 9,869 (46,731) 5,482 11,559 (35,172)
Prepaid
offering
costs... -- -- -- -- -- (355,528) (355,528)
Accounts
payable,
accrued
liabilities
and
accrued
compensation
and
related
expenses... 469,094 718,651 75,981 1,263,726 (90,532) 521,642 1,785,368
Accrued
rent.... 10,268 82,144 82,144 174,556 61,608 77,666 252,222
----------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash used in
operating
activities...... (1,405,006) (2,350,451) (2,583,546) (6,339,003) (2,022,429) (1,927,491) (8,266,494)
INVESTING
ACTIVITIES
Purchases of
property and
equipment....... (618,078) (1,098,263) (144,299) (1,860,640) (93,182) (19,874) (1,880,514)
Disposal of
property and
equipment....... -- -- -- -- -- 47,033 47,033
Organization
costs........... (218,601) -- -- (218,601) -- -- (218,601)
----------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash (used in)
provided by
investing
activities...... (836,679) (1,098,263) (144,299) (2,079,241) (93,182) 27,159 (2,052,082)
FINANCING
ACTIVITIES
Proceeds from
notes payable... 870,000 889,800 173,000 1,932,800 -- 200,000 2,132,800
1996 bridge
financing....... -- -- -- -- -- 1,937,500 1,937,500
Deferred offering
costs........... -- -- -- -- -- (193,750) (193,750)
Repayment of notes
payable......... (620,000) -- (889,800) (1,509,800) (889,800) (200,000) (1,709,800)
Payments on
capital lease
obligations..... -- (1,630) (6,640) (8,270) (3,560) (7,967) (16,237)
Net proceeds from
issuance of
preferred
stock........... 2,596,601 2,138,424 3,411,148 8,146,173 2,944,526 1,899,341 10,045,514
Issuance of common
stock, net of
repurchases..... 60,640 101 -- 60,741 -- (3) 60,738
----------- ----------- ----------- ----------- ----------- ----------- ------------
Net cash provided
by financing
activities...... 2,907,241 3,026,695 2,687,708 8,621,644 2,051,166 3,635,121 12,256,765
----------- ----------- ----------- ----------- ----------- ----------- ------------
Net (decrease)
increase in cash
and cash
equivalents..... 665,556 (422,019) (40,137) 203,400 (64,445) 1,734,789 1,938,189
Cash and cash
equivalents,
beginning of
period.......... -- 665,556 243,537 -- 243,537 203,400 --
----------- ----------- ----------- ----------- ----------- ----------- ------------
Cash and cash
equivalents, end
of period....... $ 665,556 $ 243,537 $ 203,400 $ 203,400 $ 179,092 $ 1,938,189 $ 1,938,189
=========== =========== =========== =========== =========== =========== ============
Supplemental
disclosure:
Issuance of
preferred
stock for
cancellation
of notes
payable and
accrued
interest...... $ 265,902 $ -- $ 173,000 $ 438,902 $ -- $ -- $ 438,902
Issuance of
stock options
for repayment
of certain
accrued
liabilities... -- -- -- -- -- 137,396 137,396
Deferred
compensation
related to
stock option
grants........ $ -- $ -- $ -- $ -- $ -- $ 162,604 $ 162,604
Purchases of
property and
equipment
under capital
lease
arrangements... $ -- $ 32,881 $ 193,400 $ 226,281 $ -- $ -- $ 226,281
Cash paid for
interest...... $ -- $ 12,085 $ 33,892 $ 79,462 $ 22,172 $ 25,652 $ 105,114
</TABLE>
See accompanying notes.
F-7
<PAGE> 63
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Avigen, Inc. (the "Company") was incorporated on October 22, 1992 in
Delaware for the purpose of development and commercialization of gene-based
therapeutic products. In November 1992, the Company's stockholders approved a
definitive Agreement and Plan of Merger (the "Merger") with Vestmark Inc., a New
York corporation incorporated on July 25, 1991. The merger became effective
under Delaware law on December 2, 1992. Vestmark Inc. had no operations through
the date of merger with the Company. Pursuant to the Merger, the Company became
the succeeding corporation. The stockholders of Vestmark Inc. were issued
896,062 shares of Class A common stock of the Company, in exchange for $4,970
and all the outstanding stock of Vestmark, Inc.
Basis of Presentation
The Company is in the development stage devoting substantially all of its
efforts to research and development. During its development stage, the Company
has incurred cumulative net losses of approximately $8.6 million through June
30, 1995, and expects to incur substantial and increasing losses over the next
several years. At June 30, 1995, the Company had a working capital deficit of
$916,000. The Company plans to finance its operations primarily through proceeds
from equity or debt offerings, including the Company's proposed initial public
offering (the "Offering"). The Company will require substantial additional funds
in order to complete the research and development activities currently
contemplated and to commercialize its proposed products. The Company's future
capital requirements will depend on many factors, including continued scientific
progress in research and development programs, the scope and results of
preclinical studies and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological developments, the cost of
manufacturing scale-up, the cost of commercialization activities and other
factors which may not be within the Company's control. The Company anticipates
that its existing capital resources, including the net proceeds of the proposed
Offering if completed on the terms presently anticipated, will be adequate to
fund its capital needs for at least 12 months.
Without additional funding, the Company may be required to delay, reduce
the scope of or eliminate one or more of its research or development programs,
or obtain funds through arrangements with collaborative partners or others which
may require the Company to relinquish rights to certain of its technologies,
product candidates or products that the Company would otherwise seek to develop
or commercialize itself on its own. As there can be no assurance that the
Company will be able to raise additional funds on acceptable terms, if at all,
these conditions raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that might result from
the possible inability of the Company to continue as a going concern.
Interim Financial Information
The financial information at March 31, 1996 and for the nine-month periods
ended March 31, 1995 and 1996 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and of
the operating results and cash flows for such periods. The results for the
interim periods are not necessarily indicative of results expected for the
entire year ended June 30, 1996.
F-8
<PAGE> 64
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash and cash equivalents.
Substantially all of the Company's cash and cash equivalents are maintained by
one major financial institution.
Organization Costs
Organization costs are stated at cost, less accumulated amortization.
During 1995, the remaining unamortized balance of organization costs was written
off as a result of management's assessment of recoverability.
Grant Revenue
Revenue consists of revenue from grants which are recognized in accordance
with the terms of the related agreements.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the respective
assets, which range from five to seven years, using the straight-line method.
Leasehold improvements and assets under capital leases are amortized over
the lives of the related leases or their estimated useful lives, whichever is
shorter, using the straight-line method. Accumulated amortization of assets
under capital lease was $19,834 and $1,174 at June 30, 1995 and 1994,
respectively.
Accounting for the Impairment of Long-Lived Assets
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of" ("SFAS 121") was issued. The Company will adopt SFAS 121 beginning
in fiscal year 1997, and based on current circumstances, management does not
believe adoption will have a material effect on the Company's results of
operations or financial position.
Stock-Based Compensation
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") was issued and is
effective for the Company's fiscal year 1997. As permitted under SFAS 123, the
Company intends to continue to account for employee stock options in accordance
with APB Opinion No. 25 and will make the necessary pro forma disclosures
mandated by SFAS 123 beginning in fiscal year 1997.
F-9
<PAGE> 65
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Net Loss Per Share
Except as noted below, net loss per share is computed using the weighted
average number of common shares outstanding. Common equivalent shares are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission ("SEC") Staff Accounting
Bulletins, common and common equivalent shares (stock options, warrants and
preferred stock) issued during the period commencing 12 months prior to the
initial filing of a proposed public offering at prices below the assumed public
offering price have been included in the calculation as if they were outstanding
for all periods presented (using the treasury stock method for stock options and
warrants and the if-converted method for preferred stock at the estimated
initial public offering price). Per share information calculated on the above
noted basis is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22, 1992 YEAR ENDED NINE MONTHS ENDED
(INCEPTION) JUNE 30, MARCH 31,
THROUGH ------------------------ ------------------------
JUNE 30, 1993 1994 1995 1995 1996
---------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss per share.......... $ (0.45) $ (1.08) $ (0.91) $ (0.70) $ (0.71)
========= ========= ========= ========= =========
Shares used in calculating
net loss per share........ 3,284,889 3,559,345 3,568,767 3,568,767 3,556,550
========= ========= ========= ========= =========
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect, pursuant to SEC policy, to common equivalent shares from
convertible preferred stock issued more than twelve months from the proposed
initial public offering that will automatically convert upon completion of the
Company's initial public offering (using the if-converted method) from the
original date of issuance.
Reclassifications
Certain 1993 and 1994 balances have been reclassified to conform to the
1995 presentation.
2. LICENSING AGREEMENTS
The Company has entered into various license agreements with universities
and medical research centers for the use of certain technologies. Generally,
such agreements require the Company to pay the licensor a royalty on sales of
products incorporating the licensed technology. Certain of these agreements
require the payment of minimum royalties for specified periods and payments upon
the achievement of specified milestones. These agreements are generally
cancelable by the Company upon written notice without significant financial
penalty, or by the licensors if the Company does not meet development milestones
specified in the agreements.
The Company entered into an exclusive license agreement for the use of
patented technology with Research Corporation Technologies ("RCT"). This
agreement requires the Company to achieve certain development milestones in
order to continue to use the technology. In the event the Company fails to
achieve any of these milestones by their applicable deadlines, the Company has
the right to pay RCT additional fees of up to $250,000 to extend certain of the
deadlines for specified periods. If the Company has not made good faith and
diligent efforts in connection with the initial extension, RCT can terminate the
agreement.
F-10
<PAGE> 66
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
3. NOTES PAYABLE
At June 30, 1994, the Company had a term note payable to a bank in the
amount of $880,000 which bore interest at 7.25%. The note and related interest
were paid during fiscal year 1995.
4. LEASE ARRANGEMENTS
The Company leases its facility under a noncancelable operating lease
agreement with an initial lease term of one year or more. The lease agreement
has variable payment terms; however, the Company is recognizing rent expense on
a straight-line basis over the life of the lease. The lease expires in May 2003.
The Company also has entered into various capital leases for office furniture
and laboratory equipment with an initial lease term of one year or more. Future
minimum lease payments are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING JUNE 30 LEASES LEASE
------------------------------------------------------------- -------- ----------
<S> <C> <C>
1996................................................... $ 37,646 $ 305,370
1997................................................... 57,078 397,670
1998................................................... 84,282 419,520
1999................................................... 84,282 419,520
2000................................................... 49,929 419,520
Thereafter............................................. -- 1,206,120
-------- ----------
Total minimum lease payments........................... 313,217 $3,167,720
==========
Less amount representing interest............................ (95,206)
--------
Present value of minimum lease payments...................... 218,011
Less current portion of capital lease obligations............ (3,761)
--------
Long-term capital lease obligations.......................... $214,250
========
Rent expense for fiscal year 1995 was $342,361 ($369,610 in 1994 and $68,845 for the
period from October 22, 1992 through June 30, 1993).
</TABLE>
5. STOCKHOLDERS' EQUITY
Preferred Stock
Preferred stock consists of the following:
<TABLE>
<CAPTION>
SHARES DESIGNATED SHARES ISSUED AND OUTSTANDING
------------------------------------ ---------------------------------
JUNE 30, JUNE 30,
------------------------ MARCH 31, ---------------------- MARCH 31,
1994 1995 1996 1994 1995 1996
----------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Series A................... 6,000,000 6,000,000 6,000,000 1,166,140 1,166,140 1,166,140
Series B................... 4,000,000 4,000,000 673,920 128,031 128,031 128,031
Series C................... -- 15,500,000 4,000,000 -- 775,155 816,197
Series D................... -- -- 2,500,000 -- -- 227,925
---------- ---------- ---------- --------- --------- ---------
Total...................... 10,000,000 25,500,000 13,173,920 1,294,171 2,069,326 2,338,293
========== ========== ========== ========= ========= =========
</TABLE>
The holders of Series A, B and C convertible preferred stock are entitled
to cumulative annual dividends of $.2215, $.2769 and $.2215 per share,
respectively, whether or not declared by the Board of Directors. The
F-11
<PAGE> 67
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
holders of Series D convertible preferred stock are entitled to receive
dividends when and if declared by the Board of Directors. In the event of
liquidation or winding up of the Company, holders of Series A, B, C and D
convertible preferred stock are entitled to receive liquidation preferences
equal to $4.43, $5.54, $4.87 and $7.09 per share, respectively, plus any accrued
but unpaid dividends. As of June 30, 1995, the cumulative dividends payable in
the event of a liquidation for Series A, B, and C convertible preferred stock
were $510,143, $45,357 and $105,039, respectively, ($703,872, $71,944 and
$253,488 at March 31, 1996). Each share of Series A, C and D convertible
preferred stock is automatically converted into one share of Class A common
stock and each share of Series B convertible preferred stock is automatically
converted into 1.1364 shares of Class A common stock upon the closing of an
underwritten initial public offering of the Class A common stock pursuant to an
effective registration statement under the Securities Act with aggregate gross
proceeds to the Company in excess of $10,000,000 or upon the written notice to
the Company from the holders of a majority of the outstanding shares of Series
A, B, C and D preferred stock consenting thereto. Upon conversion of the Series
A, B and C convertible preferred stock into Class A common stock, all accrued
but unpaid cumulative dividends will be canceled.
Holders of preferred stock are entitled to one vote for each share of
common stock into which such preferred stock could be converted. The voting
rights of preferred stockholders are equal to the voting rights of holders of
common stock.
Common Stock
Class A and Class B common stock have been issued to founders and certain
employees, investors and consultants of the Company. Certain of these shares
(79,816 shares at June 30, 1995, 22,513 shares at March 31, 1996) are subject to
repurchase by the Company at $.004 per share in the event of termination of
employment, death or disability. Such rights lapse over specified periods.
Certain Class A stockholders have antidilution provisions specified in
their stock purchase agreements. The Company has reserved 17,630 shares which
are issuable at $.004 per share to these stockholders as of June 30, 1995. Such
shares were issued in March 1996.
The Class B common stock automatically converts into the number of shares
of Class A common stock equal to 5% of the fully diluted capitalization of the
Company upon the receipt by the Company of cumulative capital contributions of
$10,000,000 from the date of incorporation, excluding any consideration not
actually received but deemed to be received as a result of the sale of rights or
options to purchase additional shares of Class A common stock or convertible
securities.
In July 1995, cumulative capital contributions since incorporation reached
the $10,000,000 level, and the board of directors subsequently approved the
conversion of the Class B common shares into 231,304 shares of Class A common
stock.
Warrants
In March 1993, in connection with a financing arrangement, the Company
issued warrants to purchase 6,899 shares of Series A preferred stock at an
exercise price of $4.87 to a relative of a member of the board of directors. The
warrants are exercisable at any time for a period of five years from the date of
issuance.
F-12
<PAGE> 68
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
In connection with offerings of preferred stock, the Company has issued or
has agreed to issue to related parties (see Note 7) warrants to purchase 108,583
shares of Series A preferred stock, 12,802 shares of Series B preferred stock,
78,065 shares of Series C preferred stock and 45,272 shares of Series D
preferred stock at exercise prices of $4.87, $6.11, $5.36 and $7.80 per share,
respectively. The warrants are exercisable at any time for a period of five
years from the closing of the respective offering.
In connection with a financing arrangement in the nine-month period ended
March 31, 1996, the Company issued warrants to purchase 4,513 shares of Class A
common stock at an exercise price of $7.09 to entities managed by related
parties (see Note 7). The warrants are exercisable at any time for a period of
ten years from the date of issuance.
See Notes 7 and 9 for a description of warrants issued in connection with
the Company's March 1996 Bridge Financing.
Stock Options
In 1993, the Company established a stock option plan (the "1993 Plan")
under which incentive and nonqualified stock options may be granted to key
employees, directors and consultants of the Company to purchase up to 338,600
shares of Class A common stock. Under the 1993 Plan, options may be granted at a
price per share not less than the fair market value at the date of grant as
determined by the Board of Directors. Options granted generally have a maximum
term of 10 years from the grant date and become exercisable over four years.
Option activity under the 1993 Plan from June 30, 1993 to March 31, 1996 was as
follows:
<TABLE>
<CAPTION>
OPTIONS
---------------------
OPTIONS PRICE
------- ---------
<S> <C> <C>
Outstanding at June 30, 1993............................ 4,514 $.44
Granted............................................... 58,690 .44
Canceled.............................................. --
-------
Outstanding at June 30, 1994............................ 63,204 $.44
Granted............................................... 108,465 .44-.66
Canceled.............................................. (16,930) .44
-------
Outstanding at June 30, 1995............................ 154,739 $.44-.66
Granted............................................... 193,476 .44-.71
Canceled.............................................. (46,960) .44-.66
-------
Outstanding at March 31, 1996........................... 301,255 $.44-.71
=======
</TABLE>
At June 30, 1994 and 1995, options to purchase 6,703 shares and 35,561
shares, respectively, of common stock were exercisable at prices from $.44 to
$.49 per share (112,689 at March 31, 1996). At June 30, 1995, 183,861 options
were available for future grant under the 1993 Plan (126,424 at March 31, 1996).
In July 1995, the Company granted a board member an option to purchase
515,248 shares of common stock at $0.49 per share, exercisable for five years
from the date of grant. The shares vest in equal monthly installments over
thirty-six months (128,812 shares were vested at March 31, 1996). The shares
issuable upon exercise of such option are subject to repurchase at the original
price per share upon cessation of service prior to vesting in such shares. Such
grant was made outside of the 1993 Plan.
F-13
<PAGE> 69
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
For certain options granted, the Company recognized as deferred
compensation the excess of the deemed value for financial reporting purposes of
the common stock issuable upon the exercise of such options over the aggregate
exercise price of such options. Total deferred compensation of $162,604 recorded
during the nine-month period ended March 31, 1996 is being amortized over the
vesting period for such options.
Reserved Shares
Class A common shares are reserved for future issuance as follows:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1996
--------- ---------
<S> <C> <C>
Pursuant to antidilution provisions........................... 17,630 --
Conversion of Class B common stock............................ 227,532 --
Conversion of Series A preferred stock (including warrants)... 1,281,622 1,281,622
Conversion of Series B preferred stock (including warrants)... 160,039 160,039
Conversion of Series C preferred stock (including warrants)... 853,250 894,262
Conversion of Series D preferred stock (including warrants)... -- 273,197
Stock option plan............................................. 338,600 338,600
Stock options outside of plan................................. -- 515,248
Class A common stock warrants................................. -- 4,513
--------- ---------
2,878,673 3,467,481
========= =========
</TABLE>
F-14
<PAGE> 70
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
6. BALANCE SHEET DETAIL
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Accrued consulting fees........................ $ 205,833 $ 393,125 $ 123,500
Accrued license fees........................... 227,500 109,776 122,815
Accrued offering costs......................... -- -- 355,528
Accrued financing costs........................ -- -- 193,750
Other.......................................... 4,000 75,043 85,402
---------- ---------- ----------
$ 437,333 $ 577,944 $ 880,995
========== ========== ==========
Property and equipment consists of the
following:
Leasehold improvements......................... $1,116,549 $1,116,109 $1,116,109
Office equipment............................... 40,031 44,386 45,222
Furniture and fixtures......................... 26,485 32,700 32,700
Laboratory equipment........................... 533,276 667,445 635,175
Furniture under capital lease.................. 32,881 32,881 32,881
Laboratory equipment under capital lease....... -- 193,400 193,400
---------- ---------- ----------
Property and equipment......................... 1,749,222 2,086,921 2,055,487
Accumulated depreciation and amortization...... (263,874) (631,584) (936,845)
---------- ---------- ----------
$1,485,348 $1,455,337 $1,118,642
========== ========== ==========
</TABLE>
7. RELATED PARTY TRANSACTIONS
As part of its continuous program of research and development, the Company
retains consultants to consult with and advise the Company. Certain of the
consultants are holders of the Company's common stock or options to purchase
common stock. Consulting expenses relating to these stockholders and option
holders were $193,000 and $275,000 for the years ended June 30, 1994 and 1995,
respectively ($90,999 in 1993). The amounts payable to these consultants at June
30, 1994 and 1995 were $205,833 and $393,125, respectively.
A stockholder and Director of the Company (the "Director") is an officer
and sole shareholder of Paramount Capital (the "Placement Agent"). In connection
with the Series A convertible preferred stock offerings, the Placement Agent
received a commission of $442,110, an expense allowance of $50,000, and warrants
to purchase up to 47,569 shares of Series A convertible preferred stock (see
Note 5). In connection with the Series C convertible preferred stock offering,
the Placement Agent received a commission of $129,025 and warrants to purchase
24,471 shares of Series C convertible preferred stock (see Note 5). In
connection with the March 1996 Bridge Financing (See Note 9), the Company agreed
to pay the Placement Agent a commission equal to $193,750 and to issue warrants
to purchase 19,375 shares of Class A common stock at an exercise price per share
equal to 110% of the greater of $0.25 and 80% of the offering price.
In May 1995, two promissory notes totaling $173,000 from the Director were
converted into 35,500 shares of Series C convertible preferred stock at $4.87
per share. In the six-month period ended December 31, 1995, entities managed by
the Director and another member of the Board of Directors loaned the Company
$200,000 which was repaid in December 1995. In connection with these agreements,
the Company issued warrants to purchase 4,513 shares of Class A common stock
(see Note 5).
F-15
<PAGE> 71
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. RELATED PARTY TRANSACTIONS -- (CONTINUED)
The Director has personally guaranteed the Company's five-year lease on the
office and laboratory facilities (see Note 4).
The Company has entered into non-exclusive agreements with Maxzen Medical
Technologies ("Maxzen") for the purpose of identifying potential investors in
Japan. A director of the Company is affiliated with Maxzen. Under the terms of
the agreements, Maxzen receives commissions, payable in cash and warrants,
determined based on investments in the Company initiated by Maxzen. Through June
30, 1995, Maxzen had earned commissions under the agreements amounting to
$271,561 and warrants for the purchase of 61,014 shares of Series A preferred
stock, 12,802 shares of Series B preferred stock and 53,594 shares of Series C
preferred stock (see Note 5). In connection with the 1996 Series D preferred
stock offering, the Company agreed to pay a finder's fee of $25,279 and issued
warrants to purchase 45,272 shares of Series D preferred stock (see Note 5).
8. INCOME TAXES
The Company uses the liability method to account for income taxes as
required by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using enacted tax rules and laws that
will be in effect when the differences are expected to reverse.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1994 JUNE 30, 1995
------------------------- ------------------------
FEDERAL STATE FEDERAL STATE
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net operating loss carryforward........... $ 1,614,000 $ 68,000 $2,543,000 $ 111,000
Research and development credit
carryforward............................ 215,000 86,000 335,000 88,000
Accelerated depreciation.................. 63,000 11,000 135,000 24,000
Deferred rent expense..................... 31,000 6,000 59,000 10,000
Capitalized research and development...... -- 156,000 -- 284,000
Other..................................... 33,000 6,000 69,000 12,000
----------- --------- ----------- ---------
Gross deferred tax assets................. 1,956,000 333,000 3,141,000 529,000
Valuation allowance....................... (1,956,000) (333,000) (3,141,000) (529,000)
----------- --------- ----------- ---------
Net deferred tax assets................... $ -- $ -- $ -- $ --
=========== ========= =========== =========
</TABLE>
The valuation allowance increased by $1,751,000 and $1,381,000 for the
fiscal years ended in 1994 and 1995, respectively.
At June 30, 1995, the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $7,481,000 and
$1,843,000, respectively, which expire in 1998 through 2010. At June 30, 1995,
the Company has research and development credit carryforwards for federal tax
purposes of approximately $335,000, which expire in 2008 through 2010.
Because of the "change in ownership" provisions of the Tax Reform Act of
1986, utilization of the Company's tax net operating loss carryforward and tax
credit carryforwards may be subject to an annual
F-16
<PAGE> 72
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
8. INCOME TAXES -- (CONTINUED)
limitation in future periods. As a result of the annual limitation, a portion of
these carryforwards may expire before ultimately becoming available to reduce
future income tax liabilities.
9. 1996 BRIDGE FINANCING
In March 1996, the Company completed a bridge financing pursuant to which
the Company issued $1,937,500 principal amount of bridge notes payable and
193,750 warrants to purchase Class A common stock at an exercise price per share
equal to the greater of $0.25 per share and 80% of the Offering price ("the
bridge warrants"). The bridge notes payable are due, together with interest at
the rate of 12% per annum, on the earlier of March 1997 or ten days following
the consummation of the Offering. Should the bridge notes not be repaid when
due, then 10% of such notes become convertible into shares of common stock at
$0.04 per share and the remaining balance accrues interest at 18% until paid.
The warrants expire in March 2001. The bridge warrants were assigned a value of
$300,000. This amount is reflected as a discount on the Notes and will be
accreted as additional financing (interest) expense over the term of the notes.
10. INITIAL PUBLIC OFFERING
In March 1996, the Board of Directors authorized the Company to proceed
with an initial public offering of the Company's common stock. If the Offering
is consummated under the terms presently anticipated all of the outstanding
preferred stock at March 31, 1995 will automatically convert into 2,333,179
shares of common stock. Unaudited pro forma stockholders' equity, as adjusted
for the assumed conversion of all outstanding shares of convertible preferred
stock as of March 31, 1996, is set forth on the accompanying balance sheet.
In May 1996, in contemplation of the Offering, the Company filed an Amended
and Restated Certificate of Incorporation to effect a one for 4.43 reverse stock
split of all outstanding shares of common stock, preferred stock, stock options
and warrants. All shares and per share data in the accompanying financial
statements have been adjusted retroactively to give effect to the reverse stock
split. The Amended and Restated Certificate of Incorporation also reduced the
authorized stock of the Company such that the Company is authorized to issue
5,000,000 shares of $.001 par value "blank check" preferred stock, and
30,000,000 shares of $.001 par value common stock and the Class A designation
was eliminated.
In March 1996, the Board of Directors adopted and in April 1996 the
stockholders approved the 1996 Equity Incentive Plan ("the Incentive Plan") and
reserved 600,000 shares of common stock for issuance thereunder. The Incentive
Plan provides for grants of incentive stock options to employees and non
statutory stock options, restricted stock purchase awards, stock bonuses and
stock appreciation rights to employees and consultants of the Company. No
options, restricted stock awards, stock bonuses or stock appreciation rights
have been granted under the Incentive Plan.
In March 1996, the Board of Directors adopted and in April 1996 the
stockholders approved the 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") and reserved 200,000 shares of common stock for issuance
under the Directors' Plan. The Directors' Plan provides for automatic grants of
options to purchase shares of common stock to non-employee directors of the
Company. The Directors' Plan is effective upon the closing of the Offering and
no options have been granted under the Directors' Plan.
F-17
<PAGE> 73
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
The Company............................ 13
Use of Proceeds........................ 13
Dividend Policy........................ 13
Capitalization......................... 14
Dilution............................... 15
Selected Financial Data................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 17
Business............................... 19
Management............................. 36
Certain Transactions................... 43
Principal Stockholders................. 46
Description of Capital Stock........... 48
Shares Eligible for Future Sale........ 50
Underwriting........................... 52
Legal Matters.......................... 53
Experts................................ 53
Additional Information................. 53
Index to Financial Statements.......... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,300,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
WEDBUSH MORGAN SECURITIES
SANDS BROTHERS & CO., LTD.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the distribution of the Common Stock being registered. All amounts are
estimated, except the SEC Registration Fee, the NASD Filing Fee and the Nasdaq
National Market Filing Fee:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. 8,209
NASD Filing Fee................................................... 2,881
Nasdaq National Market Filing Fee................................. 34,573
Blue Sky Fees and Expenses........................................ 15,000
Accounting Fees................................................... 125,000
Non-accountable underwriters' expenses............................ 150,000
Legal Fees and Expenses........................................... 325,000
Transfer Agent and Registrar Fees................................. 500
Printing and Engraving............................................ 100,000
Miscellaneous..................................................... 38,837
--------
Total................................................... $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Restated Certificate of Incorporation provides that
directors of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, to the fullest extent permitted by the General Corporation Law of the
State of Delaware. The Registrant's Restated Bylaws provide for indemnification
of officers and directors to the full extent and in the manner permitted by
Delaware law. Section 145 of the Delaware General corporation Law makes
provision for such indemnification in terms sufficiently broad to cover officers
and directors under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant has entered into indemnification agreements with each
director which provide indemnification under certain circumstances for acts and
omissions which may not be covered by any directors' and officers' liability
insurance.
The form of Underwriting Agreement, filed as Exhibit 1.1 to the
Registration Statement, provides for indemnification of the Registrant and its
controlling persons against certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since April 1993, the Company has sold and issued the following
unregistered securities:
(1) In November 1993, the Registrant completed a private placement of
1,097,149 shares of Series A Preferred Stock, convertible into 1,097,149
shares of Common Stock and warrants to purchase 115,482 shares of Series A
Preferred Stock at an exercise price of $4.87 per share, to sixty-one (61)
accredited investors for cash in the aggregate amount of $4,860,370. In
connection with the private placement, the Registrant paid commissions to
the placement agents equal to $548,105 and issued warrants to purchase
108,583 shares of Series A Preferred Stock at an exercise price of $4.87
per share. In addition, one of the placement agents received an accountable
expense allowance of $50,000.
(2) From February 1994 to November 1994, the Registrant sold 128,031
shares of Series B Preferred Stock, convertible into 145,491 shares of
Common Stock, to eight (8) accredited investors for cash in the aggregate
amount of $709,000. In connection with the private placement, the
Registrant paid
II-1
<PAGE> 75
a commission to the placement agent Maxzen equal to $34,968 and issued warrants
to purchase 12,802 shares of Series B Preferred Stock at an exercise price of
$6.11 per share.
(3) From August 1994 to July 1995, the Registrant sold 816,197 shares
of Series C Preferred Stock, convertible into 816,197 shares of Common
Stock to twenty-nine (29) accredited investors, including one director, for
cash in the aggregate amount of $3,977,446 and satisfaction of certain
obligations under a $173,000 loan. In connection with the private
placement, the Registrant paid commissions to the placement agents Maxzen
and Paramount equal to $285,620 and issued warrants to purchase 78,065
shares of Series C Preferred Stock at an exercise price of $5.36 per share.
(4) In October 1995, the Company issued warrants to purchase 2,708
shares of Common Stock at an exercise price of $7.09 per share to an
accredited investor in connection with the extension and repayment of a
$120,000 bridge loan.
(5) In November 1995, the Registrant issued warrants to purchase 1,805
shares of Common Stock at an exercise price of $7.09 per share to an
accredited investor in satisfaction of a $80,000 bridge loan.
(6) From December 1995 to March 1996, the Registrant issued 227,925
shares of Series D Preferred Stock, convertible into 227,925 shares of
Common Stock for cash and forgiveness of certain accrued expenses in the
aggregate amount of $1,611,800. In connection with the private placement,
the Registrant paid a finder's fee to Dr. Iwaki equal to $25,279 and issued
warrants to purchase 45,272 shares of Series D Preferred Stock at an
exercise price of $7.80 per share.
(7) In March 1996, the Registrant completed a bridge financing
pursuant to which the Company issued $1,937,500 aggregate principal amount
of promissory notes and warrants to purchase 193,750 shares of Common Stock
at an exercise price per share equal to the greater of $0.25 and 80% of the
initial public offering price to forty-four (44) accredited investors. In
connection with the private placement, the Registrant paid a commission to
the placement agent equal to $193,750 and issued warrants to purchase
19,375 shares of Common Stock at an exercise price per share equal to 110%
of the greater of $0.25 and 80% of the initial public offering price.
(8) Since inception, the Registrant has granted incentive stock
options and nonqualified stock options to employees, directors and
consultants covering an aggregate of 816,503 shares of Common Stock, at an
average exercise price of $0.51 per share. The Registrant has not issued
any shares of Common Stock pursuant to the exercise of stock options.
The share amounts set forth above give effect to the Company's 4.43-for-1
reverse stock split to be effected in April 1996. The sales and issuances of
securities in the transactions described in paragraphs (1) through (8) were
deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2), Regulation D or Regulation S promulgated thereunder. With respect
to the grant of stock options described in paragraph (11), an exemption from
registration was unnecessary in that none of the transactions involved a "sale"
of securities as such term is used in Section 2(3) of the Securities Act.
Appropriate legends are affixed to the stock certificate issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
II-2
<PAGE> 76
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
<TABLE>
<C> <S>
1.1 Underwriting Agreement
3.1+ Amended and Restated Certificate of Incorporation of the Registrant
3.2+ Bylaws of the Registrant
3.3+ Amended and Restated Certificate of Incorporation to be effective upon
closing of the offering
3.4+ Restated Bylaws of the Registrant to be effective upon the closing of the
offering
4.1 Specimen Common Stock Certificate
5.1+ Opinion of Cooley Godward Castro Huddleson & Tatum as to legality of the
Common Stock
10.2+ 1993 Stock Option Plan
10.3+ 1996 Equity Incentive Plan
10.4+ Form of Incentive Stock Option Grant
10.5+ Form of Nonstatutory Stock Option Grant
10.6+ 1996 Non-Employee Director Stock Option Plan
10.7+ Form of Series C Investors' Rights Agreement
10.8+ Form of Indemnification Agreement between the Registrant and its directors
and executive officers
10.9+ Form of Common Stock Warrant
10.10+ Form of Series A Preferred Stock Warrant
10.11+ Form of Series B Preferred Stock Warrant
10.12+ Form of Series C Preferred Stock Warrant
10.13 Form of Series D Preferred Stock Warrant
10.14+ Form of Series A Preferred Stock Subscription Agreement
10.15+ Form of Series B Preferred Stock Subscription Agreement
10.16+ Form of Series C Preferred Stock Subscription Agreement
10.17+ Form of Unit Purchase Agreement
10.18+ Form of Bridge Note
10.19+ Form of Bridge Warrant
10.20 License Agreement between the Registrant and Research Corporation
Technologies, Inc., dated May 15, 1992, as amended as of March 21, 1996 and
April 26, 1996
10.21 License Agreement between the Registrant and The Johns Hopkins University,
dated November 23, 1993, as amended as of March 21, 1996
10.22 License Agreement between the Registrant and The University of Manitoba,
dated February 2, 1994
10.23 Form of Underwriters' Warrant
10.24 Lease Agreement between Registrant and Redding Management, Inc., dated
September 15, 1992, as amended June 30, 1995
10.25 Registration Rights Agreement between the Registrant and certain
stockholders named therein, dated November 1992
</TABLE>
II-3
<PAGE> 77
<TABLE>
<C> <S>
10.26 Registration Rights and Transfer Restriction Agreement between the
Registrant and Research Corporation Technologies, Inc., The Indiana
University Foundation and Arun Srivastava, dated May 15, 1992, as amended
October 1992
11.1 Statement re computation of net loss per share
23.1 Consent of Ernst & Young LLP (see page II-6)
23.2 Consent of Cooley Godward Castro Huddleson & Tatum (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-5)
</TABLE>
- ---------------
+ Previously filed
(B) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because they are not applicable, or because the
information is included in the Financial Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
A. The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
B. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, 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 Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the 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.
C. The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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 bonafide offering thereof.
II-4
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Avigen, Inc.
has duly caused this amended Registration Statement to be signed on its behalf,
by the undersigned, thereunto duly authorized, in the City of Alameda, County of
Alameda, State of California, on May 7, 1996.
AVIGEN, INC.
By: /s/ JOHN MONAHAN, PH.D.
John Monahan, Ph.D.
President, Chief Executive Officer
and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------
<C> <S> <C>
/s/ JOHN MONAHAN, PH.D. President, Chief Executive May 7, 1996
- --------------------------------------------- Officer and Director (Principal
John Monahan, Ph.D. Executive Officer)
* Controller (Principal Accounting May 7, 1996
- --------------------------------------------- Officer)
Glenn Bauer
* Chairman of the Board and acting May 7, 1996
- --------------------------------------------- Chief Financial Officer
Philip J. Whitcome, Ph.D. (Principal Financial Officer)
* Director May 7, 1996
- ---------------------------------------------
Zola Horovitz, Ph.D.
* Director May 7, 1996
- ---------------------------------------------
Yuichi Iwaki, M.D., Ph.D.
* Director May 7, 1996
- ---------------------------------------------
Richard T. Pratt
* Director May 7, 1996
- ---------------------------------------------
John K.A. Prendergast, Ph.D.
* Director May 7, 1996
- ---------------------------------------------
Lindsay A. Rosenwald, M.D.
* Director May 7, 1996
- ---------------------------------------------
Leonard P. Shaykin
*By: /s/ JOHN MONAHAN, PH.D.
John Monahan, Ph.D.
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 79
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated September 8,
1995 (except Note 10 as to which the date is May 7, 1996), in Amendment No. 1 to
the Registration Statement (Form S-1, 333-3220) and related Prospectus of
Avigen, Inc. for the registration of 2,645,000 shares of its Common Stock.
ERNST & YOUNG LLP
Walnut Creek, California
May 7, 1996
II-6
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- ----------------------------------------------------------------------------
<C> <S> <C>
1.1 Underwriting Agreement......................................................
3.1 Amended and Restated Certificate of Incorporation of the Registrant.........
3.2+ Bylaws of the Registrant....................................................
3.3+ Amended and Restated Certificate of Incorporation to be effective upon
closing of the offering.....................................................
3.4+ Restated Bylaws of the Registrant to be effective upon the closing of the
offering....................................................................
4.1 Specimen Common Stock Certificate...........................................
5.1+ Opinion of Cooley Godward Castro Huddleson & Tatum as to legality of the
Common Stock................................................................
10.2+ 1993 Stock Option Plan......................................................
10.3+ 1996 Equity Incentive Plan..................................................
10.4+ Form of Incentive Stock Option Grant........................................
10.5+ Form of Nonstatutory Stock Option Grant.....................................
10.6+ 1996 Non-Employee Director Stock Option Plan................................
10.7+ Form of Series C Investors' Rights Agreement
10.8+ Form of Indemnification Agreement between the Registrant and its directors
and executive officers......................................................
10.9+ Form of Common Stock Warrant................................................
10.10+ Form of Series A Preferred Stock Warrant....................................
10.11+ Form of Series B Preferred Stock Warrant....................................
10.12+ Form of Series C Preferred Stock Warrant....................................
10.13 Form of Series D Preferred Stock Warrant....................................
10.14+ Form of Series A Preferred Stock Subscription Agreement.....................
10.15+ Form of Series B Preferred Stock Subscription Agreement.....................
10.16+ Form of Series C Preferred Stock Subscription Agreement.....................
10.17+ Form of Unit Purchase Agreement.............................................
10.18+ Form of Bridge Note.........................................................
10.19+ Form of Bridge Warrant......................................................
10.20 License Agreement between the Registrant and Research Corporation
Technologies, Inc., dated May 15, 1992, as amended as of March 21, 1996 and
April 26, 1996..............................................................
10.21 License Agreement between the Registrant and The Johns Hopkins University,
dated November 23, 1993, as amended as of March 21, 1996....................
10.22 License Agreement between the Registrant and The University of Manitoba,
dated February 2, 1994......................................................
10.23 Form of Underwriters' Warrant...............................................
10.24 Lease Agreement between Registrant and Redding Management, Inc., dated
September 15, 1992, as amended June 30, 1995................................
10.25 Registration Rights Agreement between the Registrant and certain
stockholders named therein, dated November 1992.............................
10.26 Registration Rights and Transfer Restriction Agreement between the
Registrant and Research Corporation Technologies, Inc., The Indiana
University Foundation and Arun Srivastava, dated May 15, 1992, as amended
October 1992................................................................
11.1 Statement re computation of net loss per share..............................
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- ----------------------------------------------------------------------------
<C> <S> <C>
23.1 Consent of Ernst & Young LLP (see page II-6)................................
23.2 Consent of Cooley Godward Castro Huddleson & Tatum (included in Exhibit
5.1)........................................................................
24.1 Power of Attorney (see page II-5)...........................................
</TABLE>
- ---------------
+ Previously filed
<PAGE> 1
Exhibit 1.1
2,300,000 SHARES
AVIGEN, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_________________, 1996
WEDBUSH MORGAN SECURITIES INC.
SANDS BROTHERS & CO.
As Representatives of the several Underwriters
c/o Wedbush Morgan Securities Inc.
1000 Wilshire Boulevard, 10th Floor
Los Angeles, California 90017-2457
Ladies and Gentlemen:
Avigen, Inc., a Delaware corporation ("Company") proposes to issue and
sell to you and the other firms and corporations named in Schedule A attached
hereto ("Underwriters," which term shall also include any underwriter
substituted as provided in Section 9 hereof), for which you are acting as
representatives ("Representatives"), 2,300,000 shares of the Company's Common
Stock, $.001 par value per share ("Primary Shares"). In addition, the Company
proposes to grant to the Underwriters an option to purchase, for the purpose of
covering over-allotments, up to an additional 345,000 shares of the Company's
Common Stock, $.001 par value per share ("Over-Allotment Shares"). The Primary
Shares and the Over-Allotment Shares are collectively referred to below as the
"Shares."
You have advised the Company that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
(hereinafter defined) has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter into an agreement substantially in the form of
Exhibit A hereto ("Pricing Agreement"). The Pricing Agreement may take the form
of an exchange of any standard form of written telecommunication between the
Company and the Representatives and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Shares will be governed by
this Agreement, as supplemented by the Pricing Agreement. From and after the
date of the execution and delivery of the Pricing Agreement, this Agreement
shall be deemed to incorporate the Pricing Agreement.
<PAGE> 2
The Company agrees with the several Underwriters as set forth below.
1. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to, and the Company also covenants and agrees
with, each of the Underwriters as follows:
(a) The Company has filed with the Securities and Exchange
Commission ("Commission") a registration statement on Form S-1 (No.
333-3220), including a preliminary prospectus, relating to the Shares
and such amendments to the registration statement and supplements to
the prospectus included therein as may have been required to the date
hereof. The Company will file with the Commission either: (i) prior to
effectiveness of such registration statement, a further amendment
thereto, including a form of prospectus, and if required after
effectiveness of such registration statement, a final prospectus in
accordance with Rule 424(b) of the rules and regulations ("Rules and
Regulations") under the Securities Act of 1933, as amended ("Securities
Act"), or (ii) after effectiveness of such registration statement, a
final prospectus in accordance with Rules 430A and 424(b) of the Rules
and Regulations. Such registration statement (as amended, if
applicable) at the time it becomes effective ("Effective Date") and the
prospectus constituting a part thereof (including, in each case,
financial statements, exhibits and all documents incorporated or deemed
to be incorporated by reference therein; the information, if any,
deemed to be part thereof pursuant to Rule 430A(b) of the Rules and
Regulations; and any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations) are hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively, except
that if the prospectus filed by the Company pursuant to Rule 424(b)
differs from the prospectus on file at the time the Registration
Statement becomes effective, the term "Prospectus" shall refer to the
Rule 424(b) prospectus and the term "preliminary prospectus" shall
refer to any predecessor prospectus.
(b) To the best of the Company's knowledge, the Commission has not
issued an order preventing or suspending the use of any preliminary
prospectus. Each such preliminary prospectus has conformed in all
material respects to the requirements of the Securities Act and the
Rules and Regulations and has not included any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. At the
date of this Agreement, when the Registration Statement becomes
effective, the date the Prospectus is first filed with the Commission
pursuant to Rule 424(b), if required, at the Closing Date (as defined
below) and as of the date of any amendment or supplement to the
Registration Statement or Prospectus filed after the Effective Date (i)
the Registration Statement and Prospectus, and any amendments or
supplements thereto, will contain all statements that are required to
be stated therein by the Securities Act and the Rules and Regulations
and will in all material respects conform to the requirements of the
Securities Act and the Rules and Regulations, (ii) the Registration
Statement will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, and
(iii) the Prospectus, and any amendments or supplements thereto, will
not include any untrue statement of a material fact and will not omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written
information finished to the Company by the Underwriters expressly for
use therein, it being understood that the only information supplied by
the Underwriters in writing for use in the Registration Statement, the
preliminary prospectus or the Prospectus are set forth in the last
paragraph on the cover of the Prospectus and the third, sixth and ninth
paragraphs under the table under the heading "Underwriting" in the
Prospectus and that no information has been omitted from the
Registration Statement in reliance on information supplied by the
Underwriters in writing.
(c) The financial statements of the Company set forth in the
Registration Statement and Prospectus present fairly, in all material
respects, the financial condition of the Company as of the dates
indicated and the results of operations and cash flows of the Company
for the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods
2
<PAGE> 3
involved (except as otherwise stated therein). No other financial
statements of the Company are required by Form S-1 or otherwise to be
included in the Registration Statement or Prospectus.
(d) Ernst & Young, LLP, the accountants who have expressed their
opinion with respect to certain of the financial statements included in
the Registration Statement, ("Company Accountants") are independent
accountants as required by the Securities Act and the Rules and
Regulations.
(e) The Company has been duly organized and is validly existing in
good standing under the laws of its jurisdiction of incorporation. The
Company has all requisite power and authority to own, lease and operate
its properties and to conduct its business as is described in the
Prospectus. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify will
not have a material adverse effect on the Company.
(f) The authorized, issued and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the
Prospectus and the issued and outstanding shares of Common Stock of the
Company have been duly authorized and validly issued and are fully paid
and nonassessable, were issued in compliance in all material respects
with all applicable federal and state securities laws, and were not
issued in violation of or subject to any preemptive rights, rights of
first refusal or similar rights (or, if issued in violation of or
subject to any such rights, such violation and rights were subsequently
waived). The sale of the Shares has been duly authorized and after
issuance of and payment for the Shares in accordance with this
Agreement, the Shares will be validly issued, fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus. Assuming an Underwriter purchases Shares in good faith
without notice of any adverse claim, such Underwriter will acquire good
and marketable title to the Shares, free and clear of any adverse
claims whatsoever. Except as disclosed in the Prospectus, the Company
does not have outstanding any options or warrants to purchase, any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into shares of its capital stock,
or any contracts or commitments to issue or sell such shares, or any
such options, warrants, rights, convertible securities or obligations.
(g) The Company has filed an application to list the Shares on the
Nasdaq National Market ("Nasdaq National Market") and has received
notification that the listing has been approved, subject to notice of
issuance of the Shares.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, not in
the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of
the Company, and there has not been any change in the capital stock of,
or any incurrence of short-term or long-term debt by, the Company or
any issuance of options, warrants or other rights to purchase the
capital stock of the Company (except for the grant of ______________
options pursuant to the Company's option plans described in the
Registration Statement and the Prospectus) or any adverse change or any
development involving, so far as the Company knows, a prospective
adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it
which would be material to the business or financial condition of the
Company.
(i) Except as set forth in the Prospectus, there is not pending or,
to the best knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party, before or by any court,
governmental agency or body or arbitration body, that could reasonably
be expected to result in any material adverse change in the financial
condition, business, properties, prospects, or results of operations of
the Company, or might materially and adversely affect the properties or
assets thereof.
(j) There are no contracts or documents that are required to be
filed as exhibits to the Registration Statement by the Securities Act
or by the Rules and Regulations that have not been so filed.
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<PAGE> 4
Any contract, agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has been
properly described therein in all material respects.
(k) Except as set forth in the Prospectus, the Company owns or has
valid leasehold interests in all material properties and assets
required for the operation of its business described in the
Registration Statement and Prospectus. The Company has good and
marketable title to all properties and assets owned by it which are
material to its business subject to no lien, mortgage, pledge, charge
or encumbrance, except as set forth in the Prospectus and other than
such as would not have a material adverse effect on the Company or its
properties, business, prospects or financial condition or on the
consummation of the transactions contemplated hereby. All leases to
which the Company is a party are valid, subsisting and enforceable and
no material default by the Company has occurred and is continuing
thereunder; and the Company enjoys peaceful and undisturbed possession
under all such leases to which it is a party as lessee.
(l) The Company has full right, power and authority to enter into
this Agreement and the Pricing Agreement and to perform all of its
obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Pricing Agreement by the Company
does not and will not violate, breach or conflict with (i) the Amended
and Restated Certificate of Incorporation or Restated Bylaws of the
Company or (ii) any agreement to which the Company is a party or by
which the Company or any of its properties is bound, excluding any
violation, breach or conflict which would not have a material and
adverse effect on the Company or its properties, business, prospects or
financial condition or on the consummation of the transactions
contemplated hereby; or (iii) any statute or order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company or any of its properties. No consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body is required in connection with the transactions
contemplated hereby except as may be required under the Securities Act,
state securities or "Blue Sky" laws or the rules of the National
Association of Securities Dealers, Inc. ("NASD") This Agreement has
been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except insofar as
indemnification and contribution may be limited by applicable federal
securities laws or the public policy of a state with respect to such
matter and except as enforceability may be limited by principles
governing the availability of equitable remedies. When executed and
delivered by the Company, the Pricing Agreement will constitute a valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforceability may be limited
by principles governing the availability of equitable remedies.
(m) The Company has all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and
permits ("Governmental Authorizations") of and from all public,
regulatory or governmental agencies and bodies, to own, lease and
operate its properties and conduct its business as now being conducted
and as described in the Registration Statement and the Prospectus,
excluding any Governmental Authorization where the failure to have
obtained such Governmental Authorization would not have a material and
adverse effect on the Company or its properties, business, prospects or
financial condition or on the consummation of the transactions
contemplated hereby, and no such consent, approval, authorization,
order, registration, qualification, license or permit contains a
materially burdensome restriction not adequately disclosed in the
Registration Statement and the Prospectus. The Company is in compliance
in all material respects with all local, state and federal laws, rules
and regulations including, but not limited to, environmental laws and
regulations governing the use, storage, discharge, handling, emission,
generation, manufacture and disposal of toxic substances, hazardous
materials, waste and other substances or products used in or resulting
from the business of the Company.
(n) Except as provided for in this Agreement, the Company has not
taken and will not take, directly or indirectly, any action designed to
cause or result in, or which constitutes or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of shares of the Common Stock of the Company to facilitate the sale or
resale of the Shares.
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<PAGE> 5
(o) Except as set forth in the Registration Statement and
Prospectus, the Company owns or possesses adequate licenses or other
rights to use all patents, trademarks, service marks, trade names,
copyrights, technology and know-how necessary to conduct the businesses
as described in the Prospectus, and, except as disclosed in the
Prospectus, the Company has not received any notice of infringement of
or conflict with (or knows of such infringement of or conflict with)
asserted rights of others with respect to any patents, trademarks,
service marks, trade names, copyrights or know-how which, individually
or in the aggregate, could reasonably be expected to result in any
material adverse effect upon the financial condition, business,
properties, prospects, or results of operations of the Company; and, to
the knowledge of the Company, except as disclosed in the Prospectus the
Company does not in the conduct of its business as now conducted as
described in the Prospectus, infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or
process which is the subject of a patent application filed by any third
party, known to the Company, where such infringement or conflict could
reasonably be expected to result in any material adverse effect upon
the financial condition, business, properties, prospects or results of
operations of the Company.
(p) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (1) transactions are
executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (3) access to assets is permitted only in accordance with
management's general or specific authorization; and (4) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(q) Neither the Company nor, to the Company's knowledge, any other
party is in violation or breach of, or in default with the passage
time, with respect to complying with any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company and each such contract,
agreement, instrument, lease, license, arrangement, and understanding
is in full force and is the legal, valid, and binding obligation of the
Company, and, to the Company's best knowledge, the other parties
thereto and is enforceable against the Company, as applicable, and, to
the Company's best knowledge, against the other parties thereto in
accordance with its terms. The Company is not a party to or bound by
any contract, agreement, instrument, lease, license, arrangement, or
understanding, or subject to any charter or other restriction, which
has had or which the Company knows will have a material adverse effect
on the financial condition, business, properties, prospects, or results
of operations, of the Company. The Company is not in violation or
breach of, or in default with respect to, any term of its Amended and
Restated Certificate of Incorporation or Restated Bylaws.
(r) The Company does not own any shares of capital stock or any
other securities of any corporation or have any equity interest in any
firm, partnership, association or other entity or subsidiary.
(s) Except as described in the Prospectus, no holder of securities
of the Company has any rights to the registration of securities of the
Company because of the filing of the Registration Statement or
otherwise in connection with the sale of the Shares contemplated hereby
which have not been waived.
(t) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940.
(u) The Company has filed all necessary federal, and all material
state and foreign income and franchise tax returns and has paid all
taxes shown thereon as due, and the Company has no knowledge of any tax
deficiency which has been or might be asserted against the Company
which would materially and adversely affect the business or properties
of the Company, taken as a whole; to the Company's knowledge, all tax
liabilities are adequately provided for on the books of the Company.
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<PAGE> 6
(v) The Company has obtained from each of its stockholders listed on
Schedule B hereto a written agreement in the form of Exhibit B attached
hereto ("Lockup Agreement") to the effect, subject to certain permitted
transfers set forth in the Lockup Agreement, that they will not offer
to sell, sell, assign or otherwise transfer or dispose of any shares of
Common Stock or securities convertible into or exchangeable for, or any
rights to purchase or acquire, Common Stock, for a period of 180 days
after the effective date of the Registration Statement, without the
prior written consent of Wedbush Morgan Securities Inc. ("Wedbush").
(w) The Company has not, directly or indirectly, at any time (i)
made any contributions to any candidate for political office, or failed
to disclose fully any such contribution in violation of law or (ii)
made any payment to any state, federal or foreign governmental officer
or official, or other person charged with similar public or
quasi-public duties, other than payments or contributions required or
allowed by applicable law. The Company's internal accounting controls
and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(x) The Company has not entered into any agreement pursuant to which
any person is entitled either directly or indirectly to compensation
from the Company for services as a finder in connection with the
proposed public offering. No person holds a right of first refusal or
other similar right to act as underwriter or agent in connection with
the offering of the Shares.
(y) Except as previously disclosed in writing by the Company to the
Representatives, to the Company's knowledge no officer, director or
principal stockholder (including, without limitation, any stockholder
holding five percent or more of the Company's outstanding Common Stock
on a fully diluted basis) of the Company has any National Association
of Securities Inc. ("NASD") affiliation.
(z) The Warrant Agreements in the form of Exhibit B hereto to be
delivered to each Representative at the First Closing Date (as defined
below) ("Warrant Agreements") have been duly authorized and, when
issued and delivered pursuant to this Agreement, will have been duly
executed, issued and delivered and will constitute valid and legally
binding obligations of the Company enforceable in accordance with their
terms, except insofar as indemnification and contribution may be
limited by applicable federal securities laws or the public policy of a
state with respect to such matter and except as enforceability may be
limited by principles governing the availability of equitable remedies.
The execution, delivery and performance of the Warrant Agreements by
the Company will not violate, breach or conflict with (i) the Amended
and Restated Certificate of Incorporation or Restated Bylaws of the
Company; (ii) any agreement to which the Company is a party or by which
the Company or any of its properties is bound, excluding any violation,
breach or conflict which would not have a material and adverse effect
on the Company or its properties, business, prospects or financial
condition or on the consummation of the transactions contemplated
thereby; or (iii) any statute or order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
any of its properties. No consent, approval, authorization or order of,
or filing with, any court or governmental or other agency or body is
required in connection with the transactions contemplated hereby or by
the Warrant Agreements except as may be required under the Securities
Act , state securities or "Blue Sky" laws or the rules of the NASD. The
shares of Common Stock issuable upon exercise of the Warrants have been
reserved for issuance upon the exercise of the Warrants and when issued
in accordance with the terms of the Warrant Agreements, will be duly
and validly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights and no personal liability will attach to
the ownership thereof. The Warrant Agreements in the aggregate will
provide for the grant to the Representatives of Warrants to purchase an
aggregate of 230,000 shares of Common Stock (subject to adjustment as
set forth in the Warrant Agreements) at an exercise price equal to
one-hundred twenty percent (120%) of the per Share initial public
offering price as set forth in the Pricing Agreement (subject to
adjustment as set forth in the Warrant Agreements).
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<PAGE> 7
2. Sale and Purchase of the Shares.
(a) The Company hereby agrees to sell the Primary Shares to the
several Underwriters as set forth in Schedule A attached hereto, and
the several Underwriters, in reliance upon the representations,
warranties and agreements herein contained, but subject to the
conditions hereinafter stated, agree, severally and not jointly, to
purchase from the Company at the place and the time specified below,
the respective aggregate numbers of Primary Shares set forth in
Schedule A opposite their respective names, plus any additional Shares
which such Underwriters may become obligated to purchase pursuant to
the provisions of Section 2(b) hereof, at a price set forth in the
Pricing Agreement.
(b) In addition, on the basis of the representations and warranties
herein contained, upon not less than five days' written notice from the
Representatives to the Company, the Company agrees to sell to the
Underwriters (but only for the purpose of covering over-allotments in
the sale of the Primary Shares), all or any portion of the
Over-Allotment Shares, as specified by the Representatives in such
notice, at the purchase price set forth in the Pricing Agreement. The
Over-Allotment Shares may be purchased on the Closing Date or at any
time thereafter so long as the notice to purchase is given within a
period of 45 days following the effective date of the Registration
Statement. Over-Allotment Shares shall be purchased by each Underwriter
in the proportion which the number of Primary Shares set opposite the
name of each Underwriter in Schedule A hereto bears to the total number
of Primary Shares. No Over-Allotment Shares shall be delivered to or
for the accounts of the Underwriters unless the Primary Shares shall be
simultaneously delivered and paid for or shall theretofore have been
delivered and paid for as herein provided.
(c) The respective purchase obligation of each Underwriter shall be
subject to such adjustments as the Representatives may in their
absolute discretion make.
3. Terms of Offering and Authority to Use Prospectus. The terms of the
public offering by the Underwriters of the Shares to be purchased by them shall
be as set forth in the Registration Statement and the Prospectus. The Company
authorized the Representatives to use preliminary prospectuses and to make them
available for use by prospective Underwriters and dealers and authorize the
Underwriters and all dealers acquiring Shares from an Underwriter to use the
Prospectus (as amended or supplemented, if the Company shall have furnished any
amendments or supplements thereto) in connection with the sale of the Shares
until the earlier of completion of the public offering or the 90th day following
effectiveness of the Registration Statement.
4. Payment and Delivery.
(a) Payment for the Primary Shares which the Underwriters agree to
purchase hereunder shall be made to the Company by wire transfer
payable in federal funds at the offices of Cooley Godward Castro
Huddleson & Tatum, Five Palo Alto Square, 3000 El Camino Real, Palo
Alto, California 94306-2155, against delivery to the Representatives
for the respective accounts of the several Underwriters of the Primary
Shares in the form of certificates for the securities comprising the
Primary Shares. The date and time of such delivery and payment shall
take place at 7:00 a.m., Pacific Standard Time on the following
applicable date (unless postponed in accordance with the provisions of
Section 9 hereof): (i) if the Company has not elected to rely on Rule
430A, on , 1996; (ii) if the Company has elected to rely on
Rule 430A, the third business day after the date on which the Pricing
Agreement is executed and delivered by the Company or (iii) at the
place, time, date (not later than the third or fourth business day
after the date under clause (i) or (ii), as applicable (as permitted
under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended
("Exchange Act))) agreed upon by the Representatives and the Company.
The date and time of this payment and delivery (which may be postponed
as provided in Section 9 hereof) are sometimes referred to below as the
"First Closing Date."
(b) Payment for the Over-Allotment Shares which the Underwriters
have the right to purchase hereunder shall be made to the Company by
wire transfer payable in federal funds at the office specified in the
immediately preceding paragraph at the time or times and on the date or
dates specified in
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<PAGE> 8
the written notice or notices delivered by the Representatives against
delivery for the respective accounts of the several Underwriters of the
Over-Allotment Shares in the form of certificates for the securities
comprising the Over-Allotment Shares. The dates and times of these
payments and deliveries are herein singularly or collectively sometimes
referred to as the "Second Closing Date." The term "Closing Date"
refers to both the First Closing Date and the Second Closing Date.
(c) You, individually and not as Representatives of the
Underwriters, may (but shall not be obligated to) make payment to the
Company for Shares to be purchased by any Underwriter whose check shall
not have been received by you at the date of payment therefor for the
account of that Underwriter. Any payment by you shall not relieve that
Underwriter from any of its obligations hereunder.
(d) The certificates for the Shares shall be registered in the name
or names and shall be in the denominations you, as Representatives, at
least three full business days prior to the First Closing Date, in the
case of the Primary Shares, and at least three full business days prior
to the Second Closing Date, in the case of the Over-Allotment Shares,
may request. The Company agrees to cause certificates for the Shares to
be delivered pursuant to this Agreement at your offices, at the offices
of The Depositary Trust Company, New York, New York, or at such other
places as may be designated by you as Representatives, and to be made
available for checking and packaging at one of the above offices or
such other places as may be designated by you as the Representatives at
least one full business day prior to the First Closing Date in the case
of the Primary Shares, and at least one full business day prior to the
Second Closing Date, in the case of the Over-Allotment Shares.
5. Conditions of the Underwriters' Obligations. The several obligations
of the Underwriters hereunder are subject to the following conditions:
(a) If not effective at the date and time this Agreement is executed
and delivered by the parties hereto, the Registration Statement shall
have become effective under the Securities Act not later than (i) 2:00
p.m., Los Angeles time, on the day following the date of this Agreement
or (ii) such other time and date, but not later than 2:00 p.m., Los
Angeles time, on the second day following the date of this Agreement,
as may be approved by you as Representatives. The Company will use its
best efforts to cause any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations as may be requested subsequent to
the date the Registration Statement is declared effective to become
effective as promptly as possible. At the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or the
qualifications of the Shares shall have been issued and no proceedings
for that purpose shall be pending before the Commission or any state
securities or "Blue Sky" commissioner or authority. If the Company has
elected not to rely on Rule 430A, the initial public offering price per
share for the Shares and the purchase price per share for the Shares to
be paid by the several Underwriters shall be agreed upon and set forth
in the Pricing Agreement, which shall be dated the date hereof, and an
amendment to the Registration Statement (as hereinafter defined)
containing such per share price information shall be filed before the
Registration Statement becomes effective. If the Company has elected to
rely upon Rule 430A, the information concerning the initial public
offering price of the Shares and price-related information shall have
been agreed upon and set forth in the Pricing Agreement and transmitted
to the Commission for filing pursuant to Rule 424(b) within the
prescribed period and the Company will provide evidence satisfactory to
the Representatives of such timely filing (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rules 430A and
424(b)).
(b) At each Closing Date, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct with
the same effect as if made on and as of such Closing Date and the
Company shall have performed all of the obligations and complied with
all of the conditions hereunder on its part to be performed or complied
with on or prior to such Closing Date; (ii) there shall have been,
since the respective dates as of which information is given, no
material adverse change in the financial condition, properties,
prospects, results of operations, capital stock, long-term debt or
general affairs of the Company from that set forth in the Registration
Statement and the Prospectus, except such
8
<PAGE> 9
changes which the Registration Statement indicates might occur after
the effective date of the Registration Statement, and the Company shall
not have incurred any material liabilities or material obligations,
direct or contingent, or entered into any material transaction,
contract or agreement not in the ordinary course of business other than
as referred to or contemplated in the Registration Statement; and,
(iii) except as set forth in the Prospectus, no action, suit or
proceeding shall be pending or threatened against the Company which
would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company before
or by any commission, board or administrative agency in the United
States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the financial condition,
business, properties, prospects or results of operations of the
Company; and you shall have received at each Closing Date, a
certificate of the principal executive officer and the principal
financial or accounting officer of the Company, dated as of such
Closing Date, evidencing compliance with the provisions of this
subsection (b), and confirming the accuracy of the representations and
warranties of the Company set forth in Section 1 hereof and confirming
that all conditions set forth herein have been met as of such date.
(c) No Underwriter shall have discovered and disclosed to the
Company prior to either Closing Date that the Registration Statement or
the Prospectus or any amendment or supplement thereto, contains an
untrue statement of a fact that in the reasonable opinion of the
Representatives is material, or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, not misleading.
(d) On each Closing Date you shall have received a signed opinion,
dated as of such date, of Gibson, Dunn & Crutcher, counsel to the
several Underwriters ("Underwriters' Counsel"), with respect to the
sufficiency of all corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby,
and the Company shall have furnished to such counsel such documents as
they may have reasonably requested for the purpose of enabling them to
pass upon such matters.
(e) (i) On each Closing Date you shall have received the signed
opinion, dated as of such date, of Cooley Godward Castro Huddleson &
Tatum to the Company, in form and substance satisfactory to counsel for
the several Underwriters, together with signed or photostatic copies
thereof for each of the other Underwriters substantially to the effect
set forth on Exhibit D attached hereto.
(ii) On each Closing Date you shall have received the signed
opinion, dated as of such date, of , patent counsel to the
Company ("Company Patent Counsel"), in form reasonably satisfactory to
the Underwriters Counsel as to such matters as such counsel may
reasonably request, together with signed or photostatic copies thereof
for each of the other Underwriters.
(e) At the time of the signing of this Agreement, on each Closing
Date and, if the Company elects to rely on Rule 430A, on the date of
the Prospectus, you shall have received a signed letter, dated,
respectively, as of each such date, from the Company Accountants, in
form and substance satisfactory to you as to such matters as you may
reasonably request, together with, in each case, signed or photostatic
copies thereof for each of the other Underwriters. There shall not be
any changes (increases or decreases) specified in the letters referred
to in this subparagraph which, in the reasonable judgment of the
Representatives, are materially adverse with respect to the financial
position or results of operations of the Company and shall be deemed to
constitute a failure of the Company to comply with the conditions to
the obligations of the Underwriters hereunder.
(f) On or prior to the effective date of the Registration Statement,
the Common Stock of the Company shall have been designated Nasdaq
National Market system securities and shall have been duly authorized
for inclusion in the Nasdaq National Market.
(g) On or prior to the First Closing Date, the Company shall execute
and deliver to the Representatives the Pricing Agreement.
9
<PAGE> 10
(h) If, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A then immediately following the execution and delivery of the
Pricing Agreement, the Company will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A and Rule
424(b), copies of an amended prospectus, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement
(including an amended prospectus), containing all information so
omitted.
(i) The Company shall have executed and delivered to the
Representatives the Warrant Agreements at the First Closing Date.
(j) All proceedings taken at or prior to each Closing Date in
connection with the sale of the Shares shall be reasonably satisfactory
in form and substance to you and the Underwriters Counsel, and at the
time of signing this Agreement and on the Closing Date, you and such
counsel shall have received each and every additional document, letter,
opinion, certificate or other item dated and executed in a manner
reasonably satisfactory to you and such counsel, as you or such counsel
may reasonably request in connection with the Prospectus, the
Registration Statement, the offer and sale of the Shares hereunder, or
proceedings at the Closing Date.
If any of the conditions herein provided for in this Section 5 shall
not have been fulfilled as of the date indicated, all obligations of the several
Underwriters under this Agreement may be cancelled by the Representatives by
notifying the Company of such cancellation on or prior to the applicable Closing
Date.
6. Covenants of the Company.
6.1 The Company covenants and agrees as follows:
(a) To use its best efforts to bring about the effectiveness of
the Registration Statement and not, at any time, whether
before or after the effective date, file any amendment to
the Registration Statement or Prospectus or supplement
thereto of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel
reasonably shall have objected or which is not in compliance
with the Securities Act and the Rules and Regulations, and
as soon as the Company is advised thereto, to advise the
Representatives and confirm this advice in writing (i) when
the Registration Statement has become effective and (ii) of
the issuance by the Commission or any state securities or
"blue sky" commissioner or authority of any order suspending
the effectiveness of the Registration Statement or any
qualification of the Shares or prohibiting the sale of the
Shares or the initiation or threatening of any proceedings
for any such purpose.
(b) To deliver, on or before the effective date of the
Registration Statement and from time to time thereafter, for
such period as in the opinion of the Underwriters Counsel a
prospectus is required by the Securities Act to be delivered
in connection with sales of Shares by the Underwriter or
dealer, without charge, to the Representatives and to send
to the several Underwriters, at such office or offices as
the Representatives may designate, as many copies of the
preliminary prospectus and Prospectus as the Representatives
may reasonably request.
(c) To furnish each of the Representatives, without charge, one
executed copy of the Registration Statement (including
exhibits) and of any amendments thereto and to furnish the
Representatives, without charge, a reasonable number of
conformed copies of the Registration Statement (excluding
exhibits) and of any amendments thereto.
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<PAGE> 11
(d) To furnish each of the Representatives with a copy of each
proposed amendment or supplement before amending or
supplementing the Registration Statement or the Prospectus.
(e) If during the period specified in Section 6.1(b) above, any
event shall occur as a result of which it shall be necessary
to amend or supplement the Prospectus in order to make the
statements therein, in light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading,
forthwith to prepare and furnish, at its own expense, to the
Underwriters and to dealers (whose names and addresses the
Representatives will furnish to the Company) to whom Shares
may have been sold by the Representatives and to any other
dealers upon request, either amendments or supplements to
the Prospectus so that the statements in the Prospectus, as
so amended or supplemented, will not, in light of the
circumstances when the Prospectus is delivered to a
purchaser, be misleading.
(f) To make generally available to the Company's security
holders, as soon as practicable, but not later than fifteen
months after the end of the Company's current fiscal
quarter, an earnings statement (which need not be audited)
covering a period of twelve months beginning after the
effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of the last paragraph
of Section 11(a) of the Securities Act.
(g) For a period of three years following the date of this
Agreement, to supply to each of the Representatives, and to
each other Underwriter who may so request in writing, copies
of such financial statements and other periodic and special
reports as the Company may from time to time furnish
generally to holders of any class of its securities, and to
file with the Commission on each report required under the
Exchange Act, and to furnish to each of the Representatives
a copy of each such report which it files with the
Commission.
(h) To cooperate with the Representatives in an endeavor to
qualify the Shares for offer and sale under the "blue sky"
laws of such jurisdictions of the United States as the
Representatives may request, and to pay, or reimburse if
paid by the Representatives, fees and disbursements of
Underwriters Counsel and all other expenses and filing fees
in connection therewith; provided, however, that the Company
shall not be required to file any general consent to service
of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation as doing
business in any jurisdiction.
(i) For a period of three years following the date of this
Agreement, to comply to the best of its ability with the
Securities Act, the Rules and Regulations and the Exchange
Act, and the rules and regulations thereunder so as to
permit the continuance of sales and dealings in the Common
Stock of the Company.
(j) To apply the net proceeds from the sale of the Shares in
accordance with the statement made under "Use of Proceeds"
in the Prospectus and, if applicable, to comply with Rule
463 under the Securities Act.
(k) To supply the Representatives with copies of all
correspondence to and from and all documents issued to and
by the Commission in connection with the registration of the
Shares under the Securities Act.
11
<PAGE> 12
(l) To use its best efforts to maintain such listing of the
Company's Common Stock on the Nasdaq National Market for at
least three years from the date of this Agreement.
(m) For a period of one year from the Effective Date of the
Registration Statement, at its expense, to cause its
regularly engaged independent certified public accountants
to review (but not audit) the Company's financial statements
for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing
of the Company's 10-Q quarterly report and the mailing of
quarterly financial information to stockholders.
(n) To file Form SR at the times required by Rule 463 under the
Securities Act.
6.2 The Company covenants and agrees to pay, or reimburse if paid by
the Representatives, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, all costs and expenses incident to
the entry into and performance under this Agreement by the Company, and without
limiting the generality of the foregoing, all costs and expenses incident to (a)
the issuance, purchase, sale and delivery of the Shares to the Underwriters, (b)
the registration of the Shares and preparing, printing and shipping the
Registration Statement and the underwriting documents, (c) the filing fees of
the Commission, the National Association of Securities Dealers, Inc. (including
fees for Nasdaq National Market) and state securities and "blue sky"
commissioners and authorities in connection with the Registration Statement and
this Agreement, and the reasonable fees, disbursements and expenses of counsel
in connection with state securities or "blue sky" matters, (d) the fees and
disbursements of counsel and accountants for the Company, (e) the furnishing to
the Representatives and the other Underwriters of copies of the Registration
Statement, any preliminary prospectus, the Prospectus, this Agreement, the Blue
Sky Survey (preliminary and final), and of the documents required by paragraphs
(b), (c), (d) and (e) of Section 6.1, to be so furnished, including costs of
preparing, printing and shipment, (f) the preparation, printing, binding,
mailing, delivery, filing and distribution by the Company of all supplements and
amendments to the Prospectus required by paragraph (e) of Section 6.1, (g) the
furnishing to the Representatives and the other Underwriters of all reports and
financial statements required by paragraphs (f) and (g) of Section 6.1, and (h)
the holding of informational meetings related to the offer and sale of the
Shares, other than the Underwriters' expenses for air transportation and hotel
accommodations. Additionally, the Company agrees to pay to the Representatives a
non-accountable expense allowance equal to $150,000, of which $25,000 has
previously been paid and the remaining $125,000 to be paid at the closing of the
purchase of the Primary Shares by the Underwriters. The Representatives will pay
the fees and costs of its counsel (except as otherwise set forth above) and the
costs of "tombstone" advertisements to be published in financial newspapers. If
the sale of any of the Shares to the several Underwriters pursuant to this
Agreement is not consummated because the offering is abandoned by the Company
for any reason, or by the Underwriters (a) if there is a material adverse change
in the Company's business, financial condition, results of operations or
prospectus, (b) if there is an adverse change in securities market conditions,
or (c) if the Underwriters discover, in the course of their due diligence of the
Company, material facts or circumstances with respect to the Company that render
the offering impracticable, then the Company will reimburse the several
Underwriters for all of their out-of pocket expenses (including reasonable fees
and expenses of counsel) incurred by the Underwriters in connection with this
Agreement or in investigating, preparing to market or marketing the Shares.
