<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number: 0-28272
AVIGEN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 13-3647113
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
</TABLE>
1201 HARBOR BAY PARKWAY, SUITE 1000, ALAMEDA,
CALIFORNIA 94502 (Address of principal
executive offices and zip code)
(510) 748-7150
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 7, 1999, 12,556,417 shares of the registrant's Common Stock,
$.001 par value, were issued and outstanding.
<PAGE> 2
AVIGEN, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Condensed Balance Sheets
June 30, 1998 and March 31, 1999...............................
Condensed Statements of Operations
Three and nine months ended March 31, 1998 and 1999
and for the period from October 22, 1992 (inception)
through March 31, 1999.........................................
Condensed Statements of Cash Flows
Nine months ended March 31, 1998 and 1999 and for the
period from October 22, 1992 (inception) through
March 31, 1999.................................................
Notes to Condensed Financial Statements.............................
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................
Item 3 Quantitative and Qualitative Disclosures About Market Risk..........
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................................
Item 2. Changes in Securities and Use of Proceeds...........................
Item 3. Defaults upon Senior Securities.....................................
Item 4. Submission of Matters to a Vote of Security Holders.................
Item 5. Other Information...................................................
Item 6. Exhibits and Reports on Form 8-K....................................
Signatures.....................................................................
</TABLE>
<PAGE> 3
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998 MARCH 31, 1999
------------ ------------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ...................................... $ 1,279,658 $ 1,556,699
Investment in marketable securities ............................ 3,197,230 4,349,910
------------ ------------
Total current assets ....................................... 4,476,888 5,906,609
Property and equipment, net ................................................ 1,359,105 1,073,529
Deposits and other assets .................................................. 160,754 473,917
============ ============
Total assets ........................................... $ 5,996,747 $ 7,454,055
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................... $ 243,609 $ 147,823
Accrued compensation and related expenses ...................... 146,748 151,460
Other accrued liabilities ...................................... 383,640 180,647
Capital lease obligations - current portion .................... 587,073 651,997
------------ ------------
Total current liabilities .................................. 1,361,070 1,131,927
Accrued rent ................................................... 192,246 162,672
Capital lease obligations (less current portion) ............... 860,144 324,725
Stockholders' equity:
Common Stock, $.001 par value, 30,000,000 shares authorized,
10,318,454 shares issued and outstanding at March 31, 1999,
7,305,858 shares issued and outstanding at
June 30, 1998 ............................................. 7,306 10,318
Additional paid-in capital ..................................... 30,782,046 39,941,705
Deferred compensation .......................................... (46,245) (15,792)
Deficit accumulated during the development stage ............... (27,159,820) (34,101,500)
------------ ------------
Total stockholders' equity ................................. 3,583,287 5,834,731
------------ ------------
Total liabilities and stockholders' equity ............. $ 5,996,747 $ 7,454,055
============ ============
</TABLE>
Note: The balance sheet at June 30, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. See notes to condensed financial statements.
See accompanying notes
<PAGE> 4
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22,
THREE MONTHS ENDED NINE MONTHS ENDED 1992
MARCH 31, MARCH 31, (INCEPTION)
----------------------------- ----------------------------- THROUGH
1998 1999 1998 1999 MARCH 31, 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Grant revenue .................................. $ -- $ 24,731 $ -- $ 199,185 $ 562,174
Expenses:
Research and development ........... 1,553,695 1,560,867 4,423,413 4,657,732 23,255,892
General and administrative ......... 738,394 975,965 2,036,579 2,572,939 12,171,696
------------ ------------ ------------ ------------ ------------
Total expenses ..................... 2,292,089 2,536,832 6,459,992 7,230,671 35,427,588
------------ ------------ ------------ ------------ ------------
Loss from operations ........................... (2,292,089) (2,512,101) (6,459,992) (7,031,486) (34,865,414)
Interest expense ............................... (54,890) (40,346) (171,997) (142,615) (1,094,939)
Interest income ................................ 228,077 93,214 471,509 240,993 1,697,680
Other income (expense) ......................... -- (6,972) (6,889) (8,572) 161,173
------------ ------------ ------------ ------------ ------------
Net loss ....................................... $ (2,118,902) $ (2,466,205) $ (6,167,369) $ (6,941,680) $(34,101,500)
============ ============ ============ ============ ============
Net loss per share ............................. (0.29) (0.24) (0.85) (0.78)
============ ============ ============ ============
Shares used in calculation of net loss per share 7,301,873 10,211,994 7,296,445 8,945,440
============ ============ ============ ============
</TABLE>
See accompanying notes
<PAGE> 5
AVIGEN, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
October 22,
NINE MONTHS ENDED 1992
MARCH 31, (INCEPTION)
-------------------------------- THROUGH
1998 1999 MARCH 31, 1999
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................... $ (6,167,369) $ (6,941,680) $(34,101,500)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ..................... 502,818 380,083 2,733,592
Amortization of deferred compensation ............. 30,453 30,453 146,812
Write-off of organization costs ................... -- -- 145,741
Noncash interest expense .......................... -- -- 509,652
Common stock issued for services .................. -- -- 11,250
Stock options issued for services ................. -- -- 67,491
Changes in operating assets and liabilities:
Prepaids, deposits and other assets . (80,667) (313,163) (473,917)
Accounts payable, accrued liabilities
and accrued compensation and
related expenses .................. 54,774 (294,067) 777,374
Accrued rent ........................ (29,574) (29,574) 162,672
------------ ------------ ------------
Net cash used in operating activities ....................... (5,689,565) (7,167,948) (30,020,833)
INVESTING ACTIVITIES
Purchases of property and equipment ......................... (207,191) (94,507) (3,555,013)
Disposal of property and equipment .......................... -- -- 47,033
Organization costs .......................................... -- -- (218,601)
Purchase of marketable securities ........................... (5,928,779) (10,126,235) (48,396,482)
Sale of marketable securities ............................... 8,616,861 6,964,310 34,663,867
Maturities of marketable securities ......................... 2,431,716 2,009,245 9,382,707
------------ ------------ ------------
Net cash provided by (used in) investing activities ......... 4,912,607 (1,247,187) (8,076,489)
FINANCING ACTIVITIES
Proceeds from notes payable ................................. -- -- 2,132,800
Repayment of notes payable .................................. -- -- (1,709,800)
Proceeds from 1996 bridge financing ......................... -- -- 1,937,500
Payment of bridge financing costs ........................... -- -- (193,750)
Repayment of 1996 bridge financing .......................... -- -- (1,937,500)
Proceeds from sale-leaseback of equipment ................... 284,196 -- 1,926,746
Payments on capital lease obligations ....................... (376,527) (470,495) (1,176,305)
Proceeds from issuance of preferred stock,
net of issuance costs ..................................... -- -- 9,884,477
Proceeds from issuance of common stock,
net of issuance costs and repurchases ..................... 8,886 9,162,671 28,789,853
------------ ------------ ------------
Net cash provided (used in) by financing activities ......... (83,445) 8,692,176 39,654,021
Net (decrease) increase in cash and cash
equivalents ............................................... (860,403) 277,041 1,556,699
Cash and cash equivalents, beginning of period .............. 3,407,057 1,279,658 --
============ ============ ============
Cash and cash equivalents, end of period .................... $ 2,546,654 $ 1,556,699 $ 1,556,699
============ ============ ============
</TABLE>
See accompanying notes
<PAGE> 6
AVIGEN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying financial
statements include all adjustments, consisting only of normal recurring
adjustments and accruals, that Avigen, Inc. (the "Company") considers necessary
for a fair presentation of its financial position as of March 31, 1999 and its
results of operations and cash flows for the three and nine months ended March
31, 1998 and 1999. These unaudited interim financial statements should be read
in conjunction with the audited financial statements of the Company and the
notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1998, filed with the Securities and Exchange
Commission.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
We will require substantial additional funding in order to complete the
research and development activities currently contemplated and to commercialize
our proposed products. We anticipate that our existing capital resources will be
adequate to fund our needs for at least the next 12 months. Our 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 our control
We intend to seek additional funding through public or private equity or
debt financing, when market conditions allow. If we raise additional funds by
issuing equity securities, there may be further dilution to existing
stockholders. We cannot assure you that we will be able to enter into such
collaborative or financing arrangements on acceptable terms or at all. Without
such additional funding, we may be required to delay, reduce the scope of or
eliminate one or more of our research or development programs.
2. GRANT REVENUE
Revenue consists of revenue from grants which are recognized in
accordance with the terms of the related agreements.
<PAGE> 7
3. BASIC AND DILUTED NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Basic net loss per share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. The
potential shares to be issued upon the assumed exercise of the options and
warrants using the treasury stock method are not added to the previously
reported fully diluted earnings per share. The potential shares to be issued
upon the assumed exercise of the options and warrants using the treasury stock
method are not added to the denominator for the diluted net loss per share
computation because the inclusion of the shares would be antidilutive due to the
loss for the period. All net loss per share amounts for all periods have been
presented, and where necessary, restated to conform to the Statement 128
requirements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion may be understood more fully by reference to
the financial statements, notes to the financial statements, and management's
discussion and analysis contained in the Company's Annual Report on Form 10-K
for the year ended June 30, 1998, filed with the Securities and Exchange
Commission.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. The words "believe," "anticipate," "expect" and
words of similar import are intended to identify these statements as
forward-working statements. The Company's actual results could differ materially
from the anticipated results discussed in the forward-looking statements.
Factors that might cause or contribute to such differences include, but are not
limited to, those discussed herein and under the caption "Risk Factors" in the
Company's Annual Report on Form 10-K for the year ended June 30, 1998 filed with
the Securities and Exchange Commission.
OVERVIEW
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 can allow
it to pursue more effective treatments for blood cell-related diseases including
sickle cell anemia, beta-thalassemia and human immunodeficiency virus ("HIV")
infection.
<PAGE> 8
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, 1999, the Company had an accumulated
deficit of $34.1 million.
RESULTS OF OPERATION
Three Months Ended March 31, 1998 and 1999
Grant revenue increased from $0 for the three month period ended March
31, 1998 to approximately $25,000 for the three month period ended March 31,
1999. Grant revenue consisted of reimbursements under a National Institute of
Health 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
approximately $1,554,000 for the three month period ended March 31, 1998 to
approximately $1,561,000 for the three month period ended March 31, 1999. The
increase from the first quarter of 1998 to the first quarter of 1999 was due
primarily to the company-wide concentration on facility, personnel and
procedural improvements to meet regulatory licensing requirements. Expenditures
relating to laboratory supplies and chemicals remained relatively the same due
to efforts in budget management.
General and administrative expenses increased from $738,000 for the
three month period ended March 31, 1998 to $976,000 for the three month period
ended March 31, 1999. The increase from the first quarter of 1998 to the first
quarter of 1999 was primarily due to the legal costs associated with patent
research and travel expenses related to the private placement that was completed
in April 1999 in which the Company raised approximately $13.1 million. The
Company expects to incur expenses in connection with raising capital for the
forseeable future.
Interest expense decreased from approximately $55,000 for the three
month period ended March 31, 1998 to approximately $40,000 for the three month
period ended March 31, 1999, primarily as a result of paying down the Company's
equipment lease with Transamerica Business Credit.
Interest income decreased from approximately $228,000 for the three
month period ended March 31, 1998 to approximately $93,000 for the three month
period ended March 31, 1999, as a result of a reduction in invest balances as
the Company incurred costs to fund operating activities.
<PAGE> 9
Nine Month Period Ended March 31, 1998 and March 31, 1999
Grant revenue increased from $0 for the nine month period ended March
31, 1998 to approximately $199,000 for the nine month period ended March 31,
1999. Grant revenue consisted of reimbursements under a National Institute of
Health 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
approximately $4,423,000 for the nine month period ended March 31, 1998 to
approximately $4,658,000 for the nine month period ended March 31, 1999. The
increase from the first nine months of 1998 to the first nine months of 1999 was
due primarily to the increased number of personnel and costs related to the
inspection for a drug manufacturing license, vector production and patent
expenditures.
General and administrative expenses increased from approximately
$2,037,000 for the nine month period ended March 31, 1998 to approximately
$2,573,000 for the nine month period ended March 31, 1999. The increase from the
first nine months of 1998 to the first nine months of 1999 was primarily due to
the travel expenses related to raising capital and legal costs associated with
patent research.