6.3 The Company covenants and agrees that it will not offer to sell,
sell or otherwise dispose of any shares of Common Stock of the Company, or
securities convertible or exchangeable for, any rights to purchase or acquire,
Common Stock, other than as provided in this Agreement, as contemplated by the
Registration Statement, pursuant to its employee benefit plans in effect as of
the date hereof or upon exercise of options or warrants outstanding as of the
date hereof, for a period of 180 days after the effective date of the
Registration Statement, without the prior written consent of Wedbush. The
Company
12
<PAGE> 13
also will, at or prior to the first Closing Date, furnish you with the
Lockup Agreements of the stockholders listed on Schedule B hereto.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Underwriter
(including specifically each person who may be substituted for an
Underwriter as provided in Section 9 hereof) and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the
Securities Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or any other statute or at
common law or otherwise, and except as provided below, will reimburse
each of the Underwriters and each such controlling person, if any, for
any legal or other expenses incurred by them or any of them in
connection with investigating or defending any actions whether or not
resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, in any preliminary prospectus
or in the Prospectus or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) any untrue statement
or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus or the omission or alleged
omission to state therein a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading, unless the untrue statement or omission or
alleged untrue statement or omission was made in such Registration
Statement, preliminary prospectus or Prospectus in reliance upon and in
conformity with information furnished in writing to the Company by you
or any Underwriter through you expressly for use therein. The foregoing
indemnity with respect to any untrue statement contained in or omission
from a preliminary prospectus shall not inure to the benefit of the
Underwriter from whom the person asserting any such loss, liabilities,
claims, damages or expenses purchased shares, or any person controlling
such Underwriter, if a copy of the Prospectus (as then amended or
supplemented, if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of the
Underwriters to such person, if such is required by law, at or prior to
the written confirmation of the sale of such Shares to such person and
the untrue statement contained in or omission from such preliminary
prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented). This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter will severally, and not jointly, indemnify and
hold harmless the Company, each of its directors, each of its officers
who have signed the Registration Statement, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become
subject under the Securities Act or any other statute or at common law
or otherwise, and, except as provided below, will reimburse the Company
and each such director, officer or controlling person for any legal or
other expenses incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement, in any preliminary prospectus or in the
Prospectus or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus or the
omission or alleged omission to state therein a material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, but only insofar as any
such untrue statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company by you or any Underwriter through
you expressly for use therein. This indemnity will be in addition to
any liability which the Underwriters may otherwise have.
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<PAGE> 14
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a
claim is to be made against an indemnifying party or parties under this
Section 7, notify each such indemnifying party of the commencement of
such action, enclosing a copy of all papers served, but the omission so
to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions of this Section 7 unless, and only to the extent that, such
omission results in the forfeiture of substantive rights or defenses by
the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the
action, with counsel satisfactory to the indemnified party, and after
notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except
as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the
defense. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of
such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there
may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based
on advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party
will not have the right to direct the defense of such action on behalf
of the indemnified party) or (4) the indemnifying party has not in fact
employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying
party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they
are incurred. An indemnifying party will not be liable for any
settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld), but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of each
indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 7 (whether or not
any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of
such claim, action or proceeding.
(d) In order to provide for just and equitable contribution under
the Securities Act in any case in which (i) any indemnified party makes
claim for indemnification pursuant to this Section 7, but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that the express
provisions of this Section 7 provide for indemnification in such case,
or (ii) contribution under the Securities Act may be required on the
part of any indemnified party; then the Company and any such
Underwriter shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs
of defense and investigation and all attorneys' fees) in either such
case (after contribution from others) in such proportions so that all
such Underwriters are responsible in the aggregate for that portion of
such losses, claims, damages or liabilities as is determined by
multiplying the total amount of such loses, claims, damages or
liabilities times the difference between
14
<PAGE> 15
the public offering price and the purchase price to the Underwriter and
dividing the product thereof by the public offering price, and the
Company shall be responsible for the portion of such losses, claims,
damages or liabilities as determined by multiplying the total amount of
such losses, claims, damages or liabilities times the purchase price to
the Underwriters and dividing the product thereof by the public
offering price; provided, however, that the contribution of each
contributing Underwriter shall not be in excess of its proportionate
share (based on the ratio of the number of Shares purchased by such
Underwriter to the number of Shares purchased by all contributing
Underwriters) of the portion of such losses, claims, damages or
liabilities for which the Underwriters are responsible and the
contribution of the Company shall not be in excess of their
proportionate share (based on the ratio of the number of Shares sold by
the Company to the total number of Shares sold) of the portion of such
losses, claims, damages or liabilities for which the Company are
responsible. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any person having liability
under Section 11 of the Securities Act other than the Company and the
Underwriters. If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Company and any
Underwriter, as the case may be, shall be entitled to contribution from
the Company and/or the Underwriters, as the case may be, to the full
extent permitted by law.
(e) It is agreed that the only information supplied by the
Underwriters in writing for use in the Registration Statement, the
preliminary prospectus or the Prospectus are set forth in the last
paragraph on the cover of the Prospectus and the third, sixth and ninth
paragraphs under the table under the heading "Underwriting" in the
Prospectus and that no information has been omitted from the
Registration Statement in reliance on information supplied by the
Underwriters in writing.
8. Effective Date and Termination.
(a) This Agreement shall become effective at 10:00 a.m., Los Angeles
time, on the first full business day following the day on which the
Registration Statement becomes effective or at the time of the initial
public offering of any of the Shares by the Underwriters after the
Registration Statement becomes effective, whichever time shall first
occur. The time of the initial public offering shall mean the time of
the release by you, for publication, of the first newspaper
advertisement, which is subsequently published, relating to the Shares,
or the time at which the Shares are first generally offered by the
Underwriters to dealers by letter or telegram, whichever shall first
occur. You may prevent this Agreement from becoming effective without
liability of any party to any other party, except as otherwise provided
in Sections 8(b) and (c), by giving notice as indicated below in
Section 8(b) prior to the time when this Agreement would otherwise
become effective as herein provided.
(b) This Agreement, except for Sections 6.2, 7, 10, 11 and 12, may
be terminated by the Representatives by notifying the Company at any
time at or prior to the First Closing Date, and the option referred to
in Section 2(b) hereof, if exercised, may be cancelled at any time
prior to the Second Closing Date, if, in the Representatives' judgment,
payment for and delivery of the Shares is rendered impracticable or
inadvisable by reason of (i) the Company having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or
government action, order or decree, (ii) trading in securities on the
New York Stock Exchange, the American Stock Exchange or Nasdaq National
Market having been suspended or limited, (iii) material governmental
restrictions having been imposed on trading in securities generally,
(iv) a banking moratorium having been declared by Federal or California
or New York state authorities, (v) an outbreak of major international
hostilities or other national or international calamity having
occurred, (vi) the passage by the Congress of the United States or by
any state legislative body, of any act or measure, or the adoption or
proposed adoption of any orders, rules, legislation or regulations by
any governmental body or any authoritative accounting institute or
board, or any governmental executive, which is believed likely by the
Representatives to have a material adverse impact on the business,
financial condition or financial statements of the Company or the
market for the securities offered hereby, (vii) any material adverse
15
<PAGE> 16
change having occurred, since the respective dates as of which
information is given in the Prospectus, in the financial condition,
business, properties, prospects or results of operations of the
Company, whether or not arising in the ordinary course of business
which, in your judgment, makes it impracticable or inadvisable to offer
or deliver the Shares on the terms contemplated by the Prospectus, or
(viii) any of the conditions specified in Section 5 hereof not having
been fulfilled or waived in writing by the Representatives, at or prior
to the Closing Date, when and as required by this Agreement to be
fulfilled.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof, except as provided in Sections 6.2 and 7, the
Company shall not be under any liability to any Underwriter nor shall
any Underwriter be under any liability to the Company, except that no
Underwriter which shall have failed or refused to purchase the Shares
agreed to be purchased by it hereunder, without some reason sufficient
hereunder to justify its cancellation or termination of its obligations
hereunder, shall be relieved of liability to the Company or to the
other Underwriters for damages occasioned by its default.
9. Default of Underwriters. If one or more of the Underwriters shall
fail or refuse (other than for a reason sufficient to justify the termination of
this Agreement) to purchase on the First Closing Date or the Second Closing Date
the aggregate number of Primary Shares or Over-Allotment Shares agreed to be
purchased by such Underwriter or Underwriters and the aggregate number of
Primary Shares or Over-Allotment Shares agreed to be purchased by the
Underwriter or Underwriters shall not exceed 10% of the total number of Primary
Shares or Over-Allotment Shares (as the case may be) to be sold hereunder to the
Underwriters, then each of the non-defaulting Underwriters shall be obligated to
purchase these Primary Shares or Over-Allotment Shares on the terms herein set
forth in proportion to their respective obligations hereunder. In that case, the
Representatives and the Company shall have the right to postpone the First
Closing Date or the Second Closing Date (as the case may be) for a period of not
more than seven days in order that necessary changes and arrangements may be
effected.
If one or more of the Underwriters shall fail or refuse (other than for
a reason sufficient to justify the termination of this Agreement) to purchase on
the First Closing Date or the Second Closing Date the aggregate number of
Primary Shares or Over-Allotment Shares agreed to be purchased by such
Underwriter or Underwriters and the aggregate number of Primary Shares or
Over-Allotment Shares agreed to be purchased by such Underwriter or Underwriters
shall exceed 10% of the total number of Primary Shares or Over-Allotment Shares
(as the case may be) to be sold hereunder to the Underwriters, then the non-
defaulting Underwriters shall have the right to purchase, or procure one or more
Underwriters reasonably acceptable to the Company, to purchase, in such
proportions as they may agree upon and upon the terms herein set forth, the
Primary Shares or Over-Allotment Shares which such defaulting Underwriter or
Underwriters agreed to purchase, and this Agreement shall be carried out
accordingly. If such other Underwriters do not exercise this right within
twenty-four hours after receiving notice of the default, then the Company shall
be entitled to an additional period of twenty-four hours within which to procure
another party or parties satisfactory to the Representatives to purchase or
agree to purchase these Primary Shares or Over-Allotment Shares on the terms
herein set forth. In any such case, the Representatives and the Company shall
have the right to postpone the First Closing Date or the Second Closing Date (as
the case may be) for a period of not more than seven days in order that
necessary changes and arrangements may be effected. If this paragraph becomes
applicable and neither the non-defaulting Underwriters nor the Company shall
make arrangements within the period stated for the purchase of the Primary
Shares or Over-Allotment Shares which the defaulting Underwriter or Underwriters
agreed to purchase, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter to the Company and without liability on the
part of the Company except as provided in Sections 6.2 and 7. The provisions of
this Section 9 shall not in' any way affect the liability of any defaulting
Underwriter to the Company arising out of the default.
10. Representations and Agreement to Remain in Effect. The expense,
reimbursement and indemnification agreements contained in Sections 6, 7 and 8
shall survive any termination of this Agreement; and the representations,
warranties and covenants of the Company set forth in this Agreement shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of any of the Underwriters, the Company, any controlling person,
director or officer of the Company or the Underwriters, and (ii) delivery,
acceptance of and payment for the Shares under this Agreement.
16
<PAGE> 17
11. Parties in Interest. This Agreement has been and is made solely for
the benefit of the Underwriters, the Company and their respective successors and
assigns, to the extent expressed herein, for the benefit of persons controlling
any of the Company, or any of the Underwriters, directors and officers of the
Company and their respective successors and assigns, and no other person,
partnership, association or corporation shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser of Shares from any Underwriter merely because of such purchase.
12. Notices, Headings, Applicable Law. Except as otherwise provided in
this Agreement, all statements, requests, notices and other communications
hereunder shall be in writing and shall be mailed, delivered, telegraphed or
sent by facsimile transmission and confirmed to the Representatives at the
address set forth above, attention: Investment Banking Division (facsimile
number: (213) 688-6642); and if to the Company to Dr. John Monahan, President
and Chief Executive Officer, 1201 Harbor Bay Parkway, Suite 1000, Alameda ,
California 94502 (facsimile number: (510) 748-7155), with a copy to Cooley
Godward Castro Huddleson & Tatum, 5 Palo Alto Square, 3000 El Camino Real, Palo
Alto, California 94306 (facsimile number: (415) 859-0663), Attention: Alan C.
Mendelson, Esq. Any party may change the address at which it is to receive
communications hereunder upon notice to the other parties as provided above. The
headings in this Agreement have been inserted as a matter of convenience and
reference and are not a part of this Agreement. The Agreement shall be construed
in accordance with the internal laws, and not the laws pertaining to choice or
conflict of laws, of the State of California.
Please confirm that the foregoing correctly sets forth the agreement
among us.
Sincerely yours,
AVIGEN, INC.
By:
-------------------------------------
Dr. John Monahan
President and Chief Executive Officer
Confirmed and Accepted as of the
date first above written.
WEDBUSH MORGAN SECURITIES INC.
SANDS BROTHERS & CO.
For themselves and as Representatives
of the several Underwriters
By: WEDBUSH MORGAN SECURITIES INC.
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
17
<PAGE> 18
SCHEDULE A
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Wedbush Morgan Securities Inc. ...........................
Sands Brothers & Co........................................
Total ............................................ 2,300,000
</TABLE>
18
<PAGE> 19
SCHEDULE B
LIST OF LOCKUP AGREEMENT SHAREHOLDERS
NAME NUMBER OF SHARES BENEFICIALLY OWNED
---- -----------------------------------
19
<PAGE> 20
EXHIBIT A
2,300,000 SHARES
AVIGEN, INC.
Common Stock
PRICING AGREEMENT
__________, 1996
Wedbush Morgan Securities Inc.
Sands Brothers & Co., as Representatives of the Several Underwriters
c/o Wedbush Morgan Securities Inc.
1000 Wilshire Boulevard, 10th Floor
Los Angeles, California 90017-2457
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated ___________, 1996
("Underwriting Agreement") relating to the sale by the Company and the purchase
by the several Underwriters for whom Wedbush Morgan Securities Inc. and Sands
Brothers & Co. are acting as representatives ("Representatives"), of the Shares
(as defined in the Underwriting Agreement). All terms herein shall have the
definitions contained in the Underwriting Agreement except as otherwise defined
herein.
Pursuant to Section 2 of the Underwriting Agreement, the Company agrees
with the Representatives as follows:
1. The initial public offering price per share for the Shares
determined as provided in said Section 2 shall be $__________.
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $__________ , being an amount equal to the initial
public offering price set forth above less $__________ per share.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters, including you, all in accordance with its terms.
Very truly yours,
AVIGEN, INC.
_____________________________________
Dr. John Monahan
President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Wedbush Morgan Securities Inc.
Sands Brothers & Co., Inc.
For themselves and as Representatives
of the several Underwriters.
By: Wedbush Morgan Securities Inc.
By: __________________________________
__________________________________
(Printed Name and Title)
<PAGE> 21
EXHIBIT B
[FORM OF REPRESENTATIVE WARRANT]
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
UNTIL THE COMMENCEMENT DATE (AS HEREINAFTER DEFINED) THIS WARRANT IS SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS DESCRIBED IN SECTION 9 HEREOF
__________ __, 1996
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
AVIGEN, INC.
VOID AFTER 5:00 P.M.. LOS ANGELES TIME, ON __________ __,2001,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M..
LOS ANGELES TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY
No. W-__
THIS CERTIFIES that, for and in consideration of $____________________,
_________________________________________ [NAME OF REPRESENTATIVE], or its
registered assigns (_______________ [NAME OF REPRESENTATIVE] or any such
registered assign being referred to herein as to the "Warrantholder"), is
entitled to subscribe for and purchase from Avigen, Inc., a Delaware corporation
(hereinafter called the "Company"), at the price of $__________ [120% OF PER
SHARE INITIAL PUBLIC OFFERING] per share (such price, as from time to time to be
adjusted as hereinafter provided, being hereinafter called the "Warrant Price"),
at any time and from time to time but not earlier than the Commencement Date (as
defined below) or later than the Expiration Date (as defined below), up to
___________________ fully paid, nonassessable shares of Common Stock, par value
$.001 per share, of the Company ("Common Stock"), subject, however, to the
provisions and upon the terms and conditions hereinafter set forth, including
without limitation the provisions of Section 3 hereof. "Commencement Date" shall
mean the first anniversary of the date hereof. "Expiration Date" shall mean 5:00
P.M., Los Angeles time, on the fifth anniversary of the date hereof, or if not a
Business Day, as defined herein, at 5:00 P.M., Los Angeles time, on the
immediately preceding business day. "Business Day" shall mean a day other than a
Saturday, Sunday or other day on which banks in the State of California are
authorized by law to remain closed.
SECTION 1. EXERCISE OF WARRANT
(a) EXERCISE PROCEDURES
This Warrant may be exercised, at any time and from time to time but
not earlier than the Commencement Date or later than the Expiration Date, by the
Warrantholder, in whole or in part (but not as to a fractional share of Common
Stock and in no event for less than 100 shares (unless Less than an aggregate of
100
1
<PAGE> 22
shares are then purchasable under all outstanding Warrants held by a
Warrantholder)), by the completion of the subscription form attached hereto and
by the surrender of this Warrant (properly endorsed) at the Company's principal
offices as set forth in Section 8 hereto (or at such other location in the
United States as it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the Company). In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the total number of whole shares of Common Stock so
purchased, registered in the name of the Warrantholder, shall be delivered to
the Warrantholder within a reasonable time, not exceeding five Business Days,
after the rights represented by this Warrant shall have been so exercised; and,
unless this Warrant has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the
Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates from the date on which this Warrant was surrendered and if exercise
is pursuant to a cash exercise, payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
(b) CASH OR NET EXERCISE
The Warrantholder may elect to exercise this Warrant by cash exercise
or a net exercise as described below.
(i) In the case of a cash exercise, the subscription
form delivered under this Section 1(a) shall be accompanied by payment
to the Company of the Warrant Price, in cash or by certified or
official bank check, for each share being purchased.
(ii) In the case of a net exercise, the Warrantholder
may elect to exercise this Warrant and receive shares on a "net
exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this
Warrant at the principal office of the Company, in which event the
Company shall issue to Holder a number of shares computed using the
following formula:
X = (P)(Y)(A-B)
-----------
A
Where: X = the number of shares of Common Stock to be issued
to Holder.
P = the percentage of the Warrant being exercised.
Y = the number of shares of Common Stock issuable
upon exercise of this Warrant.
A = the Current Market Price (as determined pursuant
to Section 3) of one share of Common Stock.
B = Warrant Price.
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<PAGE> 23
(c) CONTINGENT EXERCISE
At the election of the Warrantholder, an exercise may be made
contingent upon the closing of the sale of the shares issuable upon such
exercise in a public offering pursuant to a registration statement filed or to
be filed by the Company which registers such shares pursuant to the Securities
Act of 1933, as amended.
(d) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be so issued, upon full payment of the
Warrant Price therefor or as otherwise set forth herein, shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens,
charges and other adverse interests. Without limiting the generality of the
foregoing, the Company covenants that it will from time to time take all such
action as may be required to ensure that the par value per share, if any, of the
Common Stock is at all times equal to or less than the effective Warrant Price.
The Company will take all such action as may be necessary to ensure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange or
automated quotation system upon which the Common Stock of the Company may be
listed. The Company will not take any action which results in any adjustment of
the Warrant Price if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed the total
number of shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of first
refusal with respect to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.
(e) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(f) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(g) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.001, of the
Company as authorized on the date hereof, or shares of any class or classes
resulting from any recapitalization or reclassification thereof which are not
limited to any fixed sum or percentage and are not subject to redemption by the
Company and in case at any time there shall be more than one such resulting
class, the shares of each class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
(h) NO FRACTIONAL SHARES
No fractional shares shall be issued upon exercise of this Warrant and
no payment or adjustment shall be made upon any exercise on account of any cash
dividends on the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the provisions of this
Section 1, be delivered upon
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<PAGE> 24
any such exercise, the Company, in lieu of delivering the fractional share
thereof, shall pay to the Warrantholder an amount in cash equal to the Current
Market Price of such fractional interest, as determined pursuant to Section 3.
(i) LISTING
Prior to the issuance of any shares of Common Stock upon exercise of
this Warrant, the Company shall secure the listing of such shares of Common
Stock upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or automated
quotation system, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if and
so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES AND WARRANT PRICE
(a) ADJUSTMENTS
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2. Upon each adjustment of the Warrant Price
for any stock dividend or distribution or any subdivision or combination of the
outstanding shares of the Common Stock as provided in this Section 2, the
Warrantholder shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares (calculated to the nearest
tenth of a share) obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Warrant Price resulting from such adjustment.
(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger), the Warrant Price in effect at the
time of the record date of such dividend, distribution, subdivision,
combination, reclassification or recapitalization shall be adjusted so that the
Warrantholder shall be entitled to receive the aggregate number and kind of
shares which, if this Warrant had been exercised in full immediately prior to
such event, it would have owned upon such exercise and been entitled to receive
by virtue of such dividend, distribution, subdivision, combination
reclassification or recapitalization. Any adjustment required by this Section 2
(a)(1) shall be made successively immediately after the record date, in the case
of a dividend or distribution, or the effective date, in the case of a
subdivision, combination, reclassification or recapitalization, to allow the
purchase of such aggregate number and kind of shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as provided
in this Section 2, and the Company shall reserve, for the life of the Warrant,
such securities of such subsidiary or other corporation; provided, however that
no adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of this Warrant or upon its exercise.
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<PAGE> 25
(3) If at any time prior to the expiration of this Warrant in
full, the Company shall issue rights or Warrants to all holders of Common Stock
as such entitling them (for a period expiring within sixty days after the record
date of the determination of stockholders entitled to receive the same), to
subscribe for or purchase Common Stock at a price per share less than the
current market price per share (as defined in Section 3) on such record date,
then, in each such case the number of shares subject to this Warrant thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable upon exercise of
each Warrant by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or Warrants,
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or Warrants plus the
number of shares that the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at such current market price. For
purposes of this Section 2(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in Sections
2(a)(2) or (3) above), then in each case the Warrant Price shall be adjusted to
a price determined by multiplying the Warrant Price in effect immediately prior
to such distribution by a fraction, of which the numerator shall be the then
Current Market Price per share of Common Stock on the record date for
determination of stockholders entitled to receive such distribution, less the
then fair value (as determined by the Board of Directors of the Company in good
faith) of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, and of which the denominator shall be the Market Price per share
of Common Stock; provided, however, that if the then Current Market Price per
share of Common Stock on the record date for determination of stockholders
entitled to receive such distribution is less than the then fair value of the
portion of the assets or evidence of indebtedness so distributed or of such
subscription rights or Warrants which are applicable to one share of Common
Stock, the foregoing adjustment of the Warrant Price shall not be made and in
lieu thereof the number of shares purchasable upon exercise of each Warrant
immediately prior to such distribution shall be adjusted so that the holder of
such Warrant shall be entitled to receive upon exercise of such Warrant the kind
and number of assets, evidence of indebtedness, subscription rights and Warrants
(or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this Section 2(a)(5) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2(a) shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Notwithstanding anything in this
Section 2(a) to the contrary, the Warrant Price shall not be reduced to less
than the then existing par value of the Common Stock as a result of any
adjustment made hereunder.
(6) In the event that at any time, as the result of any
adjustment made pursuant to this Section 2(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 2(a).
(7) For purposes of any computation under this Section 2(a),
the Current Market Price and Market Price per share of Common Stock on any date
shall be deemed calculated as provided in Section 3.
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<PAGE> 26
(b) NO ADJUSTMENT FOR CASH DIVIDENDS
Except as provided in Section 2(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS
In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock (other than a subdivision or combination
of the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation or other entity (other than a merger in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in the
case of any sale, lease, transfer or conveyance to another corporation or entity
of the property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition precedent to such transaction cause
such successor or purchasing corporation or other entity, as the case may be, to
execute with the Warrantholder an agreement granting the Warrantholder the right
thereafter, upon payment of the Warrant Price in effect immediately prior to
such action, to receive upon exercise of this Warrant the kind and amount of
shares and other securities and property which the Warrantholder would have
owned or have been entitled to receive after the happening of such
reclassification, change, consolidation, merger, sale, or conveyance had this
Warrant been exercised immediately prior to such action. In the event that in
connection with any such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for, or of, a security of Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 2. The provisions of this Section 2(c) shall similarly apply to
successive reclassifications, capital reorganizations, consolidations, mergers,
sales or conveyances.
(d) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any adjustments
in the Warrant Price of the number or kind of the shares purchasable pursuant to
this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued.
(f) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mall, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
SECTION 3. CURRENT MARKET PRICE
For any computation of Current Market Price or Market Price under this
Warrant, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily market price per share for the 30
consecutive Trading Days commencing 35 Trading Days before the date in question.
"Market Price" is defined as (i) the closing sale price (or, if no closing sale
price is reported, the closing bid price) of the Common Stock in the
over-the-counter market, and reported by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq"), or, if the Common Stock is not
quoted on Nasdaq, as reported by the National Quotation Bureau Incorporated;
(ii) in the event that the Common Stock is hereafter listed for trading on one
or more United States national or regional securities exchanges, market price
shall be the closing price on the exchange or system designated by the Board of
Directors of the Company as the principal United States market in which the
Common Stock is traded; (iii) if the Warrantholder elects a net exercise in
connection with and contingent upon a public offering of the shares issuable
upon exercise of this Warrant, and if the Company's
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<PAGE> 27
registration statement relating to such public offering has been declared
effective by the Securities and Exchange Commission, then market price shall be
the initial "Price to Public" specified in the final prospectus for such
offering; or (iv) if market price cannot be established as described above,
market price shall be the fair market value of the Common Stock as determined by
mutual agreement of the Warrantholder and the Company, and if the Warrantholder
and the Company are unable to agree, at the Company's sole expense, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the Warrantholder. The term "Trading Day" shall mean a day on
which Nasdaq or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.
SECTION 4. REGISTRATION RIGHTS
(a) DEFINITIONS
As used in this Section 4, the following capitalized terms shall have
the following respective meanings:
"Demand Registration" means a registration of Registrable Securities
under Section 4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Included Registrable Securities" means Registrable Securities included
in a Registration Statement filed under this Section 4.
"Initiating Holders" means any Registration Rights Holder or Holders
who holds or has the right to acquire not less than 25% of the aggregate of (i)
all Warrant Securities issuable under all Warrants outstanding at the time a
Demand Registration is requested and (ii) all Warrant Securities outstanding at
such time.
"Participating Holders" means holders of Included Registrable
Securities.
"Person" means any individual, partnership, joint venture, trust,
corporation, limited liability company or partnership, unincorporated
organization or government or any department or agency thereof.
"Piggyback Registration" means a registration of Registrable Securities
under Section 4(c).
"Prospectus" means any 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
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments and all materials
incorporated by reference in such Prospectus.
"Registrable Securities" means any Warrant Securities; provided,
however, that as to any particular security contained in Registrable Securities,
such securities shall cease to be Registrable Securities when (1) a Registration
Statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such Registration Statement; or (2) they may be sold to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act without any restrictions or limitation on such resale.
"Registration Expenses" means any and all expenses incurred in
connection with any registration or action incident to performance of or
compliance by the Company with Article 6, including, without limitation (1) all
SEC, national securities exchange and NASD registration and filing fees; all
listing fees and all transfer agent fees; (2) all fees and expenses of complying
with state securities or blue sky laws (including the fees and disbursements of
counsel of the underwriters in connection with blue sky qualification of the
Registrable Securities); (3) all printing, mailing, messenger and delivery
expenses; (4) all fees and disbursements of counsel for the Company and of its
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance; and (5) any
disbursements of underwriters
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<PAGE> 28
customarily paid by issuers or sellers of securities including the reasonable
fees and expenses of special experts retained by the underwriters in connection
with the requested registration.
"Registration Rights Holders" means the holders of any Warrant or
Warrant Securities.
"Registration Statement" means any Registration Statement of the
Company filed or to be filed with the SEC which covers any of the Registrable
Securities pursuant to the provisions of this Section 4, including all
amendments (including post-effective amendments) and supplements thereto, all
exhibits thereto and all material incorporated therein by reference.
"Representatives" means Wedbush Morgan Securities Inc. and Sands
Brothers & Co.
"SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means underwriting discounts and commissions,
brokerage fees and transfer taxes, if any, and fees of counsel or accountants
retained by the holders of Included Registrable Securities to advise them in
their capacity as holders of Included Registrable Securities.
"Underwriting Agreement" means that certain Underwriting Agreement
dated as of ________________, 1996 by and among the Company and the
Representatives, as representatives of the several Underwriters named therein.
"Warrants" means this Warrant and all other Warrants issued to the
Representatives pursuant to the Underwriting Agreement, including all Warrants
issued in substitution or exchange thereof.
"Warrant Securities" means any Common Stock or other securities
issuable upon exercise of Warrants.
(b) DEMAND REGISTRATION
(i) If, at any time after the Commencement Date and prior to the
Expiration Date, Initiating Holders request that the Company file a Registration
Statement covering Registrable Securities, as soon as practicable thereafter the
Company shall use its best efforts to file a Registration Statement with respect
to all Registrable Securities that it has been requested to register by any
Registration Rights Holders and obtain the effectiveness of such Registration
Statement. The Company shall also take all other action necessary under federal
or state law or regulation to permit the sale or other disposition pursuant to
such Registration Statement of all Registrable Securities requested to be
registered and the Company shall maintain such compliance with each such federal
and state law and regulation for the period necessary for the Participating
Holders to effect the proposed sale or other disposition of Registrable
Securities pursuant to such Registration Statement. Notwithstanding the
foregoing, the Company shall be entitled to defer a Demand Registration for a
period of up to 90 days if and to the extent that the Company's Board of
Directors determines, in good faith, that such registration would substantially
interfere with a pending corporate transaction. The Company shall not be
obligated to effect any such registration pursuant to this Section 4(b) if (A)
such registration may only be effected on Form S-1 and (B) the Initiating
Holders, together with the other holders of any other securities entitled to
participate in such registration, propose to sell Registrable Securities and
such other securities (if any) at an aggregate offering price to the public of
less than $500,000. The limitation imposed by the preceding sentence shall not
apply to any registration which may be effected pursuant to a registration
statement on a form other than Form S-1.
(ii) Upon receipt of a request for registration from Initiating
Holders, the Company shall promptly give written notice to all other
Registration Rights Holders of its intention to effect a Demand Registration and
shall include in such registration all Registrable Securities held by other
Registration Rights Holders who request such registration within 20 Business
Days after such notice has been given by the Company.
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<PAGE> 29
(iii) Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold by a Registration Rights
Holder and the intended method of disposition.
(iv) If any Demand Registration is requested to be in the form of an
underwritten offering, the managing underwriter shall be selected and obtained
by the holders of a majority of the Included Registrable Securities. Such
selection shall be subject to the Company's consent, which consent shall not be
unreasonably withheld.
(v) The Company shall be required to effect a only one registration
pursuant to this Section 4(b). If any Registration Statement fails to be
declared effective by the SEC by reason of a decision by Participating Holders
or the underwriters to withdraw said Registration Statement, or if the
Registration Statement fails to be declared effective or, after being declared
effective, is stop-ordered by the SEC, in either case, for reasons attributable
to a Participating Holder, such Demand Registration shall count for purposes of
the limitation set forth in this Section 4(b)(v). If any Registration Statement
(1) fails to be declared effective by the SEC for any reason (except (A) by
reason of a decision by Participating Holders or underwriters to withdraw said
Registration Statement, or (B) for reasons attributable to any Participating
Holder), or (2) is stop-ordered by the SEC after being declared effective (other
than for reasons attributable to any Participating Holder) such requested
registration shall not count for purposes of the limitation set forth in this
Section 4(b)(v).
(c) PIGGYBACK REGISTRATION
(i) If, at any time or from time to time after the Commencement Date
and prior to the second anniversary of the Expiration Date, the Company proposes
to register any of its securities under the Securities Act on any form for the
registration of securities under the Securities Act, whether or not for its own
account (other than a Registration Statement filed pursuant to Section 4(b) or a
registration statement filed for registration of securities issuable under the
Company's employee benefit plans or in connection with any merger or
acquisition), the Company shall as expeditiously as possible give written notice
to all Registration Rights Holders of the Company's intention to do so and of
such Registration Rights Holders' rights under this Section 4(c). Upon the
written request of any Registration Rights Holder made within 20 Business Days
after the giving of any such notice (which request shall specify the amount of
Registrable Securities intended to be disposed of by such Registration Rights
Holder in such registration), the Company shall include in such Registration
Statement the Registrable Securities which the Company has been so requested to
register and obtain the effectiveness of such Registration Statement. The
Company shall keep such Registration Statement in effect and maintain compliance
with each federal and state law or regulation for the period necessary for
Participating Holders to effect the proposed sale or other disposition of the
Included Registrable Securities.
(ii) If a Piggyback Registration involves an offering by or through
underwriters, then (1) all Participating Holders must sell their Included
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to other selling shareholders and (2) any
Participating Holder may elect in writing, not later than 3 Business Days prior
to the effectiveness of the Registration Statement filed in connection with such
registration, to withdraw such holder's Registrable Securities from such
registration.
(iii) If a Piggyback Registration involves an offering by or through
underwriters, the Company, except as otherwise provided herein, shall not be
required to include Registrable Shares therein if and to the extent the managing
underwriters the offering reasonably believes in good faith and advises each
Registration Rights Holder requesting to have Registrable Securities included in
the Company's Registration Statement that such inclusion would materially
adversely affect such offering; provided that (1) if other selling shareholders
without contractual registration rights or with contractual registration rights
subordinate to the rights of the Registration Rights Holders have requested
registration of securities in the proposed offering, the Company will reduce or
eliminate such securities held by such selling shareholders before any reduction
or elimination of Registrable Securities; and (2) any such reduction or
elimination (after taking into account the effect or clause (1)) shall be pro
rata (based on the number of securities sought to be registered) with all other
selling shareholders with contractual registration rights which are not
subordinate to the rights of Registration Rights Holders. After the date hereof,
the Company shall not grant any registration rights with respect to any Company
securities which are senior to the rights of the
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<PAGE> 30
Registration Rights Holders without the prior written consent of the holders of
a majority of the Warrant Securities outstanding at the time.
(d) REGISTRATION PROCEDURES
If and whenever the Company is required to use its best efforts to take
action pursuant to any federal or state law or regulation to permit the sale or
other disposition of any Registrable Securities Warrants in order to effect or
cause the registration of any Registrable Securities under the Securities Act as
provided in this Section 4, the Company shall, as expeditiously as practicable:
(i) Prepare and file with the SEC, as soon as practicable within 90
days after the end of the period within which requests for registration may be
given to the Company (but subject to the provisions for deferral contained in
Section 4(b)(i) hereof) a Registration Statement or Registration Statements
relating to the registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof, and use
its best efforts to cause such Registration Statements to become effective;
provided that before filing a Registration Statement or Prospectus or any
amendment or supplements thereto, including documents incorporated by reference
after the initial filing of any Registration Statement, the Company will furnish
to the Participating Holders and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the review of
the Participating Holders and the underwriters.
(ii) Prepare and file with the SEC such amendments and post-effective
amendments to a Registration Statement as may be necessary to keep such
Registration Statement effective for a reasonable period not to exceed 180 days;
cause the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Participating Holders as set forth in such Registration
Statement or supplement to such Prospectus.
(iii) Notify the Participating Holders and the managing underwriters,
if any, promptly, and (if requested by any such person) confirm such advice in
writing, (1) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (2) of any request
by the SEC for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (3) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (4) if at any time the
representations and warranties of the Company contemplated by subsection (xiii)
below ceases to be true and correct in all material respects; (5) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; and (6) of
the happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus or any document incorporated therein
by reference untrue or which requires the making of any changes in the
Registration Statement or Prospectus so that they will not contain any untrue
statement or a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(iv) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(v) If reasonably requested by the managing underwriters, immediately
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters believe (on advice of counsel) should
be included therein as required by applicable law relating to such sale of
Registrable Securities, including, without limitation, information with respect
to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or "best
efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
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<PAGE> 31
(vi) Furnish to each Participating Holder and each managing
underwriter, without charge, at least one signed copy of the Registration
Statement and any post-effective amendment therein, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference).
(vii) Deliver to each Participating Holder and the underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) any amendment or supplement thereto as such persons
may reasonably request, and the Company consents to the use of such Prospectus
or any amendment or supplement thereto by each of the Participating Holders and
the underwriters, if any, in connection with the offering and sale of the
Included Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(viii) Prior to any public offering of Registrable Securities,
cooperate with the Participating Holders, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Participating Holder or
underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Included
Registrable Securities, provided that the Company will not be required to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action which would subject the Company to general service of process
in any jurisdiction where it is not at the time so subject.
(ix) Cooperate with the holders of Included Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations and registered in such names as the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities
to the underwriters.
(x) Use its best efforts to cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities.
(xi) Upon the occurrence of any event contemplated by Section
4(c)(iii)(b) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(xii) With respect to each issue or class of Registrable Securities,
use its best efforts to cause all Registrable Securities covered by the
Registration Statements to be listed on each securities exchange or automated
quotation system, if any, on which similar securities issued by the Company are
then listed.
(xiii) Enter into such agreements (including an underwriting agreement)
and take all such other action reasonably required in connection therewith in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection, if the registration is in connection with an
underwritten offering (1) make such representations and warranties to the
underwriters, in such form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if and
when requested; (2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions in form, scope and substance shall be
reasonably satisfactory to the underwriters) addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (3) obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
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<PAGE> 32
comfort" letters by underwriters in connection with underwritten offerings; (4)
set forth in full in any underwriting agreement entered into the indemnification
provisions and procedures of Section 4(e) hereof with respect to all parties to
be indemnified pursuant to said section; and (5) deliver such documents and
certificates as may be reasonably requested by the underwriters to evidence
compliance with clause (1) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company; the
above shall be done at each closing under such underwriting or similar agreement
or as and to the extent required hereunder.
(xiv) Make available for inspection by one or more representatives of
the Participating Holders, any underwriter participating in any disposition
pursuant to such registration, and any attorney or accountant retained by such
Participating Holders or underwriter, all financial and other record, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representatives.
(xv) Otherwise use its best efforts to comply with all applicable
federal and state regulations; and take such other action as may be reasonably
necessary to or advisable to enable each Participating Holder and each
underwriter to consummate the sale or disposition in such jurisdiction or
jurisdiction in which any such Participating Holder or underwriter shall have
requested that the Included Registrable Securities be sold.
(xvi) The Company may require each Participating Holder to furnish to
the Company such information regarding the distribution of such securities and
such other information as may otherwise be required by the Securities Act to be
included in such Registration Statement.
(d) FEES AND EXPENSES
The Company shall pay all Registration Expenses and the Participating
Holders shall pay (severally and not jointly and pro rata based upon the number
of Included Registrable Securities held by each Participating Holder) all
Selling Expenses incurred in connection with any registration of Registrable
Securities under this Section 4.
(e) INDEMNIFICATION
(i) In connection with each Registration Statement relating to
disposition of Registrable Securities, the Company shall indemnify and hold
harmless each Participating Holder and each underwriter of Included Registrable
Securities and each Person, if any, who controls such Participating Holder or
underwriter (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement of
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon 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; provided, however, that such indemnity shall not inure to the
benefit of any Participating Holder or underwriter (or any person controlling
such Participating Holder or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) on account of any losses,
claims, damages or liabilities arising from the sale of the Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission was made in such Registration Statement Prospectus or preliminary
prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by such Participating
Holder or underwriter specifically for use therein. The Company shall also
indemnify selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the
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<PAGE> 33
Exchange Act) to the same extent as provided above with respect to the
indemnification of the Participating Holders. This indemnify agreement shall be
in addition to any liability which the Company may otherwise have.
(ii) In connection with each Registration Statement, each Participating
Holder shall indemnify, to the same extent as the indemnification provided by
the Company in Section 4(e)(i), the Company, its directors and each officer who
signs the Registration Statement and each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) by only insofar as such losses, claims, damages and liabilities
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which was made in the Registration Statement, the
Prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, in reliance upon and in conformity with information furnished in
writing by such Participating Holder to the Company specifically for use
therein. In no event shall the liability of any Participating Holder hereunder
be greater in amount than the dollar amount of the net proceeds received by such
Participating Holder upon the sale of such Participating Holder's Included
Registrable Securities giving rise to such indemnification obligation.
(iii) Any party that proposes to assert the right to be indemnified
hereunder will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 4(e), notify each
such indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 4(e)(i) or 4(e)(ii) shall be available to any party who shall fail to
give notice as provided in this Section 4(e)(iii) if the party to whom notice
was not given was unaware of the proceeding to which such notice related and was
prejudiced by the failure to receive such notice, but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
the indemnifying party from any liability that it may otherwise have to any
indemnified party. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (1) the employment of counsel by
such indemnified party has been authorized in writing by the indemnifying
parties, (2) the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (3) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnified party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
(iv) In connection with each Registration Statement relating to the
disposition of Registrable Securities, if the indemnification provided for in
subsection 4(e)(i) or 4(e)(ii) hereof is unavailable to an indemnified party
thereunder in respect to any losses, claims, damages or liabilities referred to
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of losses, claims, damages or
liabilities referred to in subsection (i) or (ii) of this Section 4(e) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. No person guilty of a
fraudulent misrepresentation (within
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<PAGE> 34
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any person having liability under Section 11 of
the Securities Act other than the Company and the Participating Holders. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then the Company and any Participating Holder, as the case may be, shall be
entitled to contribution from the Company and/or the Participating Holders, as
the case may be, to the full extent permitted by law.
(v) The indemnity and contribution agreements contained in this Section
4(e) shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Participating Holders, (ii) sale of
any of Registrable Securities or (iii) any expiration of this Warrant.
(vi) Notwithstanding the foregoing provisions of the Section 4(e), to
the extent that the provisions on indemnification and contribution contained in
any underwriting agreement entered into in connection with the underwritten
public offering of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
(f) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934
With a view to making available to the holders of Warrants or Warrant
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(i) Make and keep available adequate current public information with
respect to the Company.
(ii) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act.
(iii) Furnish to any holder of Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act,
or that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), and (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports filed under any
rule or regulation of the SEC.
(g) COMPUTATIONS OF CONSENT
Whenever the consent or approval of Registration Rights Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (other than any
Warrantholder deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Registration Rights Holders of such
required percentage.
(h) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES
The Company will not take any action outside the ordinary course of
business, or permit any change within its control to occur outside the ordinary
course of business, with respect to the Registrable Securities which is without
a bona fide business purpose, and which is intended to interfere with the
ability of the Registration Rights Holders to include such Registrable
Securities in a registration undertaken pursuant to this Section 4.
SECTION 5. NOTICES OF RECORD DATES
In the event of:
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<PAGE> 35
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution (other
than regular cash dividends paid out of earned
surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any
right to sell shares of stock of any class or any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other corporation or entity, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (2) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any is to be fixed, as of which the holders of record
of Common Stock will be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be given at least 20
days and not more than 90 days prior to the date therein specified, and such
notice shall state that the action in question or the record date is subject
to the effectiveness of a registration statement under the Securities Act or
to a favorable vote of stockholders, if either is required. Failure to mail or
receive such notice or any defect therein shall not affect the validity of any
action with respect thereto.
SECTION 6. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest.
SECTION 8. NOTICES
All notices, requests and other communications required or permitted to
be given or delivered hereunder shall be in writing, and shall be delivered, or
shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile. Notices, requests and other
communications to the Warrantholder shall be sent to the Warrantholder at 1000
Wilshire Boulevard, Los Angeles, California 90017-2465, Attention: Investment
Banking, facsimile number (213) 688-6642 or to such other address or facsimile
number as shall have been furnished to the Company by notice from such
Warrantholder; and if to the Company, at 1201 Harbor Bay Parkway, Suite 1000,
Alameda, California 94502; Attention: President, facsimile number (510)
748-7155, with a copy to Cooley Godward Castro Huddleson & Tatum, 5 Palo Alto
Square, 3000 El Camino Real, Palo Alto, California 94306, facsimile number:
(415) 859-0663. Attention: Alan C. Mendelson, Esq., or at such other address or
facsimile number as shall have been furnished to the Warrantholder by notice
from the Company.
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<PAGE> 36
SECTION 9. TRANSFER, ASSIGNMENT AND EXCHANGE OF WARRANT AND RESTRICTIONS
ON TRANSFER
(a) RESTRICTIONS ON TRANSFER
(i) Until the Commencement Date, this Warrant and the
underlying shares of Common Stock which may be acquired upon exercise hereof may
not be sold, transferred, assigned, pledged or hypothecated to any other person
or entity except to any Underwriter that participated in the public offering of
shares of Common Stock of the Company pursuant to the Underwriting Agreement (as
defined in Section 4(a)), and the bona fide officers or partners thereof. Until
the Commencement Date, any shares of Common Stock acquired upon exercise of this
Warrant shall bear a legend setting forth the foregoing restriction. After the
Commencement Date, this Warrant may be freely transferred or assigned by the
Warrantholder, subject to compliance with applicable law. Assignment of this
Warrant shall be effected by delivery of the assignment form attached hereto to
the Company at its principal offices.
(ii) Except as otherwise permitted by this Section 9(a)(ii),
each Warrant shall (and each Warrant issued upon transfer or in substitution for
any Warrant shall) be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION SUCH ACT."
Except as otherwise permitted by this Section 9(a)(ii), each
certificate for securities issued upon the exercise of any Warrant and each
certificate issued upon transfer of any such security shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or certificate for securities, without a legend, if
(1) the issuance of such securities has been registered under the Securities
Act, (2) such Warrant or such securities, as the case may be, have been
registered for resale under the Securities Act or sold pursuant to Rule 144
under the Securities Act, or (3) the Warrantholder has received an opinion of
counsel (who may be house counsel for such Warrantholder) reasonably
satisfactory to the Company that such registration is not required with respect
to such Warrant or such securities, as the case may be.
(b) EXCHANGE OF WARRANT
This Warrant may be split-up, combined or exchanged for another Warrant
or Warrants containing the same terms to purchase a like aggregate number of
securities. If the Warrantholder desires to split-up, combine or exchange this
Warrant, the Warrantholder shall make such request in writing delivered to the
Company at its principal office and shall surrender to the Company this Warrant
and any other Warrants to be so split-up, combined or exchanged. Upon any such
surrender for a split-up, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Warrantholder to purchase upon exercise a fraction of a share of Common
Stock or a fractional Warrant.
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<PAGE> 37
(c) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
SECTION 10. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
SECTION 11. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable `in accordance with its terms.
SECTION 12. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of California without regard to conflict of law principles.
SECTION 13. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 14. BINDING EFFECT
This Warrant shall insure to the benefit of and shall be binding upon
the Company and the Warrantholder and their respective heirs, legal
representatives, successors and assigns.
SECTION 15. NO INCONSISTENT AGREEMENTS
The Company will not on or after the date of this Warrant enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Warrantholder in this Warrant or otherwise conflicts with
the provisions hereof. The rights granted to the Warrantholder hereunder do not
in any way conflict with and are not inconsistent with the rights granted to
holders of the Company's securities under any other agreements.
SECTION 16. ENTIRE AGREEMENT
This Warrant 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 Warrant supersedes all prior agreements and
understandings between the parties with respect to such subject matter (other
than warrants previously issued by the Company to the Warrantholder).
SECTION 17. ATTORNEYS' FEES
In any action or proceeding brought to enforce any provisions of this
Warrant, or where any provisions hereof is validly asserted as a defense , the
successful party shall be entitled to recover reasonable attorneys' fees and
disbursements in addition to its costs and expenses and any other available
remedy.
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IN WITNESS WHEREOF, the Company and the Warrantholder have executed
this Warrant on and as of the day and year first above written.
Avigen, Inc.,
a Delaware corporation
By:
-------------------------------------
Dr. John Monahan
President and Chief Executive Officer
Attest:
- ------------------------------
(Corporate Secretary)
[NAME OF REPRESENTATIVE]
------------
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
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<PAGE> 39
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
Avigen, Inc.
1201 Harbor Bay Parkway
Suite 1000
Alameda, California 94502
Attention: President
Ladies and Gentlemen:
The undersigned hereby elects to exercise the right of Warrantholder
represented by the within Warrant for, and to purchase thereunder, ____________
shares of Common Stock, as provided for therein, and (check one):
/ / herewith tenders payment for such number of shares in the amount
of $___________ in accordance with the terms of the Warrant; or
/ / herewith tenders this Warrant for such number of shares pursuant
to the net issuance exercise provisions of Section 1(b) of the
Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name of Warrantholder:___________________________
Address:_________________________________________
Social
Security or Tax ID No:___________________________
Signature of Warrantholder:______________________
Note: The above signature must correspond
exactly with the name on the first page
of this Warrant or with the name of the
assignee appearing in the assignment
form below.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed: _______________________________________
(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)
19
<PAGE> 40
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, ____________________________ hereby sells, assigns
and transfers unto _______________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ________________ attorney, to transfer said Warrant on the books of
the within-named Company with respect to the number of Warrants set forth below,
with full power of substitution in the premises:
Name(s) of
Assignee(s)/Address No. of Warrants
------------------- ----------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant, a new Warrant is to be issued in the name of said undersigned for the
balance remaining of the Warrants registered by said Warrant.
<TABLE>
<S> <C>
Dated: __________________ Name of Warrantholder: ___________________________
Signature of Warrantholder: _________________________
Note: The above signature must correspond exactly with the name on
the face of this Warrant
</TABLE>
Signature Guaranteed: _____________________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondence in the United States or by a member firm of a registered
securities exchange or the National Association of Security Dealers, Inc.)
20
<PAGE> 41
EXHIBIT C
Wedbush Morgan Securities Inc.
Sands Brothers & Co.
c/o Wedbush Morgan Securities Inc.
1000 Wilshire Boulevard, 10th Floor
Los Angeles, California 90017-2457
Ladies and Gentlemen:
The undersigned understands that you, as representatives , propose to
enter into an Underwriting Agreement on behalf of the several Underwriters
referred to therein (collectively, the "Underwriters"), with Avigen, Inc., a
Delaware corporation ("Company"), providing for a public offering of the Common
Stock of the Company ("Shares") pursuant to a Registration Statement on Form
SB-2 to be filed with the Securities and Exchange Commission ("SEC").
In consideration of the agreement by the Underwriters to offer and sell
the Shares, and of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned agrees that, during
the period beginning from the date of the final Prospectus covering the public
offering of the Shares and continuing to and including the date 180 days after
the date of such final Prospectus, the undersigned will not offer, sell,
contract to sell, grant any option to purchase, make any short sale or otherwise
dispose of any shares of Common Stock of the Company, or any options or warrants
to purchase any shares of Common Stock of the Company, or any securities
convertible into, exchangeable for or that represent the right to receive shares
of Common Stock of the Company, whether now owned or hereafter acquired, owned
directly by the undersigned (including holding as custodian) or with respect to
which the undersigned has beneficial ownership within the rules and regulations
of the SEC (collectively, the "Undersigned's Shares").
The foregoing restriction is expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a sale or disposition of the
Shares subject to this Lock-Up Agreement even if such Shares would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any rights (including without limitation any put or call
option) with respect to any of the Shares subject to this Lock-Up Agreement or
with respect to any security that includes, relates to, or derives any
significant part of its value from such Shares.
Notwithstanding the foregoing, the undersigned may transfer the
Undersigned's Shares (i) as a bona fide gift or gifts, provided that the donee
or donees thereof agree to be bound by the restrictions set forth herein, (ii)
to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the undersigned, provided that the trustee of the trust
agrees to be bound by the restrictions set forth herein, and provided further
that any such transfer shall not involve a disposition for value, or (iii) with
the prior written consent of Wedbush Morgan Securities Inc.("Wedbush") on behalf
of the Underwriters. For purposes of this Lock-Up Agreement, "immediate family"
shall mean any relationship by blood, marriage or adoption, not more remote than
first cousin. In addition, notwithstanding the foregoing, if the undersigned is
a corporation, the corporation may transfer the Undersigned's Shares to any
wholly-owned subsidiary of such corporation; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding such Shares
subject to the provisions of this Lock-Up Agreement and there shall be no
further transfer thereof except in accordance with this Lock-Up Agreement, and
provided further that in the case of (i) or (ii) any such transfer shall not
involve a disposition for value. The undersigned now has, and, except as
contemplated by clause (i), (ii) or (iii) above, for the duration of this
Lock-Up Agreement will have, good and marketable title to the Undersigned's
Shares, free and clear of all liens, encumbrances and claims whatsoever. In the
case of any transfer pursuant to clause (i) or (ii) above, the undersigned will
notify Wedbush of the proposed transfer and shall provide Wedbush with the
transferee's executed Lockup Agreement at least five business days prior to
implementing the
1
<PAGE> 42
transfer. The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of the Undersigned's Shares except in compliance with the foregoing
restrictions.
The undersigned hereby waives any right the undersigned may have to
have the Undersigned's Shares included in the Registration Statement covering
the proposed underwritten offering referred to in the first paragraph hereof.
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Dated: , 1996
-----------
Very truly yours,
-----------------------------------------------
(Name)
-----------------------------------------------
(Authorized Signature)
-----------------------------------------------
(Title)
2
<PAGE> 43
EXHIBIT D
COMPANY COUNSEL OPINION
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation.
(ii) The Company has the corporate power and authority
to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company.
(iii) The authorized capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus
and the authorized capital stock conforms as to legal matters
to the description thereof contained in the Prospectus. Upon
consummation of the offering of the Shares and after giving
effect to their issuance, the issued and outstanding capital
stock of the Company will be _____________ shares of Common
Stock.
(iv) The shares of Common Stock and Preferred Stock of
the Company outstanding prior to the issuance of the Shares
have been duly authorized and are validly issued, fully paid
and nonassessable.
(v) The Shares to be sold by the Company have been
duly authorized and, when issued and delivered in accordance
with the terms of the Underwriting Agreement, will be validly
issued, fully paid and nonassessable. The issuance of such
Shares is not subject to any preemptive rights, rights of
first refusal or similar rights under applicable law or the
Company's Restated Certificate of Incorporation or Bylaws or,
to such counsel's knowledge, pursuant to any agreement or
otherwise which have not been waived. Delivery of certificates
for the Shares pursuant to the terms of the Underwriting
Agreement will transfer valid title thereto, free and clear of
any "adverse claim" (as such term is used Section 8-302 of the
Uniform Commercial Code as in effect in the States of
California and Delaware) to each Underwriter that has
purchased such Shares pursuant to the terms of the
Underwriting Agreement, in good faith and without notice of
any such adverse claim.
(vi) The Underwriting Agreement has been duly
authorized, executed and delivered by the Company.
(vii) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, the
Underwriting Agreement will not contravene any provision of
applicable law, rule or regulation (except that we express no
opinion concerning the securities or "blue sky" laws, rules of
the National Association of Securities Dealers, Inc., rules
and regulations of the various states or the federal
securities laws and regulations other than as set forth in
paragraphs (viii), (ix), (x), (xi), (xii) and (xv) herein) or
the Amended and Restated Certificate of Incorporation or
Restated Bylaws of the Company or, to the best of such
counsel's knowledge, any agreement or other document or
instrument filed as an exhibit to the Registration Statement
or, to the best of such counsel's knowledge, any judgment or
decree of any governmental body, agency or court having
jurisdiction over the Company.
(viii) No consent, approval, authorization or order of
or qualification with any governmental body or agency or any
"self-regulatory organization" (as such term is defined in the
Securities Exchange Act of 1934, as amended) is required for
the performance by the Company
1
<PAGE> 44
of its obligations under this Agreement, except such as have
been obtained under the Securities Act with respect to the
Registration Statement being declared effective, under the
rules of the National Association of Securities Dealers, Inc.
and such as may be required by the securities or "blue sky"
laws of the various states in connection with the offer and
sale of the Shares by the Underwriters.
(ix) The statements in the Registration Statement and
the Prospectus under the captions "Description of Capital
Stock" and "Shares Eligible for Future Sale," insofar as they
refer to statements of law or descriptions of statutes, rules
and regulations or constitute summaries of documents or
proceedings are accurate in all material respects and fairly
present the information required to be shown.
(x) Such Counsel does not know of any legal or
governmental proceeding pending or threatened to which the
Company is a party or to which any of the properties of the
Company is subject that are required to be described in the
Registration Statement or the Prospectus and are not so
described or of any laws, rules, regulations, contracts or
other documents that are required to be described in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required.
(xi) The Company is not an "investment company" or an
entity "controlled" by an investment company, as such terms
are defined in the Investment Company Act of 1940, as amended.
(xii) The Registration Statement (including the
information deemed to be a part of the Registration Statement
at the time of effectiveness pursuant to Rule 430A, if
applicable) and Prospectus (except for financial statements
and notes thereto and other financial, numerical, statistical
and accounting data included therein as to which such counsel
need not express any opinion) comply as to form in all
material respects with the Securities Act and the Rules and
Regulations.
(xiii) To the best of such counsel's knowledge, there
are no outstanding options, warrants or other rights calling
for the issuance of, and no commitments, plans or arrangements
to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable for capital stock of
the Company, except as disclosed in the Prospectus.
(xiv) The certificates for the Shares comply with the
provisions of Delaware law and of the principal trading market
for the Shares and have been duly approved by the Board of
Directors of the Company.
(xv) Based on advice from the Securities and Exchange
Commission, the Registration Statement has become effective
under the Securities Act and, to the best knowledge of such
counsel, no stop order proceedings suspending the
effectiveness of the Registration Statement have been
instituted or threatened or are pending under the Securities
Act.
(xvi) The Pricing Agreement has been duly authorized,
executed and delivered by the Company.
(xvii) Except as described in the Prospectus, to such
counsel's best knowledge no holder of securities of the
Company has any rights which have not been waived to require
the registration of securities of the Company because of the
filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated by the
Underwriting Agreement.
2
<PAGE> 45
(xviii) The Warrant Agreements have been duly authorized,
executed and delivered by the Company and constitute valid and
binding obligations of the Company, enforceable in accordance
with their terms, except insofar as indemnification and
contribution provisions may be limited by applicable federal
securities laws or the public policy of a state with respect
to such matter and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally and
to general equity principles regardless of whether enforcement
is considered in a proceeding at law or equity. The shares of
Common Stock of the Company to be delivered upon exercise of
the Warrant Agreements have been duly reserved for issuance
and if, as and when issued and paid for in accordance with the
provisions of the Warrant Agreements, will be validly issued,
fully paid and nonassessable.
(xix) The Company is not in violation of or default
under the Company's Amended and Restated Certificate of
Incorporation or Restated Bylaws, or, to such counsel's best
knowledge, in violation of any material order, rule,
regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign.
(xx) The Common Stock has been approved for listing on
the Nasdaq National Market.
Such opinion shall also cover such other matters as the Representatives
or Underwriters Counsel may reasonably request. In rendering the foregoing
opinions, Company Counsel may rely as to matters of fact on statements or
certificates of responsible officers and other representatives of the Company
and of public officials. As to matters of law other than the law of the United
States or of the States of California or Delaware, such counsel may rely upon
opinions of local counsel satisfactory to you, in which case the opinion of
Company Counsel shall state that they have no reason to believe that you and
Company Counsel are not entitled to so rely.
In addition to the foregoing opinions, such counsel shall state that
such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, your representatives and your counsel at which the
contents of the Registration Statement and Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, on the basis of the
foregoing nothing has come to such counsel's attention that caused such counsel
to believe that the Registration Statement (other than the Financial Statements
and Notes thereto and other financial, numerical, statistical and accounting
data included therein, as to which such counsel need express no belief), at the
time such Registration Statement or any post- effective amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading (other than information omitted therefrom in
reliance on Rule 430A under the Securities Act), or the Prospectus (other than
the Financial Statements and Notes thereto and other financial, numerical,
statistical and accounting data included therein, as to which such counsel need
express no belief) as of its date and the Closing Date contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AVIGEN, INC.
AVIGEN, INC. , a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify as follows:
FIRST: The name of the corporation is AVIGEN, INC.
SECOND: The Certificate of Incorporation of the corporation was filed
with the Secretary of State on October 22, 1992.
THIRD: The Amended and Restated Certificate of Incorporation of the
corporation, in the form attached hereto as EXHIBIT A, has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors of the
corporation.
FOURTH: The Amended and Restated Certificate of Incorporation of the
corporation, in the form attached hereto as EXHIBIT A, was approved by the
written consent of holders of a majority of the outstanding capital stock of
the corporation in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware and by a majority of each class of
stock entitled to vote thereon pursuant to Section 228 of the General
Corporation Law of the State of Delaware. The corporation has two classes of
stock outstanding, Common Stock (formerly "Class A Common Stock") and Preferred
Stock, and each class of stock is entitled to vote with respect to the Amended
and Restated of Incorporation. The total number of outstanding shares of
Common Stock of the corporation is two million one hundred seventy-three
thousand two hundred sixty-two (2,173,262) (after giving effect to the
4.43-for-1 reverse split of the Company's stock effected hereby ("Post-Split"))
and the total number of outstanding shares of Preferred Stock is two million
three hundred thirty-eight thousand two hundred ninety-three (2,338,293)
(Post-Split).
FIFTH: The Amended and Restated Certificate of Incorporation so
adopted reads in full as set forth in EXHIBIT A attached hereto and hereby
incorporated by reference.
IN WITNESS WHEREOF, AVIGEN, INC. has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer and attested to by its Secretary this 7th day of May, 1996.
AVIGEN, INC.
By:
-----------------------------------------
John Monahan
President and Chief Executive Officer
ATTEST:
__________________________
Wanda deVlaminck
Secretary
<PAGE> 2
Exhibit A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AVIGEN, INC.
I.
The name of the Corporation is AVIGEN, INC.
II.
The registered agent of the Corporation in the State of Delaware is
The Corporation Trust Company and the address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
IV.
A. This Corporation is authorized to issue two classes of stock
to be designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the Corporation is authorized to issue is thirty
five million (35,000,000) shares. Thirty million (30,000,000) shares shall be
Common Stock, each having a par value of one tenth of one cent ($.001). Five
million (5,000,000) shares shall be Preferred Stock, each having a par value of
one tenth of one cent ($.001).
B. One million three hundred fifty-five thousand (1,355,000) of
the authorized shares of Preferred Stock are hereby designated "5% Cumulative
Convertible Series A Preferred Stock" (the "Series A Preferred"). One hundred
fifty-three thousand (153,000) of the authorized shares of Preferred Stock are
hereby designated "5% Cumulative Convertible Series B Preferred Stock" (the
"Series B Preferred"). Nine hundred three thousand (903,000) of the authorized
shares of Preferred Stock are hereby designated "Series C Preferred Stock" (the
"Series C Preferred"). Five hundred sixty-five thousand (565,000) of the
authorized shares of Preferred Stock are hereby designated "Series D Preferred
Stock" (the "Series D Preferred").
C. Upon the filing of this Amended and Restated Certificate of
Incorporation, every four and forty-three one hundredths (4.43) shares of
outstanding Class A Common Stock shall be combined into one (1) share of Common
Stock; every four and forty-three one hundredths (4.43) shares of outstanding
Series A Preferred shall be combined into one (1) share of Series A Preferred;
every four and forty-three one hundredths (4.43) shares of outstanding Series B
Preferred shall be combined into one (1) share of Series B Preferred; every
four and forty-three
1.
<PAGE> 3
one hundredths (4.43) shares of outstanding Series C Preferred shall be
combined into one (1) share of Series C Preferred; every four and forty-three
one hundredths (4.43) shares of outstanding Series D Preferred shall be
combined into one (1) share of Series D Preferred. All share amounts and per
share amounts are stated herein on a Post-Split basis.
D. The rights, preferences, privileges, restrictions and other
matters relating to the Preferred Stock are as follows:
1. DIVIDEND RIGHTS.
(a) Holders of Preferred Stock, in preference to the
holders of any other stock of the Corporation ("Junior Stock"), and Holders of
Series C Preferred, in preference to holders of the Series A Preferred, Series
B Preferred, and Series D Preferred as well as holders of the Junior Stock,
shall be entitled to receive, when, as and if declared by the Board of
Directors, but only out of funds that are legally available therefor, cash
dividends at the rate and in the amounts as follows:
(i) With respect to the Series A Preferred, each
outstanding share shall accrue $.2215 per annum. Such dividends not declared
and paid when due shall accrue and accumulate.
(ii) With respect to the Series B Preferred, each
outstanding share shall accrue $.2769 per annum. Such dividends not declared
and paid when due shall accrue and accumulate.
(iii) (A) With respect to the Series C Preferred,
until the earlier of (a) June 28, 1997, (b) a $5,000,000 Equity Receipt Event,
as defined in Section 1(a)(iii)(B) below, or (c) the conversion of the Series C
Preferred into shares of Common Stock pursuant to Section 4 hereof, the Series
C Preferred shall accrue (1) $1.9492 per share on each share of Series C
Preferred outstanding on July 29, 1995, effective July 29, 1995, and (2)
$2.7466 per share on each share of Series C Preferred outstanding on June 29,
1996, effective June 29, 1996 (the "Series C Preferred Dividends"). The Series
C Preferred Dividends not declared and paid when due shall accrue, accumulate
and be included as a liquidation preference of the Series C Preferred, as set
forth in Section 2(b) hereof.
(B) "$5,000,000 Equity Receipt Event"
shall mean the closing of an offering or offerings by the Company subsequent to
June 28, 1995 of any of its equity securities that singularly or in any
combination thereof provide aggregate gross proceeds to the Company of at least
five million dollars ($5,000,000); provided, however, that in the event that
the receipt of any such proceeds by the Company is contingent upon or a part of
a transaction in which the Company licenses technology to or is required to
provide services for the purchasing entity or any of its affiliates (a
"Corporate Partner Transaction"), then only fifty percent (50%) of the gross
proceeds received by the Company in any such Corporate Partner
2.
<PAGE> 4
Transaction shall be counted in determining whether the five million dollar
($5,000,000) threshold has been met.
(iv) With respect to the Series D Preferred, the
holders of outstanding shares of Series D Preferred Stock shall be entitled to
receive dividends, when, if and as declared by the Board of Directors. The
right to such dividends on the Series D Preferred shall not be cumulative.
(b) So long as any shares of Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Corporation be purchased, redeemed,
or otherwise acquired for value by the Corporation (except for acquisitions of
Common Stock by the Corporation from the founders of the Corporation or
pursuant to agreements with employees or consultants which permit the
Corporation to repurchase such shares upon termination of employment or
consulting relationships or in exercise of the Corporation's right of first
refusal upon a proposed transfer) until all accrued but unpaid dividends on the
Preferred Stock shall have been paid or declared and set apart. In the event
dividends are paid on any share of Common Stock, an additional dividend shall
be paid with respect to all outstanding shares of Series A Preferred, Series B
Preferred, and Series D Preferred in an amount for each such share of Series A
Preferred, Series B Preferred, or Series D Preferred equal to the aggregate
amount of such dividends for all shares of Common Stock into which each such
share of Preferred Stock could then be converted. To the extent dividends are
paid on any share of Common Stock that, on a per share basis and when
aggregated with all such prior dividends, exceed the aggregate Series C
Preferred Dividends declared and paid on the Series C Preferred, determined on
an as-converted per share basis pursuant to Section 4 but excluding adjustments
pursuant to Section 4(e) ("Excess Dividends"), an additional dividend shall be
paid with respect to all outstanding shares of Series C Preferred in an amount
for each such share of Series C Preferred equal to such Excess Dividends. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock in
exchange for shares of any other Junior Stock, or (iii) any repurchase of any
outstanding securities of the Corporation that is unanimously approved by the
Corporation's Board of Directors.
(c) Except as provided in Section 2 hereof, no dividends
or distribution shall be declared or paid on the Series A Preferred, the Series
B Preferred, or the Series D Preferred or on the Common Stock while there are
any accrued but unpaid dividends on the Series C Preferred. After payment of
any accrued Series C Preferred Dividend, no dividends shall be paid, declared
or set apart for payment on any shares of the Series A Preferred, Series B
Preferred, or Series D Preferred unless at the same time a dividend for the
same percentage of the respective dividend rates or, in the case of the Series
D Preferred, a dividend determined by the Board of Directors to be a reasonable
amount, shall also be paid, declared or set apart for payment, as the case may
be, on the shares of each other series of Preferred Stock then outstanding,
except for the shares of Series C Preferred.
3.
<PAGE> 5
(d) No undeclared or unpaid dividend shall bear or accrue
interest. Upon conversion of the Preferred Stock into shares of Common Stock,
all accrued, accumulated and unpaid dividends, whether or not declared, shall
be canceled.
(e) All dividend amounts set forth herein on a per share
of Preferred Stock basis shall be adjusted for any stock dividends,
combinations or splits with respect to such shares of Preferred Stock.
(f) The holders of Preferred Stock shall not be entitled
to any dividends other than the dividends provided in this Section 1.
2. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary (a "Liquidation
Event"), the holders of the Series A, Series B, Series C and Series D Preferred
shall be entitled to receive, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Common Stock, the amount of $4.43, $5.5375, $4.873, and $7.088 per share,
respectively (as adjusted for any stock dividends, combinations or splits with
respect to such stock), plus all declared but unpaid dividends, if any, for
each such share then held (respectively, the "Preferential Amount"). If upon
the occurrence of a Liquidation Event the assets and funds to be distributed
among the holders of Series A, Series B, Series C and Series D Preferred shall
be insufficient to permit the payment to such holders of the full Preferential
Amounts, then the entire assets and funds of the Corporation legally available
for distribution shall be distributed ratably among the holders of the Series
A, Series B, Series C and Series D Preferred Stock in proportion to the
Preferential Amount each such holder is otherwise entitled to receive.
(b) Upon a Liquidation Event, after the payment of the
distribution to the holders of the Series A, Series B, Series C and Series D
Preferred of the full Preferential Amounts provided in subsection 2(a), but
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of the Common Stock then outstanding, the holders of
the Series A, Series B and Series C Preferred then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to stockholders, whether such assets are capital, surplus or
earnings, an amount in cash or securities equal to the accrued but undeclared
and unpaid dividends (including the Series C Preferred Dividends) with respect
to such shares, to be distributed ratably to the holders of the Series A,
Series B and Series C Preferred on the basis of the amounts to which each
holder is entitled pursuant to such dividends.
(c) Upon a Liquidation Event, after the payment of the
distribution to the holders of the Series A, Series B, Series C and Series D
Preferred of the full preferential amounts set forth in subsections (a) and (b)
of this Section 2, the holders of the Common Stock then outstanding, together
with the holders of the Series A, Series B, Series C and Series D
4.
<PAGE> 6
Preferred then outstanding, shall be entitled to receive ratably, with all
shares of Series A, Series B, Series C and Series D Preferred treated as if
they have been converted into Common Stock pursuant to each such series'
respective Conversion Rate (as defined herein), all remaining assets of the
Corporation to be distributed; provided, however, that the holders of Preferred
Stock shall not share pro rata in the remaining assets of the Corporation until
all holders of Series A, Series B, Series C and Series D Preferred and Common
Stock shall have received a cumulative amount per share (as adjusted to reflect
any stock split, combination, reclassification or reorganization) equal to the
cumulative dividends per share (as adjusted to reflect any stock split,
combination, reclassification or reorganization), on an as converted basis,
paid on all series of Preferred Stock, excluding any adjustments resulting from
any adjustments to Conversion Rates pursuant to Section 4(e).
(d) For purposes of this Section 2, (i) a merger or
consolidation of the Corporation into or with another corporation (other than
with a wholly owned subsidiary of this Corporation), or any other corporate
reorganization in which the stockholders of the Corporation will not own a
majority of the outstanding shares of the surviving entity of such merger,
consolidation or reorganization, or (ii) a sale, transfer or other disposition
of all or substantially all of the assets of the Corporation, shall be deemed
to be a liquidation, dissolution or winding up of the Corporation.
(e) In the case of (1) any merger or reorganization of
the Corporation with or into any other corporation or other entity or person in
which transaction the Corporation's stockholders immediately prior to such
transaction own immediately after such transaction less than 50% of the equity
securities of the surviving corporation or its parent; or (2) sale, lease or
other disposition of all or substantially all of the assets of the Corporation,
the holders of outstanding shares of Preferred Stock and Common Stock shall be
entitled to receive, from the acquiring corporation or the Corporation, as the
case may be, the preferential amounts set forth in subsections (a), (b), and
(c) of this Section 2. In the event this requirement is not complied with, the
Corporation shall forthwith:
(i) Cause the closing of such transaction to be
postponed until the requirements of this Section 2(e) have been complied with;
or
(ii) Cancel such transaction, in which event the
rights, preferences and privileges of holders of the Corporation's Preferred
Stock and Common Stock shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the date of the first
notice referred to in this Section 2(e).