Interest expense decreased from approximately $172,000 for the nine
month period ended March 31, 1998 to approximately $143,000 for the nine month
period ended March 31, 1999 primarily as a result of the paying down of the
Company's equipment lease with Transamerica Business Credit.
Interest income decreased from approximately $472,000 for the nine
month period ended March 31, 1998 to approximately $241,000 for the nine month
period ended March 31, 1999 primarily as a result of a reduction of average
investment balances as the Company incurred costs to fund operating activities.
LIQUIDITY AND CAPITAL RESOURCES
In August and September 1998 the Company completed a private placement
raising approximately $2.7 million. In connection with the private placement the
Company issued 1,196,615 shares of Common Stock at the closing Nasdaq National
Market price on various dates at exercise prices ranging from $1.75 to $2.94 per
share and five year Warrants to acquire 239,323 shares at a twenty-five percent
premium of the closing Nasdaq National Market price on various dates at exercise
prices ranging from $2.18 to $3.67 per share.
In December 1998, Avigen completed a private placement of its common
stock and common stock warrants, raising approximately $5.8 million. In the
private placement Avigen issued an aggregate of 1,477,170 shares of its common
stock in multiple closings at the closing Nasdaq National Market price on the
respective date of issuance. The closing prices ranged from $2.25 to $4.875 per
share. For every five shares purchased, each investor also received a five-year
warrant to purchase one share of the Company's common stock at a twenty-five
percent premium to the respective closing price.
In April 1999, Avigen completed a private placement of its common stock
and common stock warrants overseas, raising approximately $13.1 million. In the
private placement Avigen
<PAGE> 10
issued an aggregate of 2,198,210 shares of its common stock in multiple closings
at the closing National Market price on the respective date of issuance. The
closing prices ranged from $5.50 to $6.00 per share. For every five shares
purchased, each investor also received a five-year warrant to purchase one share
of the Company's common stock at a twenty-five percent premium to the respective
closing price.
Cash used in operations was approximately $5,690,000 during the nine
month period ended March 31, 1998, compared to approximately $7,168,000 million
during the nine month period ended March 31, 1999. The change was due primarily
to payment of accrued expenses and an increase in net loss resulting from travel
expenses related to the private placement.
At March 31, 1998, the Company had cash, cash equivalents and
investments in marketable securities of approximately $5.9 million compared to
approximately $4.5 million at June 30, 1998. The Company expects its cash
requirements to increase significantly in future periods. The Company believes
that the 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. 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 manufacture and market any
products that are developed.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
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 existing stockholders. There can be no assurances 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.
The Company's facility is approximately 23,000 square feet leased
through May 2003. Although the Company presently anticipates that it will either
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, there can be no assurance that the Company can find suitable
alternative facilities on terms acceptable to the Company. To the extent the
Company decides to develop its own manufacturing facilities, it 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 or lease of additional capital
equipment.
<PAGE> 11
YEAR 2000 STATUS
The Company uses computer software programs and operating systems in its
operations, including applications used in financial business systems and
various administrative functions. To the extent that these software applications
contain source code that is unable to appropriately interpret the upcoming
calendar year 2000, some level of modification, or possible replacement of such
source code or applications will be necessary. This condition is commonly
referred to as the Year 2000 Issue.
Any spending for modifications and updates are being expensed as
incurred and is not expected to have a material impact on our results of
operations or cash flows. The cost of the year 2000 project is being funded
through available funds. The Company anticipates that its costs associated with
the upgrades and/or conversion of computer software relating to the year 2000
issue is less than $25,000. However, there can be no assurance that these
estimates will be achieved, and actual results could differ materially from
those anticipated.
All personal computers, servers, workstations and e-mail systems are
running on Windows NT version 4.0 with a server pac 3.0 which is Year 2000
compliant. The accounting software, platinum, is not compliant and an upgrade
has been ordered. The in house laboratories and equipment, such as: plate
reader, AKTA, HPLC & image master, are year 2000 compliant. The badge system and
the phone system are not Year 2000 compliant but are in the process of being
updated with a projected completion date of May 1999.
The Company has also initiated communications with its significant
suppliers to determine the extent to which the Company's operations are
vulnerable to those third parties' failure to solve their own year 2000 issues.
Contingency plans have been installed to utilize vendors whose systems are Year
2000 compliant in the event that the Company's primary vendors fail to
adequately address their Year 2000 issues. However, there can be no assurance
that the systems of other companies with which the Company transacts business
will be converted on a timely basis and will not have an adverse effect on the
Company's operations.
Like most business enterprises, the Company is dependent upon the
internal computer technology and rely upon the timely performance of the
suppliers/vendors. A large-scale Year 2000 failure could impair the ability to
timely complete the research and development, mainly due to problems arising
from the vendors and service providers. The Company is in the process of
identifying and minimizing this risk. The risk that the Year 2000 poses to the
suppliers/vendors and service providers is being continually redefined. This
refinement will continue through the rest of 1999.
<PAGE> 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company maintains investment portfolio holdings of various issuers,
types and maturities. These securities are short-term and classified as
available for sale. Part of this portfolio includes minority equity investments
in several publicly traded companies, the values of which are subject to market
price volatility. Because of the short-term duration of the financial
instruments held by the Company, management does not believe that its financial
instruments are materially sensitive to changes in interest rates.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 15, 1999, Avigen completed the first closing of its private
placement of its common stock and common stock warrants overseas investors,
raising approximately $1 Million. In the private placement Avigen issued an
aggregate of 180,000 shares of its common stock at $5.50 per share which was the
closing Nasdaq National Market price on the date of issuance. For every five
shares purchased, the investor also received a five-year warrant to purchase one
share of the Company's common stock at a twenty-five percent premium to the
closing price. The placement was exempt from the registration requirements of
the Securities Act of 1933, as amended, pursuant to Regulation S promulgated
thereunder.
IAA acted as the placement agent in this sale of securities, and
received $69,615 plus a warrant to purchase 18,000 shares of the Company's
common stock at an exercise price of $6.05 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.37 Form of Common Stock and Warrant Purchase
Agreement Date February 15,
1999
</TABLE>
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 29, 1999, the Company filed a report on Form 8-K
relating to the completion of the Company's private placement
of common stock and warrants to purchase common stock in
December 1998.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIGEN, INC.
(Registrant)
Date: May 17, 1999 /s/ JOHN MONAHAN
------------------------------------
John Monahan
Chief Executive Officer and President
Date: May 17, 1999 /s/ THOMAS J. PAULSON
------------------------------------
Thomas J. Paulson
Vice President Finance,
Chief Financial Officer, and Secretary
<PAGE> 1
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 16th day of February,
1999 (the "Effective Date"), by and among AVIGEN, INC., a Delaware corporation
with its principal place of business at 1201 Harbor Bay Parkway, Suite #1000,
Alameda, California 94502 (the "Company"), Placement Agent (the "Placement
Agent") and each of those persons and entities, severally and not jointly,
listed as a Purchaser on the Schedule of Purchasers attached as Exhibit A
hereto. Such persons and entities are hereinafter collectively referred to
herein as "Purchasers" and each individually as a "Purchaser."
AGREEMENT
In consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company, the Placement Agent and each Purchaser (severally and
not jointly) hereby agree as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES. Subject to the terms
and conditions of this Agreement, the Company has or before the Closing (as
defined below) will have authorized the sale and issuance of (a) up to 2,000,000
shares of its Common Stock (the "Common Stock"), (b) Warrants, each in
substantially the form attached hereto as Exhibit B (each a "Warrant" and
collectively the "Warrants"), to purchase up to 400,000 shares the "Warrant
Shares") of the Company's Common Stock. The shares of Common Stock sold
hereunder and the Common Stock issuable upon exercise of the Warrants and the
Placement Agent Warrants together shall be referred to herein as the "Shares."
The Shares and the Warrants shall be referred to herein as the "Securities."
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES.
2.1 SALE OF UNITS. At the Closing (as defined in Section 3), the Company
will sell to each Purchaser, and each Purchaser will purchase from the Company,
at a purchase price equal to five (5) times the closing price of the Company's
stock as quoted on NASDAQ on the Closing Date plus twelve and one-half ($0.125)
cents per "Unit," the number of Units set forth next to such Purchaser's name on
the Schedule of Purchasers attached hereto as Exhibit A (the "Schedule of
Purchasers"). As used herein, a Unit is comprised of (i) five shares of Common
Stock, and (ii) one warrant to purchase one share of Common Stock.
2.2 SEPARATE AGREEMENT. Each Purchaser shall severally, and not jointly,
be liable for only the purchase of the Units that appear on Exhibit A hereto and
that relate to such Purchaser. The Company's agreement with each of the
Purchasers is a separate agreement, and the sale of Units to each of the
Purchasers is a separate sale.
SECTION 3. CLOSING AND DELIVERY.
3.1 CLOSING. The Closing of the purchase and sale of ________ of the
Units pursuant to this Agreement (the "Initial Units") shall be held on February
16, 1999, at the offices of Cooley Godward LLP, 5 Palo Alto Square, 3000 El
Camino Real, Palo Alto, California, or on such other date and place as may be
agreed to by the Company and the Purchasers. The closing of the purchase and
sale of the Initial Units, together with each subsequent closing of the purchase
and sale of any of the Securities pursuant to Section 3.3 shall herein be
referred to collectively as the "Closing."
<PAGE> 2
The Company shall give at least two (2) business days prior written
notice to the Purchasers, in a manner provided for in Section 11 hereof, of the
date, time and location of the Closing. At or prior to the Closing, each
Purchaser shall execute any related agreements or other documents required to be
executed hereunder, dated as of the date of the Closing (the "Closing Date").
3.2 DELIVERY OF THE UNITS AT THE CLOSING. At the Closing, the Company
shall deliver to each Purchaser stock certificates and Warrants registered in
the name of such Purchaser, or in such nominee name(s) as designated by such
Purchaser, representing the number of shares of Common Stock and Warrants to be
purchased by such Purchaser at the Closing as set forth in the Schedule of
Purchasers. The name(s) in which the stock certificates and Warrants are to be
issued to each Purchaser are set forth in the Stock Certificate and Warrant
Questionnaire in the form attached hereto as Appendix I, as completed by each
Purchaser.
3.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 60th day
following the closing of the Initial Units, the Company may sell up to the
balance of the authorized Securities not sold at the closing of the Initial
Units. All such sales shall be made on the terms and conditions set forth in
this Agreement, including, without limitation, the representations and
warranties by such Purchasers as set forth in Section 5. Any Securities sold
pursuant to this Section 3.3 shall be deemed to be "Securities" for all purposes
under this Agreement and any purchasers thereof shall be deemed to be
"Purchasers" for all purposes under this Agreement.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to, and covenants with,
the Purchasers and the Placement Agent as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as it is currently being conducted.
4.2 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company's execution, delivery and performance of this Agreement have been duly
authorized under Delaware law by all requisite corporate action by the Company,
and will not violate any law or the Company's Amended and Restated Certificate
of Incorporation or Bylaws of the Company or any material provision of any
material indenture, mortgage, agreement, contract or other material instrument
to which the Company is a party or by which the Company or any of its properties
or assets is bound as of the date hereof, or result in a breach of or constitute
(upon notice or lapse of time or both) a default under any such material
indenture, mortgage, agreement, contract or other material instrument or result
in the creation or imposition of any lien, security interest, mortgage, pledge,
charge or other encumbrance, of any material nature whatsoever, upon any
properties or assets of the Company. Upon the execution and delivery, and
assuming the valid execution and delivery of this Agreement by each of the
Purchasers, this Agreement will constitute a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Company in
Section 8.4 hereof may be legally unenforceable.
<PAGE> 3
4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES AND THE WARRANTS. When
issued and paid for in accordance with this Agreement or the applicable form of
Warrant, the Securities will be validly issued and outstanding, fully paid and
non-assessable, and will be issued in compliance with all applicable federal and
state securities laws and the applicable rules of the National Association of
Securities Dealers.
4.4 ADDITIONAL INFORMATION. The Company represents and warrants that the
information contained in the following documents, which the Company has
furnished to the Purchasers, or will furnish if requested by the Purchasers
prior to the Closing, is or will be true and correct in all material respects as
of their respective filing dates:
(a) the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 (without exhibits unless specifically requested);
(b) the Company's Current Reports on Form 8-K filed with the SEC
since June 30, 1998, if any; and
(c) Notice of Annual Meeting and Proxy Statement for the
Company's 1998 Annual Meeting of Stockholders.