The Company shall give each holder of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred written notice of such impending
transaction not later than thirty (30) days prior to the stockholders' meeting
called to approve such transaction or thirty (30) days prior to the closing of
such transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the impending transaction
and set forth the
5.
<PAGE> 7
provisions of this Section 2, and the Company shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no
event take place sooner than thirty (30) days after the Company has given the
first notice provided for herein or sooner than ten (10) days after the Company
has given notice of any material changes; provided, however, that such periods
may be shortened upon the written consent of the holders of a majority of each
series of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred.
(f) Any securities to be delivered to the holders of the
Preferred Stock and Common Stock upon a merger, reorganization or sale of all
or substantially all of the assets of the Corporation shall be valued as
follows:
(i) if traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to
the closing;
(ii) if actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the closing; and
(iii) if there is no active public market, or if
the securities are subject to restrictions on free marketability, the value
shall be the fair market value thereof, as determined in good faith by the
Corporation's Board of Directors.
3. VOTING RIGHTS.
(a) Except as otherwise provided herein or as required by
law, the Preferred Stock shall be voted equally with the shares of the Common
Stock of the Corporation and not as a separate class, at any annual or special
meeting of stockholders of the Corporation, and may act by written consent in
the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Preferred Stock shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into
which such holder's aggregate number of shares of Preferred Stock are
convertible (pursuant to Section 4 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of
such written consent.
(b) Any amendment to the certificate of incorporation of
the Corporation which negatively affects the conversion terms of the Series A
Preferred, Series B Preferred, Series C Preferred, or the Series D Preferred
shall require the approval of the holders of a majority of shares of each such
negatively affected series.
6.
<PAGE> 8
4. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following
rights with respect to the conversion of the Preferred Stock into shares of
Common Stock:
(a) OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 4, any shares of Series A Preferred, Series
B Preferred, Series C Preferred, or Series D Preferred may, at the option of
the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred being converted. The number of shares of Common Stock to which a
holder of Series B Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series B
Preferred being converted. The number of shares of Common Stock to which a
holder of Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series C Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series C
Preferred being converted. The number of shares of Common Stock to which a
holder of Series D Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series D Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series D
Preferred being converted.
(b) CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Series A Preferred (the "Series A Conversion
Rate") shall be the quotient obtained by dividing $4.43 by the "Series A
Conversion Price," calculated as provided in Section 4(c). The conversion rate
in effect at any time for conversion of the Series B Preferred (the "Series B
Conversion Rate") shall be the quotient obtained by dividing $5.5375 by the
"Series B Conversion Price," calculated as provided in Section 4(c). The
conversion rate in effect at any time for conversion of the Series C Preferred
(the "Series C Conversion Rate") shall be the quotient obtained by dividing
$4.873 by the "Series C Conversion Price," calculated as provided in Section
4(c). The conversion rate in effect at any time for conversion of the Series D
Preferred (the "Series D Conversion Rate") shall be the quotient obtained by
dividing $7.088 by the "Series D Conversion Price," calculated as provided in
Section 4(c).
(c) CONVERSION PRICE. The conversion price for the
Series A Preferred shall, upon the Filing Date (as defined below), be $4.43
(the "Series A Conversion Price"). The conversion price for the Series B
Preferred shall, upon the Filing Date, be $4.873 (the "Series B Conversion
Price"). The conversion price for the Series C Preferred shall, upon the
Filing Date, be $4.873 (the "Series C Conversion Price"). The conversion price
for the Series D Preferred shall, upon the Filing Date, be $7.088 (the "Series
D Conversion Price"). Such Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, and Series D Conversion Price (the
"Conversion Prices") shall be adjusted from time to time in accordance
7.
<PAGE> 9
with this Section 4. All references to the Conversion Prices herein shall mean
the Conversion Prices as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Preferred
Stock who desires to convert the same into shares of Common Stock pursuant to
this Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such
office that such holder elects to convert the same. Such notice shall state
the number of shares of Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled. Such conversion shall be deemed to have been made at
the close of business on the date of such surrender of the certificates
representing the shares of Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(e) ADJUSTMENTS TO SERIES A CONVERSION PRICE, SERIES B
CONVERSION PRICE, AND SERIES C CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this
Section 4, the following definitions apply:
(1) "OPTIONS" shall mean rights, options
or warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "FILING DATE" shall mean the date on
which this Amended and Restated Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware.
(3) "CONVERTIBLE SECURITIES" shall mean
any evidences of indebtedness, shares (other than Common Stock and Series A
Preferred, Series B Preferred, Series C Preferred, or Series D Preferred) or
other securities convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Section
4(e)(iii), deemed to be issued) by the Corporation after the Filing Date, other
than shares of Common Stock issued or issuable:
(A) upon exercise of any
outstanding option or warrant to purchase Common Stock or Preferred Stock;
(B) upon conversion of any
outstanding Senior Bridge Note issued by the Company;
8.
<PAGE> 10
(C) upon conversion of any
outstanding shares of Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred;
(D) upon conversion of any
convertible securities issuable upon exercise of any outstanding option or
warrant;
(E) to officers, directors or
employees of, or consultants to, the Corporation pursuant to stock option
plans, stock purchase plans or equity incentive plans or agreements on terms
approved by the Board of Directors;
(F) as part of an initial public
offering of the Corporation's Common Stock pursuant to an underwriting public
offering registered under the Securities Act of 1933, as Amended (the "Act");
(G) upon exercise of warrants to
purchase Common Stock that hereinafter may be issued to underwriters or other
persons or entities as sales commissions or fees in connection with obtaining
equity financing;
(H) for which adjustment of the
Series A, Series B, or Series C Conversion Price is made pursuant to Section
4(f)-(j), inclusive.
(I) as a dividend or distribution
on the shares excluded from the definition of Additional Shares of Common Stock
by the foregoing clauses (A) through (H) or this clause (I);
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any
provision herein to the contrary notwithstanding, no adjustment in the Series B
or Series C Conversion Price shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share
(determined pursuant to Section 4(e)(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price for the Series C Preferred Stock in effect on the date of, and
immediately prior to, such issue. Any provision herein to the contrary
notwithstanding, no adjustment in the Series A Conversion Price shall be made
in respect of the issuance of Additional Shares of Common Stock unless the
Series C Conversion Price, as adjusted as a result of such issuance of
Additional Shares of Common Stock, is less than $4.43, as may be adjusted from
time to time taking into account adjustments that may be made pursuant to this
Section 4.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Corporation at any time or from time to time after the
Filing Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities (other than
Options or Convertible Securities described in Section 4(e)(i)(4) above), then
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the
9.
<PAGE> 11
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities and
Options, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Series
A, Series B or Series C Conversion Price shall be made upon the subsequent
issue of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Corporation, or
decrease or increase in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof, the Series A, Series B or Series C
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Series A, Series B or Series C Conversion Price shall affect Common Stock
previously issued upon conversion of the Series A, Series B, or Series C
Preferred);
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A, Series B or
Series C Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible
Securities or Options for Common Stock the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised,
10.
<PAGE> 12
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 4(e)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to clause
(2) or (3) above shall have the effect of increasing the Series A, Series B, or
Series C Conversion Price to an amount which exceeds the lower of (a) the
Series A, Series B, or Series C Conversion Price on the original adjustment
date, or (b) the Series A, Series B, or Series C Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between
the original adjustment date and such readjustment date;
(5) in the case of any Options which
expire by their terms not more than 30 days after the date of issue thereof, no
adjustment of the Series A, Series B, or Series C Conversion Price shall be
made until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (3) above.
(iv) ADJUSTMENT OF SERIES A, SERIES B, AND SERIES
C CONVERSION PRICES UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(1) (A) With respect to the Series B
and Series C Preferred, in the event the Corporation at any time after the
Filing Date shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 4(e)(iii) other
than stock dividends, Series A Preferred, Series C Preferred, or warrants to
purchase Series A or Series C Preferred or Common Stock issued upon exercise or
conversion of such warrants), in connection with an offering or series of
related offerings by the Corporation with gross proceeds to the Corporation of
at least two hundred fifty thousand dollars ($250,000), for a consideration per
share less than (I) 140% of the Series C Conversion Price in effect on the date
of and immediately prior to such issuance, if the issuance occurs prior to June
28, 1996, or (II) 196% of the Series C Conversion Price in effect on the date
of and immediately prior to such issuance, if the issuance occurs on or after
June 28, 1996, then and in such event, the Series B and Series C Conversion
Prices shall be reduced, concurrently with such issue, to an amount equal to
(a) 71.43% of the consideration per share for which such Additional Shares of
Common Stock are issued, if the issuance occurs prior to June 28, 1996, or to
(b) 51.02% of the consideration per share for which such Additional Shares of
Common Stock are issued, if the issuance occurs after June 28, 1996.
(B) If at any time the Series C
Conversion Price is reduced to equal less than $4.43 per share, as may be
adjusted from time to time taking into account adjustments that may be made
pursuant to this Section 4, then the Series A Conversion Price shall be
adjusted to equal the Series C Conversion Price.
(C) Any provision herein to the
contrary notwithstanding, in no event shall the Series A, Series B, or Series C
Conversion Prices be reduced below $1.15,
11.
<PAGE> 13
as may be adjusted from time to time taking into account adjustments that may
be made pursuant to this Section 4.
(D) The effectiveness of Section
4(e)(iv)(1)(A) and (B) shall terminate immediately upon the first to occur of
(a) an Equity Receipt Event, as defined in Section 1(a)(iii)(B); (b) the
closing of the sale of the Corporation's Common Stock in an underwritten public
offering registered under the Act, other than a registration relating solely to
a transaction under Rule 145 under the Act (or any successor thereto) or to an
employee benefit plan of the Corporation, with aggregate gross offering
proceeds (before underwriting discounts, commissions and fees) which exceed
$10,000,000 (a "Qualified Public Offering"); or (c) a merger, reorganization or
sale of substantially all of the assets of the Corporation in which the
stockholders of the Corporation immediately prior to the transaction possess
less than 50% of the voting securities of the surviving entity (or its parent,
if any).
(v) DETERMINATION OF CONSIDERATION. For purposes
of this Section 4(e), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such
consideration shall:
(A) insofar as it consists of
cash, be computed as the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board; and
(C) in the event Additional
Shares of Common Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board.
(2) OPTIONS AND CONVERTIBLE SECURITIES.
The consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to Section 4(e)(iii)
relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities,
12.
<PAGE> 14
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities by
(B) the maximum number of shares
of Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein designed to protect against dilution)
issuable upon the exercise of such Options or conversion or exchange of such
Convertible Securities.
(f) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Filing Date effect
a subdivision of the outstanding Common Stock, the Conversion Prices in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Corporation shall at any time or from time to time after the
Filing Date combine the outstanding shares of Common Stock into a smaller
number of shares, the Conversion Prices in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 4(f) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(g) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If the Corporation at any time or from time to time after the
Filing Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Conversion Prices
that are then in effect shall be decreased as of the time of such issuance or,
in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Conversion Prices then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Prices shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion
Prices shall be adjusted pursuant to this Section 4(g) to reflect the actual
payment of such dividend or distribution.
(h) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS.
If the Corporation at any time or from time to time after the Filing Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments
13.
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called for during such period under this Section 4 with respect to the rights
of the holders of the Preferred Stock or with respect to such other securities
by their terms.
(i) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Filing Date, the
Common Stock issuable upon the conversion of the Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock
or other securities or property, whether by recapitalization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 4 or in Section 2(d)), in any such event each
holder of Preferred Stock shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided
herein or with respect to such other securities or property by the terms
thereof.
(j) ADJUSTMENT FOR CAPITAL REORGANIZATIONS. If at any
time or from time to time after the Filing Date, there is a capital
reorganization of the Common Stock (other than a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4 or in Section 2(d)), as a part of such capital
reorganization provision shall be made so that the holders of the Preferred
Stock shall thereafter be entitled to receive upon conversion of the Preferred
Stock the number of shares of stock or other securities or property of the
Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 4 with respect to the rights
of the holders of Preferred Stock after the capital reorganization to the end
that the provisions of this Section 4 (including adjustment of the Conversion
Prices then in effect and the number of shares issuable upon conversion of the
Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(k) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Prices for the number of shares of
Common Stock or other securities issuable upon conversion of the Series C or
Series D Preferred, if the Series C or Series D Preferred is then convertible
pursuant to this Section 4, the Corporation, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series C or Series D Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) such adjustments and
readjustments, (ii) the Conversion Prices, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of such holder's shares.
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(l) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into
any other corporation, or any transfer of all or substantially all the assets
of the Corporation to any other person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation
shall mail to each holder of Preferred Stock at least thirty (30) days prior to
the record date specified therein a notice specifying (1) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (3) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock
(or other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(m) AUTOMATIC CONVERSION.
(i) Each share of Preferred Stock shall be
converted automatically into shares of Common Stock, based on the
then-effective Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price and Series D Conversion Price, as applicable, immediately
prior to the closing of a Qualified Public Offering. Each share of any series
of Preferred Stock shall be converted automatically into shares of Common
Stock, based on the then-effective Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price or Series D Conversion Price, as
applicable, at any time upon the affirmative vote of the holders of a majority
of the outstanding shares of such series of Preferred Stock.
(ii) Upon the occurrence of the event specified in
paragraph (i) above, the outstanding shares of Preferred Stock shall be
converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Preferred Stock are either delivered to the
Corporation or its transfer agent as provided below, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. Upon the occurrence of such automatic conversion of the
Preferred Stock, the holders of Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or any
transfer agent for the Preferred Stock. Thereupon, there shall be issued and
delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred.
15.
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(n) FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's fair market value (as determined by
the Board of Directors) on the date of conversion.
(o) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(p) NOTICES. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of the Preferred Stock
shall be deemed given upon the earlier of actual receipt or three (3) days
after the same has been deposited in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at the address of such holder appearing on the books of
the Corporation.
(q) PAYMENT OF TAXES. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Preferred Stock, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of
Preferred Stock so converted were registered.
(r) NO DILUTION OR IMPAIRMENT. The Corporation shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but shall at all times in
good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Preferred Stock against dilution or other impairment.
16.
<PAGE> 18
5. REDEMPTION.
(a) Except as expressly provided in this Section 5, the
Company shall not have the right to purchase, call, redeem or otherwise acquire
for value any or all of the Preferred Stock.
(b) At any time, the Company may, at its option, redeem
the Series A or Series B Preferred in whole, but not in part, at the Redemption
Prices hereinafter specified; provided, however, that the Company shall not
redeem Series A Preferred or Series B Preferred or give notice of any
redemption unless the Company has sufficient and lawful funds to redeem all of
the then outstanding Series A Preferred or Series B Preferred. The date on
which the Series A Preferred or Series B Preferred is to be redeemed pursuant
to this Section 5(b) is herein called the "Redemption Date."
(c) The Redemption Price of the Series A Preferred and
Series B Preferred (the "Redemption Prices") shall be an amount per share equal
to $4.43 and $5.5375, respectively, subject to appropriate adjustment to
reflect any stock split, combination, reclassification or reorganization, plus
all accrued and unpaid dividends thereon (whether or not declared), to and
including the Redemption Date. Upon payment of the Redemption Price, all
accrued and unpaid dividends (whether or not declared) on the Series A
Preferred or Series B Preferred shall automatically be canceled.
(d) The Company shall, not less than thirty (30) days nor
more than sixty (60) days prior to the Redemption Date, give written notice
("Redemption Notice") to each holder of record of Series A Preferred or Series
B Preferred to be redeemed. The Redemption Notice shall state:
(i) That all of the outstanding shares of Series
A Preferred or Series B Preferred are to be redeemed and the total number of
shares being redeemed;
(ii) The number of shares of Series A Preferred or
Series B Preferred held by the holder which the Company intends to redeem;
(iii) The Redemption Date and Redemption Price;
(iv) That the holder's right to convert the Series
A Preferred or Series B Preferred into shares of Common Stock as provided in
Section 4 hereof will terminate on the Redemption Date; and
(v) The time, place and manner in which the
holder is to surrender to the Company the certificate or certificates
representing the shares of Series A Preferred or Series B Preferred to be
redeemed.
17.
<PAGE> 19
(e) On the Redemption Date, the Redemption Price of the
Series A Preferred or Series B Preferred scheduled to be redeemed or called for
redemption shall be payable to the holders of the Series A Preferred or Series
B Preferred. On or before the Redemption Date, each holder of Series A
Preferred or Series B Preferred to be redeemed, unless the holder has exercise
his right to convert the shares as provided in Section hereof, shall surrender
the certificate or certificates representing such shares to the Company, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and retired.
(f) If the Redemption Notice is duly given, and if at
least ten (10) days prior to the Redemption Date the Redemption Price is either
paid or made available for payment through the arrangement specified in
subsection (g) below, then notwithstanding that the certificates evidencing any
of the shares of Series A Preferred or Series B Preferred so called or
scheduled for redemption have not been surrendered, all rights with respect to
such shares shall forthwith after the Redemption Date cease and terminate,
except only (i) the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor or (ii) the
right to receive shares of Common Stock upon exercise of the conversion rights
provided in Section 4 hereof on or before the Redemption Date.
(g) At least ten (10) days prior to the Redemption Date,
the Company shall deposit with any bank or trust company in New York, New York
having a capital and surplus of at least $1 billion, as a trust fund, a sum
equal to the aggregate Redemption Price of all shares of the Series A Preferred
or Series B Preferred scheduled to be redeemed or called for redemption and not
yet redeemed, with irrevocable instructions and authority to the bank or trust
company to pay, on or after the Redemption Date or prior thereto, the
Redemption Price to the respective holders upon the surrender of their share
certificates. The deposit shall constitute full payment for the shares of
Series A Preferred or Series B Preferred to the holders thereof, and from and
after the date of such deposit (even if prior to the Redemption Date), the
shares of Series A Preferred or Series B Preferred Stock shall be deemed to be
redeemed and no longer outstanding, and the holders thereof shall cease to be
shareholders with respect to such shares of Series A Preferred or Series B
Preferred and shall have no rights with respect thereto, except the right to
receive from the bank or trust company payment of the Redemption Price of the
shares of Series A Preferred or Series B Preferred, without interest, upon
surrender of their certificates therefor and the right to convert such shares
of Series A Preferred or Series B Preferred into shares of Common Stock as
provided in Section 4 hereof. Any monies so deposited that represent the
Redemption Price of shares of Series A Preferred or Series B Preferred that are
converted into shares of Common Stock shall be immediately released or repaid
to the Company upon such conversion and the holders of such shares of Series A
Preferred or Series B Preferred that are converted shall no longer be entitled
to the payment of the Redemption Price. Any monies so deposited and unclaimed
at the end of one year from the Redemption Date shall be released or repaid to
the Company, after which time the holders of shares of Series A Preferred or
Series B Preferred called for redemption shall be entitled to receive payment
of the Redemption Price only from the Corporation.
18.
<PAGE> 20
6. RESTRICTIONS AND LIMITATIONS. So long as any shares of Series
A, Series B or Series C Preferred Stock remain outstanding, the Corporation
shall not, and shall not permit any subsidiary to, without the vote or written
consent by the holders of a majority of the Series A, Series B or Series C
Preferred:
(a) Redeem, purchase or otherwise acquire for value, any
share or shares of Series A, Series B or Series C Preferred, otherwise than by
redemption in accordance with Section 5 hereof, or any warrant, option or right
to purchase any Series A, Series B or Series C Preferred;
(b) Purchase, redeem or otherwise acquire for value (or
pay into or set aside as a sinking fund for such purpose) any Common Stock or
any warrant, option or right to purchase any Common Stock; provided, however,
that this restriction shall not apply to the repurchase of shares of Common
Stock from directors or employees of or consultants or advisers to the
Corporation or any subsidiary pursuant to agreements under which the
Corporation has the option to repurchase such shares upon the occurrence of
certain events, including the termination of employment by or service to the
Corporation or any subsidiary; and provided further, however, that without the
approval, by vote or written consent, of the holders of a majority of the
Series A Preferred, the total amount applied to the repurchase of shares of
Common Stock shall not exceed $25,000 during any twelve-month period;
(c) Declare or pay any dividends on or declare or make
any other distribution, direct or indirect (other than a dividend payable
solely in shares of Common Stock), on account of the Common Stock or set apart
any sum for any such purpose without the vote or written consent by the holders
of a majority of the Series A Preferred; or
(d) Increase the total number of authorized shares of
Series A, Series B or Series C Preferred Stock.
Each holder of shares of Series A, Series B, Series C or Series D Preferred or
of shares of Common Stock shall, by virtue of its acceptance of a stock
certificate evidencing such Preferred or Common Stock, be treated as having
consented, for all purposes, to distributions made by the Corporation by the
repurchase of shares of Common Stock from directors or employees of or
consultants or advisers to the Corporation or any subsidiary upon the
termination of employment by or service to the Company or any subsidiary or
otherwise if such repurchase is made in accordance with the repurchase
agreements referred to in Section 6(b) and such repurchases are not prohibited
by Section 6(b).
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall acquire
the status of undesignated shares of Preferred Stock.
19.
<PAGE> 21
V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
(a) The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by
the Board of Directors in the manner provided in the Bylaws.
(b) In furtherance of and not in limitation of the powers
conferred by statute, the Board of Directors may from time to time make, amend,
supplement or repeal the Bylaws.
(c) The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
VI.
A director of the Corporation shall, to the full extent not prohibited
by the Delaware General Corporation Law, as the same exists or may hereafter be
amended, not be liable to the Corporation or its stockholders for monetary
damages for breach of his or her fiduciary duty as a director.
VII.
The Corporation shall, to the full extent not prohibited by Section
145 of the Delaware General Corporation Law, as the same exists or may
hereafter be amended, indemnify all persons whom it may indemnify pursuant
thereto.
20.
<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
A
[AVIGEN LOGO]
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR STATEMENTS RELATING
THE STATE OF DELAWARE TO RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS, IF ANY
This Certifies that CUSIP 053690 10 3
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.001 PER
SHARE, OF
AVIGEN, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated
/s/ Wanda deVlaminck /s/ John Monahan
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
AVIGEN, INC.
CORPORATE
SEAL
1992
DELEWARE
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT--...............Custodian...............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors
in common Act ...................................
(State)
UNIF TRF MIN ACT--.........Custodian (until age.........)
(Cust)
............... under Uniform Transfers
(Minor)
to Minors Act .........................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,_______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________
X ___________________________________________________________
X ___________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By___________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.13
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. ANY TRANSFER
OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT
AND AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH TRANSFER OR IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SUCH REGISTRATION IS UNNECESSARY
IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND BLUE SKY LAWS.
Avigen, Inc.
SERIES D PREFERRED STOCK PURCHASE WARRANT
No. WD-__
March 29, 1996
Avigen, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received, ___________________________ __ ("Holder") or any
transferee who has received this warrant (the "Warrant") in compliance with
applicable law and the terms hereof (Holder and any such transferee are herein
referred to as "the "Holder"), is entitled, on the terms set forth below, to
purchase from the Company, on or before the Expiration Time (as defined in
Section 15 below) _________________________________________________ (____)
shares of Series D Preferred Stock of the Company at a price of $1.76 per
share, subject to adjustment as provided below (the "Exercise Price").
This Warrant is being issued in connection with services rendered by
Holder in connection with the Company's Series D Preferred Stock financing.
1. Exercise of Warrant. The Holder may exercise this Warrant at
any time or from time to time on any business day prior to or on the Expiration
Time, for the full or any lesser number of shares of Series D Preferred Stock
purchasable hereunder, by surrendering this Warrant to the Company at its
principal office, with a duly executed Subscription Form (in substantially the
form attached hereto), together with payment of the sum obtained by multiplying
the number of shares of Series D Preferred Stock to be purchased by the
Exercise Price then in effect. Promptly after such exercise, the Company shall
issue and deliver to or upon the order of the Holder a certificate or
certificates for the number of shares of Series D Preferred Stock issuable upon
such exercise, and the Company will pay all taxes in connection with the issue
thereof. All shares of Series D Preferred Stock which may be issued upon
exercise of this Warrant will, upon issuance by the Company in accordance with
the terms of this Warrant, be validly issued, fully paid and non-assessable,
and free from all taxes, liens and encumbrances with respect to the issuance
thereof (except as set forth in the Company's Restated Certificate of
Incorporation (the "Certificate") or bylaws and any restrictions on sale set
forth therein or pursuant to federal or state securities laws. To the extent
permitted by law, this Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided herein, even if the Company's stock transfer
<PAGE> 2
books are at that time closed, and the Holder shall be treated for all purposes
as the holder of record of the Series D Preferred Stock to be issued upon such
exercise as of the close of business on such date. Upon any partial exercise,
the Company will issue to or upon the order of the Holder a new Warrant for the
number of shares of Series D Preferred Stock as to which this Warrant has not
been exercised.
2. Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election in which
event the Company shall issue to the Holder a number of shares of Series D
Preferred Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = the number of shares of Series D Preferred
Stock to be issued to the Holder
Y = the number of shares of Series D Preferred
Stock purchasable under the Warrant or, if
only a portion of the Warrant is being
exercised, the number of Shares purchased
under the Warrant being canceled (at the date
of such calculation)
A = the fair market value of one share of the
Company's Series D Preferred Stock (at the
date of such calculation)
B = Exercise Price (as adjusted to the date of
such calculation)
For purposes of the above calculation, fair market value of one share of Series
D Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that where there is a public market for the
Company's Common Stock, the fair market value per share shall be the product of
(i) the average of the closing prices (or bid prices if there are no such
closing prices) of the Company's Common Stock quoted in the Over-The-Counter
Market Summary or the closing price quoted on the Nasdaq National Market System
or on the primary national securities exchange on which the Common Stock is
then listed, whichever is applicable, as published in the Western Edition of
the Wall Street Journal (or, if not so reported, as otherwise reported by the
Nasdaq System) for the ten (10) trading days prior to the date of determination
of fair market value and (ii) the number of shares of Common Stock into which
each share of Series D Preferred Stock is convertible at the time of such
exercise.
3. Adjustment of Exercise Price and Number of Warrant Shares.
The Exercise Price and the number of shares of Series D Preferred Stock subject
to this Warrant shall be subject to adjustment from time to time as follows:
2.
<PAGE> 3
3.1 Subdivision or Combination of Stock.
(a) If at any time or from time to time after the
date of this Warrant (the "Issue Date") the Company shall subdivide its
outstanding shares of Series D Preferred Stock, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Series D Preferred Stock of the
Company shall be combined into a smaller number of shares, the Exercise Price
in effect immediately prior to such combination shall be proportionately
increased.
(b) Upon each adjustment of the Exercise Price as
provided in Section 3.1(a) above, the Holder shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Series D Preferred Stock (calculated to the nearest whole share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
3.2 Adjustment for Stock Dividends. If and whenever at
any time the Company shall declare a dividend or make any other distribution
upon any class or series of stock of the Company payable in shares of Series D
Preferred Stock or securities convertible into shares of Series D Preferred
Stock, the Exercise Price and the number of shares to be obtained upon exercise
of this Warrant shall be proportionately adjusted to reflect the issuance of
any shares of Series D Preferred Stock or convertible securities, as the case
may be, issuable in payment of such dividend or distribution.
3.3 Reclassification, Reorganization or Merger. In case
of any reclassification or capital reorganization of outstanding shares of
Series D Preferred Stock of the Company, or in case of any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which merger the Company is the
continuing corporation and which does not result in any reclassification or
capital reorganization of outstanding shares of Series D Preferred Stock or
other securities issuable upon exercise of this warrant) or in case of any
sale, lease or conveyance to another corporation of all or substantially all of
the assets of the Company, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder hereof
shall have the right thereafter by exercising the Warrant at any time prior to
the Expiration Time, to purchase the kind and amount of shares of stock and
other securities and property receivable upon such reclassification or capital
reorganization and reorganization, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 3.3 shall similarly apply to
successive reclassifications or capital reorganizations of shares of Series D
Preferred Stock and to successive reorganizations, consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, reorganization, consolidation, merger, sale
or conveyance, additional shares of Series D Preferred Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other
3.
<PAGE> 4
than Series D Preferred Stock, any such issue shall be treated as an issue of
Common stock covered by the provisions of Sections 3.1 and 3.2 hereof.
3.4 Minimal Adjustments. No adjustment in the Exercise
Price and/or the number of shares of Series D Preferred Stock subject to this
Warrant need be made if such adjustment would result in a change in the
Exercise Price of less than five cents ($0.05) (the "Adjustment Threshold
Amount") or a change in the number of subject shares of less than one (1)
share. Any adjustment less than these amounts which is not made shall be
carried forward and shall be made together with any subsequent adjustments, at
the time when (a) the aggregate amount of all such adjustments is equal to at
least the Adjustment Threshold Amount or (b) the Warrant is exercised.
3.5 Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Exercise Price pursuant to this
Section 3, the Company, at its expense, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
the Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon written request at any time of the Holder,
furnish or cause to be furnished to the Holder a like certificate setting forth
(a) such adjustments and readjustments, (b) the then effective Exercise Price
and number of shares of Series D Preferred Stock subject to the Warrant, and
(c) the then effective amount of securities (other than Series D Preferred
Stock) and other property, if any, which would be received upon exercise of the
Warrant.
4. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant. Nothing contained in this Warrant shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive notice as
a stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented
hereby or the shares of Series D Preferred Stock purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised in
accordance with its terms.
5. No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment.
6. No Fractional Shares. No fractional share shall be issued
upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the Holder entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of exercise (as
determined in accordance with Section 2 hereof).
4.
<PAGE> 5
7. Reservation of Stock Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all such shares of Series D
Preferred Stock and other stock, securities and property as from time to time
are receivable upon the exercise of this Warrant. If at any time the number of
authorized but unissued shares of Series D Preferred Stock shall not be
sufficient to effect the exercise of this Warrant, the Company will use its
best efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Series
D Preferred Stock to such number of shares as shall be sufficient for such
purposes. The Company further covenants that all shares that may be issued
upon exercise of the rights represented by this Warrant and payment of the
Exercise Price, all as set forth herein, will be free from all taxes, liens
incurred by the Company and charges in respect of the issue of such shares
(other than taxes in respect of any transfer occurring contemporaneously with
such exercise and payment or otherwise specified herein). The Company agrees
that its issuance of the Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Series D Preferred
Stock (and shares of Common Stock issuable upon conversion of such Series D
Preferred Stock) upon the exercise of the Warrant and covenants that all such
shares, when issued, sold and delivered in accordance with the terms of the
Warrant for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer set forth in this Warrant and
under applicable state and federal securities laws.
8. Notices of Record Date. Upon (a) any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, (b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other corporation, or
any transfer of all or substantially all the assets of the Company to any other
person, or any voluntary or involuntary dissolution, liquidation or winding up
of the Company, or (c) the first fully underwritten public offering of the
Company's Common Stock such as will cause this Warrant to expire, the Company
shall mail to each Holder at least fifteen (15) days, or such longer period as
is required by law, prior to the record date or the closing date of the first
fully underwritten public offering specified therein, a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution,
(ii) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, (iii) the closing date of the fully underwritten public
offering, and (iv) the date, if any, that is to be fixed as to when the holders
of record of Series D Preferred Stock (or other securities at that time
receivable upon exercise of the Warrant) shall be entitled to exchange their
shares of Series D Preferred Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
9. Exchanges of Warrant. Upon surrender for exchange of this
Warrant (in negotiable form, if not surrendered by the Holder named on the face
hereof) to the Company
5.
<PAGE> 6
at its principal office, the Company, at its expense, will issue and deliver a
new Warrant or Warrants calling in the aggregate for the same number of shares
of Series D Preferred Stock, in the denomination or denominations requested, to
or on the order of such Holder upon payment by such Holder of any applicable
transfer taxes; provided that any transfer of the Warrant shall be subject to
the conditions on transfer set forth herein.
10. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement in such reasonable amount as the Company may
determine,or (in the case of mutilation) upon surrender and cancellation
hereof, the Company, at its expense, shall issue a replacement.
11. Notices. Except as provided in Section 8 above, all notices
and other communications from the Company to the Holder shall be mailed by
overnight courier or by first-class, registered or certified mail, postage
prepaid, to the address furnished to the Company in writing by the last Holder
who has furnished an address to the Company in writing. Notice shall be deemed
given one (1) day after deposit with an overnight courier service, three (3)
days after deposit in the mails as aforesaid or upon delivery if personally
delivered.
12. Change; Waiver. Neither this Warrant nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Headings. The headings in this Warrant are for purposes of
convenience of reference only, and shall not be deemed to constitute a part
hereof.
14. Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of California as applied to
contracts entered into between California residents and to be performed
entirely in the State of California.
15. Expiration Time. This Warrant will be wholly void and of no
effect after 5:00 p.m. (San Francisco time) March 29, 2001 (the "Expiration
Time"); provided that, if the last day on which this Warrant may be exercised,
or on which it may be exercised at a particular Exercise Price, is a Sunday or
a legal holiday or a day on which banking institutions doing business in the
City of San Francisco are authorized by law to close, this Warrant may be
exercised prior to 5:00 p.m. (San Francisco time) on the next succeeding full
business day with the same force and effect and at the same Exercise Price as
if exercised on such last day specified herein.
16. Transfer Restrictions. The Company is relying upon an
exemption from registration of this Warrant and the shares of Series D
Preferred Stock issuable upon exercise hereof under the Act and applicable
state securities laws. The Holder by acceptance hereof represents that the
Holder understands that neither this Warrant nor the Series D Preferred Stock
issuable upon exercise hereof (or shares of any security into which such Series
D Preferred Stock may be converted) has been registered with the Securities and
Exchange Commission nor
6.
<PAGE> 7
under any state securities law, and that neither this Warrant nor the Series D
Preferred Stock issuable upon exercise hereof (or shares of any security into
which such Series D Preferred Stock may be converted) can be sold or
transferred unless registered under the Act and under any applicable state
securities laws, or unless an exemption from such registration is available.
By acceptance hereof, the Holder represents and warrants that (a) it is
acquiring the Warrant (and the shares of Series D Preferred Stock or other
securities issuable upon exercise hereof) for its own account for investment
purposes and not with a view to distribution, (b) has received all such
information as the Holder deems necessary and appropriate to enable the Holder
to evaluate the financial risk inherent in making an investment in the Company,
and satisfactory and complete information concerning the business and financial
condition of the Company in response to all inquiries in respect thereof, (c)
the Holder's acquisition of shares upon exercise hereof will be a highly
speculative investment, (d) the Holder is able, without impairing the Holder's
financial condition, to hold such shares for an indefinite period of time and
to suffer a complete loss of the Holder's investment, and (e) the Holder has
such knowledge and experience in financial and business matters that the Holder
it is capable of evaluating the merits and risks of acquisition of this Warrant
and the shares issuable upon exercise hereof and of making an informed
investment decision with respect thereto. Each certificate representing shares
of Series D Preferred Stock or other securities issued upon exercise of this
Warrant shall have conspicuously endorsed on its face, at the time of its
issuance, such legends as counsel to the Company deems necessary or
appropriate, including without limitation the legend set forth on the top of
the face page of this Warrant. In addition to those restrictions on transfer
imposed by the Act and other applicable securities laws, this Warrant may not
be sold or transferred unless to (i) an underwriter acceptable to the Company
for immediate exercise by such underwriter in connection with a fully
underwritten public offering of the Company's Common Stock underlying this
Warrant, (ii) any entity who acquires the Holder or substantially all of its
assets, or (iii) an Affiliate of the Holder (as that term is defined in Rule
144(a)(1) of the Act).
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered on the date first set forth above.
Avigen, Inc.
By:
--------------------------------
John Monahan, Ph.D.
President and Chief
Executive Officer
7.
<PAGE> 8
SUBSCRIPTION FORM
[To be executed if holder desires to exercise the Warrant]
The undersigned, holder of this Warrant, (1) hereby irrevocably elects
to exercise the right of purchase represented by this Warrant for, and to
purchase thereunder, full shares of the Series D Preferred
Stock of Avigen, Inc. provided for therein, (2) makes payment in full of the
purchase price of such shares, (3) requests that certificates for such shares
be issued in the name of
----------------------------------------------------------------
(Please print name and address)
----------------------------------------------------------------
(Please insert social security or other identifying number)
and (4) if said number of shares shall not be all the shares purchasable
thereunder, requests that a new Warrant for the unexercised portion of this
Warrant be issued in the name of and delivered to:
----------------------------------------------------------------
----------------------------------------------------------------
(Please print name and address)
Dated:
-------------------------
Signature:
-------------------------
By:
---------------------------
Title:
-------------------------
8.
<PAGE> 1
EXHIBIT 10.20
LICENSE AGREEMENT
Between
RESEARCH CORPORATION TECHNOLOGIES, INC.
And
VESTMARK INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I RECITALS .................................................... 1
ARTICLE II DEFINITIONS ................................................. 1
ARTICLE III LICENSE ..................................................... 1
SECTION 3.1 Grant of License .......................................... 1
SECTION 3.2 Term of License Grant ..................................... 2
SECTION 3.3 Extension to AFFILIATES ................................... 2
SECTION 3.4 Rights to Extend Immunity ................................. 2
SECTION 3.5 IMPROVEMENT PATENTS ....................................... 2
SECTION 3.6 No Further Rights ......................................... 3
ARTICLE IV EXCLUSIVITY ................................................. 3
SECTION 4.1 Exclusivity ............................................... 3
SECTION 4.1 Reservation ............................................... 3
ARTICLE V FINANCIAL TERMS ............................................. 3
SECTION 5.1 License Fees .............................................. 3
SECTION 5.2 Royalties ................................................. 4
SECTION 5.3 Annual Minimum Royalties .................................. 5
SECTION 5.4 Books and Records ......................................... 5
SECTION 5.5 Periodic Reports and Payments ............................. 6
SECTION 5.6 Sales Outside the U.S. .................................... 6
SECTION 5.7 Late Payment .............................................. 7
ARTICLE VI SUBLICENSING PROVISIONS ..................................... 7
SECTION 6.1 Rights and Power to Sublicense ............................ 7
SECTION 6.2 Royalties from SUBLICENSES ................................ 8
SECTION 6.3 Books, Records and Payments in Respect of SUBLICENSES ..... 8
SECTION 6.4 SUBLICENSE Reports ........................................ 8
SECTION 6.5 Notification of SUBLICENSE ................................ 9
SECTION 6.6 Continued Effect Upon Termination of this Agreement ....... 9
SECTION 6.7 AFFILIATES as SUBLICENSEES ................................ 9
ARTICLE VII OBLIGATIONS OF LICENSEE; DILIGENCE ......................... 10
SECTION 7.1 Generally ................................................. 10
SECTION 7.2 Funding of R&D PROGRAM .................................... 10
</TABLE>
(i)
<PAGE> 3
<TABLE>
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<S> <C> <C>
SECTION 7.3 Obtain Governmental Approvals and Registrations ........... 10
SECTION 7.4 The Marketing Program ..................................... 12
SECTION 7.5 Periodic Reports .......................................... 12
SECTION 7.6 Default ................................................... 12
ARTICLE VIII TERMINATION ................................................ 12
SECTION 8.1 Termination on TERMINATION DATE ........................... 12
SECTION 8.2 At LICENSEE's Election .................................... 12
SECTION 8.3 LICENSEE's Breach of Agreement ............................ 12
SECTION 8.4 Reverter .................................................. 13
SECTION 8.5 Surviving Obligation to Pay Royalties ..................... 13
SECTION 8.6 Surviving Provisions ...................................... 14
ARTICLE IX INFRINGEMENT ................................................. 14
SECTION 9.1 LICENSOR's Right to Prosecute ............................. 14
SECTION 9.2 LICENSEE's Opportunity to Prosecute ....................... 14
SECTION 9.3 Rights to Notify .......................................... 15
SECTION 9.4 Multiple Infringers ....................................... 15
SECTION 9.5 Control of Suit Initiated by LICENSOR ..................... 15
SECTION 9.6 Control of Suit Initiated by LICENSEE ..................... 16
ARTICLE X GENERAL ...................................................... 17
SECTION 10.1 Integration ............................................... 17
SECTION 10.2 Addresses and Notices ..................................... 18
SECTION 10.3 Applicable Law; Venue ..................................... 18
SECTION 10.4 Mediation and Arbitration ................................. 18
SECTION 10.5 Compliance With Law ....................................... 19
SECTION 10.6 Severability .............................................. 19
SECTION 10.7 No Representations ........................................ 19
SECTION 10.8 Independent Contractor .................................... 19
SECTION 10.9 Headings .................................................. 19
SECTION 10.10 No Third-Party Beneficiaries .............................. 19
SECTION 10.11 Waiver .................................................... 19
SECTION 10.12 Computation of Time ....................................... 19
SECTION 10.13 Registration of Agreement ................................. 19
SECTION 10.14 Disclaimer ................................................ 20
SECTION 10.15 Indemnity ................................................. 20
SECTION 10.16 Insurance ................................................. 20
SECTION 10.17 Construction .............................................. 21
SECTION 10.18 Patent Marking ............................................ 21
SECTION 10.19 Grant of Security Interest ................................ 21
SECTION 10.20 Assignment................................................. 21
SECTION 10.21 Non-Use of Names .......................................... 21
SECTION 10.22 Authority and Binding Agreement ........................... 22
SECTION 10.23 Contingent Effect ......................................... 22
</TABLE>
(ii)
<PAGE> 4
<TABLE>
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ARTICLE XI LICENSED PATENTS ............................................. 22
SECTION 11.1 Prosecution ............................................... 22
SECTION 11.2 Patent Extensions ......................................... 23
ARTICLE XII GOVERNMENT RIGHTS ............................................ 23
SECTION 12.1 Prior Rights .............................................. 23
SECTION 12.2 Agency Determination ...................................... 23
SECTION 12.3 Agreement to Comply ....................................... 23
SECTION 12.4 License to Conform ........................................ 23
SECTION 12.5 Other Arrangements ........................................ 24
Exhibit A
Exhibit B
Exhibit C
DEFINITIONS RIDER
</TABLE>
(iii)
<PAGE> 5
LICENSE AGREEMENT
Effective May 15, 1992 (the "Effective Date"), RESEARCH CORPORATION
TECHNOLOGIES, INC., a Delaware nonprofit corporation, with offices at 6840 E.
Broadway Blvd., Tucson, AZ 85710, U.S.A. ("LICENSOR"), and VESTMARK INC., a New
York corporation, with offices at 375 Park Avenue, Suite 1501, New York, NY
10022 ("LICENSEE"), agree as follows:
ARTICLE I
RECITALS
SECTION 1.1. Dr. Arun Srivastava (the "Inventor") of the University of
Indiana (the "Institution") has made an invention entitled "Safe Vector for
Gene Therapy," as described in the LICENSED PATENTS.
SECTION 1.2. LICENSOR represents that the Inventor has assigned his
rights in and to the Invention and the attendant patent rights to LICENSOR
pursuant to an agreement between LICENSOR and the University of Indiana
Foundation (the "Foundation"). LICENSOR further represents that it has the
right to grant licenses under the LICENSED PATENTS and wishes to further
develop, or cause to be further developed, the Invention so that it might be
utilized in the public interest.
SECTION 1.3. LICENSEE intends to fund and conduct a program to further
develop the Invention so that LICENSEE may commercially exploit products
embodying the Invention. LICENSEE further intends to create and implement a
systematic plan to obtain and manage any governmental approvals or
registrations that may be required to exploit such products commercially.
SECTION 1.4. LICENSEE desires to obtain a license under the LICENSED
PATENTS under the terms and conditions of this Agreement so that LICENSEE may
commercially exploit the Invention by manufacturing and SELLING products
embodying the Invention.
SECTION 1.5. LICENSOR is willing to grant to LICENSEE a license under
the LICENSED PATENTS pursuant to the terms and conditions of this Agreement.
ARTICLE II
DEFINITIONS
Fully capitalized terms shall have the meanings set forth in the
DEFINITIONS RIDER, attached to this Agreement and, by this reference,
incorporated into this Agreement. References to SECTIONS in the DEFINITIONS
RIDER are made as "SECTION DRX."
ARTICLE III
LICENSE
SECTION 3.1 Grant of License. LICENSOR hereby grants to LICENSEE,
upon the terms and conditions specified in this Agreement, an exclusive license
in the LICENSED FIELDS under the LICENSED PATENTS:
to practice any LICENSED PROCESS;
to make and have made LICENSED PRODUCTS;
1
<PAGE> 6
to USE LICENSED PRODUCTS; and
to SELL LICENSED PRODUCTS;
in the LICENSED TERRITORIES free from suit by LICENSOR for infringement of the
PATENT CLAIMS. The license granted under this SECTION 3.1 shall be exclusive
to the extent specified in SECTION 4.1 ("Exclusivity") of this Agreement and
nonassignable except to the extent specified in SECTION 10.20 ("Assignment") of
this Agreement. The foregoing grant shall not restrict LICENSEE'S USE or SALE
of LICENSED PRODUCTS in any country outside the LICENSED PATENTS such that
LICENSEE may USE and SELL LICENSED PRODUCTS worldwide. No further or different
license or rights are granted or implied by this SECTION 3.1. No license or
rights are granted or implied under any patent application or patent outside the
LICENSED PATENTS. LICENSEE covenants not to SELL LICENSED PRODUCTS to any
third party who is known to USE the LICENSED PRODUCTS outside the LICENSED
FIELDS. If this Agreement is fully executed before the issuance of the United
States patent application identified in Exhibit A, LICENSOR shall, upon written
request of LICENSEE, authorize the American Type Culture Collection to release
materials identified as 75,140, subject to SECTIONS 10.14 and 10.15 and with
the understanding that LICENSOR accepts no liability or responsibility in
connection with such materials or their quality.
SECTION 3.2. Term of License Grant. Subject to the provisions of
ARTICLE VIII ("Termination") of this Agreement, the term of the grant of license
provided in this ARTICLE III shall end on the TERMINATION DATE unless sooner
terminated as hereinafter provided.
SECTION 3.3. Extensions to AFFILIATES.
Subsection 3.3.1. Grant of Right. LICENSOR hereby grants to
LICENSEE, on the terms and conditions of this Agreement, the right to extend to
AFFILIATES of LICENSEE the license and rights granted under SECTION 3.1 of this
Agreement. LICENSEE shall notify LICENSOR in writing before any extension to
an AFFILIATE is made. Termination of this Agreement shall effect the
simultaneous termination of any right extended to an AFFILIATE of LICENSEE
under this SECTION 3.3.
Subsection 3.3.2. LICENSEE Responsible for Performance.
LICENSEE agrees to be responsible for the performance under this Agreement by
the AFFILIATES to which such license and rights are extended. For assessing,
reporting and paying earned royalties under this Agreement, the manufacture,
SALE or USE of LICENSED PRODUCTS by LICENSEE'S AFFILIATES and the practice of
LICENSED PROCESSES by LICENSEE'S AFFILIATES shall be considered the
manufacture, SALE or USE or such LICENSED PRODUCT by LICENSEE or the practice
of such LICENSED PROCESS by LICENSEE, as the case may be.
Subsection 3.3.3. Reports and Payments. Each AFFILIATE may
make the pertinent reports and royalty payments specified in ARTICLE V
("Financial Terms") of this Agreement directly to LICENSOR on behalf of
LICENSEE if LICENSEE notifies LICENSOR in writing in advance. Otherwise such
reports and payments shall be made by LICENSEE. In any event, the SALE and USE
of LICENSED PRODUCTS, and the practice of LICENSED PROCESSES, by LICENSEE'S
AFFILIATES shall be separately shown in LICENSEE'S reports to LICENSOR.
SECTION 3.4. Right To Extend Immunity. LICENSOR hereby grants to
LICENSEE, upon the terms and conditions specified in this Agreement, the right
to grant to purchasers and USERS of any product SOLD as a LICENSED PRODUCT
under this Agreement, immunity from suit for infringement of the LICENSED
PATENTS in the USE of such product only in any LICENSED PROCESS in the LICENSED
FIELDS.
SECTION 3.5. IMPROVEMENT PATENTS. If LICENSOR acquires rights to
grant licenses under any IMPROVEMENT PATENT, LICENSOR shall promptly notify
LICENSEE in writing of such fact. If, on or before the date sixty (60) days
after LICENSEE receives such written notice, LICENSEE notifies LICENSOR of its
election to add such IMPROVEMENT PATENT(s) to the LICENSED PATENTS of this
Agreement, such rights
2
<PAGE> 7
to the IMPROVEMENT PATENT shall be added to the LICENSED PATENTS of this
Agreement, in which event earned royalties and minimum royalties shall be
payable by LICENSEE to LICENSOR in respect of such newly constituted LICENSED
PATENTS under SECTIONS 5.2 and 5.3. The foregoing shall be subject to any
obligations LICENSOR or INSTITUTION may have to any third party with respect to
any such IMPROVEMENT PATENT. If LICENSEE does not timely notify LICENSOR of its
election in writing, LICENSOR shall provide LICENSEE ten days' written notice
stating that the sixty (60) day election period has expired and that, if
LICENSEE does not make an election on or before the date ten (10) days after
LICENSEE'S receipt of the written notice, LICENSOR shall be free to take steps
to commercialize such IMPROVEMENT PATENT(s) without further obligation to
LICENSEE. If LICENSEE does not notify LICENSOR of its election, in writing, on
or before the expiration of such ten (10) day period, LICENSOR shall be free to
take steps to commercialize such IMPROVEMENT PATENT(s) without further
obligation to LICENSEE. If the IMPROVEMENT PATENT(s) is added to the LICENSED
PATENTS, the earned royalties shall be payable by LICENSEE to LICENSOR with the
understanding that only one and the same earned royalty on the SALE of LICENSED
PRODUCT shall be due and payable by LICENSEE on a given LICENSED PRODUCT shall
be due and payable by LICENSEE on a given LICENSED PRODUCT, even though it
would infringe, but for this Agreement, more that one PATENT CLAIM.
SECTION 3.6. No Further Rights. Except as provided in SECTIONS 3.1,
3.2, 3.3, 3.4 and 3.5, ARTICLES IV ("Exclusivity") and VI ("Sublicensing") of
this Agreement, no other, further or different license or right is hereby
granted or implied.
ARTICLE IV
EXCLUSIVITY
SECTION 4.1. Exclusivity. Subject to the provisions of ARTICLES VI
("Sublicensing"), X ("General"), and XII ("Government Rights") of this
Agreement, the license and rights granted under the LICENSED PATENTS to SELL
LICENSED PRODUCTS pursuant to ARTICLE III ("License") of this Agreement shall
be exclusive to LICENSEE in the LICENSED FIELDS in the LICENSED TERRITORIES in
that LICENSOR agrees not to grant to a third party another concurrently
effective license in the LICENSED FIELDS under the LICENSED PATENTS to make,
USE or SELL LICENSED PRODUCTS in the LICENSED TERRITORIES, or practice any
LICENSED PROCESS, in the LICENSED TERRITORIES, during the term of this
Agreement.
ARTICLE V
FINANCIAL TERMS
SECTION 5.1. License Fees.
Subsection 5.1.1. Cash License Issue Fee. LICENSEE shall
pay to LICENSOR a cash license issue fee of One Hundred Fifty Thousand Dollars
(US$150,000.00) payable as follows:
(a) Seven Thousand Five Hundred Dollars (US$7,500) upon execution and
delivery of this Agreement;
(b) Forty Two Thousand Five Hundred Dollars (US$42,500) payable on or
before the date one hundred twenty (120) days after the Effective Date;
(c) Fifty Thousand Dollars (US$50,000) payable on or before the date
one (1) year after the date one hundred twenty (120) days after the Effective
Date;
3
<PAGE> 8
(d) Fifty Thousand Dollars (US$50,000) payable on or before the date two
(2) years after the date one hundred twenty (120) days after the Effective Date.
The license issue fee is nonrefundable and shall not be credited against any
other amount to be paid by LICENSEE under this Agreement. If this Agreement is
terminated any time before the balance of the cash license issue fee described
in paragraphs (b) and (c) above has been paid, the unpaid balance of the cash
license issue fee shall become immediately due and payable on the effective
date of such termination. If the effective date of termination of this
Agreement is before the date the amount specified in (d) above is due and
payable, LICENSEE shall have no obligation to pay the amount due in (d) above.
Subsection 5.1.2. Equity License Issue Fee. In addition to the
cash license issue fee required under Subsection 5.1.1 above, LICENSEE shall
issue on or before the date ten (10) days after execution and delivery of this
Agreement:
(a) to LICENSOR Four Hundred Thousand (400,000) shares of LICENSEE'S
common stock;
(b) to the Inventor Three Hundred Thousand (300,000) shares of
LICENSEE'S common stock;
(c) to the Foundation Three Hundred Thousand (300,000) shares of
LICENSEE'S common stock;
representing ten percent (10%) of the total outstanding shares of stock of
LICENSEE, determined on a fully diluted basis. The shares issued to LICENSOR,
the Inventor and the Foundation shall also be subject to the certain
Registration Rights and Transfer Restriction Agreement, executed concurrently
with this Agreement (the "Rights Agreement"). LICENSOR and LICENSEE acknowledge
and agree that the fair market value of such shares as of the Effective Date is
$0.001 per share or, in the aggregate, One Thousand Dollars ($1000.00).
Subsection 5.1.3. License Maintenance Fees. LICENSEE shall
not be obligated to pay any license maintenance fees under this Agreement.
SECTION 5.2. Royalties.
Subsection 5.2.1. Accrual and Payment. LICENSEE shall pay to
LICENSOR an earned royalty on each LICENSED PRODUCT USED or SOLD by or for
LICENSEE, its AFFILIATES, or SUBLICENSEES during the term of this Agreement,
and on each LICENSED PRODUCT made during the term of this Agreement but USED or
SOLD after the termination of this Agreement.
Subsection 5.2.2. Royalty Amount. The amount of earned
royalties LICENSEE shall pay to LICENSOR for LICENSED PRODUCTS made, USED or
SOLD by LICENSEE or its AFFILIATES shall be determined for each CLASS of
LICENSED PROMOTER PRODUCT as follows:
(a) NET SALES VALUE no greater than Ten Million Dollars. If the
cumulative, aggregate NET SALES VALUE (from inception of this Agreement)
of such CLASS of LICENSED PROMOTER PRODUCT USED or SOLD under this
Agreement (whether by or for LICENSEE, its AFFILIATES, or SUBLICENSEES)
is less than or equal to Ten Million Dollars ($10,000,000.00), the
amount of the earned royalty shall be five percent (5%) of the NET
SALES VALUE of all such LICENSED PROMOTER PRODUCTS made, USED or SOLD
before such threshold is reached.
(b) NET SALES VALUE greater than Ten Million Dollars but no
greater than Fifty Million Dollars. If the cumulative, aggregate NET
SALES VALUE (from inception of this Agreement) of such CLASS of LICENSED
PROMOTER PRODUCT USED or SOLD under this Agreement (whether by or for
LICENSEE, its AFFILIATES, or SUBLICENSEES) is greater than Ten Million
Dollars ($10,000,000.00) but less than or equal to Fifty Million Dollars
($50,000,000.00), the amount of the earned
4
<PAGE> 9
royalty shall be six percent (6%) of the NET SALES VALUE of all such
LICENSED PROMOTER PRODUCTS made, USED or SOLD after such lesser
threshold is reached.
(c) NET SALES VALUE greater than Fifty Million Dollars. If the
cumulative, aggregate NET SALES VALUE (from inception of this Agreement)
of such CLASS of LICENSED PROMOTER PRODUCT USED or SOLD under this
Agreement (whether by or for LICENSEE, its AFFILIATES, or SUBLICENSEES)
is greater than Fifty Million Dollars ($50,000,000.00), the amount of
the earned royalty shall be seven percent (7%) of the NET SALES VALUE of
all such LICENSED PROMOTER PRODUCTS made, USED or SOLD after such
threshold is reached.
Subsection 5.2.3. One Royalty. Only one earned royalty shall
accrue and be paid on a given LICENSED PRODUCT, even if such LICENSED PRODUCT
is SOLD or transferred between SPECIAL PARTIES for subsequent USE or RESALE, or
if such LICENSED PRODUCT is made in one country of the LICENSED PATENTS and
USED or SOLD in another country of the LICENSED PATENTS. For a LICENSED
PRODUCT manufactured in a first country of the LICENSED PATENTS and USED or
SOLD in a second country of the LICENSED PATENTS, the obligation to pay an
earned royalty shall arise upon manufacture in such first country, but the
amount of royalty shall be determined based on the NET SALES VALUE of such
LICENSED PRODUCT USED or SOLD in such second country. If the laws or
regulations of either such first or such second country prevent the payment of
such royalties or provide that such payment be blocked, the royalty shall be
deemed to accrue upon manufacture, USE or SALE in the country where payment of
royalties is not prevented or blocked by law, and the amount of royalties shall
be determined based on the NET SALES VALUE of USE or SALE of LICENSED PRODUCTS.
Subsection 5.2.4. No Royalty Charged Under U.S. Government
License. No earned royalties shall be payable under this Agreement on any
LICENSED PRODUCT made, USED or SOLD, or any LICENSED PROCESS practiced, under
any license to practice under the LICENSED PATENTS granted to or on behalf of
the United States Government, as further described in ARTICLE XII ("Government
Rights") of this Agreement.
SECTION 5.3. Annual Minimum Royalties.
Subsection 5.3.1. Amount and Payment Date. LICENSEE shall pay
to LICENSOR a prepaid, nonrefundable annual minimum royalty for each LICENSED
TERRITORY in the amounts shown in EXHIBIT B. LICENSEE's payment of the annual
minimum royalty for each calendar year shall accompany LICENSEE's report to
LICENSOR for the last quarter of the immediately preceding calendar year.
Subsection 5.3.2. Accrual. Such payments shall first accrue
and be payable on the dates set forth in EXHIBIT B.
Subsection 5.3.3. Credits. LICENSEE shall be entitled to
credit the annual minimum royalty payment due for a particular LICENSED
TERRITORY only against the amount of the earned royalties payable by LICENSEE
to LICENSOR in the same calendar year for the SALES or USE of LICENSED PRODUCTS
in such same LICENSED TERRITORY by LICENSEE, its AFFILIATES or its
SUBLICENSEES. No annual minimum royalty payment paid in respect of a
particular LICENSED TERRITORY for any given calendar year shall be carried over
or carried back as an applicable credit against the earned royalties payable in
respect of such same LICENSED TERRITORY for any subsequent or previous calendar
year, or in respect of any other LICENSED TERRITORY for any calendar year. No
amount of earned royalties paid for any calendar year in respect of a
particular LICENSED TERRITORY in excess of such annual minimum royalties shall
be creditable against any annual minimum royalty payment due in any other
calendar year in respect of such same LICENSED TERRITORY, or in respect of any
other LICENSED TERRITORY.
SECTION 5.4. Books and Records. LICENSEE shall keep full, true and
accurate books of account containing all particulars and reasonable supporting
documentation which may be necessary for the purpose of determining the NET
SALES VALUE or all LICENSED PRODUCTS. The books of account and reasonable
5
<PAGE> 10
supporting documentation shall be kept at LICENSEE's principal place of
business and shall be open at all reasonable times, for five (5) years
following the end of the calendar year to which they pertain (and access shall
not be denied thereafter if reasonably available), to the inspection of an
independent certified public accountant retained by LICENSOR for the purpose of
verifying LICENSEE's royalty statements or LICENSEE's compliance in other
respects with this Agreement. If any such inspection discloses an underpayment
of royalties of five percent (5%) or more of the amount of royalties actually
due for any quarterly period, then LICENSEE shall promptly pay the reasonable
cost of such inspection after LICENSEE's receipt of the bill/invoice for such
inspection.
SECTION 5.5. Periodic Reports and Payments. On or before the date
thirty (30) days after the end of each fiscal quarter of LICENSEE, LICENSEE
shall deliver to LICENSOR a true and accurate written report, showing the
following as they apply to the fiscal quarter just ended:
(a) the quantities of LICENSED PRODUCTS billed by
LICENSEE and its AFFILIATES during the previous calendar quarter
in each country of each LICENSED TERRITORY;
(b) the quantities of LICENSED PRODUCTS billed by
SUBLICENSEES during the previous calendar quarter in each
country of each LICENSED TERRITORY;
(c) the dollar value of the billings on such quantities
in (a) and (b) above;
(d) the computation of the NET SALES VALUE based on the
dollar value of the billings on such quantities in (a) and (b)
above determined in accordance with SECTION DR.11 ("NET SALES
VALUE") of this Agreement;
(e) the computation of royalties based on the NET SALES
VALUE computed under Paragraph (d) above;
LICENSEE's payment of the royalties due for the calendar quarter covered by the
written report shall accompany the report. If no royalties are due, it shall
be so reported. Royalties shall be paid to LICENSOR in United States currency
at LICENSOR's address specified in SECTION 10.2 ("Addresses and Notices"). The
correctness and completeness of each such report shall be certified in writing
by a responsible financial officer (or his or her designee) of LICENSEE, by the
independent public accounting firm acting as LICENSEE'S auditor, or by the
chairman or other head of LICENSEE'S internal audit committee. On or before
the date forty-five (45) days after the end of the calendar quarter in which
this Agreement is terminated, LICENSEE shall provide to LICENSOR a written
report that complies in all respects with this SECTION 5.5.
SECTION 5.6. Sales Outside the U.S. All amounts payable hereunder by
LICENSEE to LICENSOR shall be payable in United States currency collectible at
par. If LICENSEE, a SUBLICENSEE or an AFFILIATE of LICENSEE SELL any LICENSED
PRODUCTS for currency other than United States currency, the earned royalty
payable as to such LICENSED PRODUCT shall first be determined in such currency
for which the LICENSED PRODUCT was SOLD and then converted into its equivalent
in United States currency as follows:
(a) at the New York foreign exchange selling rate for such
currency for the last business day of the calendar quarter for which
payment is made, published by the Wall Street Journal; or
(b) if such rate is not so published, at the selling rate for
such currency for the last business day of the calendar quarter for
which payment is made, as published by a leading New York, New York bank
chosen by LICENSEE and reasonably acceptable to LICENSOR.
If LICENSEE is late in making any payment under this Agreement, the applicable
exchange rate obtained from the sources described above shall be the greater of
such rate on the date payment was actually made or the rate on the date on
which payment is due. If the law or regulations of any country require
withholding of taxes from
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royalties to be paid under this Agreement, such taxes shall be deducted by
LICENSEE from the remittable royalties due from USES or SALES in such country
and will be paid by LICENSEE to the proper taxing authority, with proof of
payment received and remitted to LICENSOR as evidence of such payment.
LICENSEE shall fully cooperate and assist LICENSOR in obtaining, through
ordinary administrative procedures, a refund of such taxes withheld and shall
promptly execute and sign such documents reasonably requested by LICENSOR to
obtain such refund through ordinary administrative procedures, all without
out-of-pocket expense to LICENSEE.
SECTION 5.7. Late Payment.
Subsection 5.7.1. Late Fees. LICENSEE hereby acknowledges that
late payment by LICENSEE to LICENSOR of sums due under this Agreement will cause
LICENSOR to incur certain costs including additional costs for legal, accounting
and other professional services to manage and administer this Agreement, the
exact amount of which will be extremely difficult to ascertain. Accordingly, if
LICENSEE fails to make any payment required under this Agreement on or before
the date ten (10) days after LICENSEE'S receipt of LICENSOR'S written notice of
such failure, in addition to any other remedy available under this Agreement and
any remedy available at law or equity, LICENSEE shall pay to LICENSOR a late
payment fee equal to the lesser of Three Thousand U.S. Dollars ($US3,000) or
two and one-half percent (2.5%) of such overdue amount (in addition to any
interest charges required or permitted below). The parties hereby agree that
such late charge represents a fair, reasonable and administratively simple
estimate, at the time of execution of this Agreement, of the costs LICENSOR will
incur by reason of LICENSEE's late payment.
Subsection 5.7.2. Interest Charges. If LICENSEE fails to make
any payment required under this Agreement on or before the date ten (10) days
after LICENSEE'S receipt of LICENSOR'S written notice of such failure, LICENSEE
shall pay interest on such amount at an annual rate of fifteen percent (15%)
which shall accrue from the date the payment not timely made became due until
the date such payment is paid in full. If such fifteen percent (15%) rate
exceeds the rate allowed by applicable law, then the highest rate allowed by law
shall apply.
Subsection 5.7.3. Application of Payments. Any payments
received shall be applied first to any late charges, second to the satisfaction
of any unpaid, accrued interest and finally to the satisfaction of any unpaid
principal.
ARTICLE VI
SUBLICENSING PROVISIONS
SECTION 6.1. Right and Power to Sublicense.
Subsection 6.1.1. Generally. LICENSOR hereby grants to
LICENSEE, upon the terms and conditions specified in this ARTICLE VI, a
nonassignable (except with this Agreement as provided in SECTION 10.21
["Assignment"] of this Agreement) right and power to grant to others
nonassignable, royalty-bearing sublicenses under the LICENSED PATENTS to grant
rights and power commensurate in scope to the rights and powers granted under
SECTION 3.1. The rights and powers granted to LICENSEE under this SECTION 6.1
shall only be in effect for so long as LICENSEE is not in default under any
provision of this Agreement and only during the time that the license in the
LICENSED FIELDS under the LICENSED PATENTS of a LICENSED TERRITORY is in effect.
Subsection 6.1.2. Compliance with Law. Each SUBLICENSE must
comply with all applicable laws and governmental regulations. In particular,
LICENSEE shall neither grant (and shall not have the right or power to grant) a
SUBLICENSE, nor refuse to grant a SUBLICENSE, under any circumstance or
condition amounting to a misuse of any patent within the LICENSED PATENTS.
Subsection 6.1.3. Limitations. This SECTION 6.1 shall not
grant LICENSEE any right or power to grant a sublicense to an AFFILIATE under
the terms and conditions of this ARTICLE VI. LICENSEE may
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only extend or grant rights under the LICENSED PATENTS to AFFILIATES in
accordance with SECTION 3.3 of this Agreement. LICENSEE must obtain LICENSOR'S
prior written approval, which shall not be unreasonably withheld, of any
proposed SUBLICENSEE that LICENSEE proposes to grant an exclusive SUBLICENSE in
all subfields of a LICENSED FIELD under the LICENSED PATENTS of any country.
SECTION 6.2. Royalties from SUBLICENSES.
Subsection 6.2.1. Earned and Minimum Royalties. For the
sublicensing rights and privileges granted under this ARTICLE VI, LICENSEE shall
pay to LICENSOR fifty percent (50%) of the earned royalties and minimum
royalties paid to LICENSEE under such SUBLICENSE for the manufacture, USE or
SALE of LICENSED PRODUCTS by the SUBLICENSEE or its AFFILIATES subject to the
following limitations. In no event shall the amount payable as earned royalties
to LICENSOR for the manufacture, USE or SALE of LICENSED PRODUCT by a
SUBLICENSEE or its AFFILIATES be less than four and one-quarter percent (4-1/4%)
of the NET SALES VALUE of LICENSED PRODUCTS made, USED or SOLD by or for such
SUBLICENSEE or its AFFILIATES.
Subsection 6.2.2. Additional Consideration. In addition to
such earned royalties, LICENSEE shall also pay to LICENSOR a portion of any
other consideration, including patent sublicense issue fees and maintenance fees
and other such type of consideration, payable to or on behalf of LICENSEE as
consideration for any SUBLICENSE, such portion equal to:
(a) fifteen percent (15%) of such consideration if the pertinent
SUBLICENSE signed by both parties in calendar year 1992;
(b) thirty percent (30%) of such consideration if the pertinent
SUBLICENSE is signed by both parties in calendar year 1993; and
(c) forty-five percent (45%) of such consideration if the
pertinent SUBLICENSE is signed by both parties in calendar year 1994 or
any year thereafter.
Subsection 6.2.3. Allocations in SUBLICENSE Arrangements. In
any arrangement with a SUBLICENSEE involving compensation in addition to
compensation paid for rights and licenses under the LICENSED PATENTS, the
royalties received under the pertinent SUBLICENSE under the LICENSED PATENTS
and shared with LICENSOR by LICENSEE per Subsection 6.2.1 shall constitute no
less than fifty percent (50%) of the earned or minimum royalty compensation
LICENSEE receives in such arrangement. Issue fees, maintenance fees and other
nonroyalty compensation received under such SUBLICENSE and shared with LICENSOR
by LICENSEE per Subsection 6.2.2 shall constitute no less than the applicable
percentage set forth in Subsection 6.2.2 of the total like-kind compensation
received in such arrangement. The provisions of this Subsection 6.2.3 are the
result of arm's length negotiations and are intended to ensure that, in light
of the royalty sharing structure for SUBLICENSES, LICENSOR receives adequate
compensation for any rights or licenses granted under the LICENSED PATENTS to
SUBLICENSEES. This Subsection 6.2.3 shall not apply to arrangements between
LICENSEE and SUBLICENSEES that do not involve or pertain to the LICENSED
PATENTS or the practice of the inventions claimed therein.
SECTION 6.3. Books, Records and Payments in Respect of SUBLICENSES.
LICENSEE shall include among the books of account specified in SECTION 5.4
("Books and Records") such particulars as may be necessary to show all amounts
payable to LICENSOR for any activity of SUBLICENSEES or arrangement with
SUBLICENSEES upon which royalty or other amounts may be payable under SECTION
6.2 above. LICENSEE shall require each SUBLICENSEE to keep appropriate books
of account to enable LICENSEE to comply with this SECTION 6.3.
SECTION 6.4. SUBLICENSE Reports. LICENSEE shall include in the
reports specified in SECTION 5.5 ("Periodic Reports and Payments") that same
information on SUBLICENSEES' business activities as is required
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on LICENSEE'S business activities, separately stated as to each SUBLICENSEE.
LICENSEE shall require each SUBLICENSEE to make appropriate reports to LICENSEE
to enable LICENSEE to comply with this SECTION 6.4. LICENSEE shall pay to
LICENSOR with each such report all royalties and other payments due hereunder on
account of SUBLICENSEES' activities for the period covered by such report. If no
royalties are due, it shall be so reported. Reports prepared by SUBLICENSEES
shall be subject to the same requirements specified in SECTION 5.5 and
certification of such reports required by SECTION 5.5 shall extend to both
LICENSEE and LICENSOR.
SECTION 6.5. Notification of SUBLICENSE. LICENSEE shall promptly
notify LICENSOR in writing of the issuance of all SUBLICENSES. Each SUBLICENSE
shall be in writing and shall include provisions similar in all material
respects, mutatis mutandis, to those of ARTICLES VII and VIII, and SECTIONS
10.5, 10.6, 10.7, 10.13, 10.14, 10.15, 10.16, 10.18, 10.20, 10.21 and 11.2 of
this Agreement. On or before the date thirty (30) days after the execution of
any SUBLICENSE, LICENSEE shall provide LICENSOR with a true copy of each
SUBLICENSE and an English language translation of it if it is in another
language.
SECTION 6.6. Continued Effect Upon Termination of this Agreement.
Subsection 6.6.1. SUBLICENSEE in Default. If this Agreement is
terminated and a given SUBLICENSE is in force and effect on the date of such
termination, but the pertinent SUBLICENSEE is in breach of or default under the
SUBLICENSE or any requirement under this Agreement, such SUBLICENSEE shall
terminate concurrently with the termination of this Agreement.
Subsection 6.6.2. SUBLICENSEE Not in Default.
(a) Assignment. If this Agreement is terminated and a
given SUBLICENSE is in force and effect on the date of such
termination, and the pertinent SUBLICENSEE is not in breach or
default under the SUBLICENSE or any requirement under this
Agreement, LICENSEE shall, at LICENSOR's option, promptly assign
each such SUBLICENSE to LICENSOR without further consideration
and each such SUBLICENSE shall remain in effect, but for the
benefit of LICENSOR, provided SUBLICENSEE shall then continue to
make all reports and payments due and owing under its SUBLICENSE
to LICENSOR rather then LICENSEE.
(b) LICENSOR'S Option to Reissue a Direct License. At
the sole discretion of LICENSOR, LICENSOR shall have the option
and right, for a period of ninety (90) days following the
effective date of termination of this Agreement, to issue
directly to each such SUBLICENSEE a nonexclusive or exclusive
license (as the case may be, depending on the nature of the
original SUBLICENSE), which direct license shall be issued
pursuant to a license agreement made effective as of the date of
termination of this Agreement. The license agreement granting
the direct license to each such SUBLICENSEE shall conform to the
terms, conditions, and requirements of this Agreement, as may be
amended, mutatis mutandi, to give effect to this paragraph (b)
of Subsection 6.6.2. The direct license shall be in all
respects limited to the scope of the original SUBLICENSE and it
shall not include any right to grant sublicenses. The direct
license shall require the payment to LICENSOR of license fees
and royalties that would have been payable to LICENSEE by the
SUBLICENSEE under the given SUBLICENSE and the royalties payable
to LICENSOR under the direct license shall be no less than the
royalties payable to LICENSOR under SECTION 6.2 of this
Agreement for the making, USING or SELLING of LICENSED PRODUCTS
by LICENSEE. The direct license shall also require the licensee
to exercise diligence in developing and marketing LICENSED
PRODUCTS and to pay minimum royalties in respect of each
LICENSED TERRITORY. The direct license shall replace the given
SUBLICENSE which shall terminate as of the effective date of
termination of this Agreement.