4.5 NO MATERIAL CHANGE. As of the date hereof, there has been no
material adverse change in the financial condition or results of operations of
the Company since June 30, 1998, except that the Company continues to incur
losses.
4.6 SEC REPORTS.
(a) The Company has filed with the Commission all reports ("SEC
Reports") required to be filed by it under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). All of the SEC Reports filed by the Company
comply in all material respects with the requirements of the Exchange Act. None
of the SEC Reports contains, as of the respective dates thereof, any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made. All financial statements
contained in the SEC Reports have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
indicated ("GAAP"). Each balance sheet presents fairly in accordance with GAAP
the financial position of the Company as of the date of such balance sheet, and
each statement of operations, of stockholders' equity and of cash flows presents
fairly in accordance with GAAP the results of operations, the stockholders'
equity and the cash flows of the Company for the periods then ended.
(b) No event has occurred since June 30, 1998 requiring the
filing of an SEC Report that has not heretofore been filed and furnished to the
Purchasers.
(c) The SEC Reports and this Agreement taken together as a whole
will not, as of the Closing Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein, or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (other than information
relating to the Placement Agent furnished by the Placement Agent expressly for
use in the Agreement as to which the Company makes no representation or
warranty).
4.7 LIMITATIONS ON TRANSFER. The Company hereby agrees, for the benefit
of the Purchasers, that it will not register any transfer of the Securities not
made in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration.
<PAGE> 4
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.
Each Purchaser, severally and not jointly, represents and warrants to
and covenants with the Company that:
(a) Purchaser, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Securities contemplated
hereby, either alone or together with the advice of such Purchaser's purchaser
representative, is knowledgeable, sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in shares presenting
an investment decision like that involved in the purchase of the Securities,
including investments in securities issued by the Company, and has requested,
received, reviewed and considered, either alone or with such Purchaser's
purchaser representative, all information Purchaser deems relevant in making an
informed decision to purchase the Securities.
(b) Purchaser is acquiring the Securities being acquired by
Purchaser pursuant to this Agreement in the ordinary course of its business and
for its own account for investment only and with no present intention of
distributing any of such Securities or any arrangement or understanding with any
other persons regarding the distribution of such Securities, except in
compliance with Section 5(c).
(c) Purchaser will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the securities purchased
hereunder except in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), applicable blue sky laws, and the rules and regulations
promulgated thereunder.
(d) Purchaser has completed or caused to be completed the Stock
Certificate and Warrant Questionnaire and the Registration Questionnaire,
attached hereto as Appendix I and Appendix II, respectively, for use in
preparation of the Registration Statements to be filed by the Company, and the
answers thereto are true and correct to the best knowledge of Purchaser as of
the date hereof and will be true and correct as of the effective date of the
applicable Registration Statement (provided that Purchaser shall be entitled to
update such information by providing notice thereof to the Company prior to the
effective date of such Registration Statement).
(e) Purchaser has, in connection with its decision to purchase
the Securities, relied with respect to the Company and its affairs solely upon
the information delivered to Purchaser as described in Sections 4.4 and 5(a)
above and the representations and warranties of the Company contained herein.
(f) Purchaser is an "accredited Purchaser" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act or a Qualified
Institutional Buyer within the meaning of Rule 144A promulgated under the
Securities Act.
(g) Purchaser has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement. Upon the execution and delivery of this Agreement
by Purchaser, this Agreement shall constitute a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally, (ii) as limited by equitable principles generally,
including any specific performance, and (iii) as to those provisions of Section
9.4 relating to indemnity or contribution.
<PAGE> 5
(h) Purchaser hereby represents that such Purchaser is satisfied
as to the full observance of the laws of such Purchaser's jurisdiction in
connection with any invitation to subscribe for the Securities or any use of
this Agreement, including (i) the legal requirements with such Purchaser's
jurisdiction for the purchase of the Securities, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, which may be relevant to the purchase, holding,
redemption, sale, or transfer of the Securities. Such Purchaser's subscription
and payment for, and such Purchaser's continued beneficial ownership of, the
Securities will not violate any applicable securities or other laws of such
Purchaser's jurisdiction.
(i) The Securities to be purchased by such Purchaser will be
acquired for investment for such Purchaser's own account, not as a nominee or
agent, and not for the account or benefit of, a U.S. Person, and not with a view
to the resale or distribution of any part thereof in the "United States" or to a
"U.S. Person" (as such terms are defined in Appendix IV hereto), and that
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same.
(j) Purchaser does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person in the United States or to a U.S. Person, or any
hedging transaction with any third person in the United States or to a United
States resident, with respect to any of the Securities.
(k) Purchaser understands that the Securities are not registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Regulation S thereof, and that the
Company's reliance on such exemption is predicated on the Purchasers'
representations set forth herein.
(l) Purchaser is a person or entity that is not a U.S. Person.
(m) Purchaser hereby agrees to resell such Securities only in
accordance with the provisions of Regulation S, pursuant to registration under
the Securities Act, or pursuant to an exemption from registration. Purchaser
further agrees not to engage in hedging transactions with regard to such
Securities unless in compliance with the Securities Act. In Addition, Purchaser
hereby agrees with respect to any Warrants it receives that it will only
exercise any such Warrants outside of the United States in accordance with the
provisions of Regulation S.
(n) Purchaser understands that the Securities are not registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Regulation S thereof, and that the
Company's reliance on such exemption is predicated on the Purchasers'
representations set forth herein.
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
each Purchaser herein and in the certificates for the securities delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Purchasers of the securities being purchased and the payment therefor.
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING. The
Company's obligation to complete the sale and issuance of the Securities and
deliver shares of Common Stock and Warrants to each Purchaser, individually, as
set forth in the
<PAGE> 6
Schedule of Purchasers shall be subject to the following conditions to the
extent not waived by the Company:
7.1 RECEIPT OF PAYMENT. The Company shall have received payment, by
check or wire transfer of immediately available funds, in the full amount of the
purchase price for the number of Units being purchased by such Purchaser at the
Closing as set forth in the Schedule of Purchasers.
7.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by such Purchaser in Section 5 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
7.3 COVENANTS PERFORMED. All covenants, agreements and conditions
contained herein to be performed by such Purchaser on or prior to the Closing
Date shall have been performed or complied with in all material respects.
7.4 NO GENERAL SOLICITATION; BLUE SKY. The Company shall have received
such assurances as it may reasonably request from the Placement Agent that the
Shares were not offered or sold by any form of general solicitation or
advertising and a list from the Placement Agent of countries where Shares are
being sold.
SECTION 8. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Each
Purchaser's obligation to accept delivery of the Units and to pay for the
securities evidenced thereby shall be subject to the following conditions to the
extent not waived by such Purchaser:
8.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct as of the Closing Date.
8.2 COVENANTS PERFORMED. All covenants, agreements and conditions
contained herein to be performed by the Company shall have been performed or
complied with in all material respects.
SECTION 9. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES
ACT.
9.1 REGISTRATION PROCEDURES AND EXPENSES. The Company is obligated to do
the following:
(a) Within the later to occur of (i) sixty (60) days following
the final Closing Date for the Units or (ii) May 31, 1999 (the "Filing Date"),
the Company shall use its reasonable efforts to prepare and file with the
Commission a registration statement in order to register with the Commission the
sale by the Purchasers, from time to time, of the Shares through Nasdaq or the
facilities of any national securities exchange on which the Company's Common
Stock is then traded, or in privately-negotiated transactions (a "Registration
Statement"). The Company will use its reasonable efforts to ensure that the
Registration Statement is declared effective within 60 days of the filing date
of the Registration Statement with the Commission.
(b) The Company shall use reasonable efforts to prepare and file
with the Commission (i) such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith, (ii) such SEC Reports
and (iii) such other filings required by the Commission, as may be necessary to
keep the Registration Statement
<PAGE> 7
continuously effective until the earlier of (i) second anniversary of the first
date on which no Warrants remain unexercised or unexpired or (ii) date on which
all Securities held by and issuable to Purchasers may be sold during any ninety
(90) period under Rule 144 (or successor rule promulgated by the SEC); provided,
however, that in the event of a Suspension Period (as defined below), the
Company shall extend the period of effectiveness of such Registration Statement
by the aggregate number of days of each such Suspension Period. The Company may
suspend use of the prospectus when it deems necessary, in its reasonable
judgment, until such time as the Company subsequently authorizes use of the
prospectus (each such period, a "Suspension Period"). Upon the declaration of a
Suspension Period, the Company shall use reasonable best efforts to end the
Suspension Period as quickly as possible. Notwithstanding the foregoing, the
Company shall not allow a Suspension Period to continue for more than 60 days
unless the Company shall deliver to the Purchasers a second notice, which shall
have the effect of extending the Suspension Period by up to an additional 30
days. In no event shall the Company extend a Suspension Period beyond such 90
day period. The Company shall not under any circumstances be entitled to
exercise its rights under this subparagraph to effect a Suspension Period more
than two times in any 12 month period. Each Purchaser agrees that such Purchaser
will not sell any Shares pursuant to the prospectus beginning at the time the
Company gives such Purchaser notice of the suspension of the prospectus and
ending at the time the Company gives such Purchaser notice of the termination of
the Suspension Period. Each Purchaser further agrees to promptly notify the
Company of the sale of all of such Purchaser's Securities.
(c) In order to facilitate the public sale or other disposition
of all or any of the shares by each Purchaser, the Company shall furnish to each
Purchaser with respect to the Shares registered under the Registration Statement
such number of copies of prospectuses and preliminary prospectuses as such
Purchaser reasonably requests in conformity with the requirements of the
Securities Act.
(d) The Company shall file documents required of the Company for
normal blue sky clearance in states specified in writing by each Purchaser;
provided, however, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.
(e) Other than fees and expenses, if any, of counsel or other
advisers to the Purchasers, which fees and expenses shall be borne by the
Purchasers except as provided under Section 12.8 below, the Company shall bear
all expenses (exclusive of underwriting discounts and commissions) in connection
with the procedures in paragraphs (a) through (d) of this Section 9.1.
For purposes of this Section 9.1, the term "Purchaser" shall also refer
to the Placement Agent.
9.2 TRANSFER OF SECURITIES AFTER REGISTRATION. Each Purchaser agrees
that such Purchaser will not effect any disposition of the Shares or the
Warrants that would constitute a sale within the Securities Act, except:
(i) pursuant to the Registration Statement, in which
case such Purchaser shall submit the certificates evidencing the Shares to the
transfer agent accompanied by a separate "Purchaser's Certificate" (A) in the
form of Appendix III attached hereto, (B) executed by such Purchaser or by an
officer of, or other authorized person designated by, such Purchaser, and (C) to
the effect that (1) the Shares have been sold in accordance with the
Registration Statement and (2) the requirement of delivering a current
prospectus has been satisfied; or
<PAGE> 8
(ii) pursuant to the provisions of Regulation S under
the Securities Act; or
(iii) in a transaction exempt from registration under
the Securities Act, in which case such Purchaser shall, prior to effecting such
disposition, submit to the Company an opinion of counsel in form and substance
reasonably satisfactory to the Company to the effect that the proposed
transaction is in compliance with the Securities Act.
For purposes of this Section 9.2, the term "Purchaser" shall also refer
to the Placement Agent.
9.3 LEGENDS TC. Each certificate representing Shares shall (unless
otherwise permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to
any legend required under applicable state securities laws or as provided
elsewhere in this Agreement):
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO
REGULATION S OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH, PURSUANT TO A REGISTRATION
UNDER THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION
MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH
TRANSACTIONS ARE IN COMPLIANCE WITH THE ACT."