Section 6.7. AFFILIATES as SUBLICENSEES. If a SUBLICENSEE becomes an
AFFILIATE of LICENSEE at any time, or at relevant times is an AFFILIATE of
LICENSEE, any default under this Agreement
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shall be considered a default under such SUBLICENSE and any default under such
SUBLICENSE shall be considered a default under this Agreement. Termination of
this Agreement shall effect the immediate and simultaneous termination of any
such SUBLICENSE.
ARTICLE VII
OBLIGATIONS OF LICENSEE: DILIGENCE
SECTION 7.1. Generally, LICENSEE shall exercise its best efforts to
commercially develop, promote and SELL LICENSED PRODUCTS in all countries of
the LICENSED PATENTS in which such development is commercially viable.
SECTION 7.2. Funding of R&D PROGRAM. In furtherance and partial
satisfaction of LICENSEE'S requirements under this ARTICLE VII, LICENSEE agrees
to fund the R&D PROGRAM in an amount not less than One Hundred Thousand Dollars
($100,000.00) (in addition to any amounts payable to the Institution for
overhead costs) per year for two (2) years beginning on the Effective Date,
renewable at LICENSEE'S option for additional half-year periods, all as provided
in that certain agreement among LICENSOR, LICENSEE and Institution concerning
the R&D PROGRAM (the "R&D Agreement"). The anniversary of the Effective Date on
which the total annual funding provided by LICENSEE for the R&D PROGRAM in the
twelve (12) month period following the Effective Date is less than One Hundred
Thousand Dollars ($100,000.00) is the "R&D PROGRAM Termination Date."
SECTION 7.3. Obtain Governmental Approvals and Registrations. LICENSEE
shall, either on its own part or through an AFFILIATE or a SUBLICENSEE,
diligently pursue the obtaining of governmental approvals and registrations for
LICENSED PRODUCTS in each LICENSED FIELD in all countries of the LICENSED
PATENTS. To that end, LICENSEE shall also do the following towards obtaining
approval to market and SELL LICENSED PRODUCTS:
Subsection 7.3.1. Conduct IND Program for LICENSED PRODUCTS in
LICENSED FIELD I. Promptly after the Effective Date but no later than the date
twelve (12) months after the Effective Date, LICENSEE shall diligently
establish, maintain and fund a program (the "IND Program"), or continue to
conduct an existing program, reasonably designed and funded to obtain
information adequate to enable LICENSEE to prepare and file, on or before the
date forty-eight (48) months after the Effective Date, an Investigational New
Drug Application ("IND") with the United States Food and Drug Administration
("FDA") for LICENSED PRODUCTS in LICENSED FIELD I.
Subsection 7.3.2. Conduct NDA Program. Upon completion of the
IND Program, LICENSEE shall establish and maintain a program (the "NDA
Program"), or continue to conduct an existing program, reasonably designed and
funded to obtain information adequate to enable LICENSEE to prepare and file, on
or before the date seventy-two (72) months after the Effective Date of this
Agreement, a Product License Application or New Drug Application, as Appropriate
(collectively, "NDA") with the FDA for LICENSED PRODUCTS in LICENSED FIELD I.
Subsection 7.3.3. Prosecute NDA. After an NDA for a LICENSED
PRODUCT is filed in the United States, LICENSEE shall exercise its reasonable
efforts to prosecute such NDA and file all necessary reports and respond to all
reasonable requests from the FDA for information, data, samples, tests and the
like. LICENSEE shall exhaust all administrative remedies reasonably available
(it being understood that litigation or other adversarial proceedings are not
reasonably available remedies) in instances of adverse action by the FDA.
Subsection 7.3.4. Diligence in Other Countries of the LICENSED
PATENTS. LICENSEE shall diligently seek approval for SALE of LICENSED PRODUCTS
in LICENSED FIELD I in all countries within each LICENSED TERRITORY until
LICENSEE is SELLING LICENSED PRODUCTS in LICENSED FIELD I in all countries
within each LICENSED TERRITORY. To that end, if LICENSEE has not already done
so, on or
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before the date twelve (12) months after the expiration of the seventy-two (72)
month period described in Subsection 7.3.2 above, LICENSEE shall seek approval
for marketing a LICENSED PRODUCT in LICENSED FIELD I in at least one additional
country in LICENSED TERRITORY A and in at least one country in each of LICENSED
TERRITORY B and LICENSED TERRITORY C. In addition to the foregoing but without
duplication, within each subsequent twelve (12) month period after the
expiration of the seventy-two (72) month period described in Subsection 7.3.2
above, LICENSEE shall file an application corresponding to such NDA in at least
one country, on average, of the remaining countries in each of LICENSED
TERRITORY B and LICENSED TERRITORY C to gain regulatory approval for a LICENSED
PRODUCT in LICENSED FIELD I in each such country until such applications have
been filed in all countries of LICENSED TERRITORY B and LICENSED TERRITORY C.
LICENSEE may elect to satisfy its requirements, in part, to obtain marketing
approval of LICENSED PRODUCTS in countries of LICENSED TERRITORY B through the
operative High-Technology Procedures route available through the European
Economic Community and its Committee for Proprietary Medicinal Products (or
other then available multi-state approval procedures). LICENSEE shall prosecute
such applications in a diligent manner similar to that required under Subsection
7.3.3 with respect to an NDA for LICENSED PRODUCTS in LICENSED FIELD I. The
provisions of this Subsection 7.3.4 shall not require LICENSEE to obtain
approvals in countries or LICENSED TERRITORIES in which LICENSEE or LICENSOR
agree, which agreement shall not be unreasonably withheld, that inadequate
markets or other pertinent commercial considerations do not justify the effort
and expense of obtaining such approvals.
Subsection 7.3.5. Diligence in LICENSED FIELD II. LICENSEE
shall diligently seek approval for SALE of LICENSED PRODUCTS in LICENSED FIELD
II in all countries within each LICENSED TERRITORY until LICENSEE is selling
LICENSED PRODUCTS in LICENSED FIELD II in all countries within each LICENSED
TERRITORY. LICENSEE shall be required to meet the same milestones as required
for LICENSED PRODUCTS in LICENSED FIELD I under Subsections 7.3.1 through 7.3.4
above with respect to LICENSED PRODUCTS in LICENSED FIELD II except that the
dates by which all such milestones must be met shall be the date two (2) years
after the dates provided in such Subsections.
Subsection 7.3.6. Diligence in LICENSED FIELD III. LICENSEE
shall diligently seek approval for SALE of LICENSED PRODUCTS in LICENSED FIELD
III in all countries within each LICENSED TERRITORY until LICENSEE is SELLING
LICENSED PRODUCTS in LICENSED FIELD III in all countries within each LICENSED
TERRITORY. LICENSEE shall be required to meet the same milestones as required
for LICENSED PRODUCTS in LICENSED FIELD I under Subsections 7.3.1 through 7.3.4
above with respect to LICENSED PRODUCTS in LICENSED FIELD III except that the
dates by which all such milestones must be met shall be the date two (2) years
after the dates provided in such Subsections.
Subsection 7.3.7. First SALES. The activities and efforts
required under this SECTION 7.3 shall be performed on a diligent and timely
basis with the intention that the first USE or SALE of LICENSED PRODUCTS in
LICENSED FIELD I in the United States occurs on or before the date eight (8)
years after the Effective Date, the first USE or SALE of LICENSED PRODUCTS in
LICENSED FIELD II in the United States occurs on or before the date ten (10)
years after the Effective Date, and the first USE or SALE of LICENSED PRODUCTS
in the pertinent LICENSED FIELD in the remaining LICENSED TERRITORIES occurs in
at least one LICENSED TERRITORY on or before each subsequent anniversary of the
Effective Date.
Subsection 7.3.8. Requests for Extensions. If LICENSEE should
discover that it is not able to timely satisfy the requirements set forth in
this SECTION 7.3, it shall promptly notify LICENSOR on or before the date three
(3) months before the pertinent deadline. If LICENSEE has made good faith and
diligent efforts to satisfy the requirements of this ARTICLE VII and obtain
regulatory approval in each country of the LICENSED PATENTS, LICENSOR shall not
unreasonably withhold its agreement to extend each pertinent deadline one time
for twelve (12) months without further consideration. LICENSEE may obtain
additional extensions and the fee LICENSEE shall pay for any additional
extension shall be equal to: (a) One Hundred Thousand Dollars ($100,000) for an
additional twelve (12) month extension for any deadline imposed under Subsection
7.3.13.1; (b) Two Hundred Fifty Thousand Dollars ($250,000) for an additional
twelve (12) month extension for any deadline imposed under Subsection 7.3.2; and
(c) Fifty Thousand Dollars ($50,000) for an additional twelve (12) month
extension for any
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deadline imposed under any of Subsections 7.3.3 through 7.3.7. If LICENSEE pays
the extension fee for a pertinent deadline, subsequent relevant deadlines shall
be correspondingly extended. The fees for extensions of greater or lesser
lengths of time shall be determined on a proportional basis. If LICENSEE has
not made good faith and diligent efforts as required above in connection with
any initial extension, such failure shall be a breach of, and a default under
this Agreement, in accordance with the provisions of SECTION 7.6.
SECTION 7.4. THE MARKETING PROGRAM. As approval of an NDA for a
LICENSED PRODUCT in each LICENSED FIELD is obtained in each country of the
LICENSED PATENTS, LICENSEE shall proceed diligently as follows (collectively,
the "Marketing Program"):
(a) commence and proceed to produce and SELL LICENSED PRODUCTS
in each such country after a license or approval to market and SELL
LICENSED PRODUCTS is obtained;
(b) advertise, promote the SALE of and otherwise employ
marketing and sales techniques reasonably designed to develop a public
demand for LICENSED PRODUCTS in each such country and satisfy such
demand;
(c) upon reasonable written request of LICENSOR, furnish
LICENSOR with representative copies of advertising, sales and
promotional material relating to such LICENSED PRODUCTS.
SECTION 7.5. Periodic Reports. To keep LICENSOR apprised of the
progress of the IND Program, the NDA Program, and the Marketing Program,
LICENSEE shall submit semiannual progress reports as to its activities, the
first such report to be submitted along with the second royalty report due
under SECTION 5.5 ("Periodic Reports and Payments") of this Agreement, and
subsequent reports to accompany subsequent, alternate royalty reports
thereafter until the SALE of LICENSED PRODUCTS in all LICENSED FIELDS is
approved and LICENSED PRODUCTS are being marketed on a regular commercial basis
in all countries of the LICENSED PATENTS and such approval and marketing is
reported in writing to LICENSOR.
SECTION 7.6. Default. Non-performance of any requirement of this
ARTICLE VII shall be a non-monetary breach of or default under Subsection
8.3.2 of this Agreement. If this Agreement is terminated at any time for any
reason under this Agreement, either in its entirety or with respect to one
LICENSED TERRITORY or one LICENSED FIELD, as the case may be, LICENSEE shall
promptly prepare and deliver to LICENSOR a summary report regarding the status
of its development and marketing efforts.
ARTICLE VIII
TERMINATION
SECTION 8.1. Termination On TERMINATION DATE. This Agreement shall
terminate on the TERMINATION DATE unless sooner terminated.
SECTION 8.2. At LICENSEE's Election. LICENSEE may terminate this
Agreement, or any rights granted under this Agreement with respect to an
entire LICENSED TERRITORY, at any time by giving LICENSOR three (3) months'
written notice of LICENSEE's election to terminate this Agreement or the rights
granted under this Agreement with respect to the specified LICENSED TERRITORY.
SECTION 8.3. LICENSEE's Breach of Agreement.
Subsection 8.3.1. Monetary Breach. Upon any monetary breach
of, or monetary default under, this Agreement by LICENSEE (e.g., failure to
timely pay amounts to LICENSOR required to be paid under this Agreement or
failure to timely issue shares of stock as required under Subsection 5.1.2 of
this Agreement), LICENSOR, in addition to any other remedy available at law or
equity, may elect to terminate this Agreement by giving LICENSEE thirty (30)
days' written notice of LICENSOR's election to terminate this Agreement. This
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Agreement shall terminate on the date corresponding to the expiration of such
thirty (30) day period, unless LICENSEE has cured such breach on or before such
date. If such monetary default pertains to a particular LICENSED TERRITORY or
a particular LICENSED FIELD, LICENSOR may terminate the rights granted under
this Agreement pertaining only to such LICENSED TERRITORY or such LICENSED
FIELD, as the case may be.
Subsection 8.3.2. Non-Monetary Breach. For purposes of this
ARTICLE VIII, a nonmonetary breach of, or nonmonetary default under, this
Agreement shall mean any breach or default not involving the payment to LICENSEE
of any amounts required to be paid under this Agreement, and any breach or
default under the Rights Agreement or the R&D Agreement, it being understood and
agreed that any breach of, or default under, the Rights Agreement or the R&D
Agreement shall be a nonmonetary breach of, and default under this Agreement.
Upon any non-monetary breach of, or non-monetary default under, this Agreement
by LICENSEE, LICENSOR, in addition to any other remedy available at law or
equity, may elect to terminate this Agreement by giving LICENSEE sixty (60)
days' written notice of LICENSOR's election to terminate this Agreement. This
Agreement shall terminate on the date corresponding to the expiration of such
sixty (60) day period, unless LICENSEE has cured such breach on or before such
date. If such non-monetary default pertains to a particular LICENSED TERRITORY
or LICENSED FIELD, LICENSOR may terminate the rights granted under this
Agreement pertaining only to such LICENSED TERRITORY or LICENSED FIELD, as the
case may be.
Subsection 8.3.3. Immediate Default. The following shall be
considered neither a monetary nor a nonmonetary breach of, or default under,
this Agreement: any voluntary or involuntary dissolution, bankruptcy,
insolvency of LICENSEE or assignment of LICENSEE's assets for the benefit of
creditors (collectively, a "Financial Default") and a lawsuit filed by LICENSEE
against LICENSOR seeking a declaratory judgment that any of the PATENT CLAIMS
are invalid or unenforceable ("Procedural Default"). Financial Defaults and
Procedural Defaults shall constitute immediate defaults under, and breaches of,
this Agreement and, upon the occurrence of either a Financial Default or
Procedural Default, this Agreement shall immediately terminate. On or before
the date thirty (30) days before a Financial Default or the filing of a
bankruptcy petition concerning LICENSEE, LICENSEE shall notify LICENSOR in
writing of LICENSEE'S intention to file the petition or of another's intention
to file an involuntary petition in bankruptcy or of the impending Financial
Default. Failure to provide such written notice shall be deemed to be an
immediate, pre-petition, incurable breach of, and default under, this Agreement.
Subsection 8.3.4. Dispute Over Basis for Termination. If
LICENSEE has a reasonable basis for disputing LICENSOR'S reasons for terminating
this Agreement under this SECTION 8.3, LICENSOR and LICENSEE shall submit such
dispute to the alternative dispute resolution procedures available under SECTION
10.4. This Agreement shall not terminate during the course of such procedures
so long as LICENSEE has not otherwise defaulted under this Agreement absent a
reasonable basis for dispute. If the alternative dispute resolution procedures
result in a determination that LICENSOR'S reasons for terminating this Agreement
are valid, such termination shall become effective after there time for curing
such default, commencing with the date of such determination, has expired.
SECTION 8.4. Reverter. Upon termination for any reason of this
Agreement, or of any license or right granted under this Agreement as to any
LICENSED TERRITORY or any LICENSED FIELD, all licenses and rights granted under
this Agreement, or all licenses and rights granted to such LICENSED TERRITORY or
such LICENSED FIELD, as the case may be, and any SUBLICENSES granted under this
Agreement, in whole or with respect to such LICENSED TERRITORY or such LICENSED
FIELD, as the case may be, (subject to the provisions of SECTION 5.6
("SUBLICENSE Continued Effect Upon Termination of this Agreement"), shall revert
to LICENSOR for the benefit of LICENSOR.
SECTION 8.5. Surviving Obligation to Pay Royalties. LICENSEE's
obligations to pay any amount payable to LICENSOR under this Agreement, to
report to LICENSOR and to pay royalties to LICENSOR as to any LICENSED PRODUCT
made before termination of this Agreement or expiration of the pertinent
LICENSED PATENTS (even if such LICENSED PRODUCT is USED or SOLD after the
termination of this Agreement or expiration of the pertinent LICENSED PATENT),
shall survive such termination or expiration.
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SECTION 8.6. Surviving Provisions. In addition to any provision of
this Agreement that expressly provides for acts or obligations to continue
beyond the termination of this Agreement or expiration of the LICENSED PATENTS,
the provisions of SECTIONS 5.4, 8.4 and 8.5 and ARTICLE X shall survive the
termination of this Agreement.
ARTICLE IX
INFRINGEMENT
SECTION 9.1. LICENSOR's Right to Prosecute. LICENSOR will protect the
LICENSED PATENTS from infringement and prosecute infringers when in its sole
judgment such action may be necessary, proper and justified, subject to the
provisions of SECTION 9.2 through 9.6 below.
SECTION 9.2. LICENSEE's Opportunity to Prosecute.
Subsection 9.2.1. Notice of Infringement. If a party obtains
evidence comprising a prima facie case of infringement of a PATENT CLAIM by a
third party:
(a) SELLING in a country within the LICENSED PATENTS
significant quantities of products in competition with LICENSEE'S,
LICENSEE'S AFFILIATE'S, or a SUBLICENSEE'S SALE of LICENSED PRODUCTS in
a particular LICENSED FIELD in such same country; or
(b) filing with the United States Food and Drug Administration
an Abbreviated New Drug Application on a product that infringes the
PATENT RIGHTS, which application contains the certification described in
21 U.S.C. 355(j)(2)(A)(vii)(IV); or
(c) importing or threatening the importation of significant
quantities of infringing goods in a particular LICENSED FIELD into a
country of the LICENSED PATENTS;
such party shall notify the other party in writing of such infringement. For the
purpose of this ARTICLE IX, "significant quantities" of products shall mean such
products SOLD in such LICENSED FIELD, in the country in which such infringement
occurs, by the infringing third party over a three (3) month period within the
immediately preceding six (6) months before the date of the written notice
referred to above having a NET SALES VALUE of Two Hundred Thousand United States
Dollars ($250,000.00) (or its equivalent in the currency of the pertinent
country). If more than one third party is infringing in a particular country of
the LICENSED PATENTS, "significant quantities" of products shall mean products
SOLD in such LICENSED FIELD, in the country in which such infringement occurs,
by such infringing third parties in the aggregate over such three (3) month
period have an aggregate NET SALES VALUE of One Million Dollars ($1,000,000).
Subsection 9.2.2. Meeting of the Parties. As soon as possible
after LICENSOR'S receipt of such written notice from LICENSEE, or LICENSEE'S
receipt of such written notice from LICENSOR, as the case may be, LICENSOR and
LICENSEE shall convene a meeting at which the party providing the written
notice described above shall present all available evidence of such
infringement or threatened infringement. At such meeting, the LICENSOR and
LICENSEE shall plan for and agree on the basis, strategy and responsibility for
terminating such infringement.
Subsection 9.2.3. LICENSOR'S Post-Meeting Actions. If no
agreement is reached at such meeting, LICENSOR shall either:
(a) take steps to cause said infringement to terminate;
or
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(b) take steps to initiate legal proceedings (which for
purposes of this ARTICLE IX include lawsuits, settlements
discussions or negotiations, mediation, and arbitration) against
the infringer.
If LICENSOR has failed to perform at least one of the foregoing on or before
the date three (3) months after the date of such meeting, LICENSEE may request
LICENSOR any time after the expiration of such three (3) month period to grant
LICENSEE the right, at LICENSEE's sole expense, to bring suit against the
infringer for infringement of a PATENT CLAIM.
Subsection 9.2.4. LICENSEE'S Right to Prosecute. If, on or
before the expiration of such three (3) month period, LICENSOR has failed to
perform any one of the actions stated in paragraphs (a) or (b) of Subsection
9.2.3 above or grant LICENSEE, by written notice, the right, at LICENSEE's sole
expense, to bring suit against the infringer for infringement of a PATENT CLAIM
in accordance with the terms and conditions of this ARTICLE IX, LICENSEE shall
be entitled, subject to the provisions of this ARTICLE IX, to institute
proceedings against the infringer for infringement of a PATENT CLAIM, or to
prevent the importation of infringing goods, before any relevant judicial or
administrative tribunal. If LICENSEE'S written notice of third-party
infringement pertains to an act of infringement under 35 U.S.C. 271(a)(2), the
three (3) month period described above shall be reduced to twenty-one (21)
days. The rights, if any, granted to LICENSEE under this Subsection 9.2.4 shall
in no event by deemed or interpreted to preclude LICENSOR, as assignee of the
LICENSED PATENTS, from exercising, at any time, any right it may have under the
LICENSED PATENTS.
SECTION 9.3. Right to Notify. If LICENSOR grants LICENSEE the right
to prosecute infringers of a PATENT CLAIM as provided under Subsection 9.2.3
above, or if LICENSEE becomes entitled to institute proceedings as provided in
Subsection 9.2.4 above, such right or entitlement shall include the right to
notify any such third party whose activities appear to be infringing a PATENT
CLAIM or who may be involved in or responsible for the infringing activities of
others, whether by inducement or as a contributory infringer or otherwise,
which activities constitute significant infringement of a PATENT CLAIM, that
such activities are or may constitute infringement of a PATENT CLAIM and that
any such infringement should be discontinued.
SECTION 9.4. Multiple Infringers. LICENSEE may invoke SECTION 9.2
above with respect to more than one alleged infringer of a PATENT CLAIM in a
LICENSED PATENT of a particular country at any given time even though more than
one third party in such country is infringing a PATENT CLAIM in such country.
SECTION 9.5. Control of Suit Initiated by LICENSOR.
Subsection 9.5.1. Generally. If LICENSOR institutes suit or
other legal proceedings to protect or enforce the LICENSED PATENTS, LICENSOR
shall have sole control of such suit or other proceedings and shall pay all
expenses of such suit or proceeding, including without limitations, attorneys'
fees and court costs. If LICENSEE elects to participate as permitted under
Subsection 9.5.2, LICENSEE shall have sole control over the prosecution and
settlement of claims it brings in such suit or proceeding but only to the
extent such prosecution or settlement does not compromise the validity,
enforceability or scope of any PATENT CLAIM.
Subsection 9.5.2. LICENSEE'S Right to Participate. LICENSEE
shall have the right to participate in such suit or proceeding by its own
counsel, and at its own expense, to the extent it wishes to seek damages based
on the infringement, it being understood, however, that LICENSOR shall have
sole control over any issues or matters pertaining to the validity,
enforceability or scope of any PATENT CLAIM.
Subsection 9.5.3. Cooperation of the Parties. If LICENSEE
does not participate in such suit or legal proceeding, LICENSEE shall fully
operate with LICENSOR in such suit or legal proceedings, without out-of-pocket
expense to LICENSEE. If LICENSEE participates in such suit, both parties shall
cooperates with each other, each to bear their own expense, and provide the
other party with an opportunity to make suggestions and comments regarding such
suit. Each party shall keep the other party informed and shall, from time to
time, consult with the other party regarding the status of such suit or
proceeding. Each party shall provide the other party with
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copies of all documents filed in, and written communications relating to, such
suit to the extent the interest of the parties are not adverse. Any of the
foregoing obligations shall be subject to each party's desire or need to
preserve any attorney-client privilege, or work-product privilege, which shall
take precedence over any obligation to disclose documents or discuss matters
pertaining to such suit or proceeding.
Subsection 9.54. Sharing of Awards. LICENSOR shall be
entitled to keep all damages that it asserted and was awarded in such suit or
proceeding. If LICENSEE participates in such suit or proceeding, LICENSEE shall
have the right to keep any damages that it asserted and was awarded. If damages
are not separately awarded, LICENSOR and LICENSEE shall share equally any
recovery and damages awarded. If LICENSEE participates in such suit or legal
proceeding, punitive damages awarded shall be retained by the party to whom
such damages are awarded or, if the parties are jointly awarded punitive
damages, such damages shall be shared in the proportion that each party's
normal damages bear to the total damages awarded to LICENSOR and LICENSEE.
SECTION 9.6. Control of Suit Initiated by LICENSEE.
Subsection 9.6.1. Responsibility and Legal Counsel. If
LICENSEE takes any action under this ARTICLE IX or otherwise that leads to or
results in litigation or other legal proceedings relating to the LICENSED
PATENTS or this Agreement, including but not limited to a suit for declaratory
judgment or claim or counterclaim for infringement of a PATENT CLAIM, (which
litigation or other legal proceeding are hereby deemed to come within legal
proceedings contemplated by SECTION 9.2 of this Agreement) LICENSEE shall
assume the responsibility for such legal proceedings at LICENSEE'S sole
expense. LICENSEE shall be entitled to be represented by counsel of its
choosing, at its sole expense. If LICENSOR so requests, LICENSEE'S legal
counsel shall represent LICENSOR, at LICENSEE'S expense, in any such legal
proceedings with respect to matters in which LICENSOR is a necessary party. If
LICENSEE'S legal counsel is unable to represent LICENSOR because of a conflict
of interest or other bona fide reason, LICENSOR may engage other competent
legal counsel, at LICENSEE'S expense, to represent LICENSOR in any such suit or
legal proceeding. If LICENSOR must engage counsel other than LICENSEE'S legal
counsel because of a conflict of interest that has as its origins a dispute
between LICENSOR and LICENSEE, LICENSOR shall retain, if necessary and at its
own expense, counsel to represent LICENSOR in such dispute with LICENSEE which
counsel is separate from counsel representing LICENSOR at LICENSEE'S expense
against the third-party infringer. If LICENSOR does not wish to be represented
by LICENSEE'S legal counsel, LICENSOR may engage competent legal counsel of its
own choosing to represent LICENSOR at LICENSOR'S own expense (except in the
case of a conflict of interest or other bona fide reason as described in the
preceding sentences in which case reasonable expenses for such representation
shall be borne by LICENSEE).
Subsection 9.6.2. Discontinuance or Settlement. LICENSEE
shall not discontinue or settle any such proceedings brought by it without
obtaining the concurrence of LICENSOR and giving LICENSOR a timely opportunity
to continue such proceedings in its own name, under its sole control, and at
its sole expense if such discontinuation or settlement is not acceptable to
LICENSOR. Such concurrence shall not be withheld unless the discontinuation or
settlement will result in the invalidity, unenforceability or reduction in
scope of any PATENT CLAIM or compromise LICENSOR'S right to receive reasonable
compensation for such infringement or any future infringement.
Subsection 9.6.3. Cooperation of the Parties. LICENSOR shall
fully cooperate with LICENSEE in such suit or legal proceedings, without
out-of-pocket expense to LICENSOR. LICENSEE shall provide LICENSOR with an
opportunity to make suggestions and comments regarding such suit. LICENSEE
shall keep LICENSOR fully informed and shall, from time to time, consult with
LICENSOR regarding the status of such suit or proceeding. LICENSEE shall
provide LICENSOR with copies of all documents filed in, and written
communications relating to, such suit to the extent the interest of the parties
are not adverse. Any of the foregoing obligations shall be subject to each
party's desire or need to preserve any attorney-client privilege, or
work-product
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privilege, which shall take precedence over any obligation to disclose
documents or discuss matters pertaining to such suit or proceeding.
Subsection 9.6.4. Sharing of Awards.
(a) LICENSOR joined as a necessary party plaintiff. If
LICENSOR is joined in the suit brought by LICENSEE as a
necessary party plaintiff by motion made by a party other than
LICENSOR, awards shall be shared as follows: After deducting
from any award or recovery in such suit or legal proceeding all
out-of-pocket expenses incurred by LICENSEE in such suit or
legal proceedings, LICENSOR shall then retain the amount of
reasonable royalties separately awarded to LICENSOR or, if not
separately awarded to LICENSOR, LICENSEE and LICENSOR shall
share equally any recovery and damages awarded, including
without limitation punitive damages. Punitive damages awarded
and remaining, if any, shall be retained by the party to whom
such damages are awarded or, if the parties are jointly awarded
punitive damages, such damages shall shared in the proportion
that each party's normal damages bear to the total damages
awarded to LICENSOR and LICENSEE.
(b) LICENSOR voluntarily joints as a party plaintiff. If
LICENSOR joins in the suit brought by LICENSEE as a voluntary
party plaintiff, awards shall be shared as follows: LICENSEE
shall be entitled to keep all damages that it asserted and was
awarded in such suit or proceeding subject to LICENSOR's right
to receive reasonable royalties for such infringement from such
judgment. If LICENSOR participates in such suit or proceeding,
LICENSOR shall have the right to keep any damages that it
asserted and was awarded. If LICENSOR participates in such suit
or legal proceeding, punitive damages awarded shall be retained
by the party to whom such damages are awarded or, if the parties
are jointly awarded punitive damages, such damages shall shared
in the proportion that each party's normal damages bear to the
total damages awarded to LICENSOR and LICENSEE.
(c) LICENSOR does not participate in the lawsuit. If
LICENSOR does not join, or is not compelled to join, in the suit
brought by LICENSEE, LICENSEE may keep all damages awarded to
LICENSEE in such suit or proceeding without obligation to pay a
royalty to LICENSOR in respect of such damages.
Subsection 9.6.5. Indemnity. LICENSEE shall indemnify, defend
LICENSOR and hold LICENSOR harmless from any and all claims, damages or other
obligations arising out of or resulting from any such claim or legal
proceedings instituted by LICENSEE. The foregoing indemnity shall be limited
to out-of-pocket fees, expenses, awards and damages paid or payable by
LICENSOR. The foregoing indemnity shall not apply to the extent LICENSOR
incurs claims, damages, or obligations because LICENSOR elected to continue the
proceedings in its own name as contemplated under Subsection 9.6.2 above. The
foregoing indemnity shall not apply to the extent such claims, damages, or
obligations are based on the independent and sole actions of LICENSOR.
ARTICLE X
GENERAL
SECTION 10.1. Integration. This Agreement, any EXHIBITS and RIDERS
attached to this Agreement, the R&D Agreement and the Rights Agreement
constitute the entire agreement between the parties as to the subject matter of
this Agreement. All prior negotiations, representations, warranties,
agreements, statements, promises and understandings are superseded and merged
into, extinguished by and completely expressed by these documents. No party
shall be bound by or charged with any written or oral agreements,
representations, warranties, statements, promises or understandings not
specifically set forth to these documents.
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SECTION 10.2. Addresses and Notices. All notices, request and other
communications provided in this Agreement shall be in writing and shall be
deemed to have been made or given: (a) when delivered, if delivered by hand, or
sent by facsimile, telegram or telecopier; (b) on the day following deposit with
an overnight courier, if sent via overnight courier; or (c) on the date five (5)
days following deposit with the United States Mail, certified or registered:
If to LICENSOR: If to LICENSEE:
- -------------- --------------
President President
Research Corporation Technologies, Inc. Vestmark Inc.
6840 East Broadway Boulevard 375 Park Avenue
Tucson, Arizona 85710 Suite 1501
Fax: 602-296-8157 New York, NY 10022
Fax: 212-832-4389
Such addresses may be altered by notice so given. If no time limit is specified
for a notice required or permitted to be given by this Agreement, the time limit
therefor shall be three (3) full business days, not including the day of
mailing.
SECTION 10.3. Applicable Law Venue. This Agreement and its offset are
subject to and shall be construed and enforced in accordance with the law of the
State of New York, U.S.A., without regard to the law of New York concerning the
conflicts of the laws, except as to any issue which by the law of New York
depends upon the validity, scope or enforceability of any PATENT CLAIM, which
issue shall be determined in accordance with the applicable patent laws of the
country of such patent.
SECTION 10.4 Mediation and Arbitration.
Subsection 10.4.1. Dispute Resolution. The parties shall make
all reasonable efforts to resolve any dispute, claim or controversy arising out
of or relating to this Agreement, its construction or its actual or alleged
breach, by face-to-fact negotiations between senior executives. Should such
negotiation fail to resolve the matter, any dispute, claim or controversy
arising out of or relating to this Agreement, its construction or its actual or
alleged breach, the parties shall pursue mediation in accordance with the Center
for Public Resources' Model Procedure for Mediation of Business Disputes. Should
such mediation fail to resolve the matter, the matter shall be finally decided
by arbitration by and in accordance with the Rules then in effect of the
American Arbitration Association, and judgment upon the award rendered may be
entered in the highest court of the forum, state or federal, having
jurisdiction. Any arbitration will be conducted in the New York, New York
metropolitan area.
Subsection 10.4.2. Exceptions. The provisions of this SECTION
10.4, relating to arbitration shall not apply to any issue of the patentability,
enforceability or infringement of any PATENT CLAIM or to any dispute or
controversy as to which any applicable law or treaty prohibits such arbitration.
If, in any arbitration proceeding, any issue shall arise concerning validity,
scope, enforceability or infringement of any PATENT CLAIM, the arbitration shall
assume the validity, scope, enforceability or infringement of all PATENT CLAIMS.
In any event, the arbitrators shall not delay the arbitration proceedings for
the purpose of obtaining or permitting either party to obtain judicial
resolution of such issue, unless an order staying such arbitration proceeding
shall be entered by a court of competent jurisdiction. Neither party shall
raise any issue concerning the validity, construction, enforceability or effect
of any LICENSED PATENT in any proceeding to enforce an arbitration award
hereunder or in any proceeding otherwise arising out of such arbitration award.
Subsection 10.4.3. No Waiver. Notwithstanding the foregoing,
nothing in this SECTION 10.4 shall be construed to waive any rights or timely
performance of any obligations existing under this Agreement.
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SECTION 10.5. Compliance With Law. Nothing in this Agreement shall be
construed so as to require the commission of any act contrary to law, and
wherever there is any conflict between any provision of this Agreement and any
statute, law, ordinance or treaty concerning the legal right of the parties to
contract, the latter shall prevail, but in such event the affected provisions of
this Agreement shall be curtailed and limited only to the extent necessary to
bring it within the applicable legal requirements.
SECTION 10.6. Severability. If any provision of this Agreement is
held to be or becomes invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
SECTION 10.7. No Representations. Notwithstanding anything to the
contrary in this Agreement, nothing contained in this Agreement shall be
construed as a representation by either party that the LICENSED PATENTS or any
PATENT CLAIM can be or will be used to prevent the importation by a third party
of a product into or the sale or use by a third party of a product in any
country of the LICENSED PATENTS where such product shall have been placed in
commerce under circumstances which preclude the use of the LICENSED PATENTS or
any PATENT CLAIM to prevent such importation or sale or use by reason of any
applicable law or treaty. Nothing contained in this Agreement shall be
construed as a representation or warranty: (a) as to the scope or validity of
any LICENSED PATENT or any PATENT CLAIM; or (b) that any performance, or
practice under any LICENSED PATENT or any PATENT CLAIM is not an infringement of
any patent of others.
SECTION 10.8. Independent Contractor. In its performance under this
Agreement, each party shall be an independent contractor and neither party (nor
any employee or agent thereof) shall be an agent or partner of the other party.
SECTION 10.9. Headings. The headings of the various ARTICLES,
SECTIONS and Subsections of this Agreement are used solely for the convenience
of the parties, do not form a part of this Agreement and are not intended to
affect the interpretation or meaning of this Agreement or to define, limit,
extend or describe its scope or intent.
SECTION 10.10. No Third-Party Beneficiaries. Except for SECTIONS
10.15 and 10.21, which shall also be for the benefit of, and enforceable by,
Institution and each of the Inventors, none of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party.
SECTION 10.11. Waiver. No party's consent to or waiver, express or
implied, of any other party's breach or default in the other party's
performance of its obligations hereunder shall be deemed or construed to be
a consent to or waiver of any other breach or default in the other party's
performance of the same or any other obligations hereunder. A party's failure
to complain of any act or failure to act by any other party, to declare the
other party in default, irrespective of how long such failure continues, to
insist upon the strict performance of any covenant, duty, agreement or
condition of this Agreement or to exercise any right or remedy consequent upon
a breach thereof shall not constitute a waiver by such party of its rights
hereunder, of any such breach, or of any other commitment, duty, agreement or
condition. A party's consent in any one instance shall not limit or waive the
necessity to obtain such party's consent in any future instance and in any
event no consent or waiver shall be effective for any purpose hereunder unless
such consent or waiver is in writing and signed by the party granting such
consent or waiver.
SECTION 10.12. Computation of Time. In computing any period of time
pursuant to this Agreement, the day or date of the act, notice, event or default
from which the designated period of time begins to run will not be included.
The last day of the period so computed will be included, unless it is a
Saturday, Sunday or a federal holiday, in which event the period runs until the
end of the next day which is not a Saturday, Sunday or such federal holiday.
SECTION 10.13. Registration of Agreement. LICENSEE agrees to take all
reasonable and necessary steps to register this Agreement in any country of the
LICENSED PATENTS where such is required to permit the
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transfer of funds and/or payment of royalties to LICENSOR hereunder or is
otherwise required by the government or law of such country to effectuate or
carry out this Agreement. Notwithstanding anything contained herein, but
subject to SECTION 10.5 of this Agreement, LICENSEE shall not be relieved of any
of its obligations under this Agreement by any failure to register this
Agreement in any country of the LICENSED PATENTS, and, specifically, LICENSEE
shall not be relieved of its obligation to make any payment to LICENSOR
hereunder in the United States at LICENSOR'S address for notice specified in
SECTION 10.2 hereof which payment is blocked due to any failure to register this
Agreement.
SECTION 10.14. Disclaimer. It shall be the full and sole
responsibility of LICENSEE, its AFFILIATES and its SUBLICENSEES to use
appropriate care in the practice, manufacture or use of any product pursuant to
any license or immunity granted under this Agreement. LICENSOR shall have no
right to control the manner in which any product licensed under this Agreement
is made or practiced. LICENSOR shall not be required to provide any know-how or
operating instructions or other information with respect to any such product and
LICENSOR makes no representation or warranty whatsoever with respect to any such
product. With respect to any material obtained by LICENSEE from ATCC, LICENSEE
acknowledges and agrees that LICENSOR has not provided such material to LICENSEE
but has only permitted LICENSEE to obtain such material from ATCC before the
United States' patents in the LICENSED PATENTS issue. Accordingly, LICENSOR
DOES NOT MAKE OR GRANT, AND LICENSOR HEREBY DISCLAIMS AND NEGATES, ANY EXPRESS
OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO ANY SUCH MATERIALS, ITS
USE, VIABILITY, OPERABILITY, OR FREEDOM FROM CONTAMINATION OF ANY SORT OR ANY
OTHER EXPRESS OR IMPLIED WARRANTY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE. NO
ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY LICENSOR, ITS EMPLOYEES, THE
INVENTORS, INSTITUTION OR ITS EMPLOYEES OR ANY OTHER PARTY SHALL CREATE A
WARRANTY OR MAKE ANY MODIFICATION, EXTENSION OR ADDITION TO ANY WARRANTY.
SECTION 10.15. Indemnity. LICENSEE AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS LICENSOR, EACH INVENTOR, THE INSTITUTION, AND ALL OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS OF LICENSOR AND INSTITUTION (COLLECTIVELY, THE
"INDEMNITEES") FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES AND LIABILITIES,
INCLUDING LEGAL COSTS AND FEES, ASSERTED BY THIRD PARTIES (WHETHER GOVERNMENTAL
OR PRIVATE) ARISING FROM THE MANUFACTURE, USE OR SALE OF ANY LICENSED PRODUCT BY
OR FOR LICENSEE, AN AFFILIATE OR A SUBLICENSEE, OR ARISING FROM THE USE OF ANY
SUCH LICENSED PRODUCT BY ANY THIRD PARTY INCLUDING ANY CONSUMER OR ANY CUSTOMER
OF LICENSEE OR AN AFFILIATE OR A SUBLICENSEE. LICENSEE HEREBY WAIVES ANY RIGHTS
OF SUBROGATION IT MAY HAVE AGAINST THE INDEMNITEES ON ACCOUNT OF ANY CLAIM,
DAMAGE OR LIABILITY ARISING FROM ACTIVITIES UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EXCEPT FOR DIRECT DAMAGES CAUSED BY LICENSOR'S BREACH OF THIS
AGREEMENT, LICENSOR SHALL NOT BE LIABLE TO LICENSEE FOR DAMAGES ARISING OUT OF
ANY CLAIM MADE AGAINST LICENSEE BY ANY OTHER PERSON OR PARTY BECAUSE OF
LICENSEE'S USE OF THE MATERIAL OBTAINED FROM THE ATCC, EXCEPT FOR DIRECT DAMAGES
CAUSED BY LICENSOR'S BREACH OF THIS AGREEMENT. IN NO EVENT SHALL LICENSOR BE
LIABLE UNDER THIS AGREEMENT FOR ANY DIRECT (OTHER THAN FOR AMOUNTS PAID UNDER
THIS AGREEMENT), INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING BUT NOT LIMITED TO LOST REVENUE, LOST PROFITS OR LOST SAVINGS), EVEN
IF LICENSOR HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
SECTION 10.16. Insurance. On or before the date LICENSEE begins
clinical trials involving any LICENSED PRODUCTS, LICENSEE shall obtain and,
thereafter throughout the term of this Agreement, maintain in force products
liability insurance and other insurance coverage typically carried by PERSONS
engaged in LICENSEE'S business in amounts not less that Two Million U.S.
Dollars (US$2,000,000). Such insurance policies shall name LICENSOR as an
additional named insured or, if LICENSOR is not so named, shall contain a
provision whereby the insurer waives any rights of subrogation against LICENSOR.
The insurance policies required to be
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carried by LICENSEE under this Agreement shall be with companies that have a
Best's Financial Rating of XIII or better. LICENSEE shall furnish LICENSOR
with a certificate of such policy upon request and, whenever requested, shall
satisfy LICENSOR that such policy is in full force and effect.
SECTION 10.17. Construction. The parties agree that each party has
reviewed this Agreement and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to
the interpretation of this Agreement.
SECTION 10.18. Patent Marking. LICENSEE agrees that, before any
LICENSED PATENT is issued, it will mark all LICENSED PRODUCTS with a legible
notice indicating that the LICENSED PRODUCTS are covered by claims in a pending
patent application and are for use only in the LICENSED FIELDS (which shall be
appropriately identified in any such notice and not for reproduction). As
LICENSED PATENTS issue, LICENSEE agrees that it will mark all LICENSED PRODUCTS
with a legible notice or marking indicating the patents to which the LICENSED
PRODUCTS are subject and that the LICENSED PRODUCTS are for use only in the
LICENSED FIELDS (which shall be appropriately identified in any such notice)
and not for reproduction.
SECTION 10.19. Grant of Security Interest. LICENSEE, in consideration
of the license granted to LICENSEE by LICENSOR under this Agreement, grants to
LICENSOR a security interest in any interest LICENSEE may have in the LICENSED
PATENTS, and in LICENSEE'S proceeds from the SALE of LICENSED PRODUCTS to the
extent of any amounts due to LICENSOR under this Agreement, to secure
performance of all obligations of LICENSEE as set out in this Agreement.
LICENSEE further agrees to execute such financing statements as LICENSOR may
reasonably request. Default in the performance of any obligations, or any
default under this Agreement, is a default under the security agreement
contained in this clause. Upon default, not timely cured, LICENSOR may declare
all obligations immediately due and payable and has the remedies of a secured
creditor available under applicable federal or state law.
SECTION 10.20. Assignment. This Agreement shall not be assigned by
LICENSEE except in those circumstances in which all of the following apply:
(a) the entire Agreement is assigned;
(b) as part of a sale of substantially all of LICENSEE's
business, or a merger or other combination of LICENSEE with a third
party;
(c) upon prior written notice to LICENSOR; and
(d) upon LICENSEE'S assignee's agreement to abide by the terms
of this Agreement and assume all of LICENSEE's obligations under this
Agreement.
Upon such assignment, the term "LICENSEE" as used in this Agreement shall
thereafter mean the assignee of LICENSEE.
SECTION 10.21. Non-Use of Names. LICENSEE shall not use the name of
Inventor, the Institution, LICENSOR, or any adaptation of any of them, in any
regulatory filing or in any advertising, promotional or sales literature,
without prior written consent obtained from any such Inventor, the Institution
or LICENSOR, as applicable. LICENSEE shall require its AFFILIATES and
SUBLICENSEES to comply with this SECTION 10.21 to the same extent that it
applies to LICENSEE. No prior written consent shall be required if LICENSOR's,
Institution's or an Inventor's name is used only to the extent required to
identify LICENSOR as the party granting the license under the LICENSED PATENTS,
the Inventors as the inventors of the LICENSED PATENTS and the providers of
additional research services under the R&D Agreement, and the Institution as the
originator of the technology and the site of work being done under the R&D
Program.
21
<PAGE> 26
SECTION 10.22. Authority and Binding Agreement. LICENSOR represents
that this Agreement constitutes a valid and binding agreement of LICENSOR. The
execution, delivery and performance by LICENSOR of this Agreement are within
LICENSOR'S corporate power, and have been duly authorized by all necessary
corporate action. LICENSEE represents that this Agreement constitutes a valid
and binding agreement of LICENSEE. The execution, delivery and performance by
LICENSEE of this Agreement are within LICENSEE'S corporate power, and have
been duly authorized by all necessary corporate action.
SECTION 10.23. Contingent Effect. The effectiveness of this Agreement
is subject to, and contingent upon, the contemporaneous execution of the Rights
Agreement and the R&D Agreement by LICENSEE.
ARTICLE XI
LICENSED PATENTS
SECTION 11.1. Prosecution,
Subsection 11.1.1. LICENSOR'S Patent Application Filings.
LICENSOR shall maintain and prosecute the patent applications listed in Exhibit
A as of the Effective Date. LICENSOR shall exercise its reasonable efforts to
obtain patent protection on the Invention in all the countries listed in
EXHIBIT A to the extent patent protection is available in each such country.
Subsection 11.1.2. Communication, Management and Outcome of
Patent Prosecution. Upon reasonable request of LICENSEE occurring not more
frequently than monthly, LICENSOR shall keep LICENSEE apprised of the status of
the patent prosecution of the LICENSED PATENTS. LICENSOR shall consult with
LICENSEE regarding the prosecution of any LICENSED PATENT and shall afford
LICENSEE the opportunity to review and comment on any responses or submissions
to the relevant patent authorities, although it is understood that LICENSOR
shall have final and sole authority to make any and all decisions regarding the
prosecution of any LICENSED PATENT. LICENSOR does not represent or warrant that
any patent will issue or be granted based on any of such patent applications.
Subsection 11.1.3. Interferences. If an interference between
any of the LICENSED PATENTS and any patent or patent application of LICENSEE is
declared or invoked, LICENSEE shall immediately send to LICENSOR all written
documentation received or generated by LICENSEE, its AFFILIATES, employees,
agents, attorneys or otherwise concerning the LICENSED PATENTS (it being
understood that LICENSEE shall not retain any copies of such items, for
archival purposes or otherwise) and LICENSEE shall sequester and otherwise
prohibit any employee, agent or attorney with direct or indirect access to such
written documentation from participating in any manner or advising in any way
LICENSOR'S actions, responses or participation in such interference. Each
party shall direct its own efforts in the interference. On or before the date
thirty (30) days after LICENSEE'S receipt of a statement from LICENSOR
detailing LICENSOR'S out-of-pocket costs or expenses incurred by LICENSOR in
connection with such interference, LICENSEE shall reimburse LICENSOR the amount
set forth in such statement. LICENSEE'S failure to timely reimburse LICENSOR
for its out-of-pocket costs and expenses incurred in connection with the
conduct of the interference shall be deemed a monetary default under this
Agreement.
Subsection 11.1.4. Maintenance of Patents. LICENSOR shall
maintain the patents, if any, obtained on the patent applications described
above.
Subsection 11.1.5. Abandonment. LICENSOR, in its sole
discretion, may abandon any LICENSED PATENT. If LICENSOR, in its sole
discretion, intends and elects to discontinue the prosecution or maintenance of
any LICENSED PATENT, LICENSOR shall so advise LICENSEE in writing and give
LICENSEE an opportunity to continue such prosecution or maintenance on
LICENSOR'S behalf and at LICENSEE'S expense. Any out-of-pocket expenses
thereafter incurred by LICENSEE for such prosecution or maintenance of any
LICENSED PATENT of any such country shall be creditable against earned
royalties and other amounts due under
22
<PAGE> 27
this Agreement thereafter payable under this Agreement solely in respect of
LICENSED PRODUCTS made, USED or SOLD in the country of such LICENSED PATENT.
LICENSOR shall not have any liability nor be subject to any claim for damages if
LICENSOR inadvertently or unintentionally abandons any LICENSED PATENT.
SECTION 11.2. Patent Extensions. LICENSEE shall cooperate with
LICENSOR in seeking any extension that is available or that becomes available in
respect of the term of any patent within the LICENSED PATENTS including any
patent that may issue on a patent application within the LICENSED PATENTS.
LICENSEE shall diligently advise LICENSOR in a timely manner of approval by the
United States Food and Drug Administration (or other pertinent foreign
regulatory authorities) to use or market any LICENSED PRODUCTS or any other
governmental approval obtained by or on behalf of LICENSEE or an AFFILIATE that
is pertinent to any such extension. LICENSEE shall supply LICENSOR with any
pertinent information and data in its possession or control or that is in the
possession or control of any AFFILIATE pertaining to the extension of any patent
within the LICENSED PATENTS. LICENSEE shall supply LICENSOR in a timely manner
with any information and data and any supporting affidavits or documents
required to comply with any applicable law of the United States and any
administrative rules or regulations thereunder pertaining to the extension of
any patent within the LICENSED PATENTS and any corresponding laws and
regulations that are or shall be in effect in any country within the LICENSED
PATENTS. LICENSEE shall require its AFFILIATES to comply with this SECTION
11.2.
ARTICLE XII
GOVERNMENT RIGHTS
SECTION 12.1. Prior Rights. Anything in this Agreement to the contrary
notwithstanding, this Agreement and any license or other right granted in this
Agreement as to the LICENSED PATENTS are subject to the rights of the United
States Government in and to the LICENSED PATENTS, including those derived by and
through the National Institutes of Health, pursuant to certain grant(s) from the
United States Government to INSTITUTION, identified as Grant Number AI-26323.
Such rights include, inter alia, a certain nonexclusive, nontransferable,
royalty-free, irrevocable license to the United States Government for
Governmental purposes and on behalf of any foreign government pursuant to any
existing or future treaty or agreement with the Unites States, which license
LICENSOR may have granted and/or may be required to grant pursuant to said
grants, which grants and license (reference to each of which is made for the
terms and effect thereof) shall survive unaffected by the granting of the
licenses and rights under this Agreement. This Agreement and licenses granted
in this Agreement are expressly subject to those rights specifically reserved to
the United States Government.
SECTION 12.2. Agency Determination. This Agreement and the licenses
and rights granted in this Agreement are expressly made subject to the terms and
conditions of any applicable determination by the appropriate agency of the
United States Government concerning the disposition of the LICENSED PATENTS and
permitting LICENSOR to issue licenses thereunder. Any rights that may be
reserved to the Unites States Government or any applicable law or governmental
regulations or executive order or in any such determination or otherwise are
hereby specifically reserved to the United States Government.
SECTION 12.3. Agreement to Comply. LICENSEE shall comply in all
respects with the applicable provisions of any applicable law, requirement,
regulation, executive order, or determination by the United States Government
relating to the LICENSED PATENTS and shall provide LICENSOR with any information
or report required to comply with any such law, requirement, regulation or
determination.
SECTION 12.4. License to Conform. Any inconsistency between this
Agreement and the pertinent provisions of any law, requirement, regulation,
executive order, or determination by the United States Government shall be
resolved by conforming this Agreement so such provisions of any such law,
requirement, regulation, executive order, or determination. Any license or
other right granted pursuant to this Agreement and any term of exclusivity
applicable to such license or right shall be subject to any and all applicable
governmental laws and regulations relating to compulsory licensing.
23
<PAGE> 28
SECTION 12.5. Other Arrangements. Any agreement or arrangement
relating to the LICENSED PATENTS between LICENSEE and any third party hereto
shall be made expressly subject to the terms and conditions of this ARTICLE XI
and LICENSEE shall require such other party to comply therewith to the same
extent that LICENSEE is required to comply.
IN WITNESS WHEREOF, the parties hereto have each caused a duly
authorized officer to sign this Agreement and affix the seals of the party on
whose behalf such officer is acting, and have thereby duly executed this
Agreement on the date(s) indicated below, to be effective the Effective Date.
RESEARCH CORPORATION TECHNOLOGIES ,
INC., a Delaware nonprofit corporation
Attest:
By: /s/ TIMOTHY J. RUBART By: /s/ GARY M. MUNSINGER
----------------------------- --------------------------------
Timothy J. Rubart Gary M. Munsinger
Secretary President
Date: May 15, 1992
----------------------------
VESTMARK INC., a New York corporation
Attest:
By: /s/ By: /s/
----------------------------- --------------------------------
Title: V.P. Title: President
Date: 5/14/92
----------------------------
Page 24 of a 24-Page License Agreement with Exhibits A and B and Definitions
Rider Attached.
24
<PAGE> 29
EXHIBIT A
LICENSED PATENTS
Inventor: Dr. Aron Srivastava
Invention: "Safe Vector for Gene Therapy"
RCT Project No. 137-1581
PATENT APPLICATIONS
<TABLE>
<CAPTION>
COUNTRIES SERIAL NO. FILING DATE
- --------- ---------- -----------
<S> <C> <C>
United States 789,917 11/08/91
</TABLE>
EXHIBIT A
<PAGE> 30
EXHIBIT B
SCHEDULE OF ANNUAL MINIMUM ROYALTY DUE
(ALL AMOUNTS IN UNITED STATES DOLLARS)
<TABLE>
ANNUAL MINIMUM ROYALTY DUE
PAYMENT ACCRUAL DATE FOR EACH LICENSE TERRITORY
---------------------- ----------------------------
A B C
------- ------- -------
<S> <C> <C> <C>
January 30, 1999 $50,000 $ -0- $ -0-
January 30, 2000 $50,000 $ -0- $ -0-
January 30, 2001 $75,000 $ -0- $ -0-
January 30, 2002 $75,000 $25,000 $ -0-
January 30, 2003 $75,000 $50,000 $ -0-
January 30, 2004 $75,000 $75,000 $25,000
January 30, 2005 $75,000 $75,000 $25,000
January 30, 2006 $75,000 $75,000 $50,000
Each Subsequent
January 30 $75,000 $75,000 $50,000
</TABLE>
EXHIBIT B
<PAGE> 31
DEFINITIONS RIDER
When fully capitalized in this Agreement, the following terms shall have
the meanings set forth below:
SECTION DR.1. "AFFILIATE" shall mean any PERSON to which one or more
of the following apply:
(a) any PERSON directly or indirectly controlling, controlled by
or under common control with another PERSON, wherein control shall mean
direct or indirect control of fifty percent (50%) of the voting rights
or securities of any such PERSON;
(b) any PERSON owning or controlling fifty percent (50%) or more
of the outstanding voting rights or securities of another PERSON; or
(c) any PERSON whose outstanding voting rights or securities are
owned fifty percent (50%) or more by another PERSON.
SECTION DR.2. "RAW MATERIAL FORM" shall mean a LICENSED PRODUCT in a
form other than FINAL PRODUCT FORM.
SECTION DR.3. "FINAL PRODUCT FORM" shall mean a LICENSED PRODUCT in a
dosage form suitable for final usage by the administering physician or other
end-user.
SECTION DR.4. "IMPROVEMENT INVENTION" shall mean an invention that is
made or discovered by the principal investigator in charge of the R&D PROGRAM,
or at the Institution, in the course of the R&D PROGRAM, and assigned to
LICENSOR for commercialization, which invention is directed to an improvement of
the Invention claimed in the LICENSED PATENTS, as constituted on the Effective
Date, without regard to any additions made by operation of SECTION 3.5.
SECTION DR.5. "IMPROVEMENT PATENT" shall mean any patent or patent
application the claim(s) of which cover any IMPROVEMENT INVENTION.
SECTION DR.6. "LICENSED FIELDS" shall mean LICENSED FIELD I, LICENSED
FIELD II and LICENSED FIELD III.
SECTION DR.7. "LICENSED FIELD I" shall mean the manufacture, use or
sale of vectors or virions solely for use only by the ultimate user in the
genetic alteration of mammalian cells taken from a donor which cells are to be
reintroduced into such donor or introduced into a single, pre-identified human
host.
SECTION DR.8. "LICENSED FIELD II" shall mean the manufacture, use or
sale of vectors, virions or cells transformed or transfected with vectors or
virions, or the progeny of such cells, which vectors, virions or cells are
intended solely for direct administration into a human for therapeutic or
diagnostic purposes only by the ultimate user of such product.
SECTION DR.9. "LICENSED FIELD III" shall mean the manufacture, use or
sale of cells transformed or transfected with vectors or virions, or the
progeny of such cells, which cells are intended solely for USE by the ultimate
user purchaser for in vitro diagnostic tests conducted or performed only by the
ultimate user.
SECTION DR.10. "LICENSED DIAGNOSIS PROCESS" shall mean a process or
method in the LICENSED FIELDS to diagnose disease using a vector(s), virion(s)
or cell(s) that directly infringes, contributorily infringes or induces the
infringement, literally or as an equivalent, of a PATENT CLAIM, but for this
Agreement.
(i)
<PAGE> 32
SECTION DR.11. "LICENSED MANUFACTURING PROCESS" shall mean a process
or method in the LICENSED FIELDS to manufacture new or altered biological
materials using a vector(s), virion(s) or cell(s) that directly infringes,
contributorily infringes or induces the infringement, literally or as an
equivalent, of a PATENT CLAIM, but for this Agreement.
SECTION DR.12. "LICENSED TREATMENT PROCESS" shall mean a process or
method in the LICENSED FIELDS for providing therapy for diseases, or delivering
a pharmaceutical for treating diseases, that directly infringes, contributorily
infringes or induces the infringement, literally or as an equivalent, of a
PATENT CLAIM, but for this Agreement.
SECTION DR.13. "LICENSED PATENTS" shall mean:
(a) the patent applications identified in EXHIBIT A
attached to this Agreement and any patent applications added
to this Agreement by operation of SECTION 3.5;
(b) all divisional or continuation, in whole or in
part, applications based on any of the foregoing;
(c) any and all issued and unexpired patents resulting
from any of the applications described in Paragraph (a) or (b)
above and any and all issued and unexpired patents added to
this Agreement by operation of SECTION 3.5; and
(d) any and all issued and unexpired reissues,
reexaminations, renewals or extensions that may be based on any
of the patents described in Paragraphs (c) above.
(e) any foreign patents or patent applications that
correspond to the patents or patent applications of (a), (b),
(c), or (d) above.
SECTION DR.14. "LICENSED PROCESS" shall mean any method or process in
the LICENSED FIELDS the practice of which directly infringes, contributorily
infringes or induces the infringement, literally or as an equivalent, of a
PATENT CLAIM, but for this Agreement.
SECTION DR.15. "LICENSED PRODUCT" shall mean any product in the
LICENSED FIELDS the manufacture, "LICENSED PRODUCT" shall mean any product in
the LICENSED FIELDS the manufacture, USE or SALE of which, but for this
Agreement, directly infringes, contributorily infringes or induces the
infringement, literally or by the doctrine or equivalents, of a PATENT CLAIM.
SECTION DR.16. "LICENSED PROMOTER PRODUCT" shall mean a LICENSED
PRODUCT comprising a vector made with a particular promoter, or derivative of
that promoter, and the virions made with such vector and the cells transfected
with such vectors or virions, irrespective of the coding gene or DNA sequence
under promoter control. By way of example but not limitation, particular
promoters include the B19p6 parvovirus promoter, the human globin promoters,
the metallothionine promoter, any and all tissue specific promoters, and any
and all heterologous promoters. A "CLASS of LICENSED PROMOTER PRODUCT" shall
mean all LICENSED PROMOTER PRODUCTS comprising the vector made with the same
particular promoter, or derivatives of that promoter, the virions made with
such vector and the cells transfected with such vectors or virions,
irrespective of the coding gene or DNA sequence under promoter control.
SECTION DR.17. "LICENSED TERRITORY" shall mean any one of LICENSED
TERRITORY A or LICENSED TERRITORY B. "LICENSED TERRITORIES" shall mean
LICENSED TERRITORY A and LICENSED TERRITORY B, collectively.
(ii)
<PAGE> 33
SECTION DR.18. "LICENSED TERRITORY A" shall mean Canada, Mexico and
the United States of America, its territories and possessions.
SECTION DR.19. "LICENSED TERRITORY B" shall mean all countries of the
LICENSED PATENTS that are not in LICENSED TERRITORY A or LICENSED TERRITORY C.
SECTION DR.20. "LICENSED TERRITORY C" shall mean Japan, Australia and
South Korea.
SECTION DR.21. "NET SALES VALUE" of any product shall mean the actual
billings for the USE or SALE of a product less the deductions identified below.
Subsection DR.21.1. Determining Actual Billings - FINAL PRODUCT
FORM. The billings used for calculating NET SALES VALUE of any LICENSED PRODUCT
USED or SOLD in FINAL PRODUCT FORM shall be determined as follows:
(a) If the LICENSED PRODUCT is SOLD by LICENSEE, its
AFFILIATE or a SUBLICENSEE:
1. To a third party that is not a SPECIAL
PARTY, actual billings shall be LICENSEE's, its
AFFILIATE's or SUBLICENSEE'S actual billings, as the
case may be;
2. To a SPECIAL PARTY for subsequent SALE by
such SPECIAL PARTY, actual billings shall be such
SPECIAL PARTY's actual billings for such subsequent
SALE;
3. To a SPECIAL PARTY for USE by such SPECIAL
PARTY in a LICENSED MANUFACTURING PROCESS, actual
billings shall be the SPECIAL PARTY'S actual billings
for the products of such LICENSED MANUFACTURING PROCESS
SOLD by such SPECIAL PARTY to a third party (that is not
a SPECIAL PARTY). If the LICENSED PRODUCT is USED by a
SPECIAL PARTY in a LICENSED TREATMENT PROCESS or a
LICENSED DIAGNOSIS PROCESS, the NET SALES VALUE of such
LICENSED PRODUCT shall be the amount charged by the
SPECIAL PARTY for conducting or performing such LICENSED
TREATMENT PROCESS or LICENSED DIAGNOSIS PROCESS;
(b) If the LICENSED PRODUCT is USED by LICENSEE, its
AFFILIATE, or a SUBLICENSEE in a LICENSED MANUFACTURING PROCESS,
actual billings shall be LICENSEE'S, its AFFILIATE'S or the
SUBLICENSEE'S actual billings, as the case may be, for the
products of such LICENSED MANUFACTURING PROCESS SOLD to a third
party (that is not a SPECIAL PARTY) by LICENSEE, its AFFILIATE,
or SUBLICENSEE, as the case may be. If the LICENSED PRODUCT is
USED by LICENSEE, its AFFILIATE or a SUBLICENSEE in a LICENSED
TREATMENT PROCESS or LICENSED DIAGNOSIS PROCESS, the NET SALES
VALUE of such LICENSED PRODUCT shall be the amount charged by
LICENSEE, its AFFILIATE or a SUBLICENSEE, as the case may be,
for conducting or performing such LICENSED TREATMENT PROCESS or
LICENSED DIAGNOSIS PROCESS.
(c) If a LICENSED PRODUCT is:
(i) used by LICENSEE, its AFFILIATES or
SUBLICENSEE for internal research and development
purposes for which it receives no compensation; or
<PAGE> 34
(ii) distributed, free of charge, for use in
pre-clinical or clinical trials relating to marketing
approval of such LICENSED PRODUCT;
the NET SALES VALUE of such LICENSED PRODUCTS shall be
zero dollars.
Subsection DR.21.2. Determining Actual Billings - RAW MATERIAL
PRODUCT FORM. The billings used for calculating NET SALES VALUE of any LICENSED
PRODUCT USED or SOLD in RAW MATERIAL PRODUCT FORM by LICENSEE, its AFFILIATE, or
a SUBLICENSEE shall be determined as follows:
(a) convert the quantity of such product SOLD in RAW MATERIAL
PRODUCT FORM into the quantity of product in FINAL PRODUCT FORM into
which such quantity of product in RAW MATERIAL PRODUCT FORM would
typically be made;
(b) multiply the quantity of such product in FINAL PRODUCT FORM
determined under (a) above by the average unit billings (determined in a
manner consistent with Subsection DR.16.1 above) during the calendar
quarter in which such SALE took place for a like quantity of product in
FINAL PRODUCT FORM SOLD in arm's length SALES to third parties in the
same country as the country in which such SALES of product in RAW
MATERIAL PRODUCT FORM were made by LICENSEE;
(c) from such mathematical product of (a) and (b) above, deduct
the factually applicable items listed in Subsection DR.21.3 (a) through
(d) below.
Subsection DR.21.3. Allowable Deductions. When factually
applicable, the following deductions may be deduced from actual billings as
determined above:
(a) volume or quantity discounts, allowed and taken, in amounts
customary in the trade;
(b) sales taxes and/or use taxes and/or duties imposed upon,
and with specific reference to, particular SALES to the extent included
in the amount of actual billings;
(c) amounts allowed or credited on returns (not exceeding the
original billing); and
(d) charges for freight, freight allowances and outbound
transportation costs prepaid to the extent included in such actual
billings.
No other allowance or deduction shall be made including without limitation
allowances or deductions for any commissions or sales fees by whatever name
known or for any cash or prompt-payment discounts.
SECTION DR.22. "PATENT CLAIM" shall mean a valid claim in a LICENSED
PATENT. A PATENT CLAIM shall be presumed to be valid unless and until it has
been held to be invalid by a final judgment of a court of competent
jurisdiction from which no appeal can be or is taken. For the purposes of this
Agreement, and especially for purposes of royalty determination and payment
under ARTICLES V ("Financial Terms") and VI ("Sublicensing") of this Agreement,
any claim being presented in a pending patent application shall be deemed to be
the equivalent of a valid claim of an issued, unexpired patent and in
consideration of LICENSOR's agreement to grant a license under any patent
issuing thereon earned royalties shall be payable in respect thereto as through
it were a valid patent claim.
SECTION DR.23. "PERSON" shall mean an individual or a corporation,
partnership, trust, unincorporated organization, association or any other
entity or a government or any department or agency thereof.
(iv)
<PAGE> 35
SECTION DR.24. "R&D PROGRAM" shall mean a program of research and
development work concerning the Invention to be performed at the Institution by
one or more of the Inventors (or some other researcher(s) reasonably acceptable
to LICENSEE) as further described in Exhibit A to the R&D Agreement.
SECTION DR.25. "SELL" (and any noun form and conjugated verb form
thereof) shall mean to sell, or otherwise part with or dispose of, for value.
SECTION DR.26. "SPECIAL PARTY" shall mean any one or more of LICENSEE,
AFFILIATES of LICENSEE, SUBLICENSEES, AFFILIATES OF SUBLICENSEES, or any PERSON
enjoying a special course of dealing with LICENSEE, AFFILIATES of LICENSEE,
SUBLICENSEES, or AFFILIATES OF SUBLICENSEES the effect of which special course
of dealing is that, due to other considerations in the arrangement arising from
such course of dealing, the price of a LICENSED PRODUCT transferred from or to
the party does not reflect the true arm's-length price for such LICENSED
PRODUCT. For purposes of this SECTION DR.26, and by way of example but not
limitation, a "special course of dealing" includes co-marketing arrangements
between LICENSEE and a third party wherein the third party may SELL LICENSED
PRODUCTS, arrangements under which a third party will SELL LICENSED PRODUCTS
under a private labelling arrangement with LICENSEE (other than a customary
distributorship), co-exclusive or semi-exclusive distributorship arrangements
between LICENSEE and a third party in which the market effectively reserved to
the third party is greater than 30% of the total market for the LICENSED
PRODUCT in any one country of the LICENSED PATENTS, supply contracts in which
LICENSEE agrees with a SUBLICENSEE or a third party to supply or manufacture
LICENSED PRODUCTS for SALE by the SUBLICENSEE or the third party, or barter
arrangements in which LICENSEE exchanges LICENSED PRODUCTS with a third party
for other products in kind.
SECTION DR.27. "SUBLICENSE" shall mean a sublicense under the LICENSED
PATENTS granted in accordance with the terms of ARTICLE VI. Agreements with
third parties which restrict the third party's USE of a LICENSED PRODUCT
purchased by a third party shall not necessarily constitute a SUBLICENSE.
Likewise, "SUBLICENSEE" shall mean the party to which rights are granted under
a SUBLICENSE.
SECTION DR.28. "TERMINATION DATE" shall be the date on which the
LICENSED PATENT that has the latest expiration date expires, after accounting
for any extension of any LICENSED PATENTS. A patent shall be understood to
expire at midnight of the anniversary of the date of its issuance.
SECTION DR.29. "USE" (and any noun form and conjugated verb form
thereof) shall mean to use for commercial purposes.
(v)
<PAGE> 36
AMENDMENT TO LICENSE AGREEMENT
Amendment to License Agreement, dated as of October 29, 1992, between
Research Corporation Technologies, Inc. a Delaware nonprofit corporation (the
"LICENSOR") and Vestmark, Inc., a New York corporation (the "LICENSEE").
Reference is made to the License Agreement, dated May 15, 1992, between
the LICENSEE and the LICENSOR (the "License Agreement"). All capitalized but
undefined terms stated herein shall have the meanings ascribed to them in the
License Agreement.
1. The LICENSOR and LICENSEE agree to amend Subsection 5.1.2. the
License Agreement to read in its entirety as follows:
Subsection 5.1.2. Equity License Issue Fee. In addition to the cash
license issue fee required under Subsection 5.1.1 above, the LICENSEE shall
cause to be issued, upon the effectiveness of the merger of the LICENSEE with
and into Avigen, Inc., a Delaware corporation ("Avigen"):
(a) to the LICENSOR Three Hundred Twenty Thousand (320,000)
shares of Avigen's Class A common stock;
(b) to the Inventor Two Hundred Forty Thousand (240,000) shares
of Avigen's Class A common stock;
(c) to the Foundation Two Hundred Forty Thousand (240,000)
shares of Avigen's Class A common stock;
representing ten percent (10%) of the total outstanding shares of stock of
Avigen determined on a fully diluted basis. The shares issued to the LICENSOR,
the Inventor and the Foundation shall also be subject to the certain
Registration Rights and Transfer Restriction Agreement, executed concurrently
with this Agreement and amended concurrently with this Agreement (the "Rights
Agreement"). The LICENSOR AND LICENSEE acknowledge and agree that the fair
market value of such shares as of the ef-
<PAGE> 37
fective date of the Merger is $.001 per share or, in the aggregate, EIGHT
HUNDRED dollars ($800).
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
to be executed by their respective duly authorized officers or representatives
on the respective dates indicated below to be effective as of the day first
written above.
RESEARCH CORPORATION TECHNOLOGIES,
INC., a Delaware nonprofit corporation,
Attest:
By: /s/ TIMOTHY J. RUBART By: /s/ GARY M. MUNSINGER
----------------------------- --------------------------------
President
Date:
----------------------------
VESTMARK INC., a New York corporation,
Attest:
By: /s/ STEVE KAYE By: /s/
----------------------------- --------------------------------
Title: Secretary Title:
Date:
----------------------------
2
<PAGE> 38
AMENDMENT TO LICENSE AGREEMENT
Effective March 11, 1996, (the "Amendment Effective Date"), Research
Corporation Technologies, Inc., a Delaware nonprofit corporation with offices
at 101 N. Wilmot Rd., Suite 600, Tucson, Arizona 85711 USA ("LICENSOR"), and
Avigen Inc. (successor in interest to Vestmark, Inc.), a Delaware corporation,
with offices at 1201 Harbor Bay Parkway #1000, Alameda, CA 94501 ("LICENSEE")
agree as follows:
ARTICLE I
BACKGROUND
SECTION 1.1. LICENSOR and LICENSEE are parties to a certain license
agreement made effective May 15, 1992 (the "License Agreement") whereby
LICENSOR granted to LICENSEE a license under certain "LICENSED PATENTS," as
defined in the License Agreement.
SECTION 1.2. Under Subsection 7.3.1 of the License Agreement, LICENSEE
is obligated to prepare and file, on or before May 15, 1996, an Investigation
New Drug Application ("IND") with the United States Food and Drug
Administration ("FDA") for LICENSED PRODUCTS in LICENSED FIELD I (as such terms
are defined in the License Agreement). Also, under Subsection 7.3.2 of the
License Agreement, LICENSEE is obligated to prepare and file, on or before May
15, 1996, a New Drug Application ("NDA") with the FDA for LICENSED PRODUCTS
in LICENSED FIELD I.
SECTION 1.3. LICENSOR and LICENSEE desire to evidence their agreement
to amend the foregoing provisions of the License Agreement by extending the
dates on which such filings must take place.