9.4 INDEMNIFICATION. As used in this Section 9.4 the following terms
shall have the following respective meanings:
(a) "Selling Stockholder" shall mean a Purchaser of Securities
under this Agreement, including the Placement Agent, and any transferee of such
a Purchaser who is entitled to resell Shares pursuant to the Registration
Statement;
(b) "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 9.1; and
(c) "Untrue Statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling
Stockholder and the Placement Agent from and against any losses, claims, damages
or liabilities to which such Selling Stockholder or the Placement Agent may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any Untrue Statement on or after the effective
date of the Registration Statement, or arise out of any failure by the Company
to fulfill any undertaking included in the Registration Statement and the
Company will reimburse such Selling
<PAGE> 9
Stockholder or the Placement Agent for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the Company shall not be
liable to such Selling Stockholder or the Placement Agent in any such case to
the extent that such loss, claim, damage or liability arises out of, or is based
upon, an Untrue Statement made in such Registration Statement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Selling Stockholder or the Placement Agent, respectively,
specifically for use in preparation of the Registration Statement, or the
failure of such Selling Stockholder or the Placement Agent, respectively, to
comply with the covenants and agreements contained in Section 9.1 or 9.2 hereof
respecting sale of the Shares or any statement or omission in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the Selling
Stockholder or the Placement Agent, respectively, prior to the pertinent sale or
sales by the Selling Stockholder or the Placement Agent, respectively.
Each Purchaser, severally and not jointly, agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure to comply with the covenants and agreements contained in
Section 9.1 or 9.2 hereof respecting sale of the Shares, or any Untrue Statement
contained in the Registration Statement on or after the effective date thereof
if such Untrue Statement was made in reliance upon and in conformity with
written information furnished by or on behalf of such Purchaser specifically for
use in preparation of the Registration Statement, and such Purchaser will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided that in no event shall any indemnity by a Purchaser under this
Section 9.4 exceed the gross proceeds received by such Purchaser from the sale
of Shares covered by such Registration Statement.
The Placement Agent agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Section 9.1 or 9.2 hereof
respecting sale of the Shares, or any Untrue Statement contained in the
Registration Statement on or after the effective date thereof if such Untrue
Statement was made in reliance upon and in conformity with written information
furnished by or on behalf of the Placement Agent specifically for use in
preparation of the Registration Statement, and the Placement Agent will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided that in no event shall any indemnity by the Placement Agent
under this Section 9.4 exceed the gross proceeds received by the Placement Agent
from the sale of Shares covered by such Registration Statement.
Promptly after receipt by any indemnified person of a notice of a claim
or the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 9.4, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions
<PAGE> 10
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
9.5 TERMINATION OF CONDITIONS AND OBLIGATIONS . The conditions precedent
imposed by Section 4, Section 5 or this Section 9 upon the transferability of
the Shares shall cease and terminate as to any particular number of the Shares
when such Shares shall have been sold or otherwise disposed of in accordance
with the intended method of disposition set forth in the Registration Statement
covering such Shares or at such time as an opinion of counsel satisfactory to
the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
9.6 INFORMATION AVAILABLE. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchasers or the Placement
Agent, the Company will furnish, upon request, to the Purchasers and the
Placement Agent:
(a) as soon as practicable after available (but in the case of
the Company's Annual Report to Stockholders, within 120 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted auditing standards certified by a national
firm of certified public accountants); (ii) its Annual Report on Form 10-K;
(iii) its quarterly reports on Form 10-Q (the foregoing, in each case, excluding
exhibits); and (iv) its current reports on Form 8-K, if any;
(b) upon the request of any Purchaser or the Placement Agent,
all exhibits excluded by the parenthetical to subparagraph (a)(iii) of this
Section 9.6, in the form generally available to the public; and
(c) upon the reasonable request of any Purchaser or the
Placement Agent, an adequate number of copies of the prospectuses to supply to
any other party requiring such prospectuses.
9.7 CHANGES IN PURCHASER INFORMATION. Each Purchaser agrees to promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding Purchaser or such Purchaser's plan of
distribution set forth in such Registration Statement. The Placement Agent
agrees to promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Placement Agent or its plan of
distribution set forth in such Registration Statement.
9.8 LIQUIDATED DAMAGES. The Company acknowledges and agrees that the
Purchasers will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if the Company fails to fulfill its
obligations hereunder and a Registration Statement is not declared effective by
the Commission on or before 90 days after the Filing Date (the "Registration
Date"), then the Company shall pay to each Purchaser, as
<PAGE> 11
liquidated damages and not as a penalty for each thirty day (30) period (the
"Liquidation Period") during which the Securities remain unregistered beyond the
Registration Date either (i) the number of shares of the Company's Common Stock
equal to one percent (1.0%) (the "Liquidation Amount") of the aggregate purchase
price paid for the Shares purchased under the Agreement divided by the market
value (determined as of the close of business on the last tracking date of the
Liquidation Period) of a share of Common Stock ( the "Liquidation Shares"), or,
at the option of the Company, (ii) a cash payment equal to the Liquidation
Amount. The provisions of this Section are not exclusive and shall in no way
limit the Company's obligations under the Agreement.
The Company shall notify each Purchaser within five (5) days of
the Liquidation Period and the Company shall pay the Liquidation Amount due on
the Securities to each Purchaser of record as at the end of each Liquidation
Period on the first business day of each month in which such Liquidation Amount
shall accrue.
SECTION 10. BROKER'S FEE. The Company and each Purchaser (severally and
not jointly) hereby represent that, except for amounts to be paid to the
Placement Agent by the Company as described in Section 12.8 hereof, there are no
brokers or finders entitled to compensation in connection with the sale of the
Units, and shall indemnify each other for any such fees for which they are
responsible._ TC " Section 10. Broker's Broker's Fee;. The Company and each
Purchaser (severally and not jointly) hereby represent that, except for amounts
to be paid to the Placement Agent by the Company as described in Section 12.8
hereof, there are no brokers or finders entitled to compensation in connection
with the sale of the Units, and shall indemnify each other for any such fees for
which they are responsible." \l "1"
SECTION 11. NOTICES. ALL NOTICES, REQUESTS, CONSENTS AND OTHER
COMMUNICATIONS HEREUNDER SHALL BE IN WRITING, SHALL BE SENT BY CONFIRMED
FACSIMILE OR MAILED BY FIRST-CLASS REGISTERED OR CERTIFIED AIRMAIL, OR
NATIONALLY RECOGNIZED OVERNIGHT EXPRESS COURIER, POSTAGE PREPAID, AND SHALL BE
DEEMED GIVEN WHEN SO SENT IN THE CASE OF FACSIMILE TRANSMISSION, OR WHEN SO
RECEIVED IN THE CASE OF MAIL OR COURIER, AND ADDRESSED AS FOLLOWS:
(a) if to the Company, to:
Avigen, Inc.