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to the License Agreement. Subsection 7.3.1 of
the License Agreement is hereby amended by deleting the phrase "the date
forty-eight (48) months after the Effective Date" in the fifth line of
Subsection 7.3.1 and replacing it with the phrase "December 31, 1997." In
addition, Subsection 7.3.2 of the License Agreement is hereby amended by
deleting the phrase "the date seventy-two (72) months after the Effective Date"
in the fourth line of Subsection 7.3.2 and replacing it with the phrase
"December 31, 2000."
SECTION 2.2. Additional Consideration for the foregoing Amendment. As
consideration for LICENSOR's agreement to amend the License Agreement as
specified above, LICENSEE shall pay to LICENSOR US$20,000 on or before the date
ninety days after the closing of the first public offering of LICENSEE's
capital stock but in no event later than December 31, 1996.
SECTION 2.3. Continued Effect. The License Agreement, including all
Exhibits thereto, shall continue in force and effect unchanged except as
specifically set forth in this document.
IN WITNESS WHEREOF, the parties have each caused a duly authorized
officer to sign this Agreement on the date(s) indicated below, to be effective
the Amendment Effective Date.
AVIGEN INC. RESEARCH CORPORATION TECHNOLOGIES, INC.
By: /s/ By: /s/ GARY M. MUNSINGER
-------------------------------- ----------------------------------
Name and Title: Gary M. Munsinger, President
Date: 3/13/96 Date: 3/16/96
------------------------------ --------------------------------
<PAGE> 39
BNC:TJR Second Amendment to License Agreement - RCT and Avigen;
RCT Project No. 137-1581; Srivastavs.
SECOND AMENDMENT TO LICENSE AGREEMENT
Effective April 26, 1996, (the "Amendment Effective Date"), Research
Corporation Technologies, Inc., a Delaware nonprofit corporation with offices
at 101 N. Wilmot Rd., Suite 600, Tucson, Arizona 85711 USA ("LICENSOR"), and
Avigen Inc. (successor in interest to Vestmark Inc.), a Delaware corporation,
with offices at 1201 Harbor Bay Parkway #1000, Alameda, CA 94501 ("LICENSEE")
agree as follows:
ARTICLE I
BACKGROUND
LICENSOR and LICENSEE are parties to a certain license agreement made
effective May 15, 1992, and amended effective March 11, 1996, (collectively the
"License Agreement"). LICENSOR and LICENSEE desire to evidence their agreement
to amend the License Agreement as set forth below.
ARTICLE II
AMENDMENT
SECTION 2.1. Amendment to SECTION DR.15. SECTION DR.15 of the
Definitions Rider to the License Agreements is replaced in its entirety with
the following:
SECTION DR.15. "LICENSED PRODUCT" shall mean any product in the
LICENSED FIELDS the manufacture, USE or SALE of which, but for this
Agreement, directly infringes, contributorily infringes or induces the
infringement, literally or by the doctrine of equivalents, of a
PATENT CLAIM.
SECTION 3.2. Amendment to SECTION DR.17. SECTION DR.17 of the
License Agreement is hereby replaced in its entirety with the following:
SECTION DR.17. "LICENSED TERRITORY" shall mean any one of
LICENSED TERRITORY A, LICENSED TERRITORY B, or LICENSED TERRITORY C.
"LICENSED TERRITORIES" shall mean LICENSED TERRITORY A, LICENSED
TERRITORY B, and LICENSED TERRITORY C, collectively.
SECTION 2.3. Amendment to SECTION 3.1. The third sentence of SECTION
3.1 ("Grant of License") of the License Agreement is amended to read as follows:
The foregoing grant shall not restrict LICENSEE'S USE or SALE of
LICENSED PRODUCTS in any country outside the LICENSED TERRITORIES
such that LICENSEE may USE and SELL LICENSED PRODUCTS worldwide.
SECTION 2.4. Continuing Effect. The License Agreement, including all
Exhibits thereto, shall continue in force and effect unchanged, except as
specifically set forth in this document.
IN WITNESS WHEREOF, the parties have each caused a duly authorized
officer to sign this Agreement on the date(s) indicated below, to be effective
the Amendment Effective Date.
AVIGEN INC. RESEARCH CORPORATION TECHNOLOGIES, INC.
By: /s/ John Monahan By: /s/ Timothy J. Rockart
------------------------------- -------------------------------------
John Monahan, President Timothy J. Rockart,
Secretary and General Counsel
Date: 4/29/96 Date: April 25, 1996
<PAGE> 1
Exhibit 10.21
November 11, 1992
LICENSE AGREEMENT
This Agreement, dated this 23rd day of November, 1992, is between The
Johns Hopkins University, a corporation of the State of Maryland, having a
principal place of business at 720 Rutland Avenue, Baltimore, MD 21205
(hereinafter referred to as "JHU") and Avigen, Inc., a Delaware corporation
(hereinafter the "Company"), having an initial address in care of The Castle
Group Ltd., 375 Park Avenue, Suite 150, New York, New York, 10152.
WITNESSETH:
WHEREAS, as a center for research and education, JHU is interested in
licensing PATENT RIGHTS (hereinafter defined) in a manner that will benefit the
public by facilitating the distribution of useful products and the utilization
of new methods, but is without capacity to commercially develop, manufacture
and distribute any such products or methods; and
WHEREAS, a valuable invention entitled "Method for the Inhibition and
Prevention of Viral Replication Using Fusions of a Virus Protein and a
Destructive Enzyme" (JHU Ref. DM-9363), U.S. Patent Application Serial No.
07/635,196 filed on January 2, 1991, International PCT Application Serial No.
PCT/US92/00014 was developed during the course of research conducted by Drs.
Jef D. Boeke and Georges Natsoulis (all hereinafter, "Inventors"); and
WHEREAS, JHU has acquired through assignment all rights, title and
interest, with the exception of certain retained rights by the United States
government, in said valuable invention; and
WHEREAS, Company desires to commercially develop, manufacture, use and
distribute such products and processes throughout the world;
<PAGE> 2
2
NOW, THEREFORE, in consideration of the foregoing premises and the
following mutual covenants, and other good and valuable consideration, the
receipt of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "PATENT RIGHTS" shall mean the U.S. patent application Serial
No. 07/635,196 filed on January 2, 1991, and assigned to JHU entitled "Method
for the Inhibition and Prevention of Viral Replication Using Fusions of a Virus
Protein and a Destructive Enzyme: (hereinafter the "PATENT APPLICATION") and
the invention disclosed and claimed therein, patent applications directed to
IMPROVEMENTS as defined in Paragraph 1.2, and all continuations,
continuations-in-part, divisions, and reissues based thereof, and any
corresponding foreign patent applications, and any patents, patents of
addition, or other equivalent foreign patent rights issuing, granted or
registered thereon.
1.2 "IMPROVEMENTS" means any improvements to the "Method for the
Inhibition and Prevention of Viral Replication Using Fusions of a Virus Protein
and a Destructive Enzyme" covered in the PATENT APPLICATION made over the next
three (3) years by Dr. Jef Boeke and/or Dr. Georges Natsoulis, with students
and employees in Dr. Boeke's JHU laboratory who have signed the attached
Invention Agreement (Attachment A); all while employees or students of JHU.
1.3 "LICENSED PRODUCT(S)" means any material, composition, drug,
transducing particle, or other product, the manufacture, use or sale of which
would constitute, but for the license granted to the Company pursuant to this
Agreement, an infringement of a claim of PATENT RIGHTS (infringement shall
include, but is not limited to, direct, contributory, or inducement to
infringe).
1.4 "LICENSED SERVICE(S)" means the performance on behalf of a
third party of any method including the procedure of transducing a patient's
cells (and associated handling and modification of such cells) or the
manufacture of any product or the use of any product or composition which would
constitute, but for the license granted to the Company pursuant to this
Agreement, an infringement of a claim of the PATENT RIGHTS, (infringement shall
include, but not be limited to, direct, contributory
<PAGE> 3
3
or inducement to infringe).
1.5 "NET SALES", subject to paragraph 4.9, below, shall mean gross
sales revenues and fees received by Company, AFFILIATED COMPANY and Company's
sublicensees from the sale of LICENSED PRODUCT(S) less trade discounts allowed,
refunds, returns and recalls, and sales taxes. In the event that Company,
AFFILIATED COMPANY or Company's sublicensee sells a LICENSED PRODUCT(S) in
combination with other ingredients or substances or as part of a kit, the NET
SALES for purposes of royalty payments shall be based on the sales revenues and
fees received from the entire combination or kit.
1.6 "NET SERVICE REVENUES", subject to Paragraph 4.9, below, shall
mean actual billings for the performance of LICENSED SERVICE less sales and/or
use taxes imposed upon and with specific reference to the LICENSED SERVICE.
1.7 "AFFILIATED COMPANY" or "AFFILIATED COMPANIES" shall mean any
corporation, company, partnership, joint venture or other entity which
controls, is controlled by or is under common control with the Company. For
purposes of this Paragraph 1.7, control shall mean the direct or indirect
ownership of at least fifty percent (50%).
1.8 "EXCLUSIVE LICENSE" shall mean a grant by JHU to Company of its
entire right and interest in the PATENT RIGHTS, subject to rights retained by
the United States government in accordance with P.L. 96-517, as amended by P.L.
98-620, and subject to the retained right of JHU to make, have made, provide and
use for its and The Johns Hopkins Health Systems' non-profit purposes LICENSED
PRODUCT(S) and LICENSED SERVICES.
1.9. "CTVI PROJECT" shall be an ongoing research and development
project at Company to develop and commercialize LICENSED PRODUCT(S) and
LICENSED SERVICE(S).
1.10 "EFFECTIVE DATE" of this License Agreement shall mean the date
the last party hereto has executed this Agreement.
<PAGE> 4
4
ARTICLE 2 -- GRANTS
2.1 Subject to the terms and conditions of this Agreement, JHU
hereby grants to the Company an EXCLUSIVE LICENSE to make, have made, use, and
sell the LICENSED PRODUCT(S) and to provide the LICENSED SERVICE(S) in the
United States and worldwide under the PATENT RIGHTS.
2.2 Company may sublicense others under this Agreement and shall
provide a copy of each such sublicense agreement to JHU promptly after it is
executed. Each sublicense shall be consistent with the terms of this Agreement.
2.3 Company shall have the right to extend its license rights
granted under Paragraph 2.1 to its AFFILIATED COMPANIES; however, such
AFFILIATED COMPANIES must agree in writing to be bound by the terms of this
Agreement with a copy of such agreement promptly sent to JHU after it is
executed.
ARTICLE 3 -- PATENT INFRINGEMENT
3.1 Each party will notify the other promptly in writing when any
infringement by another is uncovered or suspected.
3.2 Company shall have the first right to enforce any patent within
PATENT RIGHTS against any infringement or alleged infringement thereof, and
shall at all times keep JHU informed as to the status thereof. Company may, in
its sole judgment and at its own expense, institute suit against any such
infringer or alleged infringer and control, settle, and defend such suit in a
manner consistent with the terms and provisions hereof and recover, for its
account, any damages, awards or settlements resulting therefrom, subject to
Paragraph 3.4. This right to sue for infringement shall not be used in an
arbitrary or capricious manner, JHU shall reasonably cooperate in any such
litigation at Company's expense.
<PAGE> 5
5
3.3 If the Company elects not to enforce any patent within the PATENT
RIGHTS, then it shall so notify JHU in writing within six (6) months of
receiving notice that an infringement exists, and JHU may, in its sole judgment
and at its own expense, take steps to enforce any patent and control, settle,
and defend such suit in a manner consistent with the terms and provisions
hereof, and recover, for its own account, any damages, awards or settlements
resulting therefrom.
3.4 Any recovery by Company under Paragraph 3.2 shall be deemed to
reflect loss of commercial sales, and Company shall pay to JHU fifteen percent
(15%) of the recovery net of all reasonable costs and expenses associated with
each suit or settlement. If the cost and expenses exceed the recovery, then
one-half (1/2) of the excess shall be credited against royalties payable by
Company to JHU hereunder in connection with sales in the country of such legal
proceedings, provided, however, that any such credit under this Paragraph 3.4
shall not exceed fifty percent (50%) of the royalties otherwise payable to JHU
with regard to sales in the country of such action in any one calendar year,
with any excess credit being carried forward to future calendar years.
ARTICLE 4 - PAYMENTS, ROYALTY, RESEARCH SUPPORT AND EQUITY
4.1 On or before November 15, 1992, Company shall reimburse JHU for
past patent expenses in the amount of eighteen thousand eight hundred sixteen
dollars and eighty cents ($18,816.80). Company will reimburse JHU for JHU's
future reasonable costs associated with preparing, filing, maintaining and
prosecuting PATENT RIGHTS. Company shall directly reimburse JHU within thirty
(30) days of receipt of each invoice.
4.2 The Company shall pay to JHU within thirty (30) days of the
EFFECTIVE DATE of this Agreement, the nonrefundable sum of Five Thousand
Dollars ($5,000) and by November 15, 1992 the nonrefundable sum of Forty-five
Thousand Dollars ($45,000). This payment is nonrefundable and shall not be
credited against royalties or other fees.
4.3 The Company shall pay to JHU the following payments (not
creditable against earned royalty) within thirty (30) days of the events
indicated below:
<PAGE> 6
6
a. Twenty Five Thousand dollar ($25,000) payments at the completion
of each phase 1, 2 and 3 clinical trials for each indication of
LICENSED PRODUCT(S) and LICENSED SERVICE(S).
b. Two Hundred Thousand dollar ($200,000) lump sum payment upon
issuance of an NDA or PLA for each indication of LICENSED
PRODUCT(S) and LICENSED SERVICES(S).
4.4 The Company shall pay to JHU a Five Thousand dollar ($5,000)
annual maintenance fee due within thirty (30) days of each anniversary of the
EFFECTIVE DATE of this Agreement.
4.5 The Company shall pay to JHU, as a running royalty, for each
LICENSED PRODUCT sold, and for each LICENSED SERVICE provided, by the Company,
AFFILIATED COMPANIES and Company's Sublicensees, four percent (4%) of NET SALES
and NET SERVICES for the term of this Agreement. Such payments shall be made
quarterly as provided in Paragraph 4.7.
4.6 Company shall issue shares of common stock of Company to JHU
equal to four percent (4%) of the outstanding common and preferred shares of
Company (assuming the exercise of all options and conversion of all convertible
securities) outstanding as of the completion of the Regulation D-Private
Offering (herein "Private Offering"). The above cited stock shall be issued in
the following names: seventeen and one half percent (17 1/2%) to Jef D. Boeke;
seventeen and one half percent (17 1/2%) to Georges Natsoulis and remaining
sixty five percent (65%) to The Johns Hopkins University. Company shall place
the above cited stock in escrow, with an escrow agent approved by JHU, and
release it to JHU according to the following schedule: one quarter of such
amount released to JHU within (30) days from the EFFECTIVE DATE of this License
Agreement, a second one-quarter of such amount released at the first anniversary
of the EFFECTIVE DATE, a third one-quarter of such amount released at the second
anniversary of the EFFECTIVE DATE, one-eighth (1/8) of such amount released on
the third anniversary of the EFFECTIVE DATE, and the final eighth (1/8) of such
amount (i.e., all remaining stock in escrow) released on the fourth anniversary
of the EFFECTIVE DATE. The Company's escrow agreement shall be set up so that a
Rule 83b election can be made for all the stock held in escrow prior to the
Private Offering. If this License Agreement is terminated by the Company, the
Company's escrow agreement shall also terminate and the stock not yet released
to JHU shall be transferred to the Company. An escrow agreement in an acceptable
form shall be executed by the parties
<PAGE> 7
7
within thirty (30) days from the EFFECTIVE DATE of this License Agreement.
Stock Purchase Agreements for Jef D. Boeke and Georges Natsoulis and
JHU shall be executed by the respective parties and shall provide Jef D. Boeke
and Georges Natsoulis and JHU the following contract rights:
1) Company shall issue additional common stock to JHU and the
Inventors (according to the allocation recited above) so that a
four percent (4%) ownership position (assuming the exercise of
all options and the conversion of all convertible securities) up
to a Six Million Dollar ($6,000,000) capital investment and
thereafter weighted average antidilution in the event Company
issues additional shares (other than to Company consultants and
employees for services rendered) at a purchase price lower than
the highest price tendered for shares to raise the initial Six
Million Dollars ($6,000,000)".
ii) JHU and the Inventors shall also be granted a pre-emptive right
to buy additional stock at the then prevailing price, to
maintain its four percent (4%) ownership interest (assuming the
exercise of all options and the conversion of all convertible
securities).
iii) Stock issued to JHU and the Inventors as provided above shall
have the same registration rights as stock held by The Castle
Group, Ltd., the current principal investor.
4.7 The Company shall provide JHU within thirty (30) days of the
end of each March, June, September and December after the EFFECTIVE DATE of
this Agreement, a written report to JHU of the amount of LICENSED PRODUCTS
sold, and LICENSED SERVICES sold, the total NET SALES and NET SERVICE REVENUES
of such LICENSED PRODUCTS and LICENSED SERVICES, and the running royalties due
to JHU as a result of NET SALES and NET SERVICE REVENUES by Company, AFFILIATED
COMPANIES and sublicensees thereof. Payment of any such royalties due shall
accompany such report. Until the Company, an AFFILIATED COMPANY or a
sublicensee has achieved a first commercial sale of a LICENSED PRODUCT and
received PLA approval, a report shall be submitted at the end of every June and
December after the EFFECTIVE DATE of this Agreement and will include a full
written report describing the Company's, AFFILIATED COMPANIES or sublicensee's
technical efforts towards meeting the milestones in Article 6.
<PAGE> 8
8
4.8 The Company shall make and retain, for a period of three (3)
years following the period of each report required by Paragraph 4.7, true and
accurate records, files and books of account containing all the data reasonably
required for the full computation and verification of sales and other
information required in Paragraph 4.7. Such books and records shall be in
accordance with generally accepted accounting principles consistently applied.
The Company shall permit the inspection and copying of such records, files and
books of account by JHU or its agents during regular business hours upon ten
(10) business days' written notice to the Company. Such inspection shall not be
made more than once each calendar year. All costs of such inspection and
copying shall be paid by JHU, provided that if any such inspection shall reveal
that an error has been made in the amount equal to ten percent (10%) or more of
such payment, such costs shall be borne by the Company. The Company shall
include in any agreement with its AFFILIATED COMPANIES or its sublicensees
which permits such party to make, use or sell the LICENSED PRODUCT(S) or
provide LICENSED SERVICES, a provision requiring such party to retain records
of sales of LICENSED PRODUCT(S) and records of LICENSED SERVICES and other
information as required in Paragraph 4.7 and permit JHU to inspect such records
as required by this Paragraph 4.8.
4.9 In order to insure JHU the full royalty payments contemplated
hereunder, the Company agrees that in the event any LICENSED PRODUCT shall be
sold to an AFFILIATED COMPANY or sublicensee or to a corporation, firm or
association with which Company shall have any agreement, understanding or
arrangement with respect to consideration (such as, among other things, an
option to purchase stock or actual stock ownership, or an arrangement involving
division of profits or special rebates or allowances) the royalties to be paid
hereunder for such LICENSED PRODUCTS shall be based upon the greater of: 1) the
net selling price at which the purchaser of LICENSED PRODUCTS resells such
product to the end user, 2) the net service revenue received from using the
LICENSED PRODUCT in providing a service, 3) the fair market value of the
LICENSED PRODUCT or 4) the net selling price of LICENSED PRODUCTS paid by the
purchaser.
4.10 In addition to fees received under Paragraph 4.2, Company
agrees to provide the non-refundable sum of forty thousand dollars ($40,000) to
JHU as research support so that Dr. Georges Natsoulis can continue to work in
Dr. Boeke's laboratory at JHU until January 1, 1993. The research support will
be used to support Dr. Georges Natsoulis' in vitro lab research directed to
basic
<PAGE> 9
9
developments of the licensed technology. The forty thousand dollar ($40,000)
payment will be made by November 15, 1992. This funding will be used to cover
direct and indirect costs as specified in the Grant Information Sheet included
as Attachment B.
4.11 All payments under this Agreement shall be made in U.S. Dollars.
ARTICLE 5 -- PATENT RIGHTS AND CONFIDENTIAL INFORMATION
5.1 JHU, at the Company's expense, shall file, prosecute and
maintain all patents and patent applications specified under PATENT RIGHTS upon
authorization of the Company and the Company shall be licensed thereunder.
Title to all such patents and patent applications shall reside in JHU. JHU
shall have full and complete control over all patent matters in connection
therewith under the PATENT RIGHTS. The Company will provide payment
authorization to JHU at least one (1) month before an action is due, provided
that the Company has received timely notice of such action from JHU. Failure to
provide authorization can be considered by JHU as a Company decision not to
authorize an action. In any country where the Company elects not to have a
patent application filed or to pay expenses associated with filing,
prosecuting, or maintaining a patent application or patent, JHU may file,
prosecute, and/or maintain a patent application or patent at its own expense
and for its own exclusive benefit and the Company thereafter shall not be
licensed under such patent or patent application.
5.2 Company agrees that all packaging containing individual
LICENSED PRODUCT(S) sold by Company, AFFILIATED COMPANIES and sublicensees of
Company will be marked with the number of the applicable patent(s) licensed
hereunder in accordance with each country's patent laws.
5.3 If necessary, the parties will exchange information which they
consider to be confidential. The recipient of such information agrees to accept
the disclosure of said information which is marked as confidential at the time
it is sent to the recipient, and to employ all reasonable efforts to maintain
the information secret and confidential, such efforts to be no less than the
degree of care employed by the recipient to preserve and safeguard its own
confidential information. The information shall not be disclosed or revealed to
anyone except employees of the recipient who have a need to know the
information and who have entered into a secrecy agreement with the recipient
under which such
<PAGE> 10
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employees are required to maintain confidential the proprietary information of
the recipient and such employees shall be advised by the recipient of the
confidential nature of the information and that the information shall be treated
accordingly. The recipient's obligations under this Paragraph 5.3 shall not
extend to any part of the information:
a. that can be demonstrated to have been in the public domain or
publicly known and readily available to the trade or the public
prior to the date of the disclosure; or
b. that can be demonstrated, from written records to have been in the
recipient's possession or readily available to the recipient from
another source not under obligation of secrecy to the disclosing party
prior to the disclosure; or
c. that becomes part of the public domain or publicly known by
publication or otherwise, not due to any unauthorized act by the
recipient.
The obligations of this Paragraph 5.3 shall also apply to AFFILIATED COMPANIES
and/or sublicensees provided such information by Company. JHU's, the Company's,
AFFILIATED COMPANIES, and sublicensees' obligations under this Paragraph 5.3
shall extend until three (3) years after the termination of this Agreement.
ARTICLE 6 -- TERM, MILESTONES AND TERMINATION
6.1 This Agreement shall expire in each country on the date of
expiration of the last to expire patent included within PATENT RIGHTS in that
country or if no patents issue seventeen (17) years from the Effective Date of
this Agreement.
6.2 This agreement shall automatically terminate if Company fails
to close on at least two million dollars ($2,000,000) in equity financing by
February 28, 1993 and at least a total of five million dollars ($5,000,000) in
equity financing by December 31, 1993. (herein "Private Placement").
<PAGE> 11
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6.3 Company shall exercise best efforts to develop and
commercialize the LICENSED PRODUCT(S) and LICENSED SERVICE(S) using good
scientific judgement. As such, Company will use delivery technology other than
adeno-associated virus vectors (AAV) if dictated by good scientific judgement.
6.4 Company will, at a minimum, allocate the following resources and
personnel to the CTVI PROJECT starting in January 1993 and continuing for at
least the next four (4) years:
a. Dr. Georges Natsoulis will be retained to work full time as
manager of the CTVI PROJECT. If Dr. Natsoulis is unavailable for
any reason, a suitable replacement shall be found;
b. A virologist (Ph.D. or M.D.) shall work full time on the CTVI
PROJECT (Such virologist may be a recent graduate working at
Company for postdoctoral work);
c. Two lab technicians full time on the CTVI PROJECT;
d. Access to animal facility and tissue culture facility as
necessary;
e. A fully equipped molecular biology laboratory; and,
f. Access to expertise in transgenic animals and bone marrow
transplantation as necessary (if that expertise is not available
in-house).
6.5 Company will utilize the above resources, using good scientific
judgement, to perform the following research tasks, relating to the CTVI
PROJECT:
a. classic transgenic mouse experiments to evaluate LICENSED
PRODUCT(S) and LICENSED SERVICE(S) against murine leukemia virus
in vivo;
b. perform bone marrow transplant experiments in an animal model;
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c. in vitro studies for evaluating LICENSED PRODUCT(S) and
LICENSED SERVICE(S) against SIV or HIV; and
d. perform in vitro studies to evaluate LICENSED PRODUCT(S) and
LICENSED SERVICE(S) against one other viral system.
6.6 Company will exercise best efforts to obtain FDA regulatory
approval and will meet the following milestones for the CTVI PROJECT, by the
times noted:
a. Initiation of large animal studies, in preparation of human
clinical studies for a LICENSED PRODUCT and/or LICENSED
SERVICE, before December 1995.
b. Submission to FDA of at least one clinical protocol utilizing a
LICENSED PRODUCT and/or LICENSED SERVICE, before December 1996.
c. Initiation of at least one clinical study, utilizing a LICENSED
PRODUCT and/or LICENSED SERVICE, before December 1997.
d. Obtain FDA market approval for a LICENSED PRODUCT and/or
LICENSED SERVICE by December 2000.
6.7 After NDA or PLA has been obtained from the FDA, Company shall
exercise commercially reasonable efforts to market a product included in
LICENSED PRODUCTS in the U.S. and worldwide, conditioned upon obtaining
regulatory approval in each particular foreign nation or region. Company shall
also exercise commercially reasonable efforts to develop other LICENSED
PRODUCTS suitable for different indications, so that the PATENT RIGHTS can be
commercialized as broadly and as speedily as good scientific and business
judgement would deem possible.
6.8 After clinical or other evidence, provided in writing by JHU or
by another party, to Company, demonstrates the practicality of a particular
therapeutic technique which is not being developed
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or commercialized by Company, Company shall either provide JHU with a
reasonable development plan and start development or attempt to reasonably
sublicense the particular technology to a third party. If within six (6) months
of such notification by JHU, Company has not initiated such development efforts
or sublicensed that particular therapeutic technique, JHU may terminate this
license for such particular therapeutic technique. This Paragraph 6.8 shall not
be applicable if Company reasonably demonstrates to JHU that commercializing
such LICENSED PRODUCT(S) or granting such a sublicense would have a potentially
adverse commercial effect upon marketing or sales of the LICENSED PRODUCTS
developed and being sold by Company.
6.9 Upon breach or default of any of the terms and conditions of
this Agreement, the defaulting party shall be given written notice of such
default in writing and a period of sixty (60) days after receipt of such notice
to correct the default or breach. If the default or breach is not corrected
within said sixty (60) day period, the party not in default shall have the
right to terminate this Agreement.
6.10 Company may terminate this Agreement and the license granted
herein, for any reason, upon giving JHU sixty (60) days written notice.
6.11 Termination shall not affect JHU's right to recover unpaid
royalties or fees or reimbursement for patent expenses incurred pursuant to
Paragraph 4.1 prior to termination. Upon termination all rights in and to the
licensed technology and improvements developed during the CTVI PROJECT by
Company shall revert to JHU at no cost to JHU.
ARTICLE 7 -- MISCELLANEOUS
7.1 All notices pertaining to this Agreement shall be in writing
and sent certified mail, return receipt requested, to the parties at the
following addresses or such other address as such party shall have furnished in
writing to the other party in accordance with this Paragraph 7.1:
HWC-9363
<PAGE> 14
14
FOR JHU: Dr. Francis J. Meyer
Assistant Dean for Technology Licensing
The Johns Hopkins University
School of Medicine
550 N. Broadway, 7th Floor
Baltimore, MD 21205
FOR AVIGEN: John Monahan
President
Avigen, Inc.
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, New York 10152
7.2 All written progress reports, royalty and other payments, and
any other related correspondence shall be in writing and sent to:
FOR JHU: Francis J. Meyer, Ph.D.
Assistant Dean for Technology Licensing
The Johns Hopkins University
School of Medicine
550 N. Broadway, 7th floor
Baltimore, MD 21205
or such other addressee which JHU may designate in writing from time to time.
Checks are to be made payable to "The Johns Hopkins University".
7.3 This Agreement is binding upon and shall inure to the benefit
of JHU, its successors and assignees and shall not be assignable to another
party without the written consent of JHU, which consent shall not be reasonably
withheld, except that the Company shall have the right to assign this Agreement
to another party without the consent of JHU in the case of the sale or transfer
by the Company of all, or substantially all, of its assets relating to gene
therapy, to that party.
7.4 In the event that any one or more of the provisions of this
Agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement, or over any of the parties hereto to be
invalid, illegal or unenforceable, such provision or provisions shall be
reformed to
<PAGE> 15
15
approximate as nearly as possible the intent of the parties, and if
unreformable, shall be divisible and deleted in such jurisdictions; elsewhere,
this agreement shall not be affected.
7.5 The construction, performance, and execution of this Agreement
shall be governed by the laws of the State of Maryland.
7.6 The Company shall not use the name of THE JOHNS HOPKINS
UNIVERSITY or THE JOHNS HOPKINS HEALTH SYSTEM or any of its constituent parts,
such as the Johns Hopkins Hospital or any contraction thereof or the name of
inventors of PATENT RIGHTS in any advertising, promotional, sales literature or
fundraising documents without prior written consent from an officer of JHU.
Such written consent shall not be unreasonably withheld by JHU when disclosure
is required by SEC rules.
7.7 JHU warrants that it has good and marketable title to its
interest in the inventions claimed under PATENT RIGHTS with the exception of
certain retained rights of the United States government. JHU does not warrant
the validity of any patents or that practice under such patents shall be free
of infringement. EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH 7.7, COMPANY,
AFFILIATED COMPANIES AND SUBLICENSEES AGREE THAT THE PATENT RIGHTS ARE PROVIDED
"AS IS", AND THAT JHU MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE
PERFORMANCE OF LICENSED PRODUCT(S) AND LICENSED SERVICES INCLUDING THEIR
SAFETY, EFFECTIVENESS, OR COMMERCIAL VIABILITY. JHU DISCLAIMS ALL WARRANTIES
WITH REGARD TO PRODUCT(S) AND SERVICES LICENSED UNDER THIS AGREEMENT,
INCLUDING, BUT NOT LIMITED TO, ALL WARRANTIES, EXPRESS OR IMPLIED, OF
MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. NOTWITHSTANDING ANY
OTHER PROVISION OF THIS AGREEMENT, JHU ADDITIONALLY DISCLAIMS ALL OBLIGATIONS
AND LIABILITIES ON THE PART OF JHU, JEF D. BOEKE AND GEORGES NATSOULIS, FOR
DAMAGES, INCLUDING, BUT NOT LIMITED TO, DIRECT, INDIRECT, SPECIAL, AND
CONSEQUENTIAL DAMAGES, ATTORNEYS' AND EXPERTS' FEES, AND COURT COSTS (EVEN IF
JHU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, FEES OR COSTS),
ARISING OUT OF OR IN CONNECTION WITH THE MANUFACTURE, USE, OR SALE OF THE
PRODUCT(S) AND SERVICES LICENSED UNDER THIS AGREEMENT. COMPANY, AFFILIATED
COMPANIES AND SUBLICENSEES
<PAGE> 16
16
ASSUME ALL RESPONSIBILITY AND LIABILITY FOR LOSS OR DAMAGE CAUSED BY A PRODUCT
AND SERVICE MANUFACTURED, USED, OR SOLD BY COMPANY, ITS SUBLICENSEES AND
AFFILIATED COMPANIES WHICH IS A LICENSED PRODUCT OR LICENSED SERVICE AS DEFINED
IN THIS AGREEMENT.
7.8 JHU and the inventors of LICENSED PRODUCT(S) and LICENSED
SERVICES will not, under the provisions of this Agreement or otherwise, have
control over the manner in which Company or its AFFILIATED COMPANIES or its
sublicensees or those operating for its account or third parties who purchase
LICENSED PRODUCT(S) or LICENSED SERVICES from any of the foregoing entities,
practice the inventions of LICENSED PRODUCT(S) and LICENSED SERVICES. The
Company shall defend and hold JHU, The Johns Hopkins Health Systems, their
present and former regents, trustees, officers, inventors of PATENT RIGHTS,
agents, faculty, employees and students harmless as against any judgments,
fees, expenses, or other costs arising from or incidental to any product
liability or other lawsuit, claim, demand or other action brought as a
consequence of the practice of said inventions by any of the foregoing
entities, whether or not JHU or said inventors, either jointly or severally, is
named as a party defendant in any such lawsuit. Practice of the inventions
covered by LICENSED PRODUCT(S) and LICENSED SERVICES, by an AFFILIATED COMPANY
or an agent or a sublicensee or a third party on behalf of or for the account
of the Company or by a third party who purchases LICENSED PRODUCT(S) and
LICENSED SERVICES from the Company, shall be considered the Company's practice
of said inventions for purposes of this Paragraph 7.8. The obligation of the
Company to defend and indemnify as set out in this Paragraph 7.8 shall survive
the termination of this Agreement.
7.9 Prior to initial human testing or first commercial sale of any
LICENSED PRODUCT or LICENSED SERVICE as the case may be in any particular
country, the Company shall establish and maintain, in each country in which
Company, an AFFILIATED COMPANY or sublicensee shall test or sell LICENSED
PRODUCT(S) and LICENSED SERVICES, product liability or other appropriate
insurance coverage appropriate to the risks involved in marketing LICENSED
PRODUCT(S) and LICENSED SERVICES and will annually present evidence to JHU that
such coverage is being maintained. Upon JHU's request, the Company will furnish
JHU with a Certificate of Insurance of each product liability insurance policy
obtained and agrees to increase or change the kind of insurance pertaining to
the LICENSED PRODUCT(S) and LICENSED SERVICES at the request of JHU. JHU
<PAGE> 17
17
shall be listed as a named insured in Company's said insurance policies.
7.10 JHU may publish manuscripts, abstracts or the like describing
the PATENT RIGHTS and inventions contained therein provided confidential
information of Company as defined in Paragraph 5.3, is not included or without
first obtaining approval from the Company to include such confidential
information. Otherwise, JHU and Dr. Jef D. Boeke shall be free to publish
manuscripts and abstracts or the like directed to the work done at JHU related
to the licensed technology without prior approval; but Dr. Jef D. Boeke will
provide copies of such manuscripts and abstracts to Company prior to
publication.
7.11 This Agreement constitutes the entire understanding between the
parties with respect to the obligations of the parties with respect to the
subject matter hereof, and supersedes and replaces all prior agreements,
understandings, writings, and discussions between the parties relating to said
subject matter.
7.12 This Agreement may be amended and any of its terms or
conditions may be waived only by a written instrument executed by the
authorized officials of the parties or, in the case of a waiver, by the party
waiving compliance. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect its right at a
later time to enforce the same. No waiver by either party of any condition or
term in any one or more instances shall be construed as a further or continuing
waiver of such condition or term or of any other condition or term.
7.13 This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.
7.14 Upon termination of this Agreement for any reason, Paragraphs
5.3, 6.11, 7.6, 7.7 and 7.8 and 7.9 shall survive termination of this
Agreement.
<PAGE> 18
18
IN WITNESS WHEREOF the respective parties hereto have executed this
Agreement by their duly authorized officers on the date appearing below their
signatures.
THE JOHNS HOPKINS UNIVERSITY AVIGEN, INC.
By /s/ David A. Blake, Ph.D. By /s/ John Monahan
-------------------------------- -------------------------------
David A. Blake, Ph.D. John Monahan
Senior Associate Dean President & CEO
Date: 11/16/92 Date: 12/3/92
----------------------------- ----------------------------
I have read and agree to abide by the terms of this Agreement
By /s/ Dr. Jef D. Boeke By /s/ Dr. Georges Natsoulis
-------------------------------- -------------------------------
Dr. Jef D. Boeke Dr. Georges Natsoulis
Date: 11/13/92 Date: 11/13/92
----------------------------- ----------------------------
<PAGE> 19
18
ATTACHMENT A
INVENTION AGREEMENT
The following individuals who are employees or students of THE JOHNS
HOPKINS UNIVERSITY (hereinafter "JHU") hereby agree to assign to JHU all their
right and title to all inventions made by them during the course of their
research at JHU that are improvements to the "Method for the Inhibition and
Prevention of Viral Replication Using Fusions of a Virus Protein and a
Destructive Enzyme" covered in the PATENT APPLICATION. The following individuals
further acknowledge that the invention will be licensed pursuant to the
JHU/Avigen License Agreement and that they will only participate in the running
royalties if received for their invention as allocated pursuant to University
policy, but will not participate in equity provided to JHU or Drs. Boeke or
Natsoulis under the JHU/Avigen License Agreement.
Signature: /s/ PARTHA SESHAIA Signature: /s/ MITA MUKHERJEE
-------------------------- ----------------------------
Name: Partha Seshaia Name: Mita Mukherjee
-------------------------- ----------------------------
Title: Research Technician Title: Graduate student
-------------------------- ----------------------------
Date: 9/9/92 Date: 9/9/92
-------------------------- ----------------------------
Signature: Signature:
-------------------------- -----------------------------
Name: Name:
-------------------------- -----------------------------
Title: Title:
-------------------------- -----------------------------
Date: -------------------------- Date: -----------------------------
Signature: Signature:
-------------------------- -----------------------------
Name: Name:
-------------------------- -----------------------------
Title: Title:
-------------------------- -----------------------------
Date: -------------------------- Date: -----------------------------
Signature: Signature:
-------------------------- -----------------------------
Name: Name:
-------------------------- -----------------------------
Title: Title:
-------------------------- -----------------------------
Date: -------------------------- Date: -----------------------------
<PAGE> 20
THE JOHNS HOPKINS UNIVERSITY -----------------
INFORMATION SHEET
For Grant and Contract Applications -----------------
To be submitted with all grant and contract applications to the Divisional
Sponsored Projects Office at least five (5) working days prior to the date the
original must be filed and/or submission to sponsor.
ATTACHMENT B
- -------------------------------------------------------------------------------
Principal Dept. of Primary Division of Dept. Tel. Ext.
Investigator Appointment
Jef Boeke Mol. Biol. & Genetics 5/2481
- -------------------------------------------------------------------------------
Co-principal Dept. of Primary Division of Dept. Tel. Ext.
Investigator Appointment
- -------------------------------------------------------------------------------
Application to: (Sponsor) Date Due at Sponsor's Office
Avigen, Inc. August 25, 1992
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Direct $ Indirect $ Total $
<S> <C> <C> <C> <C>
First budget year covered by this application: From 9/01/92 to 08/31/93 23,256 16,744 40,000
--------- ---------- ----------
Total period covered by this application: From to
--/--/-- --/--/-- --------- ---------- ----------
</TABLE>
Proposal/?FP or Sponsor ID Number IDC Rate(s) 72%
----------------------- ---------
Where will the project be performed? (All performance sites, i.e., institution,
building, room number) /X/ On-Campus / / Off-Campus
614 PCTB
- -------------------------------------------------------------------------------
Title of Project:
CTVI - Capsid Targeted Viral Inactivation
<TABLE>
<CAPTION>
=================================================================================================================================
Type of Application (Check one item on each line)
<S> <C> <C> <C> <C>
/ / Grant / / Contract / / Co-Op Agr. / / Subcontract Sponsored research agreement
/X/ New / / Renewal / / Supplement / / Continuation / / Revision
/ / Organized Research / / Instruction/Dept. Research /X/ Other Sponsored Research Agreement
=================================================================================================================================
</TABLE>
Will project involve or require any of the following: (if yes for any items,
complete corresponding terms on next page)
No
/ / /X/ 1. Use of live, vertebrate animals? (If yes, attach relevant
animal portions of your application)
/ / /X/ 2. Organisms pathogenic to humans requiring safety practices,
equipment and facilities at Biosafety Level II and above
(e.g., HIV, HVB, TB, legionella, CMV, shigella, olc etc.)
/X/ / / 3. Hazardous and highly toxic chemicals (e.g., carcinogens,
mutagens, chemicals with permissible exposure level of less
than 10 parts/million TWA)?
/X/ / / 4. Use of radioactive materials?
/ / /X/ 5. Use of human subjects, discarded human tissue, serum, etc.,
medical records or personal data?
/X/ / / 6. Use of recombinant DNA?
/X/ / / 7. AIDS or AIDS-related research?
/X/ / / 8. Cancer-related research?
/ / /X/ 9. Percent of salaries requested less than percent of effort
committed?
/ / /X/ 10. Personnel from other than department submitting this
application?
/ / /X/ 11. Subcontracted effort to other organizations?
/ / /X/ 12. Additional space in any project location?
/ / /X/ 13. Alterations, renovations, additional electric or plumbing
services, etc.?
/X/ / / 14. Does any participating investigator have an equity interest
(e.g., own or control stock) in the sponsor, collaborating
organization(s), or other organization(s) having financial
interest in products or services which are a subject of the
proposed project? Does any participating investigator have a
consultant relationship with any of the above?
<TABLE>
<CAPTION>
===============================================================================
Special Comments:
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Principal Investigator Date Department Director/Chairman Date
Jef Boeke 8/21/92 Thomas Kelly 8/21/92
- -------------------------------------------------------------------------------
Administrator Date Doarls Office use only Date
Gerry Hunsicker 8/21/92 HJ
- -------------------------------------------------------------------------------
Telephone number to be called when application is approved? Gerry 2595
---------------
Nov. 3/89
</TABLE>
<PAGE> 21
DETAIL RELATING TO CORRESPONDING ITEMS ON REVERSE SIDE
<TABLE>
<S> <C> <C> <C> <C> <C>
Animal Care and Use Committee approval of Protocol / / Yes / / No Grant (Hyg. only) / / Yes / / No
List Senior P.I., Protocol numbers and approval date(s):
----------------------------------------------------------------------------------------------------------------------------------
Attach a copy of any pending protocol forms.
Approved by Office of Safety and Environmental Health (OSEH)? / / Yes Number or date of approval
/ / No (Call OSEH, 955-5918) ---------------
Approved by Office of Safety and Environmental Health (OSEH)? / / Yes Number or date of approval 5/18/89
/ / No (Call OSEH, 955-5910) ----------------
Has Radiation Safety Office approved? / / Yes Authorization number 469
/ / No (Contact Radiation -----------------------
Safety Office, 955-3710)
Has Cognizant Human Subjects Committee approved? / / Yes DPH No. (Medicine only)
or date of approval
----------------------
/ / No Date of submission
----------------------
/ / Exempt Exemption No. claimed
--------------------
Senior P.I. on Protocol:
---------------------------------------------------------------------------------------------------------
Has Recombinant DNA Committee approved? / / Yes Number or date of approval D8902020103-
8/4/92
/ / No (Contact OSEH, 955-5910) ----------------
No additional response necessary.
No additional response necessary.
Explain why and indicate account(s) to be charged for the difference between time committed and salary requested.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
0. Salary confirmed with dept. budget
Name(s) % Effort Dept. or Division office. Person approving
----------------------------------- ------------------- ------------------------------- ----------------------------------
----------------------------------- ------------------- ------------------------------- ----------------------------------
----------------------------------- ------------------- ------------------------------- ----------------------------------
----------------------------------- ------------------- ------------------------------- ----------------------------------
1. Costs must be budgeted under "Contractual" category. Are proposed subcontract budget and / / Yes / / No
lender of intent attached?
2. Location of additional space?
--------------------------------------------------------------------------------------------------
Attach documentation of institutional approval for additional space.
3. Location of allocation, etc.?
---------------------------------------------------------------------------------------------------
Attach copy of facility office cost estimate.
Are costs included in proposed budget? (if no, explain)
-----------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
4. If yes, please explain: Jef Boeke and JHU are currently negotiating a deal with Avigen that will involve both equity and a
--------------------------------------------------------------------------------------------------------
consulting agreement. This has already been approved by the Conflict of Interest Committee Meeting
--------------------------------------------------------------------------------------------------------
of 8/10/92
--------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
AMENDMENT TO LICENSE AGREEMENT
This Amendment is effective as of the 21st day of March, 1996
("Effective Date") by and between Avigen, Inc., a Delaware corporation (the
"Company") and The Johns Hopkins University, a Maryland corporation ("JHU").
WITNESSETH
WHEREAS, the parties hereto have entered into a License Agreement,
dated November 23, 1992 (hereinafter the "License Agreement"); and
WHEREAS, the parties desire to waive and modify certain milestone
provisions under Article 6 and certain pre-emptive rights contained in Article
4 of the License Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is acknowledged by the parties, the parties hereby agree as follows:
1. Section 4.6 ii), is hereby amended to read in its entirety as
follows:
"ii). JHU and the Investors shall also be granted a pre-emptive right
to buy additional common stock of the Company at the then
prevailing market price in order to maintain its percentage
ownership on a fully diluted, fully converted basis.
Notwithstanding anything herein, this pre-emptive right shall
terminate upon the closing of the Company's initial public
offering."
2. Section 6.2 of the License Agreement is hereby deleted in its
entirety.
3. Section 6.6 is hereby amended to read in its entirety as follows:
"6.6 Company will exercise best efforts to obtain FDA regulatory
approval for the CTVI PROJECT and will, in any case, meet the
following development milestones:
a. Initiation of large animal studies, in preparation of
human clinical studies for a LICENSED PRODUCT and/or
LICENSED SERVICE, before December 31, 1997.
b. Submission to the FDA of at least one clinical protocol
utilizing a LICENSED PRODUCT and/or LICENSED SERVICE,
before December 31, 1998.
c. Initiation of at least one clinical study, utilizing
a LICENSED PRODUCT and/or LICENSED SERVICE, before
December 31, 1999.
1
<PAGE> 23
d. Obtain FDA market approval for a LICENSED PRODUCT and/or
LICENSED SERVICE, before December 31, 2002."
4. JHU hereby waives any default occurring prior to the date hereof
and arising out the failure to achieve the milestones set forth in Section 6.2
or Section 6.6(a).
5. JHU and each of the Investors hereby waives any default arising out
of the failure to comply with Section 4.6 ii), together with any rights to
purchase Common Stock pursuant to Section 4.6 ii), arising prior to the date
hereof or in connection with the Company's Series D Preferred Stock financing,
1996 bridge financing and initial public offering.
IN WITNESS WHEREOF, the parties have each caused this Amendment to
License Agreement to be signed and delivered by their duly authorized
representatives as of the date first written above.
AVIGEN, INC. THE JOHNS HOPKINS UNIVERSITY
By: By: /s/ David Blake 4/3/96
------------------------- -------------------------------
Title: Title: Executive Vice Dean
----------------------- ----------------------------
/s/ Dr. Jef D. Boeke 4/3/96
- ----------------------------- ----------------------------------
Dr. Jef D. Boeke Dr. Georges Natsoulis
21079909
040296 2
<PAGE> 24
[JOHNS HOPKINS LETTERHEAD]
BUDGET FOR AVIGEN
<TABLE>
<S> <C>
Jef Boeke
Salary & Fringe Benefits $12,096
for G. Natsoulis
Supplies 11,160
Total Direct Costs 23,256
Indirect Cost @ 72% 16,744
-------
Total Costs $40,000
</TABLE>
<PAGE> 1
EXHIBIT 10.22
LICENSE AGREEMENT
This Agreement made this 2nd day of February, 1994.
BETWEEN:
THE UNIVERSITY OF MANITOBA
(hereinafter referred to as "UNIVERSITY")
- and -
AVIGEN, INC.
a Delaware corporation
(hereinafter referred to as "LICENSEE")
WHEREAS:
A. UNIVERSITY is the owner of intellectual property involving probasin gene
("PG") and uses thereof, as developed by or at the direction of Robert
J. Marusik, Ph.D. ("Inventor"), an Associate Professor of UNIVERSITY.
B. UNIVERSITY is willing to grant and LICENSEE wishes to obtain an
exclusive worldwide license to such rights on the terms and conditions
set out herein and for the consideration hereinafter appearing.
NOW WITNESSETH that the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Affiliate" shall mean, with respect to any entity, any other entity
that controls, is controlled by, or is under common control with such
entity, where the term "control" means direct or indirect possession
of at least fifty-one percent (51%) of the voting securities or
comparable equity interest by or in such entity.
1.2 "Commercial Sale" means the sale or other transfer of a product or
service to a third party for consideration. The transfer of a product
or provision of a service to a third party for use solely in research,
development, testing, clinical trials, or as marketing samples to
develop or promote such product shall not constitute a Commercial Sale.
1.3 "Dollars" and the Symbol "$" shall mean United States dollars.
1.4 "Field of Use" shall mean human gene therapy involving the transfer of
genetic material into target mammalian cells in vitro or in vivo for
the purpose of intercellular drug delivery and/or treatment of a
disease or medical condition.
<PAGE> 2
1.5 "Know-How" shall mean trade secrets, confidential information and other
useful, proprietary information, including without limitation knowledge,
know-how, techniques, processes and inventions not known to the public.
1.6 "Licensed Patents" shall mean all patent applications respecting PG:
(a) International PCT Application Serial No. PCT CA 9300319 filed
August 9, 1993 entitled "DNA Sequences of Rat Probasin Gene";
and
(b) all patent applications respecting PG which may be filed from
time to time by UNIVERSITY pursuant to this Agreement;
the inventions described and claimed therein, and any divisions,
continuations, continuarions-in-part, or reissues thereof and foreign
equivalents, which will be automatically incorporated in and added to
this Agreement from time to time and indemnified in Appendix A attached
to this Agreement and made a part thereof.
1.7 "Licensed Products" shall mean products made in accordance with or by
means of the Licensed Patents.
1.8 "Licensed Processes" shall mean the processes claimed in the Licensed
Patents.
1.9 "Net Sales" shall mean the gross revenues actually received by the
LICENSEE and its sublicensees for Commercial Sale of Licensed Products,
less the following sums actually paid or credited by LICENSEE:
(a) discounts or commissions allowed in amounts customary in the
trade;
(b) sales or use taxes and tariff duties directly imposed with
reference to particular sales;
(c) outbound transportation charges prepaid or allowed; and
(d) amounts allowed or credited on returns and return
transportation.
ARTICLE 2 -- LICENSE GRANTED
2.1 Subject to the terms and conditions of this Agreement, UNIVERSITY
hereby grants to LICENSEE an exclusive (subject to the rights of UNIVERSITY set
forth in Section 2.3(f)), worldwide, royalty-bearing license (with the right to
sublicense) to the Licensed Patents, to develop Licensed Products and to make,
have made, use or sell Licensed Products and to practice, use or sell the
Licensed Processes (the "License"). If requested by LICENSEE, the License
shall, at LICENSEE's expense, be set forth in a separate document if necessary
for recording in a foreign country.
2
<PAGE> 3
2.2 The License granted under this Agreement specifically includes the right
of LICENSEE to grant sublicenses. LICENSEE agrees that any sublicense it
grants to any third party hereunder shall be granted under the following
conditions:
(a) Any sublicense grant of rights to the Licensed Patents shall be
restricted to the Field of Use;
(b) Within 30 days after the execution of a sublicense agreement, as
authorized herein, LICENSEE shall forward to UNIVERSITY a fully
executed copy of such sublicense agreement; and
(c) Each sublicense shall specifically reference this Agreement and
all rights retained by UNIVERSITY.
2.3 The granting and acceptance of this license is subject to the following
conditions:
(a) UNIVERSITY shall, at LICENSEE's expense, file, diligently
prosecute, seek prompt issuance of and maintain all patents and
patent applications specified under the Licensed Patents and in
as many other countries as LICENSEE shall request, and LICENSEE
shall be licensed thereunder. Title to all such patents and
patent applications shall reside in UNIVERSITY. In any country
where LICENSEE elects not to have a patent application or
patent, UNIVERSITY may file, prosecute and/or maintain a patent
application or patent at its own expense and for its own benefit
and LICENSEE shall thereafter not be licensed under such patent
or patent application; provided, however, that prior to
licensing any such patent or patent application to a third party
in the Field of Use, LICENSEE shall have the right of first
refusal to be licensed under such patent or patent application
on terms no less favorable than those offered to UNIVERSITY by
such third party.
(b) LICENSEE shall reimburse UNIVERSITY for all fees and costs
reasonably incurred by UNIVERSITY during the term of this
Agreement in connection with the filing, prosecution and
maintenance of the Licensed Patents and fees and costs incurred
by UNIVERSITY heretofore in an amount not to exceed $20,000.
LICENSEE may, by notice to UNIVERSITY and subject to
UNIVERSITY's rights set forth in Section 2.3(a), abandon the
prosecution and/or maintenance of any Licensed Patents in any
country, and LICENSEE shall not, thereafter be responsible for
any fees or costs subsequently incurred and related thereto and
shall thereafter not have a License in such countries.
(c) In the event that UNIVERSITY licenses all or portion of the
subject matter of the Licensed Patents for a field of use other
than the Field of use to one or more entities other than
LICENSEE, LICENSEE shall be responsible for only a pro rata
portion of all such fees and costs set out in Sections 2.3(a)
and 2.3(b) based on the number of licensees of the subject
matter of the Licensed Patents and shall be reimbursed for all
such fees and costs previously paid by LICENSEE on a pro rata
basis.
3
<PAGE> 4
(d) The filing, prosecution and maintenance of all patents and patent
applications shall be primary responsibilities of UNIVERSITY; provided,
however, that UNIVERSITY shall:
(i) prior to filing, obtain LICENSEE's approval on the contents of
all patent applications and revisions thereto;
(ii) keep LICENSEE advised as to all substantive developments with
respect to such patent applications and the resulting patents;
and
(iii) consult with LICENSEE regarding any engagement or termination of
patent counsel.
(e) Each party shall notify the other promptly in writing when any
infringement by another is uncovered or suspected. LICENSEE shall have
the first right to enforce any patent within the licensed Patents
against any infringement or alleged infringement thereof, and shall keep
UNIVERSITY informed as to the status therefor. LICENSEE may, in its sole
judgment and at its own expense, institute suit against any such
infringer or alleged infringer and control, settle and defend such suit
in a manner consistent with the terms and provisions hereof and recover,
for its account, any damages, awards or settlements resulting therefrom.
LICENSEE shall obtain and give careful consideration to UNIVERSITY's
views prior to commencing an action with respect to any infringement.
UNIVERSITY shall reasonably cooperate in any such litigation at
LICENSEE's expense, and LICENSEE shall have the right to join UNIVERSITY
(with UNIVERSITY approval, which approval shall not be unreasonably
withheld) as a party plaintiff in any such litigation. In the event that
LICENSEE shall undertake the enforcement and/or defense of any patent
rights within the Licensed Patents by litigation, LICENSEE may withhold
up to fifty percent (50%) of the payments otherwise due UNIVERSITY under
Article 3 hereunder and apply the same toward reimbursement of up to
half of LICENSEE's expenses, including reasonable attorneys' fees, in
connection therewith. Any recovery of damages by LICENSEE for each such
suit shall be applied first in satisfaction of any unreimbursed expense
and legal fees of LICENSEE relating to such suit, and next toward
reimbursement of UNIVERSITY for any payments under Article 3 past due or
withheld pursuant to this Section 2.3(d).
(f) UNIVERSITY shall maintain the non-transferable, personal right to use
the subject matter of Licensed Patents for its own internal,
non-commercial, research purposes only.
(g) LICENSEE shall diligently pursue:
(i) relevant preclinical animal studies within one and one-half
years of the Effective Date (as defined in Section 7.1);
(ii) clinical studies within three years of the Effective Date;
4
<PAGE> 5
(iii) introduction of the Licensed Products into the
commercial market as soon as practicable, and
thereafter, to keep Licensed Products reasonably
available to the public, consistent with sound and
reasonable business practices and judgment.
(h) The exclusive licenses granted to LICENSEE by UNIVERSITY
hereunder are limited to the Field of Use.
ARTICLES 3 -- ROYALTY AND OTHER PAYMENTS
3.1 Within thirty (30) days following the execution of this Agreement
LICENSEE shall pay to UNIVERSITY thirty thousand dollars ($30,000)
which amount shall not be creditable toward earned royalties hereunder
and shall not otherwise be refundable.
3.2 LICENSEE agrees to pay to UNIVERSITY royalties ("Royalty Payments") for
the license at the royalty rates set forth below as a percentage of the
Net Sales of the Licensed Products and Licensed Processes intended to
be used for the indications set forth below and sold and otherwise
disposed of for value by LICENSEE, its affiliates or its sublicensees.
1% for prostate cancer
2% for human benign prostrate hyperplasia
1% for all other indications
3.3 Royalties shall be calculated semi-annually on the last days of June
and December and shall be payable within 30 days of the end of each
respective period on the Licensed Products sold and otherwise disposed
of for value by LICENSEE and its permitted assigns.
3.4 In order to maintain the license granted herein and in consideration
for services rendered by UNIVERSITY, LICENSEE shall pay UNIVERSITY an
annual maintenance fee (the "Annual Maintenance Fee") in the amount of
five thousand dollars ($5,000), payable within 30 days of the end of
December of each year that this Agreement is in effect.
3.5 Within 30 days after meeting the following development milestones,
LICENSEE shall make milestone payments (the "Milestone Payments") to
UNIVERSITY in the following accounts:
<TABLE>
<S> <C>
Initiation of clinical trials
of the first Licensed Product
by or on behalf of Licensee: $50,000
Completion of Phase III clinical
trials of the first Licensed Product
by or on behalf of Licensee: $70,000
New Drug Approval of the first
Licensed Product by or on behalf of
Licensee: $100,000
--------
$220,000
========
</TABLE>
5
<PAGE> 6
3.6 Payments under Sections 3.4 and 3.5 above shall not be creditable
toward earned royalties hereunder and shall not otherwise be refundable.
3.7 All amounts referred to in this Agreement are in U.S. dollars.
ARTICLE 4 -- RECORDS AND REPORTS
4.1 LICENSEE shall keep true and accurate records and books of account
containing all data necessary for the determination of royalties
payable hereunder. Said records and books of account shall upon request
of UNIVERSITY and upon reasonable notice be open for periodic inspection
(not exceeding twice per annum) by a professionally qualified
accountant on behalf of UNIVERSITY at all reasonable times during
business hours for the purpose of verifying the accuracy of LICENSEE's
reports hereunder.
4.2 LICENSEE will provide to UNIVERSITY a written research and development
plan under which LICENSEE intends to bring the subject matter of the
license granted hereunder into commercial use upon execution of this
Agreement by July 1, 1994. Such plan shall be updated annually and
include research activities, regulatory approval status, proposed
marketing efforts and projections of sales.
4.3 After New Drug Approval of the first Licensed Product by or on behalf of
LICENSEE, LICENSEE shall deliver to UNIVERSITY within 30 days of the
last day of June and December respectively calculated from the date of
the Agreement an accounting statement setting forth with respect to
operations of LICENSEE hereunder during the respective period:
(a) the quantity of Licensed Products sold;
(b) the Net Sales thereof, with itemized deductions;
(c) a provisional amount of royalty due to UNIVERSITY as calculated
in Article 3.0.
4.4 Within 90 days after the last day of each calendar year of this
Agreement LICENSEE shall provide UNIVERSITY with the following reports:
(a) a complete annual statement acceptable to UNIVERSITY (which
acceptance shall not be unreasonably withheld) for said
respective calendar year, together with any balance of
royalties due or a claim for any royalties repayable thereon;
and
(b) a report on progress in research and development, regulatory
approvals, manufacturing, and marketing during the said
respective calendar year as well as plans for the coming
calendar year; and
(c) such additional data UNIVERSITY reasonable requires to evaluate
LICENSEE's performance.
6
<PAGE> 7
ARTICLE 5 - WARRANTIES
5.1 UNIVERSITY represents and warrants to the best of its knowledge that:
(a) the entire right and title to the Licensed Patents have been
properly assigned by Inventor to UNIVERSITY, and UNIVERSITY has
exclusive rights to license the Licensed Patents to LICENSEE;
(b) UNIVERSITY has full right and authority to grant the License
to LICENSEE granted hereunder and to enter into and fully
perform this Agreement;
(c) UNIVERSITY is not party to any agreement, contract, instrument
or document that would in any way prevent UNIVERSITY from
granting the rights granted hereunder or from performing all
obligations under this agreement; and
(d) no governmental entity, agency or authority has any existing
or potential rights in the Licensed Patents.
5.2 Other than as set forth in Section 5.1, UNIVERSITY makes no warranties,
express or implied, as to any matter whatsoever including, without
limitation:
(a) the ownership, merchantability, or fitness for a particular
purpose of the PG or results derived therefrom; or
(b) the scope of the Licensed Patents or that such Licensed
Patents may be exploited by the LICENSEE without infringing
other patents.
ARTICLE 6 - INDEMNIFICATION
6.1 Except as otherwise provided by this Agreement, LICENSEE will indemnify,
defend and hold harmless UNIVERSITY, its employees, representatives or
agents, from and against any and all actions, suits, claims, or
proceedings and any damages, losses, costs, expenses (including legal
costs) or liability of any kind made, sustained or brought against
UNIVERSITY, its employees, representatives or agents:
(a) arising out of the performance by LICENSEE or by others at the
request of LICENSEE, of LICENSEE functions and/or products
contemplated by this Agreement; or
(b) resulting from acts of LICENSEE employees, representatives, or
agents in connection with this Agreement, whether or not
information or materials supplied by UNIVERSITY are utilized; or
(c) in respect of any direct, consequential, or other damages
suffered by LICENSEE or any others resulting from the use, sale
or other disposition by LICENSEE or its customers or others of
the Licensed Patents, the Licensed Products and the Licensed
Processes.
7
<PAGE> 8
6.2 Prior to initial human testing or first commercial sale of any Licensed
Product LICENSEE agrees to establish and thereafter maintain for as long
as UNIVERSITY reasonably considers necessary, products liability
insurance in an amount up to $1,000,000 per incident and $1,000,000
annual aggregate. UNIVERSITY at its option may require LICENSEE to name
UNIVERSITY as an additional insured on said insurance.
ARTICLE 7 - TERMINATION
7.1 This Agreement is effective as of February 2, 1994 (the "Effective
Date").
7.2 Subject to 7.3 and 7.4, this Agreement shall be in force until the date
on which the patent included within the Licensed Patents that has the
latest expiration date expires, after accounting for any extensions of
any such patents.
7.3 UNIVERSITY may, at its option, earlier terminate this agreement by
notice to such effect and avail itself of such other legal remedies as
are appropriate, in the event that LICENSEE shall:
(a) at any time become declared insolvent by a court of competent
jurisdiction, make an assignment for the benefit of creditors or
have a petition in bankruptcy filed for or against it; or
(b) at any time default in the payment of any royalty or the making
of any report hereunder, or commit any breach of any covenant
herein contained, or make any false report, and shall fail to
remedy any such default, breach or report, within sixty (60)
days after written notice thereof by UNIVERSITY; or
(c) fail to satisfy its obligations under Section 2.3(g) after
written notice from UNIVERSITY and a reasonable opportunity to
remedy such failure.
7.4 LICENSEE shall have the right to terminate this Agreement at any time on
three (3) months' notice to UNIVERSITY, and upon payment of all amounts
due UNIVERSITY through the effective date of the termination.
7.5 Upon termination of this Agreement and the license granted herein,
LICENSEE shall cease immediately to use, manufacture and sell the
Licensed Products, and shall return to UNIVERSITY all materials
pertaining to the PG, the Licensed Patents and the Licensed Products
which is in its possession or under its control. However, LICENSEE shall
continue to have the right to complete deliveries on contracts in hand
subject to payment to UNIVERSITY of royalties thereon in accordance with
Article 3 above.
7.6 Upon termination of this Agreement for any reason, any sublicensee not
then in default shall have the right to seek a license from UNIVERSITY.
UNIVERSITY agrees to negotiate such licenses in good faith under
reasonable terms and conditions.
7.7 Termination of the Agreement shall not affect the obligations of
LICENSEE to pay royalties which have accrued due or which will become
due in respect of sales under 3.2.
8
<PAGE> 9
7.8 Clause 2.3(e) and Articles 3, 4, 5, 6, 9 and 12 and Sections 7.4, 7.5,
7.6 and 7.8 shall survive termination of this Agreement. The obligations
of confidentiality under Article 8 shall continue for a period of three
years from termination of this Agreement.
ARTICLE 8 - CONFIDENTIAL INFORMATION
8.1 LICENSEE agrees that any proprietary information disclosed to it by
UNIVERSITY that is marked as confidential at the time it is sent to
LICENSEE and not covered by this Agreement will not be disclosed to any
third party without written consent of UNIVERSITY.
8.2 UNIVERSITY agrees that any proprietary information disclosed to it by
LICENSEE that is marked as confidential at the time it is sent to
UNIVERSITY will not be disclosed to any third party without written
consent of LICENSEE.
8.3 The obligations of confidentiality in 8.1 and 8.2 shall not apply to
information which:
(a) is now in or shall enter the public domain as a result of its
disclosure in a publication by UNIVERSITY, the issuance of a
patent or otherwise without the fault of the receiving
party and in a legal manner;
(b) the receiving party can prove was in its possession in written
form at the time of disclosure by the other party to this
Agreement;
(c) comes into the hands of the receiving party from a third party
who is entitled to make such disclosure and has no obligation of
confidentiality, vis-a-vis the other party to this Agreement; or
(d) the receiving party can demonstrate was developed by it
independently of the information received from the disclosing
party;
(e) is approved for release by written authorization of both
LICENSEE or UNIVERSITY as the case may be;
(f) with respect to disclosures under 8.1:
(i) is disclosed to regulatory agencies in support of
LICENSEE's applications to market a licensed
product, or otherwise to clinicians or others in
connection with the filing of such applications, or as
reasonably necessary for purposes of marketing a
licensed product;
(ii) is disclosed by LICENSEE to any third party, provided
that such party agrees to keep the information
confidential;
(iii) is disclosed by LICENSEE in order to file patent
applications with respect to the patent rights;
9
<PAGE> 10
(iv) is disclosed by LICENSEE to sublicensees, subject to Section 2.2
and to successors and to permitted assignees subject to Article
9;
(v) is disclosed pursuant to requirement of applicable law; or
(vi) is disclosed pursuant to any U.S. federal, state or foreign
securities laws in connection with any financing.
ARTICLE 9 -- RIGHT OF ASSIGNMENT
This Agreement may not be assigned or transferred by LICENSEE without the prior
written consent of UNIVERSITY, which consent shall not be unreasonably withheld,
provided, however, that LICENSEE may assign this Agreement to any Affiliate of
LICENSEE or to any successor in interest to all or substantially all of the
assets of LICENSEE, whether by merger, acquisition, purchase or otherwise, which
agrees in writing to be bound by the terms of this Agreement unless such
successor in interest is otherwise bound by operation of law.
ARTICLE 10 -- NOTICES
10.1 Any notice, report or other communication which any party may desire to
give to the other, may be delivered or sent prepaid by courier, telex,
registered or first class mail service or by facsimile mail to the
respective addresses as set out below, or to such other address as one
party hereto might subsequently advise the other.
If to LICENSEE:
Avigen, Inc.
1201 Harbor Bay Parkway, #1000
Alameda, CA 94502
Attn: Dr. John Monahan
If to UNIVERSITY
Vice-President (Administration)
Room 202 Administration Building
THE UNIVERSITY OF MANITOBA
Winnipeg, Manitoba
R3T 2N2
with a copy to:
Technology Commercialization Office
Room 311 Administration Building
THE UNIVERSITY OF MANITOBA
Winnipeg, Manitoba
R3T 2N2
10
<PAGE> 11
ARTICLE 11 -- CONDITION PRECEDENT
11.1 It shall be a condition precedent to this Agreement that LICENSEE
receive investment funding by March 1, 1994.
ARTICLE 12 -- MISCELLANEOUS
12.1 LICENSEE shall not use UNIVERSITY's name or trademark in any
advertising or promotional material or publicity release relating to or
upon the PG or the Licensed Products without UNIVERSITY's prior
written consent.
12.2 The Preamble forms an integral part of this Agreement.
12.3 This Agreement constitutes the entire understanding between the
parties concerning the subject matter hereof, and any modification
or amendment shall not be binding upon either party unless in
writing and signed on behalf of such by a duly authorized
representative.
12.4 LICENSEE represents that it has the capacity and authority to enter
into this Agreement.
12.5 If any provision(s) of this Agreement become ruled invalid or
illegal by any court of competent jurisdiction or are deemed
unenforceable under then current applicable law from time to time
in effect during the term of this Agreement, it is the intention
of the parties that the remainder of this Agreement shall not be
affected thereby, provided that the remaining provisions of this
Agreement are in accordance with the intention of the parties.
12.6 This Agreement shall be interpreted and governed by the laws of
Canada and the Province of Manitoba, in Canada, as applied to
transactions taking place entirely within Manitoba between Manitoba
residents. Any action taken relating to this Agreement may be
commenced in the Court of Queen's Bench (Winnipeg, Centre) of
Manitoba.
11
<PAGE> 12
IN WITNESS WHEREOF the parties have hereto duly executed this Agreement on the
day and year first above written.
(Full name of LICENSEE) THE UNIVERSITY OF MANITOBA
Per: /s/ WANDA DEVLAMINCK Per:
----------------------- ------------------------
Name: Wanda deVlaminck Name:
Title: Vice President Title:
/s/ MIRIAM HANCOCK
- --------------------------- -----------------------------
Witness Witness
ACCEPTED AND ACKNOWLEDGED
- ---------------------------
Dr. R.M. Matusik
12
<PAGE> 1
Exhibit 10.23
[FORM OF REPRESENTATIVE WARRANT]
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
UNTIL THE COMMENCEMENT DATE (AS HEREINAFTER DEFINED) THIS WARRANT IS SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS DESCRIBED IN SECTION 9 HEREOF.
__________ __, 1996
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
AVIGEN, INC.
VOID AFTER 5:00 P.M., LOS ANGELES TIME, ON __________ __,2001,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
LOS ANGELES TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY
No. W-__
THIS CERTIFIES that, for and in consideration of $____________________,
_________________________________________ [NAME OF REPRESENTATIVE], or its
registered assigns (_______________ [NAME OF REPRESENTATIVE] or any such
registered assign being referred to herein as to the "Warrantholder"), is
entitled to subscribe for and purchase from Avigen, Inc., a Delaware corporation
(hereinafter called the "Company"), at the price of $__________ [120% OF PER
SHARE INITIAL PUBLIC OFFERING] per share (such price, as from time to time to be
adjusted as hereinafter provided, being hereinafter called the "Warrant Price"),
at any time and from time to time but not earlier than the Commencement Date (as
defined below) or later than the Expiration Date (as defined below), up to
___________________ fully paid, nonassessable shares of Common Stock, par value
$.001 per share, of the Company ("Common Stock"), subject, however, to the
provisions and upon the terms and conditions hereinafter set forth, including
without limitation the provisions of Section 3 hereof. "Commencement Date" shall
mean the first anniversary of the date hereof. "Expiration Date" shall mean 5:00
P.M., Los Angeles time, on the fifth anniversary of the date hereof, or if not a
Business Day, as defined herein, at 5:00 P.M., Los Angeles time, on the
immediately preceding business day. "Business Day" shall mean a day other than a
Saturday, Sunday or other day on which banks in the State of California are
authorized by law to remain closed.
SECTION 1. EXERCISE OF WARRANT
(a) EXERCISE PROCEDURES
This Warrant may be exercised, at any time and from time to time but
not earlier than the Commencement Date or later than the Expiration Date, by the
Warrantholder, in whole or in part (but not as to a fractional share of Common
Stock and in no event for less than 100 shares (unless Less than an aggregate of
100
1
<PAGE> 2
shares are then purchasable under all outstanding Warrants held by a
Warrantholder)), by the completion of the subscription form attached hereto and
by the surrender of this Warrant (properly endorsed) at the Company's principal
offices as set forth in Section 8 hereto (or at such other location in the
United States as it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the Company). In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the total number of whole shares of Common Stock so
purchased, registered in the name of the Warrantholder, shall be delivered to
the Warrantholder within a reasonable time, not exceeding five Business Days,
after the rights represented by this Warrant shall have been so exercised; and,
unless this Warrant has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the
Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates from the date on which this Warrant was surrendered and if exercise
is pursuant to a cash exercise, payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
(b) CASH OR NET EXERCISE
The Warrantholder may elect to exercise this Warrant by cash exercise
or a net exercise as described below.
(i) In the case of a cash exercise, the subscription
form delivered under this Section 1(a) shall be accompanied by payment
to the Company of the Warrant Price, in cash or by certified or
official bank check, for each share being purchased.
(ii) In the case of a net exercise, the Warrantholder
may elect to exercise this Warrant and receive shares on a "net
exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this
Warrant at the principal office of the Company, in which event the
Company shall issue to Holder a number of shares computed using the
following formula:
X = (P)(Y)(A-B)
-----------
A
Where: X = the number of shares of Common Stock to be issued
to Holder.
P = the percentage of the Warrant being exercised.
Y = the number of shares of Common Stock issuable
upon exercise of this Warrant.
A = the Current Market Price (as determined pursuant
to Section 3) of one share of Common Stock.
B = Warrant Price.
2
<PAGE> 3
(c) CONTINGENT EXERCISE
At the election of the Warrantholder, an exercise may be made
contingent upon the closing of the sale of the shares issuable upon such
exercise in a public offering pursuant to a registration statement filed or to
be filed by the Company which registers such shares pursuant to the Securities
Act of 1933, as amended.
(d) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be so issued, upon full payment of the
Warrant Price therefor or as otherwise set forth herein, shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens,
charges and other adverse interests. Without limiting the generality of the
foregoing, the Company covenants that it will from time to time take all such
action as may be required to ensure that the par value per share, if any, of the
Common Stock is at all times equal to or less than the effective Warrant Price.
The Company will take all such action as may be necessary to ensure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange or
automated quotation system upon which the Common Stock of the Company may be
listed. The Company will not take any action which results in any adjustment of
the Warrant Price if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed the total
number of shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of first
refusal with respect to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.
(e) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(f) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(g) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.001, of the
Company as authorized on the date hereof, or shares of any class or classes
resulting from any recapitalization or reclassification thereof which are not
limited to any fixed sum or percentage and are not subject to redemption by the
Company and in case at any time there shall be more than one such resulting
class, the shares of each class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
(h) NO FRACTIONAL SHARES
No fractional shares shall be issued upon exercise of this Warrant and
no payment or adjustment shall be made upon any exercise on account of any cash
dividends on the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the provisions of this
Section 1, be delivered upon
3
<PAGE> 4
any such exercise, the Company, in lieu of delivering the fractional share
thereof, shall pay to the Warrantholder an amount in cash equal to the Current
Market Price of such fractional interest, as determined pursuant to Section 3.
(i) LISTING
Prior to the issuance of any shares of Common Stock upon exercise of
this Warrant, the Company shall secure the listing of such shares of Common
Stock upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or automated
quotation system, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if and
so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES AND WARRANT PRICE
(a) ADJUSTMENTS
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2. Upon each adjustment of the Warrant Price
for any stock dividend or distribution or any subdivision or combination of the
outstanding shares of the Common Stock as provided in this Section 2, the
Warrantholder shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares (calculated to the nearest
tenth of a share) obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Warrant Price resulting from such adjustment.
(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger), the Warrant Price in effect at the
time of the record date of such dividend, distribution, subdivision,
combination, reclassification or recapitalization shall be adjusted so that the
Warrantholder shall be entitled to receive the aggregate number and kind of
shares which, if this Warrant had been exercised in full immediately prior to
such event, it would have owned upon such exercise and been entitled to receive
by virtue of such dividend, distribution, subdivision, combination
reclassification or recapitalization. Any adjustment required by this Section 2
(a)(1) shall be made successively immediately after the record date, in the case
of a dividend or distribution, or the effective date, in the case of a
subdivision, combination, reclassification or recapitalization, to allow the
purchase of such aggregate number and kind of shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as provided
in this Section 2, and the Company shall reserve, for the life of the Warrant,
such securities of such subsidiary or other corporation; provided, however that
no adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of this Warrant or upon its exercise.
4
<PAGE> 5
(3) If at any time prior to the expiration of this Warrant in
full, the Company shall issue rights or Warrants to all holders of Common Stock
as such entitling them (for a period expiring within sixty days after the record
date of the determination of stockholders entitled to receive the same), to
subscribe for or purchase Common Stock at a price per share less than the
current market price per share (as defined in Section 3) on such record date,
then, in each such case the number of shares subject to this Warrant thereafter
purchasable upon the exercise of this Warrant shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable upon exercise of
each Warrant by a fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or Warrants,
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or Warrants plus the
number of shares that the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at such current market price. For
purposes of this Section 2(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in Sections
2(a)(2) or (3) above), then in each case the Warrant Price shall be adjusted to
a price determined by multiplying the Warrant Price in effect immediately prior
to such distribution by a fraction, of which the numerator shall be the then
Current Market Price per share of Common Stock on the record date for
determination of stockholders entitled to receive such distribution, less the
then fair value (as determined by the Board of Directors of the Company in good
faith) of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, and of which the denominator shall be the Market Price per share
of Common Stock; provided, however, that if the then Current Market Price per
share of Common Stock on the record date for determination of stockholders
entitled to receive such distribution is less than the then fair value of the
portion of the assets or evidence of indebtedness so distributed or of such
subscription rights or Warrants which are applicable to one share of Common
Stock, the foregoing adjustment of the Warrant Price shall not be made and in
lieu thereof the number of shares purchasable upon exercise of each Warrant
immediately prior to such distribution shall be adjusted so that the holder of
such Warrant shall be entitled to receive upon exercise of such Warrant the kind
and number of assets, evidence of indebtedness, subscription rights and Warrants
(or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this Section 2(a)(5) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2(a) shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Notwithstanding anything in this
Section 2(a) to the contrary, the Warrant Price shall not be reduced to less
than the then existing par value of the Common Stock as a result of any
adjustment made hereunder.
(6) In the event that at any time, as the result of any
adjustment made pursuant to this Section 2(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 2(a).
(7) For purposes of any computation under this Section 2(a),
the Current Market Price and Market Price per share of Common Stock on any date
shall be deemed calculated as provided in Section 3.
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(b) NO ADJUSTMENT FOR CASH DIVIDENDS
Except as provided in Section 2(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS
In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock (other than a subdivision or combination
of the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation or other entity (other than a merger in which the
Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in the
case of any sale, lease, transfer or conveyance to another corporation or entity
of the property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition precedent to such transaction cause
such successor or purchasing corporation or other entity, as the case may be, to
execute with the Warrantholder an agreement granting the Warrantholder the right
thereafter, upon payment of the Warrant Price in effect immediately prior to
such action, to receive upon exercise of this Warrant the kind and amount of
shares and other securities and property which the Warrantholder would have
owned or have been entitled to receive after the happening of such
reclassification, change, consolidation, merger, sale, or conveyance had this
Warrant been exercised immediately prior to such action. In the event that in
connection with any such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for, or of, a security of Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 2. The provisions of this Section 2(c) shall similarly apply to
successive reclassifications, capital reorganizations, consolidations, mergers,
sales or conveyances.
(d) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any adjustments
in the Warrant Price of the number or kind of the shares purchasable pursuant to
this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued.
(f) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mall, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
SECTION 3. CURRENT MARKET PRICE
For any computation of Current Market Price or Market Price under this
Warrant, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily market price per share for the 30
consecutive Trading Days commencing 35 Trading Days before the date in question.
"Market Price" is defined as (i) the closing sale price (or, if no closing sale
price is reported, the closing bid price) of the Common Stock in the
over-the-counter market, and reported by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq"), or, if the Common Stock is not
quoted on Nasdaq, as reported by the National Quotation Bureau Incorporated;
(ii) in the event that the Common Stock is hereafter listed for trading on one
or more United States national or regional securities exchanges, market price
shall be the closing price on the exchange or system designated by the Board of
Directors of the Company as the principal United States market in which the
Common Stock is traded; (iii) if the Warrantholder elects a net exercise in
connection with and contingent upon a public offering of the shares issuable
upon exercise of this Warrant, and if the Company's
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registration statement relating to such public offering has been declared
effective by the Securities and Exchange Commission, then market price shall be
the initial "Price to Public" specified in the final prospectus for such
offering; or (iv) if market price cannot be established as described above,
market price shall be the fair market value of the Common Stock as determined by
mutual agreement of the Warrantholder and the Company, and if the Warrantholder
and the Company are unable to agree, at the Company's sole expense, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the Warrantholder. The term "Trading Day" shall mean a day on
which Nasdaq or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.
SECTION 4. REGISTRATION RIGHTS
(a) DEFINITIONS
As used in this Section 4, the following capitalized terms shall have
the following respective meanings:
"Demand Registration" means a registration of Registrable Securities
under Section 4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Included Registrable Securities" means Registrable Securities included
in a Registration Statement filed under this Section 4.
"Initiating Holders" means any Registration Rights Holder or Holders
who holds or has the right to acquire not less than 25% of the aggregate of (i)
all Warrant Securities issuable under all Warrants outstanding at the time a
Demand Registration is requested and (ii) all Warrant Securities outstanding at
such time.
"Participating Holders" means holders of Included Registrable
Securities.
"Person" means any individual, partnership, joint venture, trust,
corporation, limited liability company or partnership, unincorporated
organization or government or any department or agency thereof.
"Piggyback Registration" means a registration of Registrable Securities
under Section 4(c).
"Prospectus" means any 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
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments and all materials
incorporated by reference in such Prospectus.
"Registrable Securities" means any Warrant Securities; provided,
however, that as to any particular security contained in Registrable Securities,
such securities shall cease to be Registrable Securities when (1) a Registration
Statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such Registration Statement; or (2) they may be sold to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act without any restrictions or limitation on such resale.
"Registration Expenses" means any and all expenses incurred in
connection with any registration or action incident to performance of or
compliance by the Company with Article 6, including, without limitation (1) all
SEC, national securities exchange and NASD registration and filing fees; all
listing fees and all transfer agent fees; (2) all fees and expenses of complying
with state securities or blue sky laws (including the fees and disbursements of
counsel of the underwriters in connection with blue sky qualification of the
Registrable Securities); (3) all printing, mailing, messenger and delivery
expenses; (4) all fees and disbursements of counsel for the Company and of its
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance; and (5) any
disbursements of underwriters
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<PAGE> 8
customarily paid by issuers or sellers of securities including the reasonable
fees and expenses of special experts retained by the underwriters in connection
with the requested registration.
"Registration Rights Holders" means the holders of any Warrant or
Warrant Securities.
"Registration Statement" means any Registration Statement of the
Company filed or to be filed with the SEC which covers any of the Registrable
Securities pursuant to the provisions of this Section 4, including all
amendments (including post-effective amendments) and supplements thereto, all
exhibits thereto and all material incorporated therein by reference.
"Representatives" means Wedbush Morgan Securities Inc. and Sands
Brothers & Co.
"SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means underwriting discounts and commissions,
brokerage fees and transfer taxes, if any, and fees of counsel or accountants
retained by the holders of Included Registrable Securities to advise them in
their capacity as holders of Included Registrable Securities.
"Underwriting Agreement" means that certain Underwriting Agreement
dated as of ________________, 1996 by and among the Company and the
Representatives, as representatives of the several Underwriters named therein.
"Warrants" means this Warrant and all other Warrants issued to the
Representatives pursuant to the Underwriting Agreement, including all Warrants
issued in substitution or exchange thereof.
"Warrant Securities" means any Common Stock or other securities
issuable upon exercise of Warrants.
(b) DEMAND REGISTRATION
(i) If, at any time after the Commencement Date and prior to the
Expiration Date, Initiating Holders request that the Company file a Registration
Statement covering Registrable Securities, as soon as practicable thereafter the
Company shall use its best efforts to file a Registration Statement with respect
to all Registrable Securities that it has been requested to register by any
Registration Rights Holders and obtain the effectiveness of such Registration
Statement. The Company shall also take all other action necessary under federal
or state law or regulation to permit the sale or other disposition pursuant to
such Registration Statement of all Registrable Securities requested to be
registered and the Company shall maintain such compliance with each such federal
and state law and regulation for the period necessary for the Participating
Holders to effect the proposed sale or other disposition of Registrable
Securities pursuant to such Registration Statement. Notwithstanding the
foregoing, the Company shall be entitled to defer a Demand Registration for a
period of up to 90 days if and to the extent that the Company's Board of
Directors determines, in good faith, that such registration would substantially
interfere with a pending corporate transaction. The Company shall not be
obligated to effect any such registration pursuant to this Section 4(b) if (A)
such registration may only be effected on Form S-1 and (B) the Initiating
Holders, together with the other holders of any other securities entitled to
participate in such registration, propose to sell Registrable Securities and
such other securities (if any) at an aggregate offering price to the public of
less than $500,000. The limitation imposed by the preceding sentence shall not
apply to any registration which may be effected pursuant to a registration
statement on a form other than Form S-1.
(ii) Upon receipt of a request for registration from Initiating
Holders, the Company shall promptly give written notice to all other
Registration Rights Holders of its intention to effect a Demand Registration and
shall include in such registration all Registrable Securities held by other
Registration Rights Holders who request such registration within 20 Business
Days after such notice has been given by the Company.
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<PAGE> 9
(iii) Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold by a Registration Rights
Holder and the intended method of disposition.
(iv) If any Demand Registration is requested to be in the form of an
underwritten offering, the managing underwriter shall be selected and obtained
by the holders of a majority of the Included Registrable Securities. Such
selection shall be subject to the Company's consent, which consent shall not be
unreasonably withheld.
(v) The Company shall be required to effect a only one registration
pursuant to this Section 4(b). If any Registration Statement fails to be
declared effective by the SEC by reason of a decision by Participating Holders
or the underwriters to withdraw said Registration Statement, or if the
Registration Statement fails to be declared effective or, after being declared
effective, is stop-ordered by the SEC, in either case, for reasons attributable
to a Participating Holder, such Demand Registration shall count for purposes of
the limitation set forth in this Section 4(b)(v). If any Registration Statement
(1) fails to be declared effective by the SEC for any reason (except (A) by
reason of a decision by Participating Holders or underwriters to withdraw said
Registration Statement, or (B) for reasons attributable to any Participating
Holder), or (2) is stop-ordered by the SEC after being declared effective (other
than for reasons attributable to any Participating Holder) such requested
registration shall not count for purposes of the limitation set forth in this
Section 4(b)(v).
(c) PIGGYBACK REGISTRATION
(i) If, at any time or from time to time after the Commencement Date
and prior to the second anniversary of the Expiration Date, the Company proposes
to register any of its securities under the Securities Act on any form for the
registration of securities under the Securities Act, whether or not for its own
account (other than a Registration Statement filed pursuant to Section 4(b) or a
registration statement filed for registration of securities issuable under the
Company's employee benefit plans or in connection with any merger or
acquisition), the Company shall as expeditiously as possible give written notice
to all Registration Rights Holders of the Company's intention to do so and of
such Registration Rights Holders' rights under this Section 4(c). Upon the
written request of any Registration Rights Holder made within 20 Business Days
after the giving of any such notice (which request shall specify the amount of
Registrable Securities intended to be disposed of by such Registration Rights
Holder in such registration), the Company shall include in such Registration
Statement the Registrable Securities which the Company has been so requested to
register and obtain the effectiveness of such Registration Statement. The
Company shall keep such Registration Statement in effect and maintain compliance
with each federal and state law or regulation for the period necessary for
Participating Holders to effect the proposed sale or other disposition of the
Included Registrable Securities.
(ii) If a Piggyback Registration involves an offering by or through
underwriters, then (1) all Participating Holders must sell their Included
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to other selling shareholders and (2) any
Participating Holder may elect in writing, not later than 3 Business Days prior
to the effectiveness of the Registration Statement filed in connection with such
registration, to withdraw such holder's Registrable Securities from such
registration.
(iii) If a Piggyback Registration involves an offering by or through
underwriters, the Company, except as otherwise provided herein, shall not be
required to include Registrable Shares therein if and to the extent the managing
underwriters the offering reasonably believes in good faith and advises each
Registration Rights Holder requesting to have Registrable Securities included in
the Company's Registration Statement that such inclusion would materially
adversely affect such offering; provided that (1) if other selling shareholders
without contractual registration rights or with contractual registration rights
subordinate to the rights of the Registration Rights Holders have requested
registration of securities in the proposed offering, the Company will reduce or
eliminate such securities held by such selling shareholders before any reduction
or elimination of Registrable Securities; and (2) any such reduction or
elimination (after taking into account the effect or clause (1)) shall be pro
rata (based on the number of securities sought to be registered) with all other
selling shareholders with contractual registration rights which are not
subordinate to the rights of Registration Rights Holders. After the date hereof,
the Company shall not grant any registration rights with respect to any Company
securities which are senior to the rights of the
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Registration Rights Holders without the prior written consent of the holders of
a majority of the Warrant Securities outstanding at the time.
(d) REGISTRATION PROCEDURES
If and whenever the Company is required to use its best efforts to take
action pursuant to any federal or state law or regulation to permit the sale or
other disposition of any Registrable Securities Warrants in order to effect or
cause the registration of any Registrable Securities under the Securities Act as
provided in this Section 4, the Company shall, as expeditiously as practicable:
(i) Prepare and file with the SEC, as soon as practicable within 90
days after the end of the period within which requests for registration may be
given to the Company (but subject to the provisions for deferral contained in
Section 4(b)(i) hereof) a Registration Statement or Registration Statements
relating to the registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof, and use
its best efforts to cause such Registration Statements to become effective;
provided that before filing a Registration Statement or Prospectus or any
amendment or supplements thereto, including documents incorporated by reference
after the initial filing of any Registration Statement, the Company will furnish
to the Participating Holders and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the review of
the Participating Holders and the underwriters.
(ii) Prepare and file with the SEC such amendments and post-effective
amendments to a Registration Statement as may be necessary to keep such
Registration Statement effective for a reasonable period not to exceed 180 days;
cause the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Participating Holders as set forth in such Registration
Statement or supplement to such Prospectus.
(iii) Notify the Participating Holders and the managing underwriters,
if any, promptly, and (if requested by any such person) confirm such advice in
writing, (1) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (2) of any request
by the SEC for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (3) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (4) if at any time the
representations and warranties of the Company contemplated by subsection (xiii)
below ceases to be true and correct in all material respects; (5) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; and (6) of
the happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus or any document incorporated therein
by reference untrue or which requires the making of any changes in the
Registration Statement or Prospectus so that they will not contain any untrue
statement or a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(iv) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(v) If reasonably requested by the managing underwriters, immediately
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters believe (on advice of counsel) should
be included therein as required by applicable law relating to such sale of
Registrable Securities, including, without limitation, information with respect
to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or "best
efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
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(vi) Furnish to each Participating Holder and each managing
underwriter, without charge, at least one signed copy of the Registration
Statement and any post-effective amendment therein, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference).
(vii) Deliver to each Participating Holder and the underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) any amendment or supplement thereto as such persons
may reasonably request, and the Company consents to the use of such Prospectus
or any amendment or supplement thereto by each of the Participating Holders and
the underwriters, if any, in connection with the offering and sale of the
Included Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(viii) Prior to any public offering of Registrable Securities,
cooperate with the Participating Holders, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Participating Holder or
underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Included
Registrable Securities, provided that the Company will not be required to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action which would subject the Company to general service of process
in any jurisdiction where it is not at the time so subject.
(ix) Cooperate with the holders of Included Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations and registered in such names as the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities
to the underwriters.
(x) Use its best efforts to cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities.
(xi) Upon the occurrence of any event contemplated by Section
4(c)(iii)(b) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(xii) With respect to each issue or class of Registrable Securities,
use its best efforts to cause all Registrable Securities covered by the
Registration Statements to be listed on each securities exchange or automated
quotation system, if any, on which similar securities issued by the Company are
then listed.
(xiii) Enter into such agreements (including an underwriting agreement)
and take all such other action reasonably required in connection therewith in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection, if the registration is in connection with an
underwritten offering (1) make such representations and warranties to the
underwriters, in such form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if and
when requested; (2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions in form, scope and substance shall be
reasonably satisfactory to the underwriters) addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (3) obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
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comfort" letters by underwriters in connection with underwritten offerings; (4)
set forth in full in any underwriting agreement entered into the indemnification
provisions and procedures of Section 4(e) hereof with respect to all parties to
be indemnified pursuant to said section; and (5) deliver such documents and
certificates as may be reasonably requested by the underwriters to evidence
compliance with clause (1) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company; the
above shall be done at each closing under such underwriting or similar agreement
or as and to the extent required hereunder.
(xiv) Make available for inspection by one or more representatives of
the Participating Holders, any underwriter participating in any disposition
pursuant to such registration, and any attorney or accountant retained by such
Participating Holders or underwriter, all financial and other record, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representatives.
(xv) Otherwise use its best efforts to comply with all applicable
federal and state regulations; and take such other action as may be reasonably
necessary to or advisable to enable each Participating Holder and each
underwriter to consummate the sale or disposition in such jurisdiction or
jurisdiction in which any such Participating Holder or underwriter shall have
requested that the Included Registrable Securities be sold.
(xvi) The Company may require each Participating Holder to furnish to
the Company such information regarding the distribution of such securities and
such other information as may otherwise be required by the Securities Act to be
included in such Registration Statement.
(d) FEES AND EXPENSES
The Company shall pay all Registration Expenses and the Participating
Holders shall pay (severally and not jointly and pro rata based upon the number
of Included Registrable Securities held by each Participating Holder) all
Selling Expenses incurred in connection with any registration of Registrable
Securities under this Section 4.
(e) INDEMNIFICATION
(i) In connection with each Registration Statement relating to
disposition of Registrable Securities, the Company shall indemnify and hold
harmless each Participating Holder and each underwriter of Included Registrable
Securities and each Person, if any, who controls such Participating Holder or
underwriter (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement of
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon 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; provided, however, that such indemnity shall not inure to the
benefit of any Participating Holder or underwriter (or any person controlling
such Participating Holder or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) on account of any losses,
claims, damages or liabilities arising from the sale of the Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission was made in such Registration Statement Prospectus or preliminary
prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by such Participating
Holder or underwriter specifically for use therein. The Company shall also
indemnify selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the
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Exchange Act) to the same extent as provided above with respect to the
indemnification of the Participating Holders. This indemnify agreement shall be
in addition to any liability which the Company may otherwise have.
(ii) In connection with each Registration Statement, each Participating
Holder shall indemnify, to the same extent as the indemnification provided by
the Company in Section 4(e)(i), the Company, its directors and each officer who
signs the Registration Statement and each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) by only insofar as such losses, claims, damages and liabilities
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which was made in the Registration Statement, the
Prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, in reliance upon and in conformity with information furnished in
writing by such Participating Holder to the Company specifically for use
therein. In no event shall the liability of any Participating Holder hereunder
be greater in amount than the dollar amount of the net proceeds received by such
Participating Holder upon the sale of such Participating Holder's Included
Registrable Securities giving rise to such indemnification obligation.
(iii) Any party that proposes to assert the right to be indemnified
hereunder will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 4(e), notify each
such indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 4(e)(i) or 4(e)(ii) shall be available to any party who shall fail to
give notice as provided in this Section 4(e)(iii) if the party to whom notice
was not given was unaware of the proceeding to which such notice related and was
prejudiced by the failure to receive such notice, but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
the indemnifying party from any liability that it may otherwise have to any
indemnified party. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (1) the employment of counsel by
such indemnified party has been authorized in writing by the indemnifying
parties, (2) the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (3) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnified party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
(iv) In connection with each Registration Statement relating to the
disposition of Registrable Securities, if the indemnification provided for in
subsection 4(e)(i) or 4(e)(ii) hereof is unavailable to an indemnified party
thereunder in respect to any losses, claims, damages or liabilities referred to
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of losses, claims, damages or
liabilities referred to in subsection (i) or (ii) of this Section 4(e) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. No person guilty of a
fraudulent misrepresentation (within
13
<PAGE> 14
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any person having liability under Section 11 of
the Securities Act other than the Company and the Participating Holders. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then the Company and any Participating Holder, as the case may be, shall be
entitled to contribution from the Company and/or the Participating Holders, as
the case may be, to the full extent permitted by law.
(v) The indemnity and contribution agreements contained in this Section
4(e) shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Participating Holders, (ii) sale of
any of Registrable Securities or (iii) any expiration of this Warrant.
(vi) Notwithstanding the foregoing provisions of the Section 4(e), to
the extent that the provisions on indemnification and contribution contained in
any underwriting agreement entered into in connection with the underwritten
public offering of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
(f) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934
With a view to making available to the holders of Warrants or Warrant
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(i) Make and keep available adequate current public information with
respect to the Company.
(ii) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act.
(iii) Furnish to any holder of Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act,
or that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), and (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports filed under any
rule or regulation of the SEC.
(g) COMPUTATIONS OF CONSENT
Whenever the consent or approval of Registration Rights Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (other than any
Warrantholder deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Registration Rights Holders of such
required percentage.
(h) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES
The Company will not take any action outside the ordinary course of
business, or permit any change within its control to occur outside the ordinary
course of business, with respect to the Registrable Securities which is without
a bona fide business purpose, and which is intended to interfere with the
ability of the Registration Rights Holders to include such Registrable
Securities in a registration undertaken pursuant to this Section 4.
SECTION 5. NOTICES OF RECORD DATES
In the event of:
14
<PAGE> 15
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution (other
than regular cash dividends paid out of earned
surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any
right to sell shares of stock of any class or any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other corporation or entity, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (2) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any is to be fixed, as of which the holders of record
of Common Stock will be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be given at least 20
days and not more than 90 days prior to the date therein specified, and such
notice shall state that the action in question or the record date is subject
to the effectiveness of a registration statement under the Securities Act or
to a favorable vote of stockholders, if either is required. Failure to mail or
receive such notice or any defect therein shall not affect the validity of any
action with respect thereto.
SECTION 6. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest.
SECTION 8. NOTICES
All notices, requests and other communications required or permitted to
be given or delivered hereunder shall be in writing, and shall be delivered, or
shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile. Notices, requests and other
communications to the Warrantholder shall be sent to the Warrantholder at 1000
Wilshire Boulevard, Los Angeles, California 90017-2465, Attention: Investment
Banking, facsimile number (213) 688-6642 or to such other address or facsimile
number as shall have been furnished to the Company by notice from such
Warrantholder; and if to the Company, at 1201 Harbor Bay Parkway, Suite 1000,
Alameda, California 94502; Attention: President, facsimile number (510)
748-7155, with a copy to Cooley Godward Castro Huddleson & Tatum, 5 Palo Alto
Square, 3000 El Camino Real, Palo Alto, California 94306, facsimile number:
(415) 859-0663. Attention: Alan C. Mendelson, Esq., or at such other address or
facsimile number as shall have been furnished to the Warrantholder by notice
from the Company.
15
<PAGE> 16
SECTION 9. TRANSFER, ASSIGNMENT AND EXCHANGE OF WARRANT AND RESTRICTIONS
ON TRANSFER
(a) RESTRICTIONS ON TRANSFER
(i) Until the Commencement Date, this Warrant and the
underlying shares of Common Stock which may be acquired upon exercise hereof may
not be sold, transferred, assigned, pledged or hypothecated to any other person
or entity except to any Underwriter that participated in the public offering of
shares of Common Stock of the Company pursuant to the Underwriting Agreement (as
defined in Section 4(a)), and the bona fide officers or partners thereof. Until
the Commencement Date, any shares of Common Stock acquired upon exercise of this
Warrant shall bear a legend setting forth the foregoing restriction. After the
Commencement Date, this Warrant may be freely transferred or assigned by the
Warrantholder, subject to compliance with applicable law. Assignment of this
Warrant shall be effected by delivery of the assignment form attached hereto to
the Company at its principal offices.
(ii) Except as otherwise permitted by this Section 9(a)(ii),
each Warrant shall (and each Warrant issued upon transfer or in substitution for
any Warrant shall) be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION SUCH ACT."
Except as otherwise permitted by this Section 9(a)(ii), each
certificate for securities issued upon the exercise of any Warrant and each
certificate issued upon transfer of any such security shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or certificate for securities, without a legend, if
(1) the issuance of such securities has been registered under the Securities
Act, (2) such Warrant or such securities, as the case may be, have been
registered for resale under the Securities Act or sold pursuant to Rule 144
under the Securities Act, or (3) the Warrantholder has received an opinion of
counsel (who may be house counsel for such Warrantholder) reasonably
satisfactory to the Company that such registration is not required with respect
to such Warrant or such securities, as the case may be.
(b) EXCHANGE OF WARRANT
This Warrant may be split-up, combined or exchanged for another Warrant
or Warrants containing the same terms to purchase a like aggregate number of
securities. If the Warrantholder desires to split-up, combine or exchange this
Warrant, the Warrantholder shall make such request in writing delivered to the
Company at its principal office and shall surrender to the Company this Warrant
and any other Warrants to be so split-up, combined or exchanged. Upon any such
surrender for a split-up, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Warrantholder to purchase upon exercise a fraction of a share of Common
Stock or a fractional Warrant.
16
<PAGE> 17
(c) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
SECTION 10. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
SECTION 11. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable `in accordance with its terms.
SECTION 12. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of California without regard to conflict of law principles.
SECTION 13. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 14. BINDING EFFECT
This Warrant shall insure to the benefit of and shall be binding upon
the Company and the Warrantholder and their respective heirs, legal
representatives, successors and assigns.
SECTION 15. NO INCONSISTENT AGREEMENTS
The Company will not on or after the date of this Warrant enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Warrantholder in this Warrant or otherwise conflicts with
the provisions hereof. The rights granted to the Warrantholder hereunder do not
in any way conflict with and are not inconsistent with the rights granted to
holders of the Company's securities under any other agreements.
SECTION 16. ENTIRE AGREEMENT
This Warrant 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 Warrant supersedes all prior agreements and
understandings between the parties with respect to such subject matter (other
than warrants previously issued by the Company to the Warrantholder).
SECTION 17. ATTORNEYS' FEES
In any action or proceeding brought to enforce any provisions of this
Warrant, or where any provisions hereof is validly asserted as a defense , the
successful party shall be entitled to recover reasonable attorneys' fees and
disbursements in addition to its costs and expenses and any other available
remedy.
17
<PAGE> 18
IN WITNESS WHEREOF, the Company and the Warrantholder have executed
this Warrant on and as of the day and year first above written.
Avigen, Inc.,
a Delaware corporation
By:
-------------------------------------
Dr. John Monahan
President and Chief Executive Officer
Attest:
- ------------------------------
(Corporate Secretary)
[NAME OF REPRESENTATIVE]
------------
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
18
<PAGE> 1
EXHIBIT 10.24
[REDDING MANAGEMENT INC. Letterhead]
February 27, 1996
Dr. John Monahan
AVIGEN, INC.
1201 Harbor Bay Parkway, Suite 1000
Alameda, CA 94502
RE: Rent Agreement
Dear Dr. Monahan:
In follow up to your meeting with Mr. Don Brewster, we would like to confirm our
agreement for payment of rent due by Avigen. As discussed, this agreement is
contingent upon our obtaining final approval from the owners.
Upon receiving approval from the owners, our agreement allows for the
forgiveness of rent due from Avigen, in the amount of $60,532.39. In return,
Avigen agrees to begin full base rent payments effective March 1, 1996, per the
lease and lease amendment documents.
Please indicate your agreement with this proposal by signing below so that we
may forward this document to the owners.
Sincerely,
REDDING MANAGEMENT, INC., APPROVED:
Agent for 1201 HARBOR BAY PARTNERSHIP AVIGEN, INC.
By: /s/ John Monahan
---------------------------------
Its: CEO
--------------------------------
Date: 2/27/96
-------------------------------
/s/ Carol A. Manning
Carol A. Manning
Property Manager
CAM:hs
<PAGE> 2
1201 HARBOR BAY PARTNERSHIP
Alameda, California
INDUSTRIAL GROSS LEASE
BASIC LEASE INFORMATION
DATE: September 15, 1992
LANDLORD: 1201 Harbor Bay Partnership,
a California general partnership
TENANT: Avigen, Inc.
a Delaware corporation
Lease Reference
---------------
PREMISES AND BUILDING: Paragraph 1
16,000 +/- rentable square feet, months 1-27
23,000 +/- rentable square feet, months 28-60
1201 Harbor Bay Parkway
Alameda, CA 94501
TERM COMMENCEMENT: Paragraph 2
May 15, 1993
LENGTH OF TERM: Paragraph 2
5 years
BASE RENT: Paragraph 3(a)
See Addendum
TENANT'S PERCENTAGE SHARE OF BUILDING: Paragraph 4(a)
BASE YEAR: Paragraph 4(a)
1993
USE: Paragraph 6
SECURITY DEPOSIT: Paragraph 15
First month's rent payable not later than 30 days from Lease execution.
<PAGE> 3
BROKER: Paragraph 26(o)
Cushman & Wakefield
1 Kaiser Plaza, Suite 250
Oakland, CA 94612
Attn: Jim McPhee and Dan Harvey
TENANT'S ADDRESS FOR NOTICES: Paragraph 20
Prior to Occupancy
c/o John Monahan
19 Tarabrook Drive
Orinda, CA 94563
After Occupancy - The Premises
LANDLORD'S ADDRESS FOR NOTICES: Paragraph 20
Redding Management, Inc.
1411 Harbor Bay Parkway, Suite 1000
Alameda, CA 94501
EXHIBIT(S) AND ADDENDUM: Paragraph 27
Exhibit "A" - Floor Plan
Exhibit "B" - Plot Plan
Exhibit "C" - Tenant Work Agreement
Exhibit "D" - Rules & Regulations
Exhibit "E" - Operating Expense Exclusions
Exhibit "F" - Real Estate Tax Exclusions
Exhibit "G" - Personal Guarantee
Addendum of four (4) pages
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the
event of any conflict between any Basic Lease Information and the Lease, the
latter shall control.
TENANT: LANDLORD:
AVIGEN, INC. 1201 HARBOR BAY PARTNERSHIP
a Delaware corporation a California general partnership
BY: /s/ John Monahan BY: Empire Alameda, Inc.
------------------------------- --------------------------------
a general partner
ITS: CEO & President ITS: President & Partner
------------------------------ -------------------------------
DATE: 11/20/92 DATE: 11/23/92
----------------------------- ------------------------------
<PAGE> 4
INDUSTRIAL GROSS LEASE
THIS LEASE, dated September 15, 1992, for purposes of reference only, is
made and entered into by and between 1201 HARBOR BAY PARTNERSHIP, a California
general partnership ("Landlord") and AVIGEN, INC., a Delaware corporation
("Tenant").
WITNESSETH
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord for the term of this Lease and at the rental and upon the
conditions set forth below, the Premises described in the Basic Lease
information and identified on the floor plan attached hereto as Exhibit "A" (the
"Premises"). For the purposes of this Lease, the term "Premises" shall mean the
portion of the Premises then being leased by Tenant pursuant to the terms of
this Lease. Subject to any obligations of Landlord as set forth in an exhibit
to this Lease relating to initial improvement of the Premises, Tenant shall
accept the Premises in its "as-is" condition at the commencement of the term.
The Premises are located within the building (the "Building") as described in
the Basic Lease Information. The accurate rentable square feet ("RSF") will be
calculated by Tenant's architect prior to lease execution in accordance with the
BOMA standard method of measurement. The "Initial Premises" shall mean that
portion of the Premises designated by Tenant (but in no event less than 16,000
RSF), at lease 120 days after execution of this Lease as to the Initial Premises
(as determined pursuant to Paragraph 2 below). The "Remainder Premises" shall
mean that portion of the Premises which is not Initial Premises. Landlord shall
have the right to lease the Remainder Premises so long as it is available for
delivery to Tenant at the beginning of the 23rd month of the Lease term and
there is no sharing of washrooms.
2. Term. Upon the full execution of this Lease, the Premises will be
delivered to Tenant so that it may commence construction pursuant to the terms
of the Tenant Work Agreement attached hereto as Exhibit C. The lease term will
commence for the Initial Premises upon the earlier of (i) substantial completion
of the tenant improvements as evidenced by the issuance of an occupancy
certificate by the City of Alameda, or (ii) May 15, 1993. Prior to the
commencement of the lease term, the Tenant shall have no obligation to pay rent
or other charges hereunder other than utility charges incurred in connection
with construction of the tenant improvements, but it shall be required to comply
with the other provisions of this Lease. The Lease will commence for the
Remainder Premises upon the earlier of: (i) substantial completion of tenant
improvements and issuance of an occupancy certificate by the City of Alameda
with respect to the Remainder Premises; or (ii) the date that is twenty-seven
(27) months after the date the Lease commences with respect to the Initial
Premises. If the last day of the term falls on a date other than the last day
of the month, then the term shall be extended so that the last day of the term
shall be the last calendar day of the month in which the term would otherwise
end.
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<PAGE> 5
3. Rent.
(a) Tenant shall pay to Landlord as rental the amount specified in the
Basic Lease Information as the Base Rent, payable in advance on the commencement
of the term and on or before the fifth day of each and every successive calendar
month during the term. If the term commences on other than the first day of a
calendar month, the first payment of rent shall be appropriately prorated on the
basis of a 30-day month.
(b) Tenant shall pay, as additional rent, all amounts of money required
to be paid to Landlord by Tenant under this Lease in addition to monthly rent,
whether or not the same be designated "additional rent". If such amounts are not
paid at the time provided in this Lease, they shall nevertheless be a
collectable as additional rent with the next installment of monthly rent
thereafter falling due, but nothing herein contained shall be deemed to suspend
or delay the payment of any amount of money at the time the same becomes due and
payable hereunder, or limit any other remedy of Landlord.
(c) Tenant hereby acknowledges that late payment by Tenant to Landlord
of rent and other amounts due hereunder after the expiration of any applicable
grace period will cause Landlord to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed on Landlord by the terms of any trust deed covering
the premises. If any installment of rent due from Tenant shall not be received
by Landlord within ten (10) days of the due date, Tenant shall pay to Landlord a
late charge equal to 4% of such overdue amount; provided that Landlord shall
provide Tenant with one grace period during each twelve month period of this
Lease commencing with the commencement date for the Initial Premises pursuant to
which grace period Tenant shall not pay a late charge until ten (10) days after
Landlord has sent Tenant a notice that Tenant's rent payment is overdue. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount, no prevent Landlord
from exercising any of the other rights and remedies granted hereunder. If any
other sum due from Tenant shall not be received by Landlord within ten (10) days
after Landlord's notice to Tenant that such sum is overdue, Tenant shall pay to
Landlord a late charge equal to 4% of such overdue amount.
(d) All payments due from Tenant to Landlord hereunder shall be made to
Landlord without deduction or offset (except as otherwise set forth in this
Lease) in lawful money of the United States of America at Landlord's address for
notices hereunder, or to such other person or at such other place as Landlord
may from time-to-time designate in writing to Tenant.
See Addendum.
4. Taxes and Operating Expenses. (a) Tenant's percentage share for the
purposes of making the determinations described in Paragraph 4(b) below shall be
determined by the ratio that the RSF within the Premises then being leased by
Tenant bears to the total RSF within the Building. Landlord represents that the
total RSF within the Building at the date of this Lease is 60,924 rentable
square feet which total is subject to verification by Tenant's architect. Tenant
shall be responsible to contract for removal of all regulated materials
generated by Tenant per
-2-
<PAGE> 6
City, County, State and Federal regulations. Operating Expenses shall include
expenses normal to buildings of an R & D nature in Harbor Bay Business Park,
pursuant to generally accepted accounting principles.
(b) For each calendar year during the term after the year specified in
the Basic Lease Information as the Base Year, Tenant shall pay its percentage
share, as specified in the Basic Tenant Information, of the increase in Property
Taxes over Base Property Taxes and its percentage share of the increase in
Operating Expenses over the Base Year Operating Expenses; provided, however,
that notwithstanding the foregoing the Tenant's pro rata share of increases in
Operating Expenses shall be subject to an annual cap of four percent (4%) on a
cumulative basis with respect to those Operating Expenses which are in the
reasonable control of Landlord, including, without limitation, management fees,
common area maintenance costs, building maintenance costs but specifically
excluding the cost of the Harbor Bay Business Park Association security,
Property Taxes, common area utilities, and insurance. For the purposes hereof,
"Property Taxes" shall mean all real property taxes and assessments or
governmentally imposed fees or charges (and any tax levied wholly or partly in
lieu thereof) levied, assessed, confirmed, imposed or which have become a lien
against the Building (which for the purposes of defining "Property Taxes" shall
include the land underlying the Building), but excluding those items described
on Exhibit F attached hereto. Notwithstanding anything contained herein to the
contrary, if any Property Taxes are payable, or may at the option of the
taxpayer be paid, in installments, such Property Taxes shall be deemed to have
been paid (including interest) in installments amortized over the maximum
allowable time period, regardless of the method of actual payment by Landlord,
and Tenant's percentage share of such Property Taxes shall only include those
installments that would become due and payable during the Term. "Operating
Expenses" shall mean: (1) the share allocable (Tenant's Percentage Share of
Building) of all costs of management, operation, maintenance, and repair of the
Building; (2) the share allocable (Tenant's Percentage Share of the Building) to
the Premises of dues and assessments payable under any reciprocal easement or
common area maintenance agreements or declarations or by any owner's
associations affecting the Premises; and (3) the share allocable (Tenant's
Percentage Share of Building) of all costs of management, operation, maintenance
and repair of the Common Area. Notwithstanding anything to the contrary in the
definition of Operating Expenses, costs incurred for or in connection with the
items described on Exhibit E attached hereto shall be excluded from Operating
Expenses except to the extent permitted by a specific exception set forth
therein: "Base Property Taxes: shall mean those Property Taxes payable during
the fiscal year ending in June of the Base Year and "Base Operating Expenses"
shall mean Operating Expenses incurred by Landlord during the Base Year.
Operating Expenses for both the Base Year and each subsequent calendar year
shall be adjusted to equal Landlord's reasonable estimate of Operating Expenses
had the total rentable area of the Building been 100% occupied. "Common Area"
shall mean the approximately 5 acres of land on which the Building is located
and the improvements thereon, as shown on Exhibit "B".
(c) Commencing on January 5, 1994, Tenant shall pay to Landlord each
month at the same time and in the same manner as monthly rent 1/12th of
Landlord's estimate of the increase in Property Taxes and Operating Expenses
from Base Property Taxes and Base Operating Expenses for the then current
calendar year. Within 90 days after the close of each calendar year, Landlord
shall deliver to Tenant a statement of actual Property Taxes and Operating
Expenses for such calendar year. If, on the basis of such statement, Tenant owes
an amount that is less than the estimated payments for such calendar year
previously made by
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Tenant, Landlord shall refund such excess to Tenant within 30 days after
delivery of the statement. If on the basis of such statement Tenant owes an
amount that is more than the estimated payments for such calendar year
previously made by Tenant, Tenant shall pay the deficiency to Landlord within
30 days after delivery of the statement. The obligations of Landlord and Tenant
under this subparagraph with respect to the reconciliation between estimated
payments and actual Property Taxes and Operating Expenses for the last year of
the term shall survive the termination of the Lease.
(d) Tenant, at its expense, shall have the right at all reasonable times
and upon reasonable notice to Landlord, to audit Landlord's books and records
relating to Tenant's obligations to pay any increases in Operating Expenses and
Property Taxes for any year of the term of this Lease, provided that Landlord
shall not be obligated to retain its books and records for any year for more
than three (3) years. If any audit conducted by Tenant discloses that Landlord
has overstated Tenant's pro rata share of the Operating Expenses by more than
three percent (3%) in any given calendar year, Landlord shall reimburse Tenant
for reasonable costs incurred by Tenant in connection with such audit.
Furthermore, Landlord shall promptly refund to Tenant all amounts overpaid,
together with interest at the rate of 10% per annum.
(e) Landlord shall promptly send to Tenant copies of all notices of
changes in assessment of the Building or any portion thereof. Landlord, at its
discretion, shall timely protest the amount of any assessment or the amount of
any real estate tax bill, and Landlord shall credit to Tenant its proportionate
share of any reduction in Property Taxes as to which Tenant has previously paid
a proportionate share pursuant to this Paragraph 4. If, in Landlord's
discretion, Landlord refuses to so protest, then Tenant shall have the right to
contest the amount of any assessment or the amount of any real estate tax bill
by instituting legal proceedings or taking such other actions as Tenant, at its
option, shall deem advisable, which proceedings or other actions taken by
Tenant, if instituted, shall be conducted diligently on behalf of Landlord or
such other entity entitled to legal standing to initiate such proceedings or
other actions. Landlord shall cooperate with Tenant in any such proceedings as
may be reasonably required to enable Tenant to prosecute the same effectively.
If such proceedings or other actions result in the reduction in the amount of
Taxes so imposed, Tenant shall first be reimbursed for all expenses attributable
to the undertaking and prosecution of any such proceedings or other actions from
the amount of rebate, if any, of Taxes previously paid, and Tenant shall then be
reimbursed Tenant's proportionate share of the balance of any such rebate. Such
reimbursement may, in Tenant's discretion, be in the form of an offset available
to Tenant against additional rent payable under this Lease.
5. Other Taxes. Except as otherwise set forth in this Paragraph 5, Tenant
shall pay or reimburse Landlord for any taxes upon, measured by or reasonably
attributable to the cost or value of Tenant's equipment, furniture, fixtures,
and other personal property located in the Premises or leasehold improvements
made in or to the Premises at Tenant's expense; for any taxes, assessments, fees
or charges imposed by any public authority or private community maintenance
association upon or by reason of the development, possession, use or occupancy
of the premises or the parking facilities used by Tenant in connection with the
premises; provided that Landlord shall pay any tax attributable to Tenant's
immovable equipment or fixtures or tenant improvements which are intended to
remain in the Premises upon expiration of the lease term, regardless of whether
such items were paid for by Landlord or Tenant.
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6. Use.
(a) Premises shall be used and occupied by Tenant for the following:
Administration and Marketing; BioMedical Research, Development and Production;
Molecular Development; Research Laboratories. Tenant shall, at Tenant's expense,
comply promptly with all applicable statutes, ordinances, rules, regulations,
orders, and requirements in effect during the term regulating Tenant's
activities or the use by Tenant of the premises. Tenant shall not use or permit
the use of the premises in any manner that will tend to create waste or a
nuisance, or which shall tend unreasonably to disturb other tenants of the
Building, nor, except as otherwise set forth in this Lease, shall Tenant place
or maintain any signs on or visible from the exterior of the premises without
Landlord's written consent, or use any corridors, sidewalks, or other areas
outside of the premises for storage or any purpose other than access to the
premises. Except as provided in Paragraph 6(b) below, Tenant shall not use, keep
or permit to be used or kept on the premises any foul or noxious gas or
substance, nor shall Tenant do or permit to be done anything in and about the
premises, either in connection with activities hereunder expressly permitted or
otherwise, which would cause, in the reasonable judgment of the insurer of the
Premises, a cancellation of any policy of insurance (including fire insurance)
maintained by Landlord in connection with the premises or the Building or which
would violate the terms or any covenants, conditions, or restrictions affecting
the Building or the land on which it is located. Landlord hereby agrees that
Tenant may install a sign above its entry to the Building and a monument sign to
be located at the front of the Building, at its own cost, provided that such
signage will be subject to the review and approval of Landlord, which approval
shall not be unreasonably withheld, and must meet applicable city codes and
signage criteria of the Covenants Conditions and Restrictions (CC&R's) referred
to in Section 21 below.
(b) Tenant shall comply with all statutes, laws, ordinances, rules,
regulations, and precautions now or hereafter mandated or advised by any
federal, state, local or other governmental agency with respect to the use,
generation, storage, or disposal of any hazardous, toxic or radioactive
materials ("Hazardous Materials"). As herein use, Hazardous Materials shall,
include, but not be limited to, those materials identified in Sections 66680
through 66685 of Title 22 of the California Administrative Code, Division 4,
Chapter 30, as amended from time-to-time, and those substances defined as
"hazardous substances", "hazardous materials", "hazardous wastes", or other
similar designations in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq. and any
other governmental statues, laws, ordinances, rules, regulation, and
precautions. Notwithstanding anything to the contrary set forth in this
Paragraph 6 (b). Tenant shall be entitled to use, generate, store or dispose of
Hazardous Materials that are used by Tenant in the ordinary course of Tenant's
business and are customarily used by tenants engaging in the biotechnology
business (including, without limitation, low level radioactive materials) and
which are used, generated, stored or disposed of in compliance with all
applicable environmental laws.
(c) Tenant shall indemnify and hold harmless Landlord, its partners and
their directors, officers, employees, shareholders, agents and assigns, any
lender holding a deed of trust encumbering the Building ("Lender"), and any
successors to Landlord's interest in the Building, their directors, officers,
employees, shareholders, agents and assigns, from and against any and all
claims, demands, liabilities, obligations, damages, actions, causes of action,
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judgements, liens, bonding requirements, losses, expenses, fines, charges,
penalties, administrative and judicial proceedings and orders and enforcement
actions of every kind (any and all of the foregoing, "Claims") as set forth in
this Paragraph 6(c). This indemnification shall include, without limitation, all
costs and expenses incurred in connection with any Claim, including payment of
reasonable attorneys' fees incurred by Landlord in connection with the defense
of any such Claim, which attorneys' fees shall be paid as incurred. Claims
subject to indemnification are:
(i) Claims directly or indirectly arising out of the presence, use,
generation, release, emission, storage, discharge or disposal
of Hazardous Materials by Tenant including, without
limitation, all foreseeable and all unforeseeable
consequential damages;
(ii) The cost of any required or necessary repair, cleanup,
detoxification of the Building, Common Areas or Premises, or
removal, relocation, remediation or encapsulation of Hazardous
Materials and the preparation of any closure or other required
plans, whether such action is required or necessary prior to or
following transfer of title to the Building, to the full
extent that such action is attributable, directly or
indirectly, to the presence or use, generation, storage,
release, threatened release, or disposal of Hazardous
Materials by Tenant, its employees, agents or invitees to the
Premises on or after the date hereof.
(d) Landlord shall indemnify and hold harmless Tenant, its directors,
officers, employees, shareholders, agents and assigns, and any successors to
Tenant's interest in the Premises, its directors, officers, employees,
shareholders, agents and assigns, from and against any and all claims, demands,
liabilities, obligations, damages, actions, causes of action, judgments, liens,
bonding requirements, losses, expenses, fines, charges, penalties,
administrative and judicial proceedings and orders and enforcement actions of
every kind (any and all of the foregoing, "Claims") as set forth in Paragraph
6(d). This indemnification shall include, without limitation, all costs and
expenses incurred in connection with any Claim, including payment of reasonable
attorneys' fees incurred by Tenant in connection with the defense of any such
Claim, which attorneys' fees shall be paid as incurred. Claims subject to
indemnification are:
(i) Claims directly or indirectly arising out of the presence, use,
generation, release, emission, storage, discharge or disposal
of Hazardous Materials not caused by Tenant including, without
limitation, all foreseeable and all unforeseeable
consequential damages;
(ii) The cost of any required or necessary repair, cleanup,
detoxification of the Building, Common Areas or Premises, or
removal, relocation, remediation or encapsulation of Hazardous
Materials and the preparation of any closure or other required
plans, whether such action is required or necessary prior to or
following transfer of title to the Building, to the full
extent that such action is attributable, directly, or
indirectly, to the presence or use, generation, storage,
release, threatened release, or disposal of Hazardous
Materials not caused by Tenant, its employees, agents or
invitees to the Premises on or after the date hereof.
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<PAGE> 10
The indemnification obligation contained herein shall survive termination of the
Lease.
7. Utilities.
(a) Tenant shall pay for all water, sewer, gas, electricity, heat,
cooling energy, telephone, refuse collection, alarm monitoring services, and
other utility-type services furnished to Tenant or the premises, together with
all related installations or connection charges or deposits. All such services
shall be separately metered or charged to Tenant by the provider thereof and
paid for directly by Tenant. Tenant shall cause all such utilities to be
physically separated and separately metered and Landlord hereby grants to Tenant
such non-exclusive easements as may be necessary in, on and over the Building
for construction, access, maintenance and repair with respect to any and all
utility conduits, lines and piping from the point where such utilities reach the
Building's perimeter, up to and across the exterior of the Building's roof and
into the Premises; provided, that to the extent Tenant disturbs any portion of
the Building as a result of such construction, maintenance or repair, Tenant
shall restore such portion of the Building to its original condition (but Tenant
shall not have to remove any such conduits, lines or piping). To the extent any
of the foregoing services are provided by Landlord, Tenant shall reimburse
Landlord for all costs incurred by Landlord in connection with the provision of
such services based on Landlord's reasonable estimate of the level of Tenant's
use or consumption of such services. Landlord shall bill Tenant on a monthly or
other periodic basis for such services and payment shall be made by Tenant
within 30 days after submittal of Landlord's statement.
(b) Except as set forth in the immediately succeeding sentence,
Landlord shall not be in default hereunder or be liable for any damages directly
or indirectly resulting therefrom, and there shall not be any rent abatement, by
reason of any interruption or curtailment whatsoever in utility services. If
Tenant is unable to obtain any of the Building's sanitary, electrical, heating,
air conditioning, water of other essential systems serving the Premises
(collectively, "Essential Services") for reasons within the reasonable control
of Landlord, and such inability causes Tenant to cease operations in the
Premises for a period of five (5) consecutive business days, the Rent shall be
abated based upon the extent to which such inability to obtain Essential
Services materially impairs Tenant's ability to carry on its business in the
Premises. Such abatement shall continue until the Essential Services have been
restored so that lack of any remaining services no longer materially impairs
Tenant's ability to carry on its business in the Premises. In the event of any
stoppage or interruption of Essential Services to the Premises for reasons with
the reasonable control of Landlord, Landlord shall use its best efforts to
restore Essential Services to the Premises as soon as possible; provided,
however, Tenant shall have the right, at is option, to terminate this Lease by
written notice to Landlord if such failure to provide Essential Services by
Landlord continues for any reason (other than the actions of Tenant, its
employees, licensees or invitees) for more than thirty (30) consecutive calendar
days (subject to Unavoidable Delays) and such failure materially impairs
Tenant's ability to carry on its business in the Premises. Such notice by Tenant
to Landlord shall be effective ten (10) days from the date of receipt of such
notice by Landlord. For the purposes of this Paragraph 7(b), an "Unavoidable
Delay" shall mean a delay that is unavoidable and a direct result of delays by
Tenant, acts of God, strikes, civil commotion, fire, earthquake, governmental
restrictions, regulation or controls (including delays attributable to the
actions and requirements of federal, state and local agencies and any
architectural review board or similar body having jurisdiction over the Harbor
Bay Business Park, respecting issuance of building
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<PAGE> 11
permits, utility hookup permits and/or like matters) or other similar conditions
which are beyond the reasonable control of Landlord. If a delay occurs as
provided in this Paragraph 7(b), unless Landlord shall give notice to Tenant of
its claim to extension of time within ten (10) days after the event giving rise
to such claim shall have occurred, there shall be excluded in computing the
number of days by which the time for performance of the act in question shall be
extended, the number of days in excess of ten (10) days which shall have elapsed
between the occurrence of such event and the actual giving of such notice.
8. Maintenance, Repairs and Alterations.
(a) Subject to the provisions of Paragraph 10 below, and except for
damages caused by Tenant, its agents or invitees, Landlord shall keep in good
condition and repair the foundations and exterior walls and roofs of the
Building and all common areas within the Building not leased to tenants and the
Common Areas. If Landlord fails to commence performance of its obligations
hereunder within 30 days after notice by Tenant to Landlord specifying wherein
Landlord has failed to perform necessary repairs, then Tenant reserves the right
to make repairs due to Landlord's failure to keep the premises or the Building
in good order, condition, and repair. In the event Tenant completes such
repairs, Landlord shall reimburse Tenant for all costs incurred within 30 days
of invoice. If Landlord has not made reimbursement to Tenant within 30 days,
Tenant shall have the right to offset the rent to the extent of the cost for
repairs.
(b) Tenant shall, at Tenant's expense, maintain the interior portion of
the Premises (including, but not limited to, all plumbing and electrical
connections, outlets and lightbulbs) in good condition and repair. If Tenant
fails to do so within thirty (30) days after notice by Landlord specifying
wherein Tenant has failed to perform necessary repairs, Landlord may, but shall
not be required to, enter the Premises and put them in good condition, and
Landlord's cost thereof shall automatically become due and payable as additional
rent. Tenant shall be responsible for the provision, at its own expense, of
appropriate janitorial services for the Premises. Tenant shall also cause to be
maintained, at its expense and in good operating condition and repair all heat,
ventilating, and air-conditioning equipment serving the Premises and for
Tenant's sole use. At the expiration of the term, Tenant shall deliver up
possession of the premises in good condition and repair, only ordinary wear and
tear and damages by casualty or Landlord's acts expected.
(c) Tenant shall have the right to alter the premises without
Landlord's consent so long as the work is non-structural and does not adversely
impact HVAC, electrical, or plumbing systems of the adjacent tenant. Tenant
shall be required to submit a set of governmentally approved plans to Landlord
and there shall be no fee assessed by Landlord or Landlord contractors to review
alteration plans. Landlord's approval of any proposed alterations requiring
Landlord's consent shall not be unreasonably withheld. If the work is
structural, Landlord shall not unreasonably withhold consent unless in
Landlord's reasonable discretion such work would effect the future leaseability
of the Premises or other premises within the Building. Tenant shall have no
obligation to restore Premises to the original condition at termination of the
Lease.
(d) If tenant's work requires Landlord's consent, Tenant shall submit
to Landlord complete drawings and specifications describing such work and the
identity of the proposed
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contractor. As a condition to giving such consent, Landlord may, among
other things, require that Tenant remove any such alterations, improvements or
additions at the expiration of the term, and to restore the premises to their
prior condition. Before commencing any work relating to alterations, additions
or improvements affecting the premises, Tenant shall notify Landlord of the
expected date of commencement thereof and of the anticipated cost thereof, and
shall furnish such information as shall reasonably be requested by Landlord
substantiating Tenant's ability to pay for such work. Landlord shall then have
the right at any time and from time-to-time to post and maintain on the premises
such notices as Landlord reasonably deems necessary to protect the premises and
Landlord from mechanic's liens or any liens. In any event, Tenant shall pay when
due all claims for labor or materials furnished to or for Tenant at or for use
in the premises. If any mechanic's liens are levied against the Premises or the
Building for any labor or materials furnished to Tenant or claimed to have been
furnished to Tenant or to Tenant's agents or contractors in connection with work
of any character performed by or on behalf of Tenant, then Tenant shall have the
right, in good faith, to contest the validity of any such liens at its sole
expense. In such case Tenant shall defend itself and Landlord against the same
and any adverse judgment that may be rendered thereon, and if such dispute is
not resolved and such lien removed within thirty (30) days after the date such
lien is filed against the Premises or the Building (or such shorter period of
time as may be required by Landlord's Lender as stated to Tenant in a notice
from Landlord), then Tenant shall furnish to Landlord a surety bond reasonably
satisfactory to Landlord, and in form and substance sufficient to comply with
the provisions of Section 3143 of the California Civil Code, in an amount not
less than one and one-half times the amount of such contested line (or other
security reasonably satisfactory to Landlord). (If Tenant shall fail to provide
such security, Landlord may, but shall not be obligated to, obtain such security
and Tenant shall immediately reimburse Landlord for all costs so incurred by
Landlord.) Work of any character performed by or on behalf of Tenant shall be
done in a first-class, workmanlike manner, shall not unreasonably lessen the
value of the leasehold improvements in the premises, and shall be completed in
compliance with all applicable laws, ordinances, regulations, and orders of any
governmental authority having jurisdiction thereover, as well as the
requirements of insurers of the premises and the Building. Upon Landlord's
request, Tenant shall remove any contractor, subcontractor, or material supplier
from the premises and the Building if the work or presence of such person or
entity results in labor disputes in or about the Building, or material damage to
the premises, or Building. Unless Landlord requires their removal, as set forth
above, all alterations, improvements, or additions which may be made on the
premises shall become the property of Landlord and remain upon and be
surrendered with the premises at the expiration of the term.
9. Insurance and Indemnity.
(a) Tenant shall obtain and maintain during the term of this Lease
commercial general liability insurance with a combined single limit for personal
injury and property damage in a form and with carriers reasonably acceptable to
Landlord in an amount not less than $1,000,000, and employer's liability and
workers' compensation insurance as required by law. Tenant's commercial general
liability insurance policy shall be endorsed to provide that (i) it may not be
cancelled or altered in such a manner as adversely to affect the coverage
afforded thereby without 30 days' prior written notice to Landlord, (ii) mutual
waiver of claims by Landlord and Tenant pursuant to subparagraph (b) below are
approved, and (iii) such insurance is primary with respect to Landlord and that
any other insurance maintained by Landlord is excess and noncontributing with
such insurance. If, in the reasonable opinion of Landlord's
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insurance adviser, based on what is customary for tenants operating businesses
similar to Tenant in buildings within Harbor Bay Business Park similar to the
Building, the specified amounts of coverage are no longer adequate, such
coverage shall be appropriately increased; provided, that no such increase shall
take place during the initial 5 year term of this Lease. Prior to the
commencement of the term, Tenant shall deliver to Landlord a duplicate of such
policy or a certificate thereof to Landlord for retention by it, with
endorsements, and at lease 30 days prior to the expiration of such policy or any
renewal thereof, Tenant shall deliver to Landlord a replacement or renewal
binder, followed by a duplicated policy or certificate within a reasonable time
thereafter. If Tenant fails to obtain such insurance or to furnish Landlord any
such duplicate policy or certificate as herein required, Landlord may, at its
election, with notice to Tenant and without any obligation to do so, procure and
maintain such coverage and Tenant shall reimburse Landlord on demand as
additional rent for any premium so paid by Landlord. Landlord, throughout the
term of this Lease, will insure the Building and the property against damage by
fire and standard extended coverage perils (to the extent of at least 90% of
full replacement value) and public liability insurance, loss of rental income
insurance, and such other coverages as Landlord reasonably deems prudent or
advisable.
(b) Landlord hereby waives all claims against Tenant, and Tenant's
officers, directors, partners, employees, agents and representatives for loss or
damage to the extent that such loss or damage is insured against under any valid
and collectable insurance policy insuring Landlord or required to be maintained
by Landlord under this Lease or would have been insured against but for any
deductible amount under any such policy, and Tenant waives all claims against
Landlord including Landlord's officers, directors, partners, employees, agents,
and representative for loss or damage to the extent such loss or damage is
insured against under any valid and collectable insurance policy insuring Tenant
or required to be maintained by Tenant under this Lease, or would have been
insured against, but for any deductible amount under any such policy. Each party
shall provide to the other party upon request evidence of such party's
insurance company's waiver of subrogation as set forth in this Paragraph 9 (b).
(c) As this Lease does not involve the public interest and insurance is
available to Tenant which will protect it against such claims, damage, injury or
death, Tenant hereby waives all claims against Landlord for damage to any
property or injury to or death of any person in, upon or about the premises or
the Building arising at any time and from any cause. Tenant shall hold Landlord
harmless from and defend Landlord against all claims (except such as arise from
the sole negligence or willful misconduct of Landlord, its agents, employees, or
contractors) (i) for damage to any property or injury to or death of any person
arising from the use of the Premises by Tenant, or (ii) arising from the
negligence or willful misconduct of Tenant, its employees, agents, or
contractors in, upon or about those portions of the Building other than the
Premises. The foregoing indemnity obligation of Tenant shall include reasonable
attorneys' fees, investigation costs, and all other reasonable costs and
expenses incurred by Landlord from the first notice that any claim or demand is
to be made or may be made. The provisions of this Paragraph 9)c) shall survive
the termination of this Lease with respect to any damage, injury, or death
occurring prior to such termination.
(d) Landlord shall hold Tenant harmless from and defend Tenant against
all claims (except such as arise from the sole negligence or willful misconduct
of Tenant, its agents, employees, or contractors) arising out of or in any way
connected with this Lease, including, without limitation, damage to any property
or injury to or death of any person. The foregoing
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indemnity obligation of Landlord shall include reasonable attorneys' fees,
investigation costs, and all other reasonable costs and expenses incurred by
Tenant from the first notice that any claim or demand is to be made or may be
made. The provisions of this Paragraph 9(d) shall survive the termination of
this Lease with respect to any damage, injury, or death occurring prior to its
termination.
10. Damage or Destruction.
(a) Subject to the provisions of Paragraph 10(b) and 10(c) below, if,
during the term of this Lease, the Building or the Premises are totally or
partially destroyed from any casualty, Landlord shall restore the Building and
the Premises to substantially the same condition as they were in immediately
before the destruction. Landlord's obligation shall not include repair or
replacement of Tenant alterations or Tenant's equipment, furnishings, fixtures
and personal property.
(b) The provisions of Paragraph 10(a) to the contrary notwithstanding,
if as a result of such destruction, Landlord decides to demolish the Building
rather than rebuild it, Landlord shall have the election to terminate this Lease
as of the date of the destruction; provided, however, that Landlord may only
elect to demolish the Building if the estimated cost to repair the damage
exceeds fifty percent (50%) of the full replacement cost of the Building. Such
election shall be made by Landlord within 30 days after such destruction.
(c) If any destruction occurs to the premises during the last six (6)
months of the initial term of this Lease or during the last six (6) months of
any extension period which materially interferes with Tenant's use of the
Premises, Landlord or Tenant can elect to terminate this Lease within thirty
(30) days after the destruction occurs, otherwise the provisions of Paragraph
10(a) shall apply.
(d) In the event of destruction or damage to the premises which
materially interferes with Tenant's use of the premises, if this lease is not
terminated as above provided, there shall be an abatement or reduction of rent
between the date of destruction and the date Landlord substantially completes is
reconstruction obligations, based upon the extent to which the destruction
interferes with Tenant's use of the Premises, but all other obligations of
Tenant under this Lease shall remain in full force and effect. Except for
abatement of rent, Tenant shall have no claim against Landlord for any loss
suffered by Tenant due to damage or destruction of the premises or any work of
repair undertaken as herein provided, however, Landlord and Tenant agree that if
Landlord fails to commence such reconstruction within 90 days after the date of
destruction or is unable to substantially complete its reconstruction
obligations within 180 days of the date of destruction, Tenant may, at Tenant's
option, terminate this Lease.
(e) The provisions of California Civil Code Sections 1932(2) and
1933(4), and any successor statutes, are inapplicable with respect to any
destruction of the premises, such sections providing that a lease is terminated
upon the destruction of the premises unless otherwise agreed between the parties
to the contrary.
(f) If this Lease terminates pursuant to any of the provisions of this
Paragraph 10, the Lease shall be deemed to have terminated as of the date of
such destruction and Tenant shall receive any rent previously paid by Tenant
that is attributable to the period after the date
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of such destruction. It is also understood and agreed between Landlord and
Tenant that if Landlord is obligated to or elects to repair or restore the
Building or the Premises as herein provided, Tenant shall be obligated to make
repairs or restoration to those portions of said Premises which were originally
constructed by Tenant, and Landlord shall make available to Tenant any and all
insurance proceeds received by Landlord that were paid pursuant to insurance
carried by Landlord for the purpose of insuring such portions of the Premises
against casualty. All repairs by Landlord shall be of equal quality of
materials, finishes and density as when the Lease term commenced.
11. Eminent Domain. If all or any part of the Building, Common Areas or
Premises shall be taken as a result of the exercises of the power of eminent
domain, condemnation or is conveyed in lieu of any such taking, this Lease shall
terminate as to the part so taken as of the date of taking, and, in the case of
partial taking, Tenant shall have the right to terminate this Lease as to the
balance of the premises by notice to Landlord within 30 days after such date if
the portion of the Premises, Building or Common Areas taken shall be of such
extent and nature as substantially to handicap, impede or impair in Tenant's
reasonable judgement Tenant's use of the balance of the premises for Tenant's
purposes or if such taking materially reduces the parking ratio set forth in
Paragraph 25. In the event of any taking, Landlord shall be entitled to any and
all compensation, damages, income, rent, awards, or any interest therein
whatsoever which may be paid or made in connection therewith; provided, however,
that Tenant and its representatives shall have the right to participate in any
negotiations with respect to the amount or allocation of such award to which
Tenant is entitled pursuant to this Paragraph 11. Payment for the award shall be
made by Landlord to Tenant in an amount equal to that part, if any, of the
aggregate award which is paid by the condemnor or awarded by the court for: (1)
the value of any immovable trade fixtures or improvements in the Premises paid
for by Tenant, (2) the leasehold value of of this Lease, and (3) any amount
representing Tenant's removal or relocation costs or anticipated or lost
profits, or damages to any personal property, or detriment to the business of
Tenant, or any consequential, incidental or special damages to Tenant. If this
Lease is not terminated and if the Premises, Building or Common Areas have been
damaged as a result of a partial taking, Landlord shall as soon as practically
possible repair the Premises, Building and Common Areas to an architectural unit
as nearly as compatible to the unit existing just prior to the taking or damage;
provided, however, that Landlord shall not be required to repair or restore any
injury or damage to the personal property of Tenant or to make any repairs or
restoration of any alterations, additions, fixtures and improvements installed
on the Premises, and Landlord shall make available to Tenant any and all
condemnation proceeds attributable to the portions of the Premises that
originally constructed by Tenant. In the event of a partial taking which does
not result in a termination of this Lease, the monthly rental thereafter to be
paid shall be equitably reduced on a square footage basis. Notwithstanding
anything to the contrary Landlord's share of any such award shall not be less
than its cost in the Building and recovery of all its tenant improvement costs
and leasing commissions.
12. Assignments and Subletting.
(a) Tenant shall not assign this Lease or any interest herein or sublet
the premises or any part thereof without the prior consent of Landlord, which
consent shall not be unreasonably withheld; Tenant shall not hypothecate this
Lease or any interest herein or permit the use of the premises by any party
other than Tenant without the prior consent of Landlord; which consent may be
withheld by Landlord in its absolute discretion. This Lease shall not, nor
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shall any interest herein, be assignable as to the interest of Tenant by
operation of law without consent of Landlord. Any of the foregoing acts without
such consent shall be void and shall, at the option of Landlord, terminate the
Lease if not cured within 30 days. In connection with each consent requested by
Tenant, Tenant shall submit to Landlord the terms of the proposed transaction,
the identity of the parties to the transaction, the proposed documentation for
the transaction, current financial statements of any proposed assignee or
sublessee and all other information reasonably requested by Landlord and which
is obtainable by Tenant concerning the proposed transaction and the parties
involved therein.
(b) Without limiting the other instance in which it may be reasonable
for Landlord to withhold its consent to as assignment or subletting, Landlord
and Tenant acknowledge that it shall be reasonable for Landlord to withhold its
consent in the following instances:
(1) if the proposed assignee of sublessee is a governmental
agency which is incompatible with other business users;
(2) if, in Landlord's reasonable judgement, the use of the
premises by the proposed assignee or sublessee (if different from that permitted
hereunder) would entail any alterations which would lessen the value of the
leasehold improvements in the premises, or would require increased services by
Landlord which will be unrecoverable;
(3) if, in Landlord's reasonable judgement, the financial
worth of the proposed assignee or sublessee does not meet the credit standards
applied by Landlord for other Biotech tenants under leases with comparable
terms, or the character, reputation or business of the proposed assignee or
sublessee is not consistent with the quality of the other Biotech tenancies in
the Harbor Bay Business Park (the "Park");
(4) in the case of a subletting of less than the entire
premises, if the subletting would result in the division of the premises into
more than two subparcels, would create a subparcel of a configuration that is
not suitable for normal leasing purposes; or
(5) if at the time consent is requested an Event of Default
has occurred and is continuing under Paragraph 13 below.
(c) If at any time or from time-to-time during the term of the Lease
Tenant desires to sublet all or any part of the premises, Tenant shall give
notice to Landlord setting forth the terms of the proposed subletting and the
space so proposed to be sublet. Landlord shall have the option, exercisable by
notice given to Tenant within 20 days after Tenant's notice is given, either to
sublet from Tenant such space at the rental and other terms set forth in
Tenant's notice. If Landlord does not exercise such option, Tenant shall be free
to sublet such space to any third party on the same terms set forth in the
notice given to Landlord, subject to obtaining Landlord's prior consent as
hereinabove provided. If Landlord does exercise such option, Tenant shall have
ten (10) days after receipt of Landlord's notice exercising such option to
rescind Tenant's notice of the proposed subletting in which case Landlord shall
not be entitled to sublet such space.
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(d) Notwithstanding the provisions of Paragraph 12 to the contrary,
Tenant may assign this Lease or sublet the Premises or any portion thereof, with
notice to Landlord but without the necessity of Landlord's consent, to any
corporation that controls, is controlled by or is under common control with
Tenant, to any corporation resulting from the merger or consolidation with
Tenant, or to any person or entity that acquires all the assets of Tenant as a
going concern of the business that is being conducted on the Premises.
(e) No sublessee (other than Landlord if it exercises its option
pursuant to subparagraph (c) above) shall have a right further to sublet, or
assign without Landlord's prior consent in the same manner as if Tenant were
entering into a new sublease or assignment.
(f) All sums or other economic consideration actually received by
Tenant from a sublessee or assignee shall be divided 50% to Landlord and 50% to
Tenant after first deducting (i) the rental due hereunder, prorated to reflect
only rent allocable to the assigned or sublet portion of the premises; (ii) the
cost of any real estate commissions incurred in connection with such sublet or
assignment; (iii) the cost of any improvements required for the Subtenant
amortized over the term of the Lease; (iv) the cost of carrying the Premises
during the period of vacancy directly caused by construction of improvements
required by Subtenant; (v) reasonable advertising fees and reasonable counsel
fees incurred with respect to such subletting or assignment; (vi) costs, if any,
paid by Tenant to Landlord pursuant to the provisions of Paragraph 12 (h);
(vii) the cost of any utilities, janitorial services and other services provided
to the subtenant or assignee to the extent paid by Tenant; and (viii) any other
reasonable and necessary expenses incurred by Tenant in connection with such
subletting or assignment, provided such costs are amortized over the term of the
Lease.
(g) Regardless of Landlord's consent, no subletting or assignment shall
release Tenant of Tenant's obligation or alter the primary liability of Tenant
to pay the rental and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rental by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting.
(h) In the event Tenant shall request the consent of Landlord to any
assignment or subletting then Tenant shall pay up to $300.00 of Landlord's
reasonable attorneys' fees incurred in connection therewith.
13. Default by Tenant.
(a) The following events shall constitute Events of Default under this
Lease:
(1) a default by Tenant in the payment of any rent or other
sum payable hereunder for a period of 10 days after written notice thereof from
Landlord;
(2) a default by Tenant in the performance of any of the other
terms, covenants, agreements, or conditions contained herein and, if the default
is curable, the continuation of such default for a period of 10 days after
notice by Landlord or beyond the time reasonably necessary for cure if the
default is of the nature to require more than 10 days to remedy;
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(3) the bankruptcy or insolvency of Tenant, any transfer by
Tenant in fraud of creditors, assignment by Tenant for the benefit of creditors,
or the commencement of any proceedings of any kind by or against Tenant under
any provision of the Federal Bankruptcy Act or under any other insolvency,
bankruptcy or reorganization act unless, in the event any such proceedings are
involuntary, Tenant is discharged from the same within 60 days thereafter; the
appointment of a receiver for a substantial part of the assets of Tenant where
possession is not restored to Tenant within 30 days; or the levy upon this Lease
or any estate of Tenant hereunder by any attachment or execution where such levy
is not discharged within 30 days; and
(4) the abandonment of the premises for more than 90
consecutive days.
(b) Upon the occurrence of any Event of Default by Tenant hereunder,
Landlord may, at its option and without any further notice or demand, in
addition to any other rights and remedies given hereunder or by law, do any
of the following:
(1) Landlord shall have the right, so long as such Event of
Default continues, to given notice of termination to Tenant, and on the date
specified in such notice this Lease shall terminate.
(2) In the event of any such termination of this Lease,
Landlord may then or at any time thereafter, re-enter the premises and remove
therefrom all persons and property and again repossess and enjoy the premises,
without prejudice to any other remedies that Landlord may have by reason of
Tenant's default or of such termination.
(3) In the event of any such termination of this Lease, and in
addition to any other rights and remedies Landlord may have, Landlord shall have
all the rights and remedies of a landlord provided by Section 1951.2 of the
California Civil Code. The amount of damage which Landlord may recover in event
of such termination shall include, without limitation, (i) the reasonable worth
at the time of award (computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one
percent) of the amount by which the unpaid rent for balance of the term after
the time of award exceeds the amount of rental loss that Tenant proves could be
reasonably avoided, (ii) all reasonable legal expenses and other related costs
incurred by Landlord following Tenant's default, (iii) all reasonable costs
incurred by Landlord in restoring the premises to good order and condition, or
in remodeling, renovating or otherwise preparing the premises for reletting, and
(iv) all reasonable costs (including, without limitation, any brokerage
commissions) incurred by Landlord in reletting the premises.
(4) For the purpose of determining the unpaid rent in the
event of a termination of this Lease, or the rent due hereunder in the event of
a reletting of the premises, the monthly rent reserved in this Lease shall be
deemed to be the sum of the rental due under paragraph 3 above and the amounts
last payable by Tenant pursuant to paragraph 4 above.
(5) After terminating this Lease, Landlord may remove any and
all personal property located in the premises and place such property in a
public or private warehouse provided that any warehouse or storage facility is
leased at competitive market rates for storage facilities available in Alameda
County or elsewhere at the sole cost and expense of Tenant.
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(c) Even though Tenant has breached this Lease and abandoned the
premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all its rights
and remedies under this lease, including the right to recover rental as it
becomes due under this Lease. Acts of maintenance or preservation, efforts to
relet the premises, or the appointment of a receiver upon initiative of Landlord
to protect Landlord's interest under this Lease, shall not constitute a
termination of Tenant's right to possession.
(d) The remedies provided for in this Lease are in addition to any
other remedies available to Landlord at law or in equity, by statute or
otherwise.
14. Defaults by Landlord. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord hereunder within a reasonable
time, but in no event later than 10 days after notice by Tenant to Landlord
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord's obligation is such that more than 10
days are required for performance, then Landlord shall not be in default if
Landlord commences performance within such 10 day period and thereafter
diligently prosecutes the same to completion. In the event of the occurrence of
any default by Landlord with respect to any term, covenant or condition of this
Lease on the part of Landlord to be performed, which default is not cured within
the appropriate cure period, then Tenant may perform any such term, covenant and
condition for the account and on behalf of Landlord and further shall have all
rights available to tenants in law and equity to (i) procure Landlord's
performance hereunder, (ii) bring an action for damages, and (iii) seek
declaratory relief as to the parties' respective rights and obligations under
this Lease. In the event that Tenant performs any term, covenant or condition on
account and on behalf of Landlord, Landlord shall promptly reimburse Tenant for
all costs thereby incurred, including reasonable costs of administration and
management, together with interest on any unpaid amount at the rate of ten
percent (10%) per annum from the date which is ten (10) days after the date
Landlord receives Tenant's demand therefor until paid. If Landlord fails to make
such repayment, in addition to any other rights it may have, Tenant shall have
the right to offset the cost to Tenant of such performance for the account of
Landlord from the basic rent or additional rent due hereunder. In addition,
except as otherwise set forth in this Lease, including any other provision of
this Lease in which Tenant is given the right to terminate this Lease, if
Landlord does not cure a default or perform any obligations required of Landlord
under this Lease within 180 days of notice by Tenant, provided that such default
or obligation can be cured or performed within such time period, Tenant will
have the right, at Tenant's option, to terminate this Lease.
15. Security Deposit. On execution of this Lease Tenant shall deposit with
Landlord the sum specified in the Basic Lease Information (the "deposit"). The
deposit shall be held by Landlord as security for the performance by Tenant of
all of the provisions of this Lease, Landlord may use, apply, or retain all or
any portion of the deposit for the payment of any rent or other charge in
default, or the payment of any other sum to which Landlord may become obligated
by reason of Tenant's default, or to compensate Landlord for any loss or damage
which Landlord may suffer thereby. If Landlord so uses or applies all or any
portion of the deposit, then within 10 days after demand therefore Tenant shall
deposit cash with Landlord in an amount sufficient to restore the deposit to the
full amount thereof, and Tenant's failure to do so shall be a material breach of
this Lease. Landlord shall not be required to keep the deposit separate from its
general accounts. If Tenant performs all of Tenant's obligations hereunder,
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the deposit, or so much thereof as has not theretofore been applied by Landlord,
shall be returned, without payment of interest for its use, to Tenant (or, at
Landlord's option, to the last assignee, if any, of Tenant's interest hereunder)
at the expiration of the term hereof, and after Tenant has vacated the premises.
No trust relationship is created herein between Landlord and Tenant with respect
to the deposit.
16. Estoppel Certificate.
(a) Tenant shall at any time upon not more than 10 days' prior notice
from Landlord execute, acknowledge and deliver to Landlord a statement
certifying (i) that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) (ii) the date to which the
rent, security deposit, and other sums payable hereunder have been paid, (iii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of the Landlord hereunder, or specifying such defaults, if any, which
are claimed, and (iv) such other matters as may reasonably be requested by
Landlord. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Building.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant, (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance, and (iii) that not more than
one month's rent has been paid in advance.
(c) If Landlord desires to finance or refinance the Building, Tenant
agrees to deliver to any lender designated by Landlord such financial statements
of Tenant as may be reasonably required by such lender. All such financial
statements shall be received by Landlord in confidence and shall be used for the
purposes herein set forth. Tenant agrees to provide financial statements so long
as Landlord ensures that said financial statements are confidential and used
only for the purposes of refinancing the Building.
17. Subordination. This Lease, at Landlord's option, shall be subordinate
to any ground lease, mortgage, deed of trust, or any other hypothecation for
security now or hereafter placed upon the Building and to any and all advances
made on the security thereof and to all renewals, modifications, consolidations,
replacements, and extensions thereof. Notwithstanding such subordination,
Tenant's right to quiet possession of the premises shall not be disturbed except
pursuant to the provisions of this Lease after an Event of Default, unless this
Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee,
or ground lessor shall elect to have this Lease prior to the lien of its
mortgage, deed of trust or ground lease, and shall give notice thereof to
Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease is dated prior to or subsequent to the date of
said mortgage or deed of trust. If any mortgage or deed of trust to which this
Lease is subordinate is foreclosed or a deed in lieu of foreclosure is given to
the mortgagee or beneficiary, Tenant shall attorn to the purchaser at the
foreclosure sale or to the grantee under the deed in lieu of foreclosure; if any
ground lease to which this Lease is subordinate is terminated, Tenant shall
attorn to the ground lessor. Tenant agrees to execute any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, or to evidence such
attornment.
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18. Attorneys' Fees. If either party commences legal proceedings in order
to secure compliance with any of the provisions of this Lease or to recover
damages for breach of any such provisions, or to terminate this Lease or pursue
any remedy available hereunder (including eviction of Tenant), the prevailing
party in such legal action shall be entitled to recover its attorneys' fees and
costs in such amount as the court may adjudge reasonable.
19. Non-Discrimination. Tenant covenants for itself, its heirs, executors,
administrators, and assigns, and all persons claiming under or through it, and
this Lease is made and accepted by it subject to the condition that there shall
be no discrimination against or segregation of any person or group of persons,
on account of race, color, creed, religion, sex, marital status, national
origin, or ancestry in the leasing, subleasing, transferring, use, occupancy,
tenure, or enjoyment of the premises herein leased nor shall the Tenant itself,
or any such person claiming under or through it, establish or permit any such
practice or practices of discrimination or segregation with reference to the
selection, location, number, use, or occupancy of tenants, subtenants, or
vendees in the premises.
20. Notices. All notices, consents, demands, and other communications from
one party to the other given pursuant to the terms of this Lease shall be in
writing and shall be deemed to have been fully given (i) 24 hours after being
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested, (ii) 24 hours after being deposited with a recognized
courier service guaranteeing overnight delivery; or (iii) on the date of
personal delivery, and addressed as follows: to Landlord at the address
specified in the Basic Lease Information, or to such other place and with such
other copies as Landlord may from time to time designate in a notice to Tenant;
or, in the case of Tenant, delivered to Tenant at the premises.
21. Conditions, Covenants, & Restrictions. Tenant shall faithfully observe
and strictly comply with all of the provisions contained in that certain
Declaration of Covenants, Conditions and Restrictions for the Harbor Bay
Business Park dated March 24, 1983, and recorded March 29, 1983, in the Official
Records of Harbor Bay Isle Associates, a California general partnership, who is
the declarant thereunder (the "Declaration") and Tenant agrees that this Lease
is subject to and subordinate to the same. Upon reasonable prior notice, Tenant
shall allow Landlord, or its agents or representative, access to the Premises
for the purpose of performing and complying with all of the provisions of the
Declaration; provided that Landlord shall not unreasonably interfere with
Tenant's use and occupancy of the Premises.
22. Rules and Regulations. Rules and Regulations for the Premises, Building
and Complex are attached hereto as Exhibit "D" and made a part hereof (the
"Rules and Regulations"). Landlord reserves the right to amend and supplement
the Rules and Regulations at any time. Tenant agrees to faithfully comply with
and observe all Rules and Regulations, as same may be amended or supplemented
from time-to-time, and failure by Tenant to do so shall be deemed a material
breach of this Lease. In no event shall Landlord be liable for its failure to
enforce any Rules or Regulations as to any other tenant of the Complex, nor
shall Landlord be liable for the conduct of any such tenants. In the event of
any conflict between the terms of this Lease and the Rules and Regulations, the
terms of this Lease shall control. Notwithstanding the foregoing, Landlord
agrees that it will not change or modify the Rules and Regulations in any way
that (i) reduces the specific obligations of Landlord to perform under the terms
and conditions of this Lease, (ii) increases the specific obligations of Tenant
to perform under the
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terms and conditions of this Lease, (iii) materially interferes with Tenant's
use and enjoyment of the Premises, or (iv) materially interferes with the
conduct of Tenant's normal business. Landlord agrees to apply and administer the
Rules and Regulations in a fair and nondiscriminatory manner. Should any tenant
in the Building receive any waiver or special dispensation from Landlord with
regard to the Rules and Regulations, Tenant shall be entitled upon request to a
similar waiver or special dispensation.
23. Aircraft Noise. Tenant acknowledges that Landlord has informed Tenant
that noise produced by aircraft used at Metropolitan Oakland International
Airport (the "Airport") which adjoins the Building may be heard at the Premises.
Tenant further acknowledges that Landlord has informed Tenant that the Premises
are subject to a recorded noise easement and release whereby the owners of the
airport are released from any claims or lawsuits for damages by any persons or
entities using the Building, including, without limitation, Tenant, with
respect to airport operations including, without limitation, aircraft related
noise. Tenant hereby agrees to indemnify, defend, protect and hold Landlord and
its agents, employees, representatives, partners, officers, directors and
shareholders harmless from and against any claim, loss, cost damage or expense,
including, without limitation, attorneys' and paralegals' fees and costs and
court costs, arising out of or incurred in connection with any claim, loss cost,
damage or expense incurred by Tenant, or its agents, representatives, employees,
invitees, guests or affiliates, arising out of or in connection with such
airport operations including, without limitation, aircraft related noise.
24. Common Area. Tenant, its employees, invitees, agents and guests are
hereby granted the non-exclusive use of the (i) Building common area and (ii)
that portion of the Common Areas provided by Landlord for parking automobiles
and for ingress and egress to the Building, Premises and the Common Areas;
provided, however, Landlord reserves the right to restrict or prohibit the use
of any Common Area for reasons of maintenance, repair or safety on a temporary
basis as long as Landlord provides sufficient parking and access to the Building
and Premises for Tenant's employees, guests and invitees.
25. Parking. Landlord shall provide within the Common Areas parking for
automobiles and such parking shall be in such designated areas on a non-reserved
basis only. Landlord reserves the right to (i) designate, from time-to-time,
parking space for guests and invitees of tenants of the Building and (ii) alter
and change the configuration of parking areas including, without limitation,
installation of gate controls. There shall be no imposition of parking fees
during the term of the lease unless imposed by governmental regulations.
Landlord may, at its option, and subject to obtaining the approval of the City
of Alameda and the tenant adjacent to the Premises, make certain modifications
to the existing handicapped parking spaces allocated in front of Tenant's
premises to spread them more evenly across the front of the parking area.
26. General Provisions.
(a) This Lease shall be governed by and construed in accordance with
the laws of the state of California.
(b) the invalidity of any provision of this Lease, as determined by a
court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
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(c) This Lease contains all agreements of the parties with respect to
any matter mentioned herein and only may be modified in writing, signed by the
parties.
(d) No waiver by Landlord of any provision hereof shall be deemed a
waiver of any other provision or of any subsequent breach by Tenant of the same
or any other provision. Landlord's consent to or approval of any act shall not
be deemed to render unnecessary the obtaining of Landlord's consent to or
approval of any subsequent act by Tenant. The acceptance of rent hereunder by
Landlord shall not be a waiver of any preceding breach by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
(e) If Tenant remains in possession of the premises or any part thereof
after the expiration of the term with the consent of Landlord, such occupancy
shall be a tenancy from month to month at a rental in the amount of 125% the
last month's rental during the term plus all other charges payable hereunder,
and upon all of the terms hereof.
(f) Subject to the provisions of this Lease restricting assignment or
subletting by Tenant, this Lease shall bind the parties, their personal
representatives, successors, and assigns.
(g) Landlord and Landlord's agents shall have the right to enter the
premises at reasonable times upon reasonable notice for the purpose of
inspecting the same, showing the same to prospective purchasers or lenders, and
making such alterations, repairs, improvements, or additions to the premises or
to the Building as Landlord may deem necessary or desirable; provided, that in
the event that Landlord's access to the Premises or performance of work therein
or elsewhere in the Building or Common Areas materially interferes with the
conduct of Tenant's business for a period of five (5) consecutive business days,
the Rent shall be abated based upon the extent to which such access to the
Premises or performance of work therein or elsewhere in the Building or Common
Areas materially impairs Tenant's ability to carry on its business in the
Premises. Such abatement shall continue until such access to the Premises or
work conducted therein or elsewhere in the Building or Common Areas by Landlord
no longer materially impairs Tenant's ability to carry on its business in the
Premises. Tenant shall not be entitled to such an abatement to the extent that
Landlord's access to the Premises or work conducted therein or elsewhere in the
Building or Common Areas are caused by Tenant, its employees, contractors,
agents, licensees or invitees. Tenant shall have the right, at its option, to
terminate this Lease by written notice to Landlord if such access to the
Premises or work conducted therein or elsewhere in the Building or Common Areas
by Landlord continues for any reason (other than the actions of Tenant, its
employees, contractors, agents, licensees, or invitees) for more than thirty
(30) consecutive calendar days (subject to Unavoidable Delays as defined in
Paragraph 7(b)) and such access to the Premises or work conducted therein or
elsewhere in the Building or Common Areas materially impairs Tenant's ability to
carry on its business in the Premises. Such notice by Tenant to Landlord shall
be effective ten (10) business days from the date of receipt of such notice by
Landlord. Landlord may at any time during the last 120 days of the term place on
or about the premises any ordinary "For Lease" sign.
(h) Tenant shall not conduct any auction at the premises without
Landlord's prior consent.
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(i) The voluntary or other surrender of this Lease by Tenant, the
mutual cancellation thereof or the termination of this Lease by Landlord as a
result of Tenant's default shall, at the option of Landlord, terminate all or
any existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.
(j) If Tenant is a corporation, each individual executing this Lease on
behalf of Tenant represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of the corporation in accordance with a duly
adopted resolution of the Board of Directors and that this Lease is binding upon
the corporation in accordance with its terms. Each individual executing this
Lease on behalf of Landlord represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of Landlord in accordance with
Landlord's partnership agreement and that this Lease is binding upon Landlord in
accordance with its terms.
(k) The term "Landlord" as used herein means the then owner of the
Building and in the event of a sale of the Building the selling owner shall be
automatically relieved of all obligations of Landlord hereunder, except for acts
or omissions of Landlord theretofore occurring.
(l) The term "day" as used herein means a calendar day.
(m) The obligations of Landlord under this Lease do not constitute
personal obligations of the partners, directors, officers, shareholders or
trustees of Landlord, Tenant shall look solely to Landlord and its assets for
the realization of any claims against Landlord and not to the assets of any of
the partners of Landlord, and Tenant expressly waives any and all right to
proceed against any of its partners or the officers, directors, trustees,
shareholders, agents, or employees of any such partners, except to the extent of
their interest in Landlord.
(n) Subject to Paragraph 5, on request by Landlord, Tenant shall
furnish Landlord with satisfactory evidence of payment of Tenant's business
personal property taxes and deliver copies of such business personal property
tax bills to Landlord.
(o) Tenant and Landlord each warrant that CUSHMAN & WAKEFIELD is the
only real estate broker or agent with whom it dealt in connection with the
negotiation of this Lease and that Landlord and Tenant know of no other real
estate broker or agent who is entitled to a commission in connection with this
Lease. Landlord agrees to pay to CUSHMAN & WAKEFIELD all commissions earned in
connection with the negotiation of this Lease.
27. Addendum. In the event of any inconsistency between the terms of this
Lease and the terms of the Addendum, the terms of the Addendum shall control.
28. Exhibits. The exhibits and addendum, if any, specified in the Basic
Lease Information are attached to this Lease and by this reference made a part
hereof.
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IN WITNESS WHEREOF, the parties have executed this Lease on the
respective dates indicated below.
TENANT: LANDLORD:
Avigen, Inc. 1201 HARBOR BAY PARTNERSHIP
a Delaware corporation a California General Partnership
Empire Alameda Inc
a general partner
BY: /s/ John Monahan BY: /s/ [Illegible]
------------------------- ----------------------------
ITS: CEO & President ITS: President
------------------------ ---------------------------
DATE: 11/20/92 DATE: 11/23/92
----------------------- --------------------------
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ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE ("Addendum") is dated as of September 15, 1992, and
is made between 1201 HARBOR BAY PARTNERSHIP, a California general partnership
("Landlord") and AVIGEN, INC., a Delaware corporation ("Tenant") to be a part of
that certain Lease with the same date between Landlord and Tenant ("Lease")
covering the approximate 23,000 rentable square foot premises located in the
building commonly known as 1201 Harbor Bay Parkway, Alameda, California (the
"Building"). Any capitalized terms used, but otherwise not defined herein, shall
have the meaning as defined in the Lease. Landlord and Tenant agree that the
Lease is hereby modified and supplemented as follows:
1. Rent Schedule
Base rent, exclusive of utilities and janitorial will be as follows:
<TABLE>
<CAPTION>
Months Rent
------ ----
<S> <C>
1-27 $1.32
28-48 $1.42
49-60 $1.52
</TABLE>
However, if Tenant occupies additional space prior to month 28, Tenant
shall pay rent of $1.32 per square foot per month.
2. Tenant Improvement Allowance
Landlord shall contribute $736,000 ($32 psf X 23,000 sf) as their
tenant improvement allowance. Funds for tenant improvements will be
placed by Landlord and Tenant in an escrow account with Bank of America
Alameda Main Branch and construction draws will be made in accordance
with standard industry practice between lending agencies and general
contractors. Additional tenant improvements and equipment needed by
Tenant will be funded by Tenant and paid in accordance with the work
letter attached hereto as Exhibit C. It is understood that the total
cost will exceed $1,500,000 and that a detailed cost breakdown will be
supplied to Landlord. Tenant's deposit into escrow shall be the greater
of $736,000 or the difference between total cost less $736,000. In no
event shall the Landlord contribute more than 50% of the cost of tenant
improvements that remain with the building at the end of the Lease, or
any earlier lease termination, Tenant will hire its own general
contractor (Sim/Tech - Simon Gundelson) to develop the space.
Landlord's review of plans, construction drawings or construction
shall be Landlord's sole cost.
Over the course of construction, Sim/Tech and Tenant will need Landlord
approval to access the roof and install equipment as well as access for
maintenance thereafter and Landlord hereby provides to Tenant and its
contractors a non-exclusive easement for such purposes.
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3. Option to Lease Additional Space
Provided Tenant is in actual physical occupancy of at least two thirds
of the rentable area comprising the Premises and no Event of Default
has occurred and is continuing under the Lease, Tenant shall have an
option to lease not less than 7,500 sf in 1201 Harbor Bay Parkway or
Parkway Centre buildings 1301, 1311, 1321, or 1351 Harbor Bay Parkway.
By written notice to Landlord between June 1, 1996 and December 1,
1996, Landlord will attempt to make available space consisting of 7,500
plus or minus 10% contiguous rentable square feet within 6 months of
Tenant's written notice, in a location and configuration selected by
Landlord in its sole discretion (the "Available Space"); provided,
however, that such space shall be of a configuration which is
consistent with sound space planning principles, including without
limitation those affecting exterior window exposure for such space, if
applicable and if the offered space is at 1201 Harbor Bay Parkway, it
shall have direct access to other space leased by Tenant. If Tenant
accepts the Available Space (which Tenant shall do by giving Landlord
written notice within ten (10) days after Landlord advises Tenant as to
the location and configuration of such space), Landlord and Tenant
shall enter into an Addendum to this Lease which shall provide that
Tenant is leasing the Available Space on the same terms as this Lease
except as expressly stated in this Paragraph 3 to the Addendum to the
Lease. Tenant shall be obligated to pay the lesser of the then existing
rent with respect to the Premises or 95% of the then FMV as defined in
Paragraph 5 below. Rent shall commence upon receipt of a certificate of
occupancy from the City of Alameda. If Landlord cannot deliver the
Available Space as required by this Paragraph 3, Tenant's only remedy
shall be to cancel the Lease on a 120 day written notice or continue to
lease the Premises pursuant to the terms of this Lease.
In the event Tenant doesn't need expansion space during the above
timeframe, Landlord shall make the best efforts to accommodate Tenant
in the event expansion space is required.
4. Non-Disturbance Agreement
The effectiveness of this Lease is conditioned upon Landlord obtaining
the consent to this Lease from Landlord's Lender (CalFed) and Lender
delivering to Tenant a non-disturbance agreement in form acceptable to
Tenant within ten (10) business days from the date of full execution of
this Lease. If the conditions set forth in this Paragraph 4 are not
satisfied within such ten (10) business day period then either party
shall have the right to terminate this Lease by notice to the other, in
which event neither party shall have any further liability to the
other.
5. Right to Extend the Lease
Tenant shall have two 5 year options to extend the lease term. The
options to extend shall be exercisable by Tenant prior to termination
of the initial term or any subsequent terms by notifying Landlord in
writing of their intent to renew 180 days prior to lease expiration.
The gross rental rate for the lease option(s) shall be 95% of the then
Fair Market Value (FMV) but not less than the rental rate for the
previous 12 months and not
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more than an accumulated increase of an average of 4% per annum. The
determination of FMV shall be made as follows: Landlord shall propose a
fair market rental value and shall notify Tenant of its determination
upon offering Available Space or 120 days prior to the expiration of
the initial term or any option term of the Lease, as the case may be.
Tenant shall have fifteen (15) business days from the date of
Landlord's notice within which to accept or reject Landlord's
determination. If Tenant rejects Landlord's determination by written
notice to Landlord, and the parties are unable to thereafter agree
within fifteen (15) business days, then each of the parties shall,
within fifteen (15) business days of Tenant's notice of rejection,
appoint a M.A.I. appraiser familiar with the Harbor Bay Business Park
and with no less than ten years experience in the geographical area of
the Building. If either Landlord or Tenant shall fail to appoint an
M.A.I. appraiser so qualified, then the single appraiser appointed
shall be the sole appraiser and determine the fair market rental value
of the Premises or the Available Space, as the case may be. In the
event each party appoints an appraiser, such appraisers shall within
thirty days after the appointment, complete their determinations of
fair market rental value and furnish the same to Landlord and Tenant.
If the low appraisal varies from the higher appraisal by 10% or less of
the higher appraisal, the fair market rental value shall be the average
of the two valuations. If the low appraisal varies from the high
appraisal by more than 10% of the higher appraisal, the two appraisers
shall within ten (10) days after submission of the last appraisal
report, appoint a third appraiser who has not previously acted in any
capacity for or against either party. Such third appraiser shall,
within thirty (30) days after appointment, make a determination of fair
market rental value and submit an appraisal report to Landlord and
Tenant. The fair market rental value of the Premises or the Available
Space, as the case may be, shall be as determined by the third
appraiser, unless it is less than the valuation set forth in the lower
appraisal previously obtained, in which case the valuation set forth in
the lower prior appraisal shall be controlling, or unless it is greater
than the valuation set forth in the higher appraisal previously
obtained, in which case the valuation set forth in the higher prior
appraisal shall be controlling. Neither party shall be permitted an
appraiser, nor shall the two appraisers so appointed be permitted to
appoint a third appraiser, who will not be available for resolution of
the dispute within the thirty (30) day period following their
appointment. Each party shall bear fees and charges of the appraiser
appointed by it, and the fees and charges of the third appraiser shall
be paid equally by the parties. In making their determination, the
appraisers shall determine the fair market rental value on comparable
lease transactions for office or research and development space in the
Park. Market conditions including concessions such as free rent,
overstandard tenant improvements, moving allowances or any other
concessions then available shall be taken into account when determining
fair market rental. If the lease for the Available Space or the
extended term of this Lease shall commence before the appraisers shall
determine the fair market rental value of the Premises or the Available
Space, as the case may be, then the rental shall be the rental then
being paid under this Lease and upon such fair market rental value
being determined, if such rental shall be greater than the rental then
being paid for such space, then Tenant shall pay such difference to
Landlord, and if such rental shall be less than the rent then being
paid for such space, then Tenant shall receive a credit against the
rent next coming due for the difference.
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6. Right to Terminate the Lease
In the event that ownership of Tenant is transferred or sold and the
Premises are deemed "excess", the Tenant shall have the one time option
to terminate the Lease by giving Landlord not less than 6 months prior
written notice of termination and thereupon paying the Landlord the
following described termination fee so long as no Event of Default has
occurred and is continuing at the time the lease termination notice is
given to Landlord and throughout the period from delivery of the notice
to termination of the Lease. The termination fee shall be the greater
of (i) an amount equal to one year's rent calculated as the average
monthly rent payable throughout the lease term plus the monthly amount
last payable by Tenant pursuant to section 4 of the Lease multiplied by
12, or (ii) the unamortized balance of the $736,000 payable for tenant
improvements by Landlord and leasing commissions paid by it with
respect to this Lease based upon the amortization of those expenses
over five years with interest thereon calculated at 10% per annum.
7. Personal Guarantee
This Lease shall be personally guaranteed by Dr. Lindsay A. and Riyki
Rosenwald on the form attached Exhibit "G".
8. Quiet Enjoyment. Landlord covenants that the Tenant's use and enjoyment
of the Premises will not be disturbed during the term of this Lease so
long as the Tenant pays the rent, and performs all of its obligations
in this Lease.
9. Trash Enclosure. Landlord shall provide space consisting of not less
than two (2) parking stalls reasonably adjacent to Tenant's Premises
for the installation of a dumpster or other trash enclosure for use by
Tenant. Tenant shall install such trash enclosure in accordance with
all applicable laws.
10. Loading Dock; Roof Hatch. Tenant shall have the right to construct a
loading dock in the northeast corner of the Building. Tenant shall also
have the right to construct a roof hatch to allow access from the
Premises directly to the roof of the Building. The location of the
loading dock and the roof hatch shall be as set forth on the Space
Plan (as defined in Exhibit C to this Lease).
11. Upon the commencement date of the Lease term for the Initial Premises,
the Landlord and Tenant shall execute an instrument confirming such
date and setting forth the Tenant's percentage share of the Building.
12. The effectiveness of this Lease is conditioned upon Tenant obtaining
within ten (10) business days from the date of full execution of this
Lease an agreement from the existing tenant at the Building (the
"Existing Tenant") in form acceptable to Tenant pursuant to which the
Existing Tenant agrees to allow Tenant to take all actions necessary for
Tenant to separate the utilities serving the Building, including,
without limitation, access to the Adjacent Tenant's sanitary,
electrical, heating, air conditioning, water or other essential
services serving the Adjacent Tenant's premises as become necessary to
effectuate such separation of utilities. If the conditions set forth in
this
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Paragraph 12 are not satisfied within such ten (10) business day period
then Tenant shall have the right to terminate this Lease by notice to
Landlord, in which event neither party shall have any further liability
to the other. If Tenant fails to so terminate the Lease within the ten
(10) business day period, this condition shall be deemed satisfied.
Notwithstanding anything heretofore provided, Tenant shall perform such
work in a manner that will not unreasonably interfere with Adjacent
Tenant's premises and, if necessary, Tenant will contract to perform
such work on an after hours basis.
13. Notwithstanding anything to the contrary contained in this Lease, upon
the full execution of this Lease Tenant shall have the right to occupy
the lobby of the Premises (including installation of telephones and
office furniture) subject to all of the terms and conditions of this
Lease other than the obligation to pay rent or other charges hereunder
other than utility charges for the entire Premises and any other costs
relating to its partial occupancy and construction of tenant
improvements.
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Exhibit C
Initial Tenant Improvements - Work Agreement
The undersigned, as Landlord and Tenant, are executing this Work
Agreement concurrently with the Lease for the Premises described in the Lease to
which this Work Agreement is attached as Exhibit C and made a part thereof.
Terms used herein which are defined in the Lease shall have the meanings therein
given.
1. Tenant's Design; Plans and Specifications for Construction.
A. The term "Tenant Improvements" as used herein and the Lease shall
mean the tenant improvements to be made to the Premises by Tenant pursuant to
the Plans and Specifications referred to below.
B. Attached hereto as Exhibit 1 is Tenant's space plan for the Premises
("Space Plan") which shall be deemed to be approved by Landlord upon Landlord's
execution of the Lease.
C. Landlord has provided Tenant with all Building standard details,
base sheets and base Building details that are in Landlord's possession. Tenant
shall submit to Landlord for approval, which approval shall not be unreasonably
withheld, complete working drawings including architectural, mechanical and
electrical engineering plans, specifications and details for construction of
Tenant Improvements. Tenant agrees at Tenant's cost and expense to cause
Tenant's architect to prepare and deliver to Landlord for Landlord's approval
one (1) reproducible sepia set of Tenant plans and of specifications showing
design and finishing of the Premises (herein "Plans and Specifications"). Tenant
agrees that all engineering design shall be performed by engineering firms
reasonably acceptable to Landlord. It is the responsibility of Tenant to be
certain that all Plans and Specifications are prepared in accordance with the
Building Codes of the City and County of Alameda and all other applicable codes
and regulations and to obtain any and all required permits for construction. In
addition, any design that varies from Building Standard materials shall be based
upon sound architectural and engineering practice utilizing construction methods
and materials which are of no less quality than Building Standard.
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D. Landlord shall have five (5) business days following submission of
the Plans and Specifications to respond to Tenant with Landlord's comments or
approval of the Plans and Specifications. Landlord's failure to respond within
such period shall be deemed Landlord's approval. In the event Landlord makes
requested changes to said Plans and Specifications, they shall be revised by
Tenant who shall submit the revised Plans and Specifications to Landlord for
Landlord's review and approval and Landlord shall have three (3) business days
following submission to Landlord to respond with the approval or comments.
Landlord's failure to respond within such period shall be deemed Landlord's
approval. This procedure shall continue until Landlord has given its approval
for Tenant's Plans and Specifications.
E. If Tenant shall request any change, addition or alteration in the
approved Plans and Specifications, Tenant shall prepare and submit to Landlord
revised Plans and Specifications with respect to such change, addition or
alteration; provided, however, that notwithstanding the foregoing, Tenant shall
be entitled to make minor field changes without Landlord's consent. Any such
change, addition or alteration shall be subject to the provisions of Section 1.C
and 1.D above.
F. Within sixty (60) days after completion of construction of the
Tenant Improvements, Tenant shall provide Landlord with a set of conformed plans
on mylar incorporating all field changes made and all Landlord-approved changes
and/or revisions to the Plans and Specifications.
2. Construction.
A. Following Landlord's approval of Tenant's Plans and Specifications,
Tenant shall cause Tenant's contractor to commence and diligently proceed with
the construction of the Tenant Improvements.
B. All Tenant Improvements shall be constructed by Tenant's contractor.
(1) All work by Tenant and its contractors shall be performed
in such a manner so as to maintain harmonious labor relations and as not to
interfere with or delay the work of Landlord's contractors working in the
Building or to unreasonably interfere with other Building tenants or the
operation of the Building.
(2) No work by Tenant or its contractor shall proceed without
Landlord's prior written approval not
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to be unreasonably withheld of (1) Tenant's contractor (provided that Landlord
hereby approves of Sim/Tech Construction and Management Corporation as Tenant's
contractor); (ii) the Plans and Specifications for the work; and (iii) a
certification of Worker's Compensation Insurance in an amount and with a
company on a form reasonably acceptable to Landlord and a Certificate of
Insurance in form and from an insurer reasonably acceptable to the Landlord,
showing Tenant or Tenant's contractor to have in effect public liability and
property damage insurance with combined single limit of $1,000,000. All such
certificates shall be endorsed to show Landlord as an additional insured and
such insurance shall be maintained by Tenant or Tenant's contractor at all times
during the performance of the Tenant Improvement work by Tenant and its
contractors.
(3) All work by Tenant and its contractors shall be done in
conformity with all applicable codes and regulations of governmental authorities
having jurisdiction over the Building and valid building permits and other
applicable governmental requirements. Any work performed by Tenant's contractors
not acceptable to the City of Alameda Building and Fire Departments, or any
successor department or agency thereto, shall be promptly replaced at Tenant's
expense. Notwithstanding any failure by Landlord to object to any such work,
Landlord shall have no responsbility therefor.
(4) Tenant and Tenant's contractors shall abide by all safety
and construction rules and regulations of Landlord, and all work and deliveries
shall be scheduled through Landlord. Entry by Tenant's contractors shall be
deemed to be under all the terms, covenants and conditions of the Lease except
the covenant to pay Rent. All Tenant's materials, work, installation and
decorations of any nature brought upon or installed in the Premises before the
commencement date of the Lease shall be at Tenant's risk, and neither Landlord
nor any party acting on Landlord's behalf shall be responsible for any damage
thereto or loss or destruction thereof. Contractors and subcontractors engaged
by Tenant shall employ persons and means to insure so far as may be possible the
progress of the work without interruption on account of strikes, work stoppage
or similar causes for delay.
(5) Tenant's representative shall be responsible for and shall
secure all governmental approvals and permits required for the Tenant
Improvements and will provide Landlord with copies of such permits or approvals
prior to the commencement of the construction of the Tenant Improvements.
Landlord will cooperate with Tenant to obtain
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such approvals and execute and deliver such applications and consents as may be
required in accordance with the approved Plans and Specifications.
(6) Tenant will be responsible for all clean-up with respect
to the Tenant Improvements, whether in the Premises themselves or in other areas
utilized by Tenant or its contractors, and agrees to reimburse Landlord for any
and all expenses incurred by Landlord by reason of substandard work performed by
Tenant's contractor or contractors (as reasonably determined by Landlord) or as
a result of inadequate clean-up.
(7) Storage of Tenant's contractors' construction materials,
tools and equipment and construction trailers shall be confined within the
Premises and in a construction staging area located reasonably adjacent to the
Building. If any such materials, tools and equipment are stored in space or
spaces outside the Premises but within the Building, they shall be moved to such
other space as Landlord shall direct from time to time to avoid unreasonable
interference or disturbance of other tenants in the Building.
(8) Tenant shall be fully responsible for the operations and
activities of its general contractor and all subcontractors employed by the
general contractor, and other individuals or contractors employed by Tenant in
the completion of the Tenant Improvements.
(9) Tenant shall reimburse Landlord for any expense incurred
by Landlord by reason of faulty work done by Tenant or its contractors, or by
reason of cleanup which fails to comply with Landlord's rules and regulations.
C. Landlord shall provide to Tenant and its contractors access and
entry to the Premises and such other portions of the Building as are necessary
for the construction of the Tenant Improvements, subject to all of the terms and
conditions of the Lease. Landlord shall permit Tenant's contractor to erect a
small sign provided that such sign shall conform with all applicable laws,
ordinances, rules and regulations.
3. Tenant Improvement Costs.
A. Landlord will provide Tenant with an allowance of $32.00 per
rentable square foot (with respect to the entire Premises, including the Initial
Premises and the Remainder Premises) for tenant improvement costs, including the
cost of the Tenant Improvements and any tenant
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improvement costs for the Remainder Premises not included in the initial Tenant
Improvements ("Landlord's Allowance"). Tenant shall pay all tenant improvement
costs in excess of Landlord's contribution, it being understood and agreed that
Landlord's maximum contribution for tenant improvements shall not exceed $32.00
per rentable square foot. Tenant hereby agrees to pay towards the cost of the
tenant improvements one dollar for each dollar of Landlord's Allowance that is
paid towards tenant improvements pursuant to Paragraph 3B below.
B. Prior to the commencement of construction of the Tenant
Improvements, the Landlord's Allowance shall be placed by Landlord in a type of
escrow account and with a despositary reasonably acceptable to Landlord and
Tenant (which account shall be in the name of Landlord) and an equal sum shall
be placed by Tenant in a similar escrow account with the same depositary (which
account shall be in the name of Tenant) (collectively, the "Escrowed Amounts").
The Escrowed Amounts shall be disbursed from each escrow account on a 50-50
basis to the parties designated by Tenant within ten (10) days after Tenant has
delivered to Landlord copies of the original invoices for the Tenant Improvement
work, unconditional waivers and releases of lien rights for all work performed
and materials delivered in connection with the tenant improvements, excluding
work performed and materials delivered for the then requested payment and the
immediately preceding payment, and a certificate from Tenant's architect
certifying that the work and materials have been furnished as indicated in such
statement and such work has been completed in accordance with the approved Plans
and Specifications. Disbursements from either escrow account shall require the
signatures of Landlord, Tenant and, until final payment has been made to
Tenant's contractor for the Tenant Improvements, Tenant's contractor. Any
Escrowed Amounts remaining undisbursed after completion of the initial Tenant
Improvements shall be disbursed in the manner set forth in this Paragraph 3B
towards the cost of any immovable equipment to be installed by Tenant in the
Premises as well as the cost of any tenant improvements to the Remainder
Premises; provided that any Escrowed Amounts remaining undisbursed after the
date that is twenty-eight (28) months after the commencement date with respect
to the Initial Premises shall be disbursed to the party in whose name the
applicable escrow account is held.
4. Liens, etc.
Tenant shall promptly pay when due all costs incurred in connection
with the Tenant Improvements and, as provided in Paragraph 8 of the Lease,
shall not permit the
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filing of any mechanic's lien or other lien in connection with the Tenant
Improvements, except that if any lien is filed against the Building, Tenant
shall have the right to contest the correctness or the validity of any such
lien if, within fifteen (15) days after demand by Landlord, Tenant procures and
records a lien release bond issued by a corporation authorized to issue surety
bonds in California in an amount equal to one and one-half times the amount of
the claim of lien. Notwithstanding the foregoing, if any lien is filed against
the Building in connection with Tenant's Improvements and such lien is not the
result of a failure by Landlord to make a payment under Paragraph 3.B of this
Exhibit, then Tenant shall have no obligation to discharge or cause to be
discharged the lien.
5. Delay.
No delay in the completion of construction of the Tenant Improvements
shall be considered in the determination of the commencement date of the Lease
except and only to the extent such delay is unavoidable and the direct result of
delays by Landlord, acts of God, strikes, civil commotion, fire, earthquake,
governmental restrictions, regulations or controls (including delays
attributable to the actions and requirements of federal, state and local
agencies and any architectural review board or similar body having jurisdiction
over the Harbor Bay Business Park, respecting issuance of building permits,
utility hookup permits and certificates of occupancy and/or like matters) or
other similar conditions which are beyond the reasonable control of Tenant. If a
delay occurs as provided in this Paragraph 5, unless Tenant shall give a notice
to Landlord of its claim to an extension of time within ten (10) days after the
event giving rise to such claim shall have occurred, there shall be excluded in
computing the number of days in excess of ten (10) days which shall have elapsed
between the occurrence of such event and the actual giving of such notice. In
the event of any such delay the commencement date shall be delayed by the number
of days of such delay; provided, however, if as a result of such delays Tenant
is unable to obtain all necessary building and utility hookup permits by the
date that is one hundred twenty (120) days after the date of full execution of
the Lease, then Tenant shall have the right to terminate this Lease by notice to
Landlord. Prior to Tenant obtaining all necessary building and utility permits
for the Tenant Improvements or waiving its right to terminate the Lease pursuant
to this Paragraph 5, Tenant shall not perform any of the Tenant Improvements
work without first obtaining the
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approval of Landlord, which approval shall not be unreasonably withheld and
which approval shall indicate whether the work for which such approval is being
requested must be removed and the Premises restored if all such permits are not
obtained and Tenant terminates the Lease. In addition, prior to Tenant obtaining
all necessary building and utility permits or waiving its right to terminate the
Lease pursuant to this Paragraph 5, Landlord shall not be required to pay any
sums towards the cost of performing the Tenant Improvements work; provided,
however, that upon Tenant obtaining all such permits or waiving such termination
right, Landlord shall reimburse to Tenant Landlord's pro rata share of such
costs in the manner set forth in Paragraph 3B above as if Landlord had always
been obligated to pay such costs.
LANDLORD:
1201 HARBOR BAY PARTNERSHIP
a California general partnership
By: /s/ Jim Hunter
--------------------------------
Its: President
---------------------------
Date: 11/23/92
--------------------------
TENANT:
AVIGEN, INC.
a Delaware corporation
By: /s/ John Monahan
--------------------------------
Its: CEO & President
---------------------------
Date: 11/20/92
--------------------------
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EXHIBIT "D"
PARKWAY CENTRE
RULES AND REGULATIONS
1. The Common Areas shall not be obstructed by Tenant or used for any
purpose other than for ingress and egress to and from the Premises. Landlord
shall in all cases retain the right to control and prevent access to all
Buildings and the Common Areas to all persons whose presence, in the reasonable
judgement of Landlord, would be prejudicial to the safety, character, reputation
and interests of any portion of the Building.
2. Except as set forth in this Lease, no sign, placard, picture, name,
advertisement or notice visible from the exterior of the Premises shall be
inscribed, painted, affixed or otherwise displayed by Tenant on any part of the
Building without the prior written consent of the Landlord. Landlord will adopt
and furnish to Tenant general guidelines relating to signs inside of a Building.
Tenant agrees to conform to such guidelines. All approved signs or lettering on
doors shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person approved by Landlord. Material visible from the outside of a
Building will not be permitted without the prior written consent of Landlord.
3. The Premises shall not be used for the storage of merchandise held for
sale to the general public or for lodging and no cooking for consumption shall
be done or permitted on the Premises except private use by Tenant of
Underwriters' Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages, provided that such use is in accordance with
all applicable Federal, state and municipal laws, codes, ordinances, rules and
regulations.
4. Tenant shall not be permitted to place, or permit the placement, of any
coin or other operated vending machine on the Premises or any Common Area
without the prior written consent of the Landlord.
5. Tenant shall not obtain for use in the Premises ice, drinking water,
food, beverages, towels or other similar services, except at such reasonable
hours and under such reasonable regulations as may be fixed by Landlord.
6. Tenant shall not use or permit the use of any gas, electrical or other
type of space heater within the Premises or Building.
7. Tenant shall not conduct in or about the Premises any auction, public
or private, without the prior written approval of Landlord.
8. Tenant upon the termination of this lease shall deliver to Landlord all
keys to doors of the Premises and of all Buildings of which the Premises are a
part.
9. There shall not be used in any space, or in the public halls of any
Building, either by Tenant or others, any hand trucks except those equipped with
rubber tires and side guards or other such material handling equipment as
Landlord may approve. No other vehicles of any kind shall be brought by Tenant
into any Building or kept in or about the Premises.
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10. Tenant will keep all doors opening to the exterior of any Building in
which the Premises are located, all fire doors, and all smoke doors closed at
all times.
11. If Tenant uses the Premises after regular business hours or on
non-business days, Tenant shall lock any entrance doors to the Building or
Premises used by Tenant immediately after using such doors.
12. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, hangings or decorations shall be attached to, hung or placed in, or
used in connection with any window of a Building without the prior written
consent of Landlord. In any event, with the prior written consent of Landlord,
such items shall be installed on the office side of Landlord's standard window
covering and shall in no way be visible from the exterior of the Building.
13. Tenant shall keep the doors to Building corridors closed at all times
except for ingress and egress.
14. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed. No foreign substance of any kind whatsoever shall be thrown herein
and the expense of any breakage, stoppage or damage resulting from such a
violation shall be borne by Tenant if Tenant or its employees or invitees, shall
have caused same.
15. Except as set forth in the Lease, Tenant shall not install any radio or
television antenna, loudspeaker, or other devise on the roof or exterior walls
of any Building or in the Common Areas. No TV or radio or recorder shall be
played on such a manner as to cause a nuisance to any other tenant.
16. Canvassing, soliciting, distribution of handbills or any other written
material and peddling on the Common Areas are prohibited, and Tenant shall
cooperate at no expense to Tenant to prevent the same.
17. During recognized normal business hours only, the parking areas within
the Common Areas shall be used solely for the parking of passenger vehicles
only. No vehicle may be parked overnight without Landlord's prior written
consent. Company business vehicles may be parked provided same are
pre-registered with Landlord and an appropriate permit is issued. All vehicles
must park in designated parking lanes within the lines drawn therefor and in
conformity with all signs and markers except as otherwise set forth in the
Lease. The parking of other trucks and trailer vehicles may occur with the
approval of Landlord. Storage of vehicles within the parking areas is prohibited
at all times. If a vehicle shall be disabled, it must be removed within 48 hours
of such disabling otherwise it shall be subject to removal by Landlord under
applicable ordinances. No vehicle shall contain or be posted with a "For Sale"
sign or other advertising sign, except for company business vehicles permitted
as set forth above. Violators of the above parking rules are subject to their
vehicle being removed at the violator's expense. Tenant agrees that Tenant
leaves any such vehicles in such parking solely at its own risk and that in no
event shall Landlord be liable for any damage to or destruction of any such
vehicle.
-29-
<PAGE> 40
18. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Park.
19. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, any of the other
agreements, covenants or conditions contained in this Lease. Wherever Landlord's
consent is required hereunder it shall not be unreasonably withheld.
-30-
<PAGE> 41
EXHIBIT E
OPERATING EXPENSES - EXCLUSIONS
(a) Cost of decorating, redecorating, or special cleaning or other services
not provided on a regular basis to tenants of the building, so long as
such decorations are typical and customary in public areas of suburban
office buildings on the market.
(b) Wages, salaries, fees and fringe benefits paid to administrative or
executive personnel or officers or partners of landlord unless
employed at competitive rates as independent contractors;
(c) Any charge for depreciation of the building or equipment and any
interest or other financing charge;
(d) Any charge for landlord's income taxes, excess profit taxes, franchise
taxes, or similar taxes on landlord's business;
(e) All costs relating to activities for the solicitation and execution of
leases of space in the building;
(f) All costs for which tenant or any other tenant in the building is being
charged other than pursuant to the operating expense clauses;
(g) The cost of any electrical current furnished to the premises or any
rentable area of the building for purposes other than the operation of
building equipment and machinery and the lighting of public toilets,
stairways, shaftways, and building machinery or fan rooms;
(h) The cost of correcting defects in the construction of the building or
in the building equipment, or bringing the Building into compliance
with building and safety codes applicable to the Building;
(i) The cost of any repair made by landlord because of the total or partial
destruction of the building or the condemnation of a portion of the
building.
(j) Any increase in insurance premium to the extent that such increase is
caused or attributable to other tenant's;
(k) The cost of any items for which Landlord is reimbursed by insurance or
otherwise compensated by parties other than tenants of the building
pursuant to clauses similar to this paragraph;
(l) The cost of any additions or capital improvements to the building
subsequent to the date of original construction;
-31-
<PAGE> 42
EXHIBIT E
OPERATING EXPENSES - EXCLUSIONS (Cont'd)
(m) The cost of any repairs, alterations, additions, changes, replacements,
and other items which under generally accepted accounting principles
are properly classified as capital expenditures to the extent they
upgrade or improve the building as opposed to replacing existing items
which have worn out;
(n) Any operating expense representing an amount paid to a related
corporation, entity, or person which is in excess of the amount which
would be paid in the absence of such relationship;
(o) The cost of tools and equipment used initially in operation, repair and
maintenance of the building;
(p) The cost of any work or service performed for or facilities furnished
to any tenant of the building to a greater extent or in manner more
favorable to such tenant than that performed for or furnished to tenant
other than set out;
(q) The cost of alterations of space in the building leased to other
tenants;
(r) The cost of overtime or other expense to Landlord in curing its
defaults or performing work expressly provided in this Lease to be
borne at Landlord's expense.
(s) Capital improvements or expenditures incurred to reduce operating
expenses shall be included in operating expenses to the lesser of the
annual amortized amount of said improvements or expenditures (over the
useful life of the improvement or item) or the actual savings.
(t) The cost to comply with any environmental regulations including but not
limited to the cost of removal or chlorofluorocarbons (CFC) or adaption
of building HVAC systems to use substances other than CFC, nor shall
Tenant be responsible for any increase in cost of substitute materials
to replace CFC.
-32-
<PAGE> 43
EXHIBIT F
REAL ESTATE EXCLUSIONS
1. Inheritance Taxes
2. Gift Taxes
3. Transfer Taxes
4. Franchise Taxes
5. Excise Taxes
6. Net Income Taxes
7. Profit Taxes
8. Capital Levies
9. Late Payment Charges and Penalties
10. Special assessments levied against other than real estate. Assessments
payable hereunder may be payable by Tenant in installments if the
Landlord is permitted to do so.
11. Real estate tax increases arising form sale or transfer of the Building,
including those arising from reappraisal of the Building due solely to
sale or transfer, including, without limitation, any increase in real
estate taxes arising from Landlord's acquisition of the Building.
12. Real estate tax increases arising as a result of any improvements of the
Building or Common Areas made by or for the exclusive benefit of any
tenants, including the Tenant.
-33-
<PAGE> 44
GUARANTY
DR. LINDSAY A. ROSENWALD and RIVKI ROSENWALD (collectively, "Guarantor"),
whose address is 30 West 63rd Street, New York, New York 10023, as a material
inducement to and in consideration of 1201 HARBOR BAY PARTNERSHIP ("Landlord")
entering into a written lease (the "Lease") with AVIGEN, INC. ("Tenant"), dated
the same date as this Guaranty, pursuant to which Landlord is leasing to Tenant
and Tenant is leasing from Landlord, premises located at 1201 Harbor Bay
Parkway, Alameda, California, unconditionally guarantees and promises to and
for the benefit of Landlord that Tenant shall perform the provisions of the
Lease that Tenant is to perform.
If Guarantor is more than one person, Guarantor's obligations are joint
and several and are independent of Tenant's obligations. A separate action may
be brought or prosecuted against any Guarantor whether the action is brought or
prosecuted against any other Guarantor or Tenant, or all, or whether any other
Guarantor or Tenant, or all, are joined in the action.
Guarantor waives the benefit of any statute of limitations affecting
Guarantor's liability under this Guaranty.
The provisions of the Lease may be changed by written agreement between
Landlord and Tenant at any time, without the consent of or without notice to
Guarantor. This guaranty shall guarantee the performance of the Lease as
changed. Assignment of the Lease (as permitted by the Lease) shall not affect
this Guaranty.
This Guaranty shall not be affected by Landlord's failure or delay to
enforce any of its rights.
If an Event of Default by Tenant occurs under the Lease, Landlord can
proceed immediately against Guarantor or Tenant, or both, or Landlord can
enforce against Guarantor or Tenant, or both, any rights that it has under the
Lease, or pursuant to applicable laws. If the Lease terminates and Landlord has
any rights it can enforce against Tenant after termination, Landlord can
enforce those rights against Guarantor without giving previous notice to Tenant
or Guarantor, or without making any demand on either of them, except to the
extent Landlord is required give Tenant notice under the Lease.
Guarantor waives the right to require Landlord to (1) proceed against
Tenant; (2) proceed against or exhaust any security that Landlord holds from
tenant; or (3) pursue any other remedy in Landlord's power. Guarantor waives any
defense by reason of any disability of Tenant, and waives any other defense
based on the termination of Tenant's liability from any cause except full
performance of tenant's obligations under the Lease. Until all Tenant's
obligations to Landlord have been discharged in full, Guarantor has not right
of subrogation against Tenant. Guarantor waives its right to enforce any
remedies that Landlord now has, or later may have, against Tenant. Guarantor
waives any right to participate in any security now or later held by Landlord.
Except as other wise set forth in this Guaranty, Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protests, notices of dishonor, and notices of acceptance of this
Guaranty, and waives all notices of existence, creation, or incurring of new or
additional obligations.
-34-
<PAGE> 45
If Landlord disposes of its interest in the Lease, "Landlord," as used
in this Guaranty, shall mean Landlord's successors.
If Landlord is required to enforce Guarantor's obligations by legal
proceedings, Guarantor shall pay to Landlord all costs incurred, without
limitation, reasonable attorneys' fees.
Guarantor's obligations under this Guaranty shall be binding on Guarantor's
successors.
Defined terms not otherwise defined herein shall have the meaning ascribed
to them under the Lease.
Dated November 17, 1992
/s/ Lindsay A. Rosenwald
------------------------------
Dr. Lindsay A. Rosenwald
/s/ Rivki Rosenwald
------------------------------
Rivki Rosenwald
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
The foregoing instrument was subscribed and sworn to before me this
17th day of November 1992, by Lindsay A. Rosenwald, M.D. and Rivki Rosenwald.
WITNESS my hand and official seal.
My commission expires: April 27, 1994
STEVE H. KANZER
Notary Public State of New York
No. 31-4995672
Qualified in New York County
Commission Expires April 27, 1994
---------------------------------
Notary Public
/s/ Steve H. Kanzer Nov. 17, 1992
-35-
<PAGE> 46
SECOND ADDENDUM TO LEASE
THIS AGREEMENT, made and entered into as of this 30th day of June, 1995,
by and between 1201 HARBOR BAY PARTNERSHIP, a California general partnership
(hereinafter referred to as "Landlord"), and AVIGEN, INC., a Delaware
corporation (hereinafter referred to as "Tenant"):
WITNESSETH
WHEREAS, on the 15th day of September 1992, Landlord and Tenant entered
into an agreement to lease covering those certain premises consisting of
Twenty-Three Thousand Square Feet (23,000) in that certain building situated in
the City of Alameda, County of Alameda, State of California and more commonly
known as 1201 Harbor Bay Parkway, for a period of five (5) years; and
WHEREAS, Landlord and Tenant now desire to amend the terms of said Lease
in certain particulars hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
1) Term: The term of the Lease shall be extended for an additional five (5)
years from May 15, 1998 to May 14, 2003.
2) Base Rent: Base rent for Tenant's entire premises of 23,000 square
feet, during this extension period, shall be Thirty-Four Thousand Nine Hundred
and Sixty and no/100 Dollars ($34,960.00) per month. This rent is calculated at
$1.52 per square foot, per month, and shall remain in effect for the entire
five (5) year extension.
3) Rent Deferral: Landlord and Tenant understand and agree that the rent
increase from $1.32, per square foot, per month to $1.42, per square foot, per
month, effective August 15, 1995, shall be deferred until February 15, 1996.
Additionally, the rent due on the additional Six Thousand Five Hundred and
Seventy-One (6,571) square feet of space, effective August 15, 1995, shall be
deferred until February 15, 1996. All deferred rent shall become due and
payable until on February 15, 1996 and there shall be no interest accrued on
said deferred rents.
4) Estoppel: Tenant agrees, to the best of it's ability, that (i) Landlord
has performed all of its obligations under the Lease to the date hereof, and
(ii) no event has occurred or is occurring which, with the passage of time or
the giving of notice, or both, would constitute a default, by the Landlord,
under the Lease.
5) Ratification: As amended hereby, the Lease is ratified and confirmed in
all respects.
<PAGE> 47
In witness whereof, the undersigned have executed this instrument as of the
date hereinabove written.
LANDLORD: TENANT:
AVIGEN, INC., a
1201 HARBOR BAY PARTNERSHIP Delaware Corporation
a California general partnership
By: /s/ D. Bruester By: /s/ John Monahan
------------------------- --------------------------
D. Breuster John Monahan
Its: CFO Its: President and CEO
2
<PAGE> 48
EXCLUSIVE SUBLEASING LISTING AGREEMENT
1. In consideration of the listing for sublease of the real property
hereinafter described (the "Property") by REDDING MANAGEMENT, INC., a
California Corporation ("Broker"), and Broker's agreement to use its
best efforts to effect a sublease or subleases of same, the
undersigned ("Sublessor") hereby grants to Broker the exclusive right to
negotiate a sublease or subleases of the Property for a period
commencing June 20, 1995, and ending midnight, December 20, 1995 (the
"Term"). The term of the lease under which Sublessor is the tenant of
the Property (the "Master Lease") expires on May 14, 2003, and the term
of the sublease(s) shall expire on or before said date. The sublease(s)
shall be on terms acceptable to Sublessor and Sublessee and shall in all
other respects be on the terms and conditions of the Master Lease,
except ________________________________________________. The property is
situated in the City of Alameda, County of Alameda, State of California,
is located at 1201 Harbor Bay Parkway, and is further described as +/-
6,571 square feet of a larger portion of +/- 23,000 square feet located
in a +/- 61,100 square foot building. References herein to the Property
shall be understood to include portions of the Property. The lessor
under the Master Lease shall be referred to as the "Master Lessor."
2. Sublessor agrees to pay Broker a subleasing commission in an amount and
manner as hereinafter set forth. This commission shall be earned for
services rendered if, during the Term: (a) the Property is subleased to
a subtenant procured by Broker, Sublessor, or anyone else; (b) a
subtenant is procured by Broker, Sublessor, or anyone else who is ready,
willing and able to sublease the Property on the terms above stated, or
on any other terms agreeable to Sublessor; (c) any contract for the
sublease of the Property is entered into by Sublessor; (d) Sublessor is
relieved of primary liability for future rent under the Master Lease,
whether by cancellation or otherwise; or (e) Sublessor removes the
Property from the market. Broker is authorized to co-operate with and to
share its commission with other licensed real estate brokers, regardless
of whether said brokers represent prospective subtenants or act as
Broker's subagents. As used in this Agreement, the term "sublease" shall
be deemed to include an assignment of Sublessor's interest under the
Master Lease, and the term "subtenant" shall be deemed to include the
assignee of such interest or a person or entity assuming Sublessor's
obligations under the Master Lease.
3. Sublessor further agrees that Sublessor shall pay Broker the
aforementioned commission, if, within one hundred twenty (120) calendar
days after the expiration or termination of the Term; (a) the Property
is subleased to a person or entity (including his/her/its successors,
assigns or affiliates) to whom or to whose agent Broker has submitted
the Property prior to the expiration or termination of the Term; (b) the
Property is leased to such person or entity (including his/her/its
successors, assigns or affiliates), if by reason of such lease Sublessor
is relieved of primary liability for future rent under the Master Lease;
or (c) negotiations continue, resume or commence and thereafter continue
leading to either of the foregoing events. Broker agrees to submit a
list of such persons or entities to Sublessor not later then fifteen
(15) calendar days following the expiration or termination of the Term,
and Broker is authorized to continue negotiating with such persons or
entities; provided, however, that if a written offer has been submitted,
it shall not be necessary to include the offeror's name on the list. The
aforementioned commission shall also be paid by Sublessor to Broker if,
after the expiration of the Term, Sublessor is relieved of primary
liability for future rent under the Master Lease as a result of
negotiations with the Master Lessor which commenced during the Term and
continued or resumed thereafter.
4. Commissions shall be payable hereunder when earned or at execution of
the sublease or other documents representing a transaction contemplated
by this Agreement, or possession by the sub-tenant.
5. Commissions earned by Broker pursuant to this Agreement shall be
calculated and paid in accordance with Broker's Schedule of Sale and
Lease Commissions (the "Schedule"), a copy of which is executed by
Sublessor, attached hereto and hereby made a part hereof, provided,
however:(a) In the event a cash sum in addition to rent is paid to
Sublessor, such sum shall be deemed included in the base rental for the
period in which it is payable; (b) In the event Sublessor is relived of
rent liability under the Master Lease, by cancellation or otherwise, or
in the event a subtenant assumes Sublessor's obligations under the
Master Lease, then the commission due under the Schedule shall be
calculated on the basis of the total base rental which would otherwise
have been due from Sublessor for the balance of the Master Lease term.
If a cash sum is paid to Sublessor by the subtenant or by the Master
Lessor, then such sum shall also be deemed rent which would have been
due from Sublessor for the period in which said sum is payable. If a
cash sum is paid by Sublessor in order to obtain relief from rent
liability under the
<PAGE> 49
Master Lease, by cancellation or otherwise, then the sum paid shall be
prorated over the balance of the Master Lease term and deducted from the
total rent liability remaining under the Master Lease, for the purpose
of calculation of the commission. Commissions due under this subsection
shall be payable upon execution of any instrument by which a subtenant
assumes the obligations of the Master Lease, or any instrument relieving
Sublessor of future rent liability.
6. Sublessor represents that the terms of the Master Lease permit Sublessor
to sublet the Property without the consent of the Master Lessor, or, in
the alternative, that the terms of the Master Lease permit Sublessor to
sublet the Property with the consent of the Master Lessor and that
Sublessor has, or can obtain, the Master Lessor's consent thereto.
7. Sublessor and Broker agree that the Property will be offered in
compliance with all applicable federal, state and local
antidiscrimination laws and regulations.
8. Sublessor agrees to cooperate with Broker in bringing about a sublease
of the Property, to furnish Broker with a copy of the Master Lease and
immediately to refer to Broker all inquiries to anyone interested in the
Property. All negotiations are to be through Broker. Broker is hereby
authorized to accept a deposit from any prospective subtenant and to
handle it in accordance with the instructions of the parties unless
contrary to applicable law. Broker is further exclusively authorized to
advertise the Property and exclusively authorized to place a sign or
signs on the Property if, in Broker's opinion, such would facilitate the
subleasing of the Property. Sublessor warrants to Broker that the
placing of such signs on the Property is not prohibited by the terms of
the Master Lease. Sublessor and its counsel will be responsible for
determining the legal sufficiency of a sublease and other documents
relating to any transaction contemplated by this Agreement.
9. Sublessor agrees to disclose to Broker and to prospective subtenants any
and all information which Sublessor has regarding present and future
zoning and environmental matters affecting the Property and regarding
the condition of the Property, including, but not limited to structural,
mechanical and soils conditions, the presence and location of asbestos,
PCB transformers, other toxic, hazardous or contaminated substances, and
underground storage tanks in, on or about the Property. Broker is
authorized to disclose any such information to prospective subtenants.
10. If security of earnest money or similar deposits made by a prospective
subtenant are forfeited, in addition to any other rights of Broker
pursuant to this Agreement, Broker shall be entitled to one-half (1/2)
thereof, but not to exceed the total amount of the anticipated
commission.
11. To the extent permitted by applicable law, Broker is authorized to
deduct its commissions from any deposits, payments or other funds,
including proceeds of rental payments, paid by a subtenant in connection
with a transaction contemplated by this Agreement and Sublessor hereby
irrevocably assigns said funds and proceeds to Broker to the extent
necessary to pay said commissions. Broker is authorized to provide a
copy of this Agreement to any subtenant or other person holding such
funds, and such subtenant or other person is hereby instructed by
Sublessor to pay Broker's commissions from any such funds or proceeds
available. Sublessor shall remain liable for the entire amount of said
commissions regardless of whether Broker exercises its rights under this
paragraph.
12. Sublessor acknowledges that Broker is a national brokerage firm and
that in some cases it may represent prospective subtenants. Owner
desires that the Property be presented to such persons or entities and
consents to the dual representation created thereby. Broker shall not
disclose the confidential information of one principal to the other.
13. In the event that the Property comes under the jurisdiction of a
bankruptcy court, Sublessor shall immediately notify Broker of the same,
and if Sublessor is the subject of the bankruptcy, shall promptly take
all steps necessary to obtain court approval of Broker's appointment,
unless Broker shall elect to terminate this Agreement upon said notice.
14. In the event that the Property becomes the subject of foreclosure
proceedings prior to the expiration of this Agreement, then this
Agreement shall be deemed suspended until such time as the Owner may
reacquire his interest in the Property within the Term. If this
Agreement is suspended pursuant to this paragraph, Broker shall be free
to enter into a listing agreement with any receiver, the party
initiating the foreclosure, the party purchasing the Property at a
foreclosure sale, or any other person who has acquired an interest in
the Property.
<PAGE> 50
15. In the event of any dispute between Sublessor and Broker relating to this
Agreement, the Property or Sublessor or Broker's performance hereunder,
Sublessor and Broker agree that such dispute shall be resolved by means of
binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association, and judgement upon the award rendered
by the arbitrator(s) may be entered in any court of competent
jurisdiction. Depositions may be taken and other discovery obtained during
such arbitration proceedings to the same extent as authorized in civil
judicial proceedings in the state where the office of Broker executing this
Agreement is located. The arbitrator(s) shall be limited to awarding
compensatory damages and shall have no authority to award punitive,
exemplary or similar type damages. The prevailing party in the arbitration
proceedings shall be entitled to recover its expenses including the costs
of the arbitration proceeding, and reasonable attorneys' fees.
NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES'
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND
YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU
ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH
RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES' PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA
CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF
DISPUTES' PROVISION TO NEUTRAL ARBITRATION.
/s/ JOHN MONAHAN /s/ JIM HUNTER
____________________ ____________________
SUBLESSOR BROKER
16. In the event that Sublessor lists the Property with another broker after
the expiration or termination of this Agreement, Sublessor agrees to
provide in the subsequent listing agreement that a commission will not be
payable to the new broker on transactions for which Sublessor remains
obligated to pay a commission to Broker under paragraph 3 hereof.
Sublessor's failure to do so, however, shall not affect Owner's obligation
to Broker under Paragraph 3.
17. Each signator to this Agreement represents and warrants that he or she has
full authority to sign this Agreement on behalf of the party for whom he or
she signs and that this Agreement binds such party.
18. This Agreement constitutes the entire agreement between Sublessor and
Broker and supersedes all prior discussions, negotiations and agreements,
whether oral or written. No amendment, alteration, cancellation or
withdrawal of this Agreement shall be valid or binding unless made in
writing and signed by both Sublessor and Broker. This Agreement shall be
binding upon, and shall benefit, the heirs, successors and assignees of the
parties.
19. The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this
Agreement, including, but not limited to, the 1964 Civil Rights Act and all
amendments thereto, the Foreign Investment in Real Property Tax Act, the
Comprehensive Environmental Response Compensation and Liability Act, and
the Americans With Disabilities Act.
<PAGE> 51
The undersigned Sublessor hereby acknowledges receipt of a copy of this
Agreement and the Schedule.
--------------------------------------
Avigen, Inc.
a Delaware Corporation
Sublessor
Accepted:
Redding Management, Inc. By: /s/ John Monahan 8/31/95
----------------------------------
Title: CEO
--------------------------------
By: /s/ Carol A. Manning By:
------------------------- -----------------------------------
Carol A. Manning Title:
Vice President of Operations --------------------------------
Address: 1411 Harbor Bay Parkway Address: 1201 Harbor Bay Parkway #1000
#1000 ------------------------------
Alameda, CA 94502 Alameda, CA 94502
--------------------------------------
- ---------------------------- --------------------------------------
Telephone: (510) 337-7999 Telephone: (510) 748-7150
----------------------------
<PAGE> 52
REDDING MANAGEMENT, INC.
BROKERAGE AND MANAGEMENT
SCHEDULE OF SALE AND LEASE COMMISSIONS
FOR PROPERTY AT 1201 Harbor Bay Parkway
----------------------------------------------------------------
A. SALES:
As to sales of improved real property, Broker's commission shall be 6% of the
gross sales price. As to sales of unimproved real property, Broker's commission
shall be 10% of the gross sales price. Gross sales price shall include any and
all consideration received or receivable, in whatever form, including but not
limited to assumption or release of existing liabilities. For purposes of this
Schedule, the Property is deemed to be X improved unimproved.
----- -----------
This commission shall be paid when earned or at the close of escrow through
escrow, or if there is no escrow, then upon recordation of the deed; provided,
however, if the transaction involves an installment contract, then payment
shall be made upon execution of such contract. In the event Owner contributes
or conveys the Property or any interest therein to a joint venture, partnership,
or other business entity, the commission shall be calculated on the fair market
value of the Property, less the value of the interest in the Property retained
by or transferred to Owner, as the case may be, and shall be paid at the time
of the contribution or transfer. If Owner is a partnership, corporation or
other business entity, and an interest in the partnership, corporation or other
business entity is transferred, whether by merger, outright purchase, or
otherwise, in lieu of a sale of the Property, and applicable law does not
prohibit the payment of a commission in connection with such sale or transfer,
the commission shall be calculated on the fair market value of the Property,
rather than the gross sales price, multiplied by the percentage of interest so
transferred, and shall be paid at the time of the transfer.
B. LEASES OR SUBLEASES:
Commission shall be payable on execution of a lease by Owner and a tenant, in
accordance with the following rates:
<TABLE>
<S> <C>
GROSS LEASES NET LEASES
(Where Landlord pays all or base year (Where Tenant pays all real estate taxes)
portion of real estate taxes)
6% of the total base rental for the first twenty-four (24) 7% of the total base rental for the first twenty-four (24)
months in which rent is to be paid, plus months in which rent is to be paid, plus
5% of the total base rental for the next twelve (12) months 6% of the total base rental for the next twelve (12) months
in which rent is to be paid, plus in which rent is to be paid, plus
4% of the total base rental for the next twenty-four (24) 5% of the total base rental for the next twenty-four (24)
months in which rent is to be paid, plus months in which rent is to be paid, plus
3% of the total base rental for the next sixty (60) months 4% of the total base rental for the next sixty (60) months
in which rent is to be paid, plus in which rent is to be paid, plus
2% of the total base rental for the balance of the term. 3% of the total base rental for the balance of the term.
</TABLE>
The above rates are subject to the following provisions:
1. Term of more than 25 Years:
If a lease term is in excess of 25 years then the commission shall be
calculated only upon the base rental to be paid for the first 25 years
of the lease term.
2. Month to Month Tenancy:
The minimum commission for a month to month tenancy, tenancy at will,
or any other tenancy which is not reduced to a written lease agreement
between a tenant and Owner shall be equal to 50% the first month's base
rental or $ , whichever is greater. The
---------------------------------
commission shall be payable upon occupancy. In the event such a tenant
subsequently executes a written lease with Owner, either directly or
with the assistance of Broker or anyone else, within 24 months from the
date of initial occupancy, then Broker shall receive a leasing
commission with respect to such lease in accordance with the provisions
of paragraph B., above.
3. Options(s) or Right(s) of First Refusal to Renew, Extend Lease or Occupy
Additional Space:
If a lease for which a commission is payable hereunder contains (i) an
option(s) or right(s) of first refusal to renew or extend, and a lease
term(s) is renewed or extended whether strictly in accordance with the
terms of such option(s) or right(s) or otherwise and/or (ii) an
option(s) or right(s) of first refusal to expand, and a tenant occupies
additional space whether strictly in accordance with the terms of such
option(s) or right(s) or otherwise, then Owner shall pay a leasing
commission in accordance with the provisions of this Schedule on the
additional base rental to be paid, calculated at the commission rate
applicable hereunder to the years of the lease in which the additional
base rental is payable. Said commission shall be earned and payable at
the time the extended term commences or the additional space is
occupied, as applicable.
4. Purchase of Property by Tenant:
If a lease for which a commission is payable hereunder contains an
option, right of first refusal, or similar right, and a tenant, its
successors or assignees, or any agent, officer, employee or shareholder
of a tenant purchases the Property whether strictly in accordance with
the terms of such option, right of first refusal, similar right or
otherwise during (a) the term of the lease, (b) any extension thereof,
or (c) within ninety days after the expiration thereof, then a sales
commission shall be calculated and paid in accordance with the
provisions of Section A above;
<PAGE> 53
provided however, that there shall be a credit against such sales
commission in the amount of lease commissions previously paid to Broker
relating to that portion of the purchaser's lease term which is
cancelled by reason of such sale. In no event shall such credit exceed
the amount of such sales commission.
The provisions hereof are subject to the terms and provisions of any Exclusive
Sales Listing Agreement, Exclusive Leasing Listing Agreement, Exclusive
Subleasing Listing Agreement, Exclusive Representation Agreement or other
agreement to which this Schedule may be attached and which is executed by the
parties hereto.
In the event Owner fails to make payment within the time limits set forth
herein, then from the date due until paid the delinquent amount shall bear
interest at the maximum rate permitted in the state in which the office of the
Broker executing this Schedule is located. If Broker is required to institute
legal action against Owner relating to this Schedule or any agreement of which
it is a part, Broker shall be entitled to reasonable attorneys' fees and costs.
Owner hereby acknowledges receipt of a copy of this Schedule and agrees that it
shall be binding upon its heirs, successors and assignees. In the event Owner
sells or otherwise disposes of its interest in the Property, Owner shall remain
liable for payment of the commissions provided for in this Schedule and any
agreement of which it is a part, including, without limitation, the commission
provided for in this Schedule and any agreement of which it is a part,
obligations set forth in paragraphs 3, 4, and 5 of Section B, unless the
purchaser or transferee assumes all of such obligations in writing. The term
"Owner" as used herein shall be deemed to include the owner of the Property, a
party under contract to acquire the Property, a tenant under a ground lease and
a tenant of the Property wishing to effect a sublease, lease assignment, or
lease cancellation. The term "tenant" as used herein shall be deemed to include
any subtenant, or assignee of a tenant, and the term "lease" shall be deemed to
include a sublease or lease assignment.
APPROVED this _____ day of ________________, 19__
-------------------------------------------------
Owner
By: /s/ John Monahan
_____________________________________________
Redding Management, Inc Title: President & CEO
Licensed Real Estate Broker __________________________________________
By: /s/ Carol A. Manning By: /s/ John Monahan
_______________________ _____________________________________________
Title: President & CEO
_______________________ __________________________________________
<PAGE> 54
SECOND ADDENDUM TO LEASE
THIS AGREEMENT, made and entered into as of this 30th day of June, 1995,
by and between 1201 HARBOR BAY PARTNERSHIP, a California general partnership
(hereinafter referred to as "Landlord"), and AVIGEN, INC., a Delaware
corporation (hereinafter referred to as "Tenant"):
WITNESSETH
WHEREAS, on the 15th day of September 1992, Landlord and Tenant entered
into an agreement to lease covering those certain premises consisting of
Twenty-Three Thousand Square Feet (23,000) in that certain building situated in
the City of Alameda, County of Alameda, State of California and more commonly
known as 1201 Harbor Bay Parkway, for a period of five (5) years; and
WHEREAS, Landlord and Tenant now desire to amend the terms of said Lease
in certain particulars hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
1) Term: The term of the Lease shall be extended for an additional five (5)
years from May 15, 1998 to May 14, 2003.
2) Base Rent: Base rent for Tenant's entire premises of 23,000 square
feet, during this extension period, shall be Thirty-Four Thousand Nine Hundred
and Sixty and no/100 Dollars ($34,960.00) per month. This rent is calculated at
$1.52 per square foot, per month, and shall remain in effect for the entire
five (5) year extension.
3) Rent Deferral: Landlord and Tenant understand and agree that the rent
increase from $1.32, per square foot, per month to $1.42, per square foot, per
month, effective August 15, 1995, shall be deferred until February 15, 1996.
Additionally, the rent due on the additional Six Thousand Five Hundred and
Seventy-One (6,571) square feet of space, effective August 15, 1995, shall be
deferred until February 15, 1996. All deferred rent shall become due and
payable on February 15, 1996 and there shall be no interest accrued on said
deferred rents.
4) Estoppel: Tenant agrees, to the best of it's ability, that (i) Landlord
has performed all of its obligations under the Lease to the date hereof, and
(ii) no event has occurred or is occurring which, with the passage of time or
the giving of notice, or both, would constitute a default, by the Landlord,
under the Lease.
5) Ratification: As amended hereby, the Lease is ratified and confirmed in
all respects.
<PAGE> 55
In witness whereof, the undersigned have executed this instrument as of the
date hereinabove written.
LANDLORD: TENANT:
AVIGEN, INC., a
1201 HARBOR BAY PARTNERSHIP Delaware Corporation
a California general partnership
By: /s/ D. Brewster By: /s/ John Monahan
------------------------- --------------------------
D. Brewster John Monahan
Its: CFO Its: President and CEO
2
<PAGE> 1
EXHIBIT 10.25
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of this
day of November, 1992 between Vestmark, Inc., a New York corporation, with
its principal offices at c/o The Castle Group, Ltd., 375 Park Avenue, New York,
New York 10152 (the "Company") and each of the individuals listed on Schedule A
hereto (individually, a "Purchaser" and collectively, the "Purchasers").
WITNESSETH:
WHEREAS, Vestmark, Inc. (Vestmark"), a New York corporation, and the
Purchasers are parties to certain Stock Purchase Agreements each dated as of
December 31, 1991 (the "Purchase Agreement"), pursuant to which the Purchasers
have purchased from Vestmark an aggregate of 100 shares (the "Shares") of Common
Stock, par value $.001 per share, of the Company (the "Common Stock"); and
WHEREAS, pursuant to the Purchase Agreement, the Company has agreed to
provide the Purchasers and their transferees (individually, a "Holder" and
collectively, the "Holders") the registration rights with respect to the
Registrable Securities (as hereinafter defined) as set forth in this Agreement;
and
WHEREAS, Vestmark has been merged with and into the Company pursuant to
a Merger Agreement, dated November , 1992 between the Company and Vestmark
pursuant to which the Purchasers received an aggregate of 3,969,555 shares of
Class A Common Stock, par value $.001 per share, of the Company (each share
being "Class A Common Stock" and in aggregate the "Class A Shares") for the
Shares;
NOW, THEREFORE, for and in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
<PAGE> 2
I. REGISTRATION RIGHTS
1.1 Demand Registration. If at any time, but not more than five (5)
years from the date hereof, the Company shall receive a written request therefor
from any record Holder or Holders of an aggregate of more than 60% of the Class
A Shares (the "Registrable Securities"), the Company shall prepare and file with
the Securities and Exchange Commission (the "Commission") a registration
statement under the Securities Act of 1933, as amended (the "Act"), covering
such Registrable Securities which are the subject of such request and shall use
its best efforts to cause such registration statement to become effective under
the Act. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record Holders of the Registrable
Securities that such registration is to be effected. The Company shall include
in such registration statement such Registrable Securities for which it has
received written requests to register by such other record Holders within thirty
(30) days after the delivery of the Company's written notice to such other
record holders. In the event that the Holders of a majority of the Registrable
Securities for which registration has been requested pursuant to this Section
1.1 determine for any reason not to proceed with such registration at any time
before the registration statement has been declared effective by the Commission,
and such registration statement, if theretofore filed with the Commission, is
withdrawn with respect to the Registrable Securities covered thereby, and the
Holders of such Registrable Securities agree to bear their own expenses incurred
in connection therewith and to reimburse the Company for the expenses incurred
by it in connection with such registration of such Registrable Securities then
the Holders of such Registrable Securities shall not be deemed to have exercised
their rights to require the Company to register such Registrable Securities
pursuant to this Section 1.1 at the expense of the Company.
If, at any time after any written request for registration is received
by the Company pursuant to this Section 1.1, the Company determines to proceed
with the actual preparation and filing of a registration statement under the Act
in connection with the proposed offer and sale of any of its securities by it or
any of its security holders, such written request shall be deemed to have been
given pursuant to Section 1.2 hereof rather than
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<PAGE> 3
this Section 1.1, and the rights of the Holders of Registrable Securities
covered by such written request shall be governed by Section 1.2 hereof.
If the registration pursuant to this Section 1.1 is an underwritten
offering of Registrable Securities, the managing underwriter of such offering
shall be selected by the Holders of a majority of the Registrable Securities for
which registration has been requested and shall be reasonably acceptable to the
Company. If, in the good faith judgment of the managing underwriter of such
offering, the inclusion with the Registrable Securities requested for inclusion
pursuant to this Section 1.1 of any other securities of the Company which are to
be offered by the Company or which have "piggyback" registration rights would
adversely affect the success of such offering, reduce the number or type of
securities to be offered by the Holders or interfere with the successful
marketing of the securities offered by the Holders, the number of shares to be
included in the underwritten public offering may be (i) reduced pro rata among
the holders thereof or (ii) excluded in their entirety if so required by the
managing underwriter or underwriters. Those securities which are excluded from
or were not requested to be included in the underwritten public offering, shall
be withheld from the market by the holders thereof for a period, not to exceed
120 days, which the managing underwriter reasonably determines is necessary in
order to effect the underwritten public offering.
The obligations of the Company under this Section 1.1 shall be limited
to one (1) registration statement. The Company shall pay the expenses described
in Section 1.5 hereof for the registration statement filed pursuant to this
Section 1.1 which is declared effective by the Commission, except for
underwriting discounts and commissions.
1.2 "Piggyback" Registration Rights. From and after the closing of an
initial public offering (the "IPO") of the Company's Class A Common Stock, but
not more than five (5) years from the date hereof, if the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Act with respect to any of its securities by it or any of
its security holders (other than a registration statement on Form S-4 or S-8, or
any form substituting therefore, or filed in connection with an exchange offer
or an of-
3
<PAGE> 4
fering of securities solely to the Company's existing stockholders or other
limited purpose form), the Company will give written notice of its determination
to all record Holders of the Registrable Securities, which notice shall offer
such Holders the opportunity to register the number of Registrable Securities as
each Holder may request. Upon the written request of a record Holder of any of
the Registrable Securities given within twenty (20) days after receipt of any
such notice from the Company, the Company will, except as herein provided, use
its best efforts to cause all such Registrable Securities to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of Registrable Securities to be
so registered; provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration. If any public
offering pursuant to this Section 1.2 shall be underwritten in whole or in part,
the Company will use its best efforts to cause the managing underwriter or
underwriters of such offering to permit such Registrable Securities requested
for inclusion pursuant to this Section 1.2 to be included in the offering on the
same terms and conditions as any similar securities of the Company included
therein. Notwithstanding the foregoing, if, in the good faith judgment of the
managing underwriter or underwriters of such public offering, the inclusion of
the Registrable Securities requested for inclusion pursuant to this Section 1.2
together with any other securities of the Company which have similar "piggyback"
registration rights (collectively, the "Requested Securities") would adversely
affect the success of such offering, reduce the number or type of securities to
be offered by the Company or interfere with the successful marketing of the
securities offered by the Company, the number of shares of Requested Securities
otherwise to be included in the underwritten public offering may be (i) reduced
pro rata among the holders thereof or (ii) excluded in their entirety if so
required by the managing underwriter or underwriters. To the extent only a
portion of the Requested Securities is included in the underwritten public
offering, those Requested Securities which are excluded from, and Registrable
Securities the holders of which have not requested inclusion in, the
underwritten public offering, shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is
4
<PAGE> 5
necessary in order to effect the underwritten public offering.
The obligations of the Company under this Section 1.2 shall be limited
to two (2) registration statements. The Company shall pay the expenses
described in Section 1.5 hereof for the registration statement filed pursuant to
this Section 1.2 which is declared effective by the Commission, except for
underwriting discounts and commissions.
1.3 Lock Up Provision. In connection with the Company's IPO, each
Holder hereby agrees to be subject to a lock-up for 180 days or such longer
period following the IPO as required by the underwriter or underwriters of the
IPO. In connection with any subsequent public offering of the Company's
securities, each Holder hereby agrees to be subject to a lock-up for 120 days or
such longer period following such public offering as required by the underwriter
or underwriters of such public offering. During such periods, if a Holder is
not participating in such public offering, such Holder agrees not to sell any
shares of Common Stock without the prior written consent of such underwriter or
underwriters.
1.4 Registration Procedures. If and whenever the Company is required
by the provisions of Section 1.1 or 1.2 to effect the registration of
Registrable Securities under the Act, the Company will:
(a) prepare and file with the Commission a registration statement
which includes such Registrable Securities (subject to the managing
underwriters' discretion referred to in Section 1.1 and 1.2) and use its best
efforts to cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
Registrable Securities, not to exceed six (6) months;
(b) prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective for such period as may be reasonably necessary to effect the
sale of such Registrable Securities, not to exceed six (6) months;
<PAGE> 6
(c) furnish to the Holders of Registrable Securities included in such
registration statement and to the underwriter or underwriters, if any, such
reasonable number of conformed copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such holders of
Registrable Securities, underwriter or underwriters may reasonably request in
order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the Registrable
Securities included in such registration statement under such state securities
of "blue sky" laws of such jurisdictions as such Holders of Registrable
Securities may reasonably request in writing within twenty (20) days following
the original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it has not already done so;
(e) notify the Holders of Registrable Securities included in such
registration statement, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has been filed;
(f) notify such Holders of Registrable Securities promptly of any
request by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the request of
any such Holders of Registrable Securities, any amendments or supplements to
such registration statement or prospectus which, in the opinion of counsel for
such Holders of Registrable Securities (and concurred in by counsel for the
Company), is required under the Act or the rules and regulations thereunder in
connection with the distribution of Registrable Securities by such Holders;
(h) prepare and promptly file with the Commission and promptly notify
such Holders of Registrable Securities of the filing of an amendment or
supplement to such registration statement or prospectus as may be
6
<PAGE> 7
necessary to correct any statements or omissions if, at the time when a
prospectus relating to the Registrable Securities is required to be delivered
under the Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as is then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(i) notify such Holders of Registrable Securities, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(j) at the request of any such Holder of Registrable Securities,
furnish on the effective date of the registration statement, and, if such
registration includes an underwritten public offering, at the closing provided
for in the underwriting agreement relating thereto; (i) opinions, dated such
respective dates, of the counsel representing the Company for the purposes of
such registration, addressed to the underwriter or underwriters, which may be
relied on by the Holder or Holders of Registrable Securities making such
request, covering such matters as such underwriter or underwriters may
reasonably request; and (ii) "cold comfort" letters, dated such respective
dates, from the independent certified public accountants of the Company,
addressed to the underwriter or underwriters, which may be relied on by the
Holder or Holders of Registrable Securities making such request, covering such
matters as such underwriter or underwriters may reasonably request, in which
letter such accountants shall state (without limiting the generality of the
foregoing) that they are independent certified public accountants within the
meaning of the Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the Act; and
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<PAGE> 8
(k) use its reasonable efforts to take all other steps necessary to
effect the registration of the Registrable Securities contemplated hereby.
1.5 Expenses.
(a) With respect to the registration requested pursuant to Section 1.1
hereof and the inclusion of Registrable Securities in a registration statement
pursuant to Section 1.2 hereof, all fees, costs and expenses of and incidental
to such registration, inclusion and public offering (as specified in paragraph
(b) below) in connection therewith shall be borne by the Company; provided,
however, that any Holders of Registrable Securities included in such
registration statement shall bear their pro rata share of the underwriting
discounts and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the National Association of Securities Dealers, Inc.
(the "NASD"), as may be required by the rules and regulations of the NASD,
printing expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of complying
with state securities or "blue sky" laws of any jurisdictions in which the
Registrable Securities to be offered are to be registered and qualified. Fees
and disbursements of counsel and accountants for the selling Holders of
Registrable Securities and any other expenses incurred by the selling Holders
of Registrable Securities not expressly included above shall be borne by the
selling Holders of Registrable Securities.
1.6 Indemnification.
(a) The Company will indemnify and hold harmless each Holder of
Registrable Securities which are included in a registration statement pursuant
to the provisions of Section 1.1 or 1.2 hereof, its directors, officers,
representatives, agents, and any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such Holder,
its directors, officers, represen-
8
<PAGE> 9
tatives, agents, and each such underwriter and controlling person with respect
to, any and all loss, damage, liability, cost and expense to which such Holder
or any such underwriter or controlling person may become subject under the Act
or otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances in which they were made) not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished by
or on behalf of such Holder, such underwriter or such controlling person in
writing specifically for use in the preparation thereof.
(b) Each Holder of Registrable Securities included in a registration
pursuant to the provisions of Section 1.1 or 1.2 hereof will indemnify and hold
harmless the Company, its directors, officers, employees, representatives and
agents, any controlling person and any underwriter from and against, and will
reimburse the Company, its directors, officers, employees, representatives and
agents, any controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company, its directors,
officers, employees, representatives and agents, or any controlling person
and/or any underwriter may become subject under the Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in light
of the circumstances in which they were made), not misleading; provided,
however, that such Holder will be liable in any such case only to the extent
that any such loss, damage, liability, cost or expense
9
<PAGE> 10
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of such Holder, any underwriter for such Holder and any
controlling person of such Holder in writing specifically for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 1.6 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
provided, however, the omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or in addition to
those available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also representing
the indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satis-
10
<PAGE> 11
factory to the indemnified party to represent the indemnified party within a
reasonable time after the notice of the commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
II. MISCELLANEOUS
2.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company or the Purchasers at their respective addresses set
forth in the first paragraph of this Agreement. Notices shall be deemed to have
been given on the date of mailing, except notices of change of address, which
shall be deemed to have been given when received.
2.2 This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.
2.3 This Agreement shall be binding upon and inure to the benefit
of the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
2.4 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE
PARTIES HEREBY AGREE THAT ANY DISPUTE WHICH MAY ARISE BETWEEN THEM ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE ADJUDICATED BEFORE A COURT
LOCATED IN NEW YORK CITY AND THEY HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK, NEW YORK AND OF THE
FEDERAL COURTS IN THE SOUTHERN DISTRICT OF NEW YORK WITH RESPECT TO ANY ACTION
OR LEGAL
11
<PAGE> 12
PROCEEDING COMMENCED BY ANY PARTY, AND IRREVOCABLY WAIVE ANY OBJECTION THEY NOW
OR HEREAFTER MAY HAVE RESPECTING THE VENUE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR RESPECTING THE FACT THAT SUCH COURT IS AN
INCONVENIENT FORUM, RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTS OR
OMISSIONS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND CONSENT TO THE
SERVICE OF PROCESS IN ANY SUCH ACTION OR LEGAL PROCEEDING BY MEANS OF REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, IN CARE OF THE ADDRESS SET FORTH IN
SECTION 2.1 HEREOF OR SUCH OTHER ADDRESS AS THE UNDERSIGNED SHALL FURNISH IN
WRITING TO THE OTHER.
2.5 THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT, FRAUD OR OTHERWISE) IN ANY WAY ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
2.6 In order to discourage frivolous claims the parties agree
that unless a claimant in any proceeding succeeds in establishing his claim and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then the other party
shall be entitled to recover from such claimant all of its/their legal costs and
expenses relating to such proceeding and/or incurred in preparation therefor.
2.7 The holding of any provision of this Agreement to be invalid
or unenforceable by a court of competent jurisdiction shall not affect any
other provision of this Agreement, which shall remain in full force and effect.
2.8 It is agreed that a waiver by any party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
2.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
12
<PAGE> 13
Schedule A
Lindsay A. Rosenwald
Kinder Investments, L.P.
Rivki Rosenwald
Huntington Street Co.
June Street Co.
Trust U/A Rivki Rosenwald for the Benefit
of Joshy Rosenwald
Trust U/A Rivki Rosenwald for the Benefit
of Doni Rosenwald
Trust U/A Rivki Rosenwald for the Benefit
of Demi Rosenwald
John Rosenwald
Seth Rosenwald
Blossom Rosenwald
<PAGE> 14
2.10 This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Lindsay A. Rosenwald
- ------------------------------------------
Signature of Purchaser
Lindsay A. Rosenwald
- ------------------------------------------
Name of Purchaser
please print
c/o The Castle Group, Ltd.
375 Park Ave. Ste. 1501
New York, New York 10152
- ------------------------------------------
Address of Purchaser
19.75 Shares Common Stock, $0.01 par value
- ------------------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 15
2.10 This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set forth above.
VESTMARK, INC.
By:
------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/
- -------------------------------
Signature of Purchaser
Kinder Investments, L.P.
- -------------------------------
Name of Purchaser
please print
c/o Kenton Wood
P. O. Box 88
Norton Hall, New York 12135
- -------------------------------
Address of Purchaser
63 Shares of Common Stock
- -------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 16
2.10 This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay Rosenwald
------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Rivki Rosenwald
- ----------------------------
Signature of Purchaser
Rivki Rosenwald
- ----------------------------
Name of Purchaser
please print
c/o The Castle Group, Ltd.
375 Park Avenue
New York, New York 10152
- ----------------------------
Address of Purchaser
10.50 Common Shares
- ----------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 17
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Lindsay A. Rosenwald
- ----------------------------------
Signature of Purchaser
Huntington Street Co.
- ----------------------------------
Name of Purchaser
please print
c/o Lindsay Rosenwald
30 W. 63rd Street, #6-H
New York, New York 10023
- ----------------------------------
Address of Purchaser
5 shares of Common Stock
- ----------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 18
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Lindsay A. Rosenwald
- -----------------------------------
Signature of Purchaser
June Street Co.
- -----------------------------------
Name of Purchaser
please print
c/o The Castle Group, Ltd.
375 Park Ave., Ste. 1501
New York, New York 10152
- -----------------------------------
Address of Purchaser
5 shares of Common Stock, $0.01 par
- -----------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 19
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Rivki Rosenwald
- -----------------------------------------------
Signature of Purchaser
Trust U/A Rivki Rosenwald F/B/O/ Joshy Rosenwald
- ------------------------------------------------
Name of Purchaser
please print
c/o The Castle Group Ltd.
375 Park Avenue, Ste 1501
New York, New York 10152
- -----------------------------------------------
Address of Purchaser
1.50 Shares of Common Stock, $0.01 par
- -----------------------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 20
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Rivki Rosenwald
- ----------------------------------------------
Signature of Purchaser
Trust U/A Rivki Rosenwald F/B/O/ of Doni Rosenwald
- -----------------------------------------------
Name of Purchaser
please print
c/o The Castle Group Ltd.
375 Park Avenue, Ste 1501
New York, New York 10152
- -----------------------------------------------
Address of Purchaser
1.50 Shares of Common Stock, $0.01 par
- -----------------------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 21
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By: /s/ Lindsay A. Rosenwald
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Rivki Rosenwald
- ----------------------------------------------
Signature of Purchaser
Trust U/A Rivki Rosenwald F/B/O/ Demi Rosenwald
- -----------------------------------------------
Name of Purchaser
please print
c/o The Castle Group Ltd.
375 Park Avenue, Ste 1501
New York, New York 10152
- -----------------------------------------------
Address of Purchaser
1.50 Shares of Common Stock, $0.01 par
- -----------------------------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 22
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ John Rosenwald
- --------------------------
Signature of Purchaser
John Rosenwald
- --------------------------
Name of Purchaser
please print
Twelve Westwood Pl.
- --------------------------
Address of Purchaser
Holland, PA 18966
.75 Shares of Common Stock
- --------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 23
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Seth Rosenwald
- --------------------------
Signature of Purchaser
Seth Rosenwald
- --------------------------
Name of Purchaser
please print
2300 Brookhaven Drive
Yardly, PA 19067
- --------------------------
Address of Purchaser
.75 Shares of Common Stock
- --------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 24
2.10 This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
VESTMARK, INC.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED:
/s/ Blossom Rosenwald
- ----------------------------
Signature of Purchaser
Blossom Rosenwald
- ----------------------------
Name of Purchaser
please print
1200 June Road
Huntington Valley, PA 19006
- ----------------------------
Address of Purchaser
.75 Shares of Common Stock
- ----------------------------
Number of Shares
owned by Purchaser
13
<PAGE> 1
EXHIBIT 10.26
REGISTRATION RIGHTS AND TRANSFER RESTRICTION AGREEMENT
Effective May 15, 1992, (the "Effective Date"), Vestmark, Inc. (the
"Corporation"), a New York corporation with offices at 375 Park Avenue, Suite
1501, New York, New York 10152, RESEARCH CORPORATION TECHNOLOGIES, INC. ("RCT"),
A Delaware nonprofit corporation with offices at 6840 East Broadway Boulevard,
Tucson, Arizona 85710, THE INDIANA UNIVERSITY FOUNDATION, with offices at
Showalter House, Bloomington, Indiana 47402 ("FOUNDATION"), and ARUN SRIVASTAVA,
a married man residing in Bloomington, Indiana ("SRIVASTAVA") agree as follows:
R E C I T A L S
A. SRIVASTAVA has made an invention entitled "Safe Vector for Gene
Therapy" (the "Invention")
B. RCT and the Corporation are parties to that certain license
agreement made effective May 15, 1992 by which RCT is granting to the
Corporation a license to practice under certain patents and patent applications
claiming the Invention (the "License Agreement").
C. In consideration for the license and rights granted by RCT to the
Corporation under the License Agreement, the Corporation is issuing to each of
RCT, FOUNDATION, and SRIVASTAVA shares of the Corporation's common stock subject
to the rights, duties and obligations of the parties under this Agreement.
D. By way of this Agreement, the parties wish to provide for and
evidence their agreement to, rights of RCT, FOUNDATION, and SRIVASTAVA
pertaining to the registration of shares of the Corporation's common stock held
by such parties and restriction on the transfer of such shares.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises herein contained, the parties hereby agree as follows:
Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
<PAGE> 2
(a) "Act" shall mean the Securities Act of 1933, as amended, or
any other statute in effect from time to time corresponding to such act.
(b) "Capitalization Event: shall mean the first to occur of
(i) a Terminating Event or (ii) an Equity Receipt Event.
(c) "Common Shares" shall mean the shares of Common Stock
issued to each of RCT, FOUNDATION and SRIVASTAVA as partial consideration for
RCT's entering into the License Agreement with the Corporation and includes all
securities received by each of RCT, The Foundation and Srivastava as stock
dividend, stock split or other recapitalization or similar distribution or in
respect of the original shares of common stock issued to such parties.
(d) "Common Stock" shall mean the Corporation's common stock,
$.001 par value per share.
(e) "Equity Receipt Event" shall mean the receipt by the
Corporation of capital contributions (whether as paid-in-capital or surplus) of
Two Million Dollars ($2,000,000) in aggregate amount from the date of its
incorporation.
(f) "Fully-Diluted Basis" shall mean, when computing the amount
of Common Stock outstanding, including in such computation all Common Stock
outstanding assuming that all Options or Convertible Securities have been
exercised, converted or exchanged into Common Stock pursuant to the terms of
such Options and Convertible Securities, and further including in such
computation all contemplated or approved subdivisions or dividends of Common
Stock.
(g) "Holder" shall mean each of RCT, FOUNDATION and SRIVASTAVA
and any other person holding Registrable Securities to whom these registration
rights have been transferred pursuant to SECTION 12(a) of this Agreement.
(h) "Percentage Interest" shall mean, in the case of RCT, four
percent (4%) of the outstanding shares of Common Stock of the Corporation,
determined on a Fully-Diluted Basis, and in the case of each of FOUNDATION and
SRIVASTAVA, three percent (3%) of the outstanding shares of Common Stock of the
Corporation, determined on a Fully-Diluted Basis.
-2-
<PAGE> 3
(i) "Register, "Registered," and "Registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration of ordering of effectiveness of such
registration statement.
(j) "Registrable Securities" shall mean: (1) the Common Shares;
and (2) any shares of Common Stock of the Corporation issued as a dividend or
other distribution with respect to, or in exchange or in replacement of, the
Common Shares.
(k) "Terminating Event" shall mean the closing of a firm
commitment underwritten public offering of the Common Stock pursuant to a
registration statement declared effective under the Act pursuant to which
closing the Corporation receives aggregate proceeds of at least $10 million and
the public offering price of which is at least $10.00 per share of Common Stock
(proportionately adjusted for stock splits, stock dividends, reclassification,
recapitalizaion and other similar events).
1. Nondilution.
(a) Nondilution Guarantee. If, before a Capitalization Event
(as defined below) but while any Holder is the owner of all of the Common
Shares, the Corporation issues any shares of Common Stock (or any securities
convertible into shares of Common Stock, or option or rights to purchase shares
of Common Stock), the Corporation shall concurrently issue to each Holder,
without any further consideration, additional shares of Common Stock such as may
be necessary for each Holder to continue to own and hold its respective
Percentage Interest of the outstanding shares of the Corporation's Common Stock
determined on a Fully-Diluted Basis. The foregoing obligation of the
Corporation shall not apply to the issuance of shares of Common Stock (or such
convertible securities or such options or rights) in connection with a
Terminating Event. If a transaction occurs before the occurrence of an
Capitalization Event that affects the Percentage Interest of any Holder, the
Corporation shall, for each such transaction, issue shares of Common Stock to
each Holder in a manner to preserve the rights of each such Holder under this
Section 1 and, if such transaction results in an Equity Receipt Event, the
Corporation shall issue shares of Common Stock to each Holder in a manner to
preserve the rights of each such Holder under this Section 1 as though (and only
up to the point in which) the Corporation received a capital contribution of One
Dollar ($1.00) less than the amount
-3-
<PAGE> 4
which would cause the Equity Receipt Event. All shares of Common Stock issued
pursuant to this Section 1 shall be treated as Registrable Securities and Common
Shares for all purposes under this Agreement with the same force and effect as
the original Common Shares.
(b) Tax Considerations. Each Holder severally acknowledges
that: (i) if required under law, it will recognize compensation income equal to
the value of all shares of Common Stock issued to Purchaser under this Section
1; (ii) it will not be entitled to any "gross-up" or other consideration in
respect of such compensation; and (iii) such income so recognized will cause
purchase to be liable for the payment of income taxes at a time that such Holder
may not be permitted or may be unable to sell any of the Stock in order to
obtain sufficient funds to pay such tax.
2. Registration Rights.
(a) Piggyback Rights. If, (i) within six (6) years from the
effective date of this Agreement and (ii) after the date one (1) year after the
date on which securities of the Corporation are first registered in connection
with the public offering of such securities, the Corporation proposes to
register any of its Common Stock in connection with the public offering of such
securities on a form that would also permit the registration of the Registrable
Securities, the corporation shall, each such time, promptly give each Holder
written notice of such proposal. Upon the written request of any Holder given
within twenty (20) days after the receipt of any such notice by the respective
Holder, the Corporation shall use its best efforts to cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered.
(b) Obligations of the Corporation. Whenever required under
Section 2(a) to use it best efforts to effect the registration of any
Registrable Securities, the Corporation shall, as expeditiously as reasonable
possible:
(i) Prepare and file with the Securities and Exchange Commission
("SEC") a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become and remain
effective. For any proposed registration intended to permit an offering of any
securities from time to time (i.e., a so-called "shelf registration"), the
Corporation
-4-
<PAGE> 5
shall not be obligated to cause such registration to remain effective for more
than ninety (90) days;
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the supplements to such registration statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement;
(iii) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonable request in order to
facilitate the disposition of Registrable Securities owned by them; and
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities of Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement.
(c) Furnish Information. It shall be a condition precedent to
the obligations of the Corporation to take any action under this Section 2 that
the Holders shall furnish to the Corporation such information regarding them,
the Registrable Securities held by them, and the intended method of disposition
of such securities as the Corporation shall reasonable request and as shall be
required in connection with the action to be taken by the Corporation.
(d) Expenses of Registration. In the case of any registration
effected pursuant to Section 3(a), the Corporation shall bear all registration
and qualification fees and expenses (excluding underwriters' discounts and
commissions), including any additional costs and disbursements of counsel for
the Corporation that result from the inclusion of securities held be the Holders
in such registration. Each selling Holder shall bear the fees and costs of its
own counsel in such registration.
3. Indemnification.
(a) Indemnification by the Corporation. If any Registrable
Securities are included in a registration statement under this Agreement, to the
extent permitted by law, the Corporation will indemnify, defend and hold
harmless each Holder requesting or joining in a registration, any
-5-
<PAGE> 6
underwriter (as defined in the Act) for it, and each person, if any, who
controls such Holder or underwriter within the meaning of the Act, against any
losses, claims, damages, or liabilities, joint or several, to which they may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading or arise out of any violation by the
corporation of any rule or regulation promulgated under the Act applicable to
the Corporation and relating to action or inaction required of the Corporation
in connection with any such registration. The Corporation shall reimburse each
such Holder, such underwriter, or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action. The indemnity
contained in this Section 3(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Corporation (which consent shall not be
unreasonably withheld) nor shall the Corporation be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon an untrue statement of alleged untrue statement of
omission or alleged omission made in connection with such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder, underwriter, or controlling person.
(b) Indemnification by the Holders. If any Registrable
Securities are included in a registration statement under this Agreement, to the
extent permitted by law, each Holder requesting or joining in a registration
will indemnify and hold harmless the Corporation, each of its directors, each of
its officers who have signed the registration statement, each person, if any,
who controls the Corporation within the meaning of the Act, and each agent and
any underwriter for the Corporation (within the meaning of the Act) against any
losses, claims, damages, or liabilities to which the Corporation or any such
director, officer, controlling person, agent, or underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims,
-6-
<PAGE> 7
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, including any final prospectus
contained therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in each case only to the extent that such untrue statement or
omission or alleged omission was made in such registration statement, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration. Each such Holder will reimburse any legal
or other expenses reasonably incurred by the Corporation or any such director,
officer, controlling person, agent, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability, or action.
The indemnity agreement contained in this Section 3(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
is such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Procedures. Promptly after receipt by an indemnified party
under this Section 3 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 3, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties. The failure
to notify an indemnifying party promptly of the commencement of any such
action, shall relieve, to the extent such failure materially prejudices its
ability to defend such action, such indemnifying party of any liability to the
indemnified party under this Section 3, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section 3.
4. Reports. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Act and any other rule or regulation
of the SEC that may at any time permit a Holder to sell securities of the
Corporation to the public without registration, the Corporation agrees to use
its best efforts to:
-7-
<PAGE> 8
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to ninety (90)
days after the effective date of the first registration statement covering an
underwritten public offering filed by the Corporation;
(b) file with the SEC in a timely manner all reports and other
documents required of the Corporation under the Act and the Securities Exchange
Act of 1934, as amended (the "1934 Act"); and
(c) furnish to any Holder, so long as such Holder owns any of
the Registrable Securities, upon request a written statement by the Corporation
that it has complied with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of said first registration
statement filed by the Corporation), and of the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Corporation, and such other
reports and documents so filed by the Corporation as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC permitting the
selling of any such securities without registration.
5. Right of First Refusal. Before any shares of Common Shares, or
any beneficial interest or other interest therein, may be sold or transferred
(including transfer by operation of law) by a Holder ("Offeror"), such shares
shall first be offered as follows:
(a) Offeror shall deliver a notice (the "Notice") to the
Corporation and the other Holders stating (i) the number of shares to be sold or
transferred (the "Offered Stock"), (ii) his bona fide intention to sell or
transfer the Offered Stock, (iii) the per share price for which he proposes to
sell or transfer the Offered Stock (the "Offered Price") (in the case of a
transfer not involving a sale, Offered Price shall be deemed to be the fair
market value of such shares as determined pursuant to Section 6(c) hereof) and
the terms of payment of that purchase price and other terms and conditions of
transfer or sale (the "Offered Terms and Conditions"), and (iv) the name,
address and identification of the proposed purchaser or transferee. If the
proposed consideration to be received for the Offered Stock is in a form other
than money or an obligation to pay money, the Offered Price will be deemed to be
the fair market value of such consideration, as determined in good faith by an
independent appraiser appointed by both the Offeror and the Corporation's Board
of Directors, divided by the number of shares of Offered Stock. This
-8-
<PAGE> 9
determination shall be final and binding upon all parties and persons claiming
under or through them.
(b) Within thirty (30) days after the receipt of the Notice, the
Holders (excluding the Offeror), on a pro-rata basis, may elect to purchase any
or all of the Offered Stock at the Offered Price and upon the Offered Terms and
Conditions. An election to purchase shall be made by written notice to the
Offeror, specifying the number of shares to be purchased.
(c) In the event that the other Holders elect not to purchase
all the Common Shares offered by the Offeror, within sixty (60) days after end
of the thirty day period described in Section 5(b) above, the Corporation may
elect to purchase any or all of the remaining Offered Stock at the Offered Price
and upon the Offered Terms and Conditions. An election to purchase shall be
made by written notice to Purchaser, specifying the number of shares to be
purchased. The Corporation may freely assign its right of first refusal as set
forth in this Section 5 to one or more persons or entities, in whole or in part.
(d) In the case of a transfer of shares of Stock not involving a
sale, the fair market value of the shares shall be determined in good faith by
an independent appraiser appointed by both the Offeror and the Corporation's
Board of Directors. This determination will final and binding upon all parties
and persons claiming under or through them.
(e) To the extent the Holder or the Corporation (or the
Corporation's assignee) does not elect to purchase all of the Offered Stock as
provided in subsection (b) or (c) above, Offeror may sell or transfer the
remaining Offered Stock to the purchaser or transferee named in the Notice at,
in the case of a sale, the Offered Price or at a higher price, provided that
such sale or transfer is consummated within five (5) months of the date the
Notice was received by the Corporation, and provided, further, that any such
sale is in accordance with all the Offered Terms and Conditions and upon the
terms and conditions hereof.
(f) The rights of the Holders and the Corporation under this
Section 5 shall (i) terminate upon a Terminating Event and (ii) not apply in
respect of any sale of any or all of the Common Shares by Offeror as a selling
shareholder in an underwritten secondary public offering.
-9-
<PAGE> 10
(g) No Holder shall pledge or grant a security interest in any
or all of the Common Shares no longer subject to the right of first refusals
unless prior thereto the pledgee or secured party delivers to the Corporation a
written agreement, in form and substance satisfactory to the Corporation,
acknowledging receipt of a copy of this Agreement and unconditionally agreeing
that any foreclosure of the pledge or security interest shall be treated as a
sale of the Common Shares by a Holder to which all provisions of this Section 5
shall apply.
6. Exempt Transfers.
(a) The provisions of Section 5 hereof shall not apply to a
transfer of Common Shares by Holder, either during his lifetime or on death by
inter vivos trust, will or intestacy, to his ancestors, descendants or spouse,
or any custodian or trustee for the account or benefit of Holder or Holder's
ancestors, descendants or spouse; or by involuntary transfers as a result of
bankruptcy or legal incapacity of the Holder, or whereby Holder's Common Shares
are subject to receivership or court sales; or by permitted transfers pursuant
to a change of control of the Corporation either through a Merger, Sale of
Substantially all of the Corporation's assets, or Dissolution; provided, that
the transferee shall receive and hold such Common Shares subject to the
provisions of this Agreement, and there shall be no further transfer of such
shares except in accordance herewith. The transferee shall execute a copy of
the attached Exhibit A and file the same with the Secretary of the Corporation.
(b) Holder shall have the right to transfer all or any portion
of the Common Shares to a trust established by Holder for the benefit of
himself, his spouse or children, without being subject to the provisions of
Section 5 hereof, provided that the trustee on behalf of the trust shall agree
in writing to be bound by the terms and conditions of this Agreement. The
trustee shall execute a copy of the attached Exhibit A and file the same with
the Secretary of the Corporation.
7. Legends. All certificates representing the Common Shares shall
have endorsed thereon the following legends:
(a) "The shares represented by this certificate are subject to
restrictions upon transfer, including certain options to purchase
such shares, set forth in an agreement between the issuer
corporation, the registered holder, or his predecessor in
interest, and others, a copy of
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<PAGE> 11
which is on file at the principal office of the issuer corporation and will be
furnished upon request to such registered holder."
(b) "The shares represented by this certificate are subject to
restrictions upon transfer, including a right of first refusal option in favor
of other holders and the issuer corporation, set forth in an agreement between
the issuer corporation and certain registered holders, or his predecessor in
interest, a copy of which is on file at the principal office of the issuer
corporation and will be furnished upon request to such registered holder."
(c) All legends required by Section 10 hereof.
8. Violation Of Transfer Provisions. The Corporation shall not be
required (i) to transfer on its books any shares of Common Shares which shall
have been sold, transferred, assigned or pledged in violation of any of the
provisions of this Agreement, or (ii) to treat as owner of such shares or to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares shall have been so sold, transferred, assigned or pledged.
9. Rights as Shareholder. Except as otherwise provided herein, each
Holder shall, during the term of this Agreement, exercise all rights and
privileges of a shareholder of the Corporation with respect to the Common
Shares.
10. Securities Laws. Holder represents and warrants to and covenants
with the Corporation as follows:
(a) The Common Shares will be acquired by Holder with his own
funds for investment for an indefinite period of time for his own account, not
as a nominee or agent for any other person, firm or corporation, and not with a
view to the sale or distribution of all or any part thereof, and Holder has no
present intention of selling, granting any participation in, or otherwise
distributing, any or all of the Common Shares. Holder does not have any
contract, undertaking, agreement or arrangement with any person, firm or
corporation to sell, transfer or grant participation to such person, firm or
corporation, with respect to any or all of the Common Shares.
(b) Holder understands that the Common Shares will not be
registered under the Securities Act, in part based upon an exemption from
registration predicated on the accuracy and completeness of Holder's
representations and warranties
-11-
<PAGE> 12
appearing herein, except as may be otherwise required under this agreement.
(c) Holder agrees that in no event will he sell, transfer,
assign or pledge all or any part of the Common Shares or any interest therein,
unless and until (i) he shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a statement of the
circumstances surrounding the proposed disposition, and (ii) he shall have
furnished the Corporation with an opinion of counsel satisfactory in form and
content to the Corporation to the effect that (A) such disposition will not
require registration of the Common Shares under the Securities Act or compliance
with applicable state securities laws, or (B) appropriate action necessary for
compliance with the Securities Act and applicable state securities laws has been
taken, or (iii) the Corporation shall have waived, expressly and in writing, its
right under clauses (i) and (ii) of this subsection.
(d) Holder is able to fend for himself in the transactions
contemplated by this Agreement relating to his receipt of the Common Shares, has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of being a holder of Common Shares, has the
ability to bear the economic risks as a holder of Common Shares for an
indefinite period of time.
(e) Holder understands and acknowledges that as a result of the
matters described in this Section 10, he will not be permitted to sell,
transfer, assign or pledge the Common Shares until they are registered or an
exemption from the registration and prospectus delivery requirements of the
Securities Act is available to him. There is no assurance that such an
exemption from registration will ever be available or that he will ever be able
to sell any or all of the Common Shares.
(f) Promptly after the execution and delivery of This
Agreement, Holder shall execute and deliver to the Corporation a letter
substantially in the form attached hereto as Exhibit B.
(g) The Corporation shall not be obligated to sell any of the
Common Shares if counsel for the Corporation determines that any applicable
registration requirement under the Securities Act or any other applicable
requirement of federal or state law has not been met. If counsel for the
Corporation does not opine that an exemption from registration is available, no
sale of securities shall take place until an
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<PAGE> 13
opinion from the Holders' counsel is presented in which an exemption from
registration is available, provided Holders' counsel is reasonably acceptable to
the Corporation.
11. Distribution of Common Shares. The Common Shares issued to the
Holders are done so for consideration for the grant of certain licenses and
rights granted by RCT to the Company under the License Agreement. Under that
certain invention administration agreement between RCT and the FOUNDATION dated
August 20, 1980 as supplemented between that certain memorandum of understanding
between RCT and the FOUNDATION made effective October 8, 1985 (collectively the
"IAA"), RCT is obligated to distribute to the FOUNDATION a portion of the
consideration it receives in connection with the commercialization of invention
accepted by RCT under the IAA. The amount and type of consideration that RCT
under its commercialization efforts are determined solely at RCT's discretion.
Thus, the Company has issued Common Shares to the FOUNDATION and to Srivastava
solely at RCT's request in fulfillment of RCT's obligations under the IAA.
FOUNDATION and Srivastava, therefore, severally acknowledge and agree that (i)
it or he has not relied upon any statement, promise or assurance of the
Corporation or RCT (or any representative of the Corporation or RCT) in
receiving its allotment of the Common Shares; (ii) its receipt of its allotment
of the Common Shares is not based on analysis of the merits or risks of the
business of the Corporation but solely in satisfaction of RCT's obligations
under the IAA; and (iii) neither FOUNDATION or Srivastava is relying on any
analysis by RCT of the merits or risk of the business of the Corporation in
receiving its allotment of the Common Shares.
12. General Provisions
(a) No Assignments. Holder shall not transfer, assign or
encumber any of his rights, privileges, duties or obligations under this
Agreement without the prior written consent of the Corporation, and any attempt
to so transfer, assign or encumber shall be void. The registration rights of
the Holder under this Agreement may be transferred to any transferee who
acquires at least ten percent (10%) of the Holder's Registrable Securities if
the Corporation is given written notice by the Holder at the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are being
assigned.
(b) Notices. All notices, requests and other communications
provided for herein shall be in writing, and shall be deemed to have been made
or given: (a) when
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<PAGE> 14
delivered, if delivered by hand, or sent by telex, facsimile, telegram,
telecopier or the like; or (b) on the day following deposit with an overnight
courier, if sent via overnight courier; or (c) on the date three (3) days
following deposit with the Untied States mail, certified or registered:
Vestmark, Inc.
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
Research Corporation Technologies, Inc.
6840 E. Broadway Blvd.
Tucson, AZ 85710
Dr. Arun Srivastava
Dept. of Microbiology
Indiana Univ. School of Medicine
M.S. 255, 635 Barnhill Drive
Indianapolis, IN 46202
The Indiana University Foundation
Showalter House
Bloomington, Indiana 47402
or at such other address as the party may hereafter specify for such purpose by
notice to the other party.
(c) Standoff Agreement. Holder agrees that, in connection with an
initial public offering registered under the Securities Act of shares of equity
securities of the Corporation by or on behalf of the Corporation or any security
holder, Holder shall not sell or transfer, or offer to sell or transfer, any
shares of Common Shares or other equity securities of the Corporation for such
time as the managing underwriter of such offering reasonably determines is
necessary to effect the underwritten public offering.
(d) Choice of Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws of conflicts of
law) of the State of New York.
(e) Severability. The parties hereto agree that the terms and
provisions in this Agreement are reasonable and shall be binding and enforceable
in accordance with the terms hereof and, in any event, that the terms and
provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for
any reason be adjudged
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<PAGE> 15
to be unenforceable or invalid, then such unenforceable or invalid term or
provision shall not affect the enforceability or validity of the remaining terms
and provisions of this Agreement, and the parties hereto hereby agree to replace
such unenforceable or invalid term or provision with an enforceable and valid
arrangement which, in its economic effect, shall be as close as possible to the
unenforceable or invalid term or provision.
(f) Attorneys' Fees. Holder shall pay to the Corporation all
fees, costs and expenses incurred by the Corporation in successfully enforcing
its rights under this Agreement or any agreement or instrument referred to
herein including, without limitation, the fees, costs and expenses of attorneys,
accountants and experts, whether or not litigation is instituted, and including
such fees, costs and expenses of appeals.
(g) Successors. All references in this Agreement to the
Corporation shall include any and all successors in interest to the Corporation
whether by merger, consolidation, sale of all or substantially all assets or
otherwise, and this Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the terms herein set forth, shall be
binding upon Holder, his heirs, executors, administrators, successors and
permitted assigns.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(i) Modification, Amendment and Waiver. No modification,
amendment or waiver of any provision of this Agreement shall be effective
against the Corporation unless the same shall be in a written instrument signed
by an officer of the Corporation on its behalf and such instrument is approved
by its Board of Directors. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of either party thereafter to enforce
each and every provision hereof in accordance with its terms.
(j) Further Assurances. The parties agree to execute such further
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement, and Holder specifically agrees to
cooperate affirmatively with the Corporation, to the extent reasonably
-15-
<PAGE> 16
requested by the Corporation, to enforce the rights of the Corporation and its
assignees hereunder.
(k) Integration. This Agreement, together with the Exhibits hereto,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and thereof.
(l) Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(m) Gender and Number. As used in this Agreement, the masculine,
feminine or neuter gender, and the singular or plural, shall be deemed to
include the others whenever and wherever the context so requires. Additionally,
unless the context requires otherwise, "or" is not exclusive.
(n) Amendments to Certificate of Incorporation. On or before thirty
days after the Effective Date, The Company's Stockholders Board of Directors
shall have approved and filed a restated and amended certificate of
incorporation reasonably acceptable to RCT which will enable The Company to
issue one million shares of Common Stock to the Holders.
(o) Corporate Authority. On or before thirty days after the
Effective Date, The Company will have obtained all of the necessary corporate
authority to satisfy all of its obligations under the License Agreement,
including and without limitation, the issuance of the Common Shares as required
under Subsection 5.1.2 of the License Agreement.
13. Arbitration.
(a) At the option of any party, any and all disputes or
controversies, whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement, shall be decided by binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association (the "Association").
(b) If the parties are unable to agree upon a single arbitrator,
the arbitrator shall be a single, independent arbitrator selected by the
Association. The Corporation reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a competing organization.
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<PAGE> 17
(c) Arbitration shall take place in New York, New York or any other
location mutually agreeable to the parties. At the request of any party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained by
the arbitrator in secrecy under seal, available for the inspection only of the
parties and their respective attorneys and their respective experts who shall
agree in advance and in writing to receive all such information confidentially
and to maintain such information in secrecy until such information shall become
generally known. The decision of the arbitrator will be final and binding upon
the parties hereto and all persons claiming under and through them.
(d) The fees and expenses of the arbitrator shall be borne equally
by the Corporation and Holder.
13. Certain Tax Matters. Set forth below is a brief summary of certain of
the federal income tax consequences of Holder's purchase of the Common Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. EACH HOLDER SHOULD CONSULT A TAX ADVISOR BEFORE PURCHASING
THE STOCK.
Holder acknowledges that he has been advised by the Company that
Holder will recognize compensation income in an amount equal to the excess, if
any, of the fair market value of the Common Shares over the value for the Common
Shares as stated in the License Agreement (the "Stated Value"). Unless an
election is filed by Holder with the Company and the Internal Revenue Service
and, if necessary, the proper state authorities, within 30 days of the purchase
of the Common Shares, electing pursuant to Section 83(b) of the Internal
Revenue Code (and similar state tax provisions if applicable) to be taxed
currently on the difference between the stated value and the fair market value
of the Common Shares on the date of receipt, there will be recognition of
taxable income to Holder, measured by the excess, if any, of the fair market
value of the Common Shares, at the time the Common Shares becomes vested (i.e.,
as and when the Purchase Option ceases to apply), over the Purchase Price for
the Common Shares. Holder represents that he has consulted with any tax
advisor(s) Holder deems advisable in connection with the purchase of the Common
Shares or the filing of the Section 83(b) election. A form of Election under
Section 83(b) is attached hereto as Exhibit E.
-17-
<PAGE> 18
EACH HOLDER HEREBY ASSUMES ALL THE RESPONSIBILITY FOR FILING SUCH ELECTION,
PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR THE LAPSE OF THE PURCHASE
OPTION ON THE STOCK.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their respective
officers, partners or other representatives, thereunto duly authorized, all as
of the day and year first above written.
VESTMARK, INC.
By /s/ Lindsay A. Rosenwald
---------------------------------------
Address: c/o The Castle Group
375 Park Avenue, Suite 1501
New York, NY 10152
RESEARCH CORPORATION TECHNOLOGIES, INC.
/s/ Gary M. Mussinger
---------------------------------------
Address: 6840 E. Broadway Blvd.
Tucson, AZ 85710
SRIVASTAVA
/s/ Srivastava
---------------------------------------
Address: Dept. of Microbiology
Indiana Univ. School of Medicine
M. S. 255, 635 Barnhill Drive
Indianapolis, IN 46202
FOUNDATION
/s/ Thomas M. Mc Glass V.P.
---------------------------------------
Address: Showalter House
Bloomington, Indiana 47402
<PAGE> 19
CONSENT OF SPOUSE
I, Carolyn, the spouse of Arun Srivastava, acknowledge that I have
read the Registration Rights and Transfer Restriction Agreement dated as of May
15, 1992 (the "Agreement"), by and between Vestmark, Inc. (the "Corporation")
and my spouse, and that I know the contents of the Agreement. I am aware that by
the provisions of the Agreement (a) the Corporation has the option to purchase
all of the Common Shares (as defined in the Agreement) which my spouse owns
pursuant to the Agreement, including any interest I might have therein, upon a
Cessation, as defined in and under circumstances set forth in the Agreement, and
(b) certain other restrictions are imposed on the sale or other disposition of
the Common Shares.
I hereby agree to be bound by the Agreement and acknowledge and agree
that my interest, if any, in the Common Shares is subject to the Agreement and
shall be irrevocably bound by the Agreement, and further understand and agree
that any property interest I may have in the Common Shares shall be similarly
bound by the Agreement.
I am aware that the legal, financial and related matters contained in
the Agreement are complex and that I am free to seek independent professional
guidance or counsel with respect to this Consent. I have either sought such
guidance or counsel or determined after reviewing the agreement carefully that
I waive such right. I am not relying upon any representation or advice from the
Corporation or any of its representatives or from any investor or prospective
investor (or any attorney for such investor or prospective investor) about the
Agreement, its contents or effect or about this Consent, its contents or
effect.
Dated: May 12, 1992
Carolyn Srivastava
/S/ Carolyn Srivastava
----------------------
Print Name
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<PAGE> 20
EXHIBIT A
ACKNOWLEDGMENT OF AN AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AND TRANSFER RESTRICTION AGREEMENT
BETWEEN
VESTMARK, INC.
a New York corporation
and
------------------------------------
The undersigned, as transferee of _______ shares of Common
Stock of Vestmark, Inc. (the "Corporation") from _______ ("Transferor"), hereby
acknowledges that he has read and reviewed the terms of that certain
Registration Rights and Transfer Restriction Agreement among the Corporation
and Transferor dated as of _______, 199_ and hereby agrees to be bound by the
terms and conditions thereof, and of all of the exhibits thereto, as if the
undersigned had entered into such Registration Rights and Transfer Restriction
Agreement as an original party thereto.
DATED: ________, 199_
---------------------
---------------------
---------------------
<PAGE> 21
EXHIBIT B
May 15, 1992
Vestmark, Inc.
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
Ladies and Gentlemen:
In connection with the receipt of four hundred thousand (400,000)
shares (the "Common Shares") of Common Stock of NEWCO, a New York corporation
(the "Corporation"), by the undersigned, Research Corporation Technologies,
Inc. ("Receiver") hereby agrees, represents and warrants as follows:
1. Purchase Entirely for Own Account.
Receiver represents and warrants that it is receiving the Common Shares
solely for its own account for investment and not with a view to or for sale or
distribution of the common Shares or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Common Shares of any portion thereof. Receiver also represents
that the entire legal and beneficial interest of the Common Shares Receiver is
receiving is being received for, and will be held for, its account only and
neither in whole nor in part for any other person.
2. Information Concerning Corporation.
Receiver represents and warrants that it has heretofore received all
such information as Receiver deems necessary and appropriate to enable
Receiver to evaluate the financial risk inherent in becoming a holder of the
Common Shares. Receiver further represents and warrant that it has
<PAGE> 22
received satisfactory and complete information about the business
and finances of the Corporation in response to all inquiries in respect
thereof. Receiver has not, however, relied on any information from, or
other statements by, other shareholders of the Corporation who are
not officers of the Corporation.
3. Economic Risk.
Receiver represents and warrant that Receiver realizes that
Receivers receipt of the Common Shares will be a highly speculative
investment and that I am able, without impairing my financial condition,
to hold the Common Shares for an indefinite period of time.
Receiver acknowledges that the Corporation and Receiver have
made a good faith attempt to ascertain the fair market value of the
Common Shares, but neither the corporation nor any investor in the
Corporation (nor any attorney for the Corporation or any such Investor)
shall have any liability or other obligation to me if the fair market
value of the Common Shares is more or less than the value stated in the
License Agreement (the "Stated Value"). Receiver recognizes that
there may be serious adverse tax consequences to me if the fair market
value of the Common Shares is greater than the price Receiver has paid.
4. Restricted Securities.
I represent and warrant that the Corporation has disclosed
to me in writing that:
a. the sale of the Common Shares that I am
purchasing has not been registered under the Securities Act of 1933,
as amended (the "Act"), and the Common Shares must be held indefinitely
unless a transfer of the Common Shares is subsequently registered under
the Act or an exemption from such registration is available;
b. any share certificates representing the Common
Shares will be stamped with the legends restricting transfer specified
in the Registration Rights and Transfer Restriction Agreement between
the Corporation and me; and
c. the Corporation will make a notation in its
records of the aforementioned restrictions on transfer and legends.
5. Disposition under Rule 144.
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<PAGE> 23
Receiver represents and warrants that Receiver understands that the
shares of the Common Shares are restricted securities within the meaning of
Rule 144 promulgated under the Act; that the exemption from registration
under Rule 144 will not be available in any event for at least two (2) years
from Receiver's receipt of Common Shares, or (ii) the date Receiver makes
payment in full in cash for the Common Shares, and even then will not be
available unless (a) a public trading market then exists for the securities of
the Corporation, (b) adequate information concerning the Corporation is then
available to the public, and (c) other terms and conditions of Rule 144 are
complied with; and that any sale of the Common Shares may be made by Receiver
only in accordance with such terms and conditions.
6. Further Limitations on Disposition.
Without in any way limiting my representations set forth above,
Receiver further agrees that Receiver shall in no event make any disposition of
all or any portion of the Common Shares (or any interest therein) that Receiver
is receiving unless and until:
a. There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
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<PAGE> 24
b. (i) Receiver shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, (ii) Receiver shall
have furnished the Corporation with an opinion of my own counsel to the effect
that such disposition will not require registration of such shares under the
Act or compliance with any applicable state securities laws.
Very truly yours,
--------------------------------------------
RESEARCH CORPORATION TECHNOLOGIES, INC.
ACCEPTED AND AGREED TO:
VESTMARK, INC.
By /s/
-----------------------------------
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<PAGE> 25
EXHIBIT C
MAY 15, 1992
Vestmark, Inc.
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
Ladies and Gentlemen:
In connection with the receipt of three hundred thousand (300,000)
shares (the "Common Shares") of Common Stock of NEWCO, a New York corporation
(the "Corporation"), by the undersigned, Arun Srivastava ("Receiver") hereby
agrees, represents and warrants as follows:
1. Purchase Entirely for Own Account.
Receiver represents and warrants that it is receiving the Common Shares
solely for its own account for investment and not with a view to or for sale or
distribution of the Common Shares or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Common Shares or any portion thereof. Receiver also represents
that the entire legal and beneficial interest of the Common Shares Receiver is
receiving is being received for, and will be held for, its account only and
neither in whole nor in part for any other person.
2. Information Concerning Corporation.
Receiver acknowledges and agrees that (i) it or he has not relied upon
any statement, promise or assurance of the Corporation or RCT (or any
representative of the Corporation or RCT) in receiving its allotment of the
Common Shares; (ii) its receipt of its allotment of the Common Shares is not
based on analysis of the merits or risks of the business of the Corporation but
solely in satisfaction of RCT's obligations
-5-
<PAGE> 26
under the IAA; and (iii) Receiver is not relying on any analysis by RCT of the
merits or risk of the business of the Corporation in receiving its allotment of
the Common Shares.
3. Economic Risk.
Receiver represents and warrant that Receiver realizes that Receivers
receipt of the Common Shares will be a highly speculative investment and that I
am able, without impairing my financial condition, to hold the Common Shares
for an indefinite period of time.
Receiver acknowledges that the Corporation and Receiver have made a
good faith attempt to ascertain and fair market value of the Common Shares, but
neither the Corporation nor any investor in the Corporation (nor any attorney
for the Corporation or any such Investor) shall have any liability or other
obligation to me if the fair market value of the Common Shares is more or less
than the value stated in the License Agreement (the "Stated Value"). Receiver
recognizes that there may be serious adverse tax consequences to me if the
fair market value of the Common Shares is greater than the price Receiver has
paid.
4. Restricted Securities.
I represent and warrant that the Corporation has disclosed to me in
writing that:
a. the sale of the Common Shares that I am purchasing has not
been registered under the Securities Act of 1933, as amended (the "Act"), and
the Common Shares must be held indefinitely unless a transfer of the Common
Shares is subsequently registered under the Act or an exemption from such
registration is available;
b. any share certificates representing the Common Shares will
be stamped with the legends restricting transfer specified in the Registration
Rights and Transfer Restriction Agreement between the Corporation and me; and
c. the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
5. Disposition under Rule 144.
Receiver represents and warrants that Receiver understands that the
shares of the Common Shares are restricted securities within the meaning of
Rule 144
-6-
<PAGE> 27
promulgated under the Act; that the exemption from registration under Rule 144
will not be available in any event for at least two (2) years from Receiver's
receipt of Common Shares, or (ii) the date Receiver makes payment in full in
cash for the Common Shares, and even then will not be available unless (a) a
public trading market then exists for the securities of the Corporation, (b)
adequate information concerning the Corporation is then available to the public,
and (c) other terms and conditions of Rule 144 are complied with; and that any
sale of the Common Shares may be made by Receiver only in accordance with such
terms and conditions.
6. Further Limitations on Disposition.
Without in any way limiting my representations set forth above,
Receiver further agrees that Receiver shall in no event make any disposition of
all or any portion of the Common Shares (or any interest therein) that Receiver
is receiving unless and until:
a. There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
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<PAGE> 28
b. (i) Receiver shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, (ii)
Receiver shall have furnished the Corporation with an opinion of my own Counsel
to the effect that such disposition will not require registration of such
shares under the Act or compliance with any applicable state securities laws,
and (iii) such opinion of my counsel shall have been concurred in by counsel
for the Corporation and the Corporation shall have advised me of such
concurrence.
Very truly yours,
/s/ Arun Srivastava
--------------------------------
Dr. Arun Srivastava
ACCEPTED AND AGREED TO:
Vestmark, Inc.
By /s/
--------------------------
-8-
<PAGE> 29
[Indiana University Foundation Letterhead]
May 11, 1992
Vestmark, Inc.
c/o The Castle Group, Ltd.
375 Park Avenue, Suite 1501
New York, NY 10152
Ladies and Gentlemen:
In connection with the receipt of three hundred thousand (300,000)
shares (the "Common Shares") of Common Stock of NEWCO, a New York corporation
(the "corporation"), by the undersigned, the Indiana University Foundation
("Receiver") hereby agrees, represents and warrants as follows:
1. Purchase Entirely for Own Account.
Receiver represents and warrants that it is receiving the Common Shares
solely for its own account for investment and not with a view to or for sale or
distribution of the Common Shares or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Common Shares or any portion thereof. Receiver also represents
that the entire legal and beneficial interest of the Common Shares Receiver is
receiving for, and will be held for, its account only and neither in whole nor
in part for any other person.
2. Information Concerning Corporation.
Receiver acknowledges and agrees that (i) it has not relied upon any
statement, promise or assurance of the Corporation or RCT (or any
representative of the Corporation or RCT) in receiving its allotment of the
Common Shares; (ii) its receipt of its allotment of the Common Shares is not
based on analysis of the merits or risks of the business of the Corporation but
solely in satisfaction of RCT's obligations under the IAA; and (iii) Receiver
is not relying on any analysis by RCT of the merits or risk of the business of
the Corporation in receiving its allotment of the Common Shares.
3. Economic Risk.
Receiver represents and warrants that Receiver realizes that Receivers
receipt of the Common Shares will be a highly speculative investment and that
it is able, without impairing my financial condition, to hold the Common Shares
for an indefinite period of time.
Showalter House, Post Office Box 500, Bloomington, Indiana 47402
812 855-8311 Fax: 812 855-6956
Conference Center 241, 850 West Michigan Street, Indianapolis, Indiana 46223
317 274-3711 Fax: 317-274-8818
625 North Michigan Avenue, Suite 500, Chicago, Illinois 60611
312 751-5407 Fax: 312 751-2731
<PAGE> 30
Vestmark, Inc.
May 11, 1992 - Page 2
Receiver acknowledges that the Corporation and Receiver have made a good
faith attempt to ascertain the fair-market value of the Common Shares, but
neither the Corporation nor any investor in the Corporation (nor any attorney
for the Corporation or any such Investor) shall have any liability or other
obligation to it if the fair-market value of the Common Shares is more or less
than the value stated in the License Agreement (the "Stated Value"). Receiver
recognizes that there may be serious adverse tax consequences to it if the
fair-market value of the Common Shares is greater than the price Receiver has
paid.
4. Restricted Securities.
Receiver represents and warrants that the Corporation has disclosed to
it in writing that:
a. the sale of the Common Shares that it is receiving has not been
registered under the Securities Act of 1933, as amended (the "Act"), and the
Common Shares must be held indefinitely unless a transfer of the Common Shares
is subsequently registered under the Act or an exemption from such registration
is available;
b. any share certificates representing the Common Shares will be
stamped with the legends restricting transfer specified in the Registration
Rights and Transfer Restriction Agreement between the Corporation and it; and
c. the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
5. Disposition under Rule 144.
Receiver represents and warrants that Receiver understands that the
shares of the Common Shares are restricted securities within the meaning of
Rule 144 promulgated under the Act; that the exemption from registration under
Rule 144 will not be available in any event for at least two (2) years from
Receiver's receipt of Common Shares, or (ii) the date Receiver makes payment in
full in cash for the Common Shares, and even then will not be available unless
(a) a public trading market then exists for the securities of the Corporation,
(b) adequate information concerning the Corporation is then available to the
public, and (c) other terms and conditions of Rule 144 are complied with; and
that any sale of the Common Shares may be made by Receiver only in accordance
with such terms and conditions.
<PAGE> 31
Vestmark, Inc.
May 11, 1992 - Page Three
6. Further Limitations on Disposition.
Without in any way limiting the representations set forth above,
Receiver further agrees that Receiver shall in no event make any disposition of
all or any portion of the Common Shares (or any interest therein) that Receiver
is receiving unless and until:
a. There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
b. (i) Receiver shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, (ii) Receiver shall
have furnished the Corporation with an opinion of its own counsel to the effect
that such disposition will not require registration of such shares under the Act
or compliance with any applicable state securities laws, and (iii) such opinion
of its counsel shall have been concurred in by counsel for the Corporation and
the Corporation shall have advised it of such concurrence.
Very truly yours,
INDIANA UNIVERSITY FOUNDATION
By: /s/ Joseph A. Martin
Vice President-Investments
ACCEPTED AND AGREED TO;
Vestmark, Inc.
By: /s/
___________________
<PAGE> 32
EXHIBIT E
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF
TRANSFER OF PROPERTY PURSUANT TO SECTION 83(b)
OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b)
of the Internal Revenue Code with respect to the property described below and
supplies the following information in accordance with the regulations
promulgated thereunder:
1. Name:
Address: ____________________________________
Social Security No.: ________________________
2. Description of property with respect to which the
election is being made:
___________________________ shares of Common Stock of
NEWCO, a New York corporation (the "Shares").
3. Date on which property was transferred is
____________________, 199_.
4. The taxable year to which this election relates is
__________________________.
5. Nature of restrictions to which property is subject:
The shares are subject to restrictions on the transferability of the shares
including a prohibition on transfers of invested Shares and a requirement that
vested Shares may not be transferred unless they are first offered for sale to
other holders and the issuer.
6. The fair market value at the time of transfer
(determined without regard to any restrictions other than restrictions which by
their terms will never lapse) of the property with respect to which this
election is being made is $0.001 per share of $ _______________ in aggregate.
7. A copy of this statement has been furnished to
Vestmark, Inc, a New York corporation. A copy of this
<PAGE> 33
statement is being filed by the taxpayer with the IRS office at which the
taxpayer files his/her respective tax returns within 30 days after taxpayer's
acquisition of the property. The taxpayer will attach a copy of this statement
to his/her tax returns for the year to which the election relates.
Dated: ____________________, 199_
___________________________________
___________________________________
-2-
<PAGE> 34
AMENDMENT TO REGISTRATION RIGHTS
AND TRANSFER RESTRICTION AGREEMENT
Amendment to Registration Rights and Transfer Restriction Agreement,
dated October , 1992, among Research Corporation Technologies, Inc. a
Delaware non-profit corporation ("RCT"), Vestmark, Inc., a New York corporation
("Vestmark"), The Indiana University Foundation (the "Foundation") and Arun
Srivastava ("Srivastava").
Reference is made to the Registration Rights and Transfer Restriction
Agreement, dated May 15, 1992, among RCT, Vestmark, the Foundation and
Srivastava (the "Registration Rights Agreement"). All capitalized but undefined
terms stated herein shall have the meanings ascribed to them in the
Registration Rights Agreement.
Each of the parties agrees to Amend the Registration Rights Agreement
as follows:
1. Amendment to paragraph (d) of the definition section.
Paragraph (d) of the definition section is hereby amended to read in
its entirety as follows:
(d) "Common Stock" shall mean the Corporation's Class A Common
Stock, $.001 par value per share or any shares of the Corporation's capital
stock convertible into such Class A Common stock.
2. Deletion of Section 12(n).
Section 12(n) is hereby deleted in its entirety. The effect of this
Section is to hereby waive any obligations of Vestmark pursuant to Section
12(n) of the License Agreement.
3. Amendment of Section 12(o).
Section 12(o) is hereby amended in its entirety to read as follows:
Corporate Authority. On the effective date of the merger between
Avigen, Inc., a Delaware corporation ("Avigen") and the Corporation, Avigen
will have obtained
<PAGE> 35
all of the necessary corporate authority to satisfy all of its obligations
under the License Agreement including and without limitation, the issuance of
the Common Shares as required under Subsection 5.1.2 of the License Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective duly authorized officers or representatives
on the respective dates indicated below to be effective as of the day first
written above.
VESTMARK, INC.
By: /s/
_________________________________
Address: c/o The Castle Group
375 Park Avenue, Suite 1501
New York, NY 10152
RESEARCH CORPORATION TECHNOLOGIES, INC.
By: /s/
__________________________________
Address: 6840 E. Broadway Blvd.
Tucson, AZ 85710
SRIVASTAVA
By: /s/ Srivastava
__________________________________
Address: Dept. of Microbiology
Indiana Univ. School of Medicine
M.S. 255, 635 Barnhill Drive
Indianapolis, IN 46202
FOUNDATION
By: /s/ Thomas M. McGlas
__________________________________
Address: Showalter House
Bloomington, IN 47402
2
<PAGE> 1
EXHIBIT 11.1
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22, 1992 NINE MONTHS ENDED
(INCEPTION) YEAR ENDED JUNE 30, MARCH 31,
THROUGH ------------------------- -------------------------
JUNE 30, 1993 1994 1995 1995 1996
---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Loss........................... $ (1,493,774) $(3,849,126) $(3,264,991) $(2,495,901) $(2,530,893)
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding...................... 1,749,068 2,023,524 2,032,946 2,032,946 2,020,729
Shares related to Staff Accounting
Bulletin Topic 4D:
Common Stock..................... 158,641 158,641 158,641 158,641 158,641
Common Stock Options............. 663,135 663,135 663,135 663,135 663,135
Preferred Stock.................. 502,493 502,493 502,493 502,493 502,493
Common & Preferred Stock
Warrants...................... 211,552 211,552 211,552 211,552 211,552
----------- ----------- ----------- ----------- -----------
Shares used in computing net loss
per share........................ 3,284,889 3,559,345 3,568,767 3,568,767 3,556,550
=========== =========== =========== =========== ===========
Net loss per share................. $ (0.45) $ (1.08) $ (0.91) $ (0.70) $ (0.71)
=========== =========== =========== =========== ===========
Calculation of shares outstanding
for computing pro forma net loss
per share:
Shares use in computing net loss
per share........................ 3,568,767 3,556,550
Adjustment to reflect the effect of
the assumed conversion of
convertible preferred stock from
the date of issuance............. 1,726,297 1,875,834
----------- -----------
Shares used in computing pro forma
net loss per share............... 5,295,064 5,432,384
=========== ===========
Pro forma net loss per share....... $ (0.62) $ (0.47)
=========== ===========
</TABLE>