1201 Harbor Bay Parkway, Suite #1000
Alameda, California 94502
Attention: Glenn Bauer
Facsimile: (510) 748-7155
with a copy so mailed to:
Cooley Godward LLP
Five Palo Alto Square, 4th Floor
Palo Alto, California 94306
Attention: Alan C. Mendelson
Facsimile: (650) 849-7400
or to such other person at such other place as the Company shall
designate to the Purchasers and the Placement Agent in writing;
and
(b) if to the Purchasers or the Placement Agent, at the address
as set forth at the end of this Agreement, or at such other address or addresses
as may have been furnished to the Company in writing.
<PAGE> 12
SECTION 12. MISCELLANEOUS
12.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged, terminated, modified or amended
except upon the written consent of the Company and holders of at least a
majority of the Shares.
12.2 HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
12.3 SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California by California residents,
without regard to conflicts of law principles.
12.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
12.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
12.7 ENTIRE AGREEMENT. This Agreement and other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
12.8 PAYMENT OF FEES AND EXPENSES. Each of the Company and the
Purchasers shall bear its own expenses and legal fees incurred on its behalf
with respect to this Agreement and the transactions contemplated hereby (the
"Offering"); provided, that the Company shall reimburse the Purchaser for the
reasonable fees and expenses of one special counsel to the Purchasers. The fees
and expenses of the special counsel to the Purchasers for which the Company
shall be liable hereunder shall in no event exceed $10,000 in the aggregate.
Purchasers acknowledge that the Placement Agent will receive a cash commission
equal to 7.0% and common stock warrants equal to 10.0% at an exercise price
equal to 110% of the closing price per Unit sold in the Offering. If any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
COMPANY: PURCHASER:
AVIGEN, INC.
By:_______________________________ Signature:__________________________
John Monahan, Ph.D.
President and Chief Executive Officer Print Name:_________________________
Address: 1201 Harbor Parkway, Suite #1000 Print Title:________________________
Alameda, CA 94502
Facsimile: (510) 748-7155 Print Company:______________________
Print Address:______________________
____________________________________
____________________________________
____________________________________
Date:__________________________
U.S. Dollar Amount Invested: $________________
Contact (Placement Agent): ___________________
<PAGE> 14
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
NAME NO. OF UNITS TOTAL COST OF
SHARES
<S> <C> <C>
TOTAL
</TABLE>
<PAGE> 15
EXHIBIT B
FORM OF WARRANT
<PAGE> 16
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO REGULATION S OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH, PURSUANT TO A REGISTRATION UNDER THE ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION MAY BE
CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH TRANSACTIONS ARE IN
COMPLIANCE WITH THE ACT.
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES TO BE ISSUED UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE ACT AND MAY NOT BE EXERCISED BY OR
ON BEHALF OF ANY `U.S. PERSON' (AS DEFINED IN REGULATION S UNDER THE ACT) UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
AVIGEN, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. ________ ________ Shares
FOR VALUE RECEIVED, AVIGEN, INC., a Delaware corporation (the
"Company"), with its principal office at 1201 Harbor Bay Parkway, #1000,
Alameda, California 94502, hereby certifies that __________ ("Holder"), or its
assigns, is entitled, subject to the provisions of this Warrant, to purchase
from the Company, at any time before 5:00 p.m. (Pacific Time) on the expiration
date of [five years from closing date]; provided, however, that the expiration
date shall be extended by one day for each day since the issuance of this
Warrant on which there has been effective a Suspension Period, as that term is
defined in the Common Stock and Warrant Purchase Agreement dated February 16,
1999, pursuant to which this Warrant was issued (the "Expiration Date"), the
number of fully paid and nonassessable shares of Common Stock of the Company set
forth above, subject to adjustment as hereinafter provided.
Holder may purchase such number of shares of Common Stock at a purchase
price per share (as appropriately adjusted pursuant to Section 6 hereof) of
_____ Dollars and _____ Cents ($____) (the "Exercise Price"). The term "Common
Stock" shall mean the aforementioned Common Stock of the Company, together with
any other equity securities that may be issued by the Company in addition
thereto or in substitution therefor as provided herein.
SECTION 1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised in whole or in part on any
business day prior to the Expiration Date by presentation and surrender hereof
to the Company at its principal office at the address set forth in the initial
paragraph hereof (or at such other address as the Company may hereafter notify
Holder in writing) with the Purchase Form annexed hereto duly executed and
accompanied by proper payment of the Exercise Price in lawful money of the
<PAGE> 17
United States of America in the form of a check, subject to collection, for the
number of Warrant Shares specified in the Purchase Form. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of Holder thereof to
purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt
by the Company of this Warrant and such Purchase Form, together with proper
payment of the Exercise Price, at such office, Holder shall be deemed to be the
holder of record of the Warrant Shares, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to Holder. The Company shall
pay any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of the Warrant Shares.
SECTION 2. RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such exercise in
accordance with the terms of this Warrant, shall be validly issued, fully paid
and nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale (other than as provided in the
Company's certificate of incorporation and any restrictions on sale set forth
herein or pursuant to applicable federal and state securities laws) and free and
clear of all preemptive rights.
SECTION 3. FRACTIONAL INTEREST. The Company will not issue a fractional
share of Common Stock upon exercise of a Warrant. Instead, the Company will
deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: multiply
the current market price of a full share by the fraction of a share and round
the result to the nearest cent.
The current market price of a share of Common Stock for purposes of this
Section only is the Quoted Price (as defined in Section 6(b) below) of the
Common Stock on the last trading day prior to the exercise date.
SECTION 4. ASSIGNMENT OR LOSS OF WARRANT.
(a) Except as provided in Section 9, Holder shall be entitled,
without obtaining the consent of the Company, to assign its interest in this
Warrant in whole or in part to any person or persons. Subject to the provisions
of Section 9, upon surrender of this Warrant to the Company or at the office of
its stock transfer agent or warrant agent, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax, the Company
shall, without charge, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees named in such instrument of assignment (any such
assignee will then be a "Holder" for purposes of this Warrant) and, if Holder's
entire interest is not being assigned, in the name of Holder, and this Warrant
shall promptly be canceled.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnification satisfactory to the Company, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
SECTION 5. RIGHTS OF HOLDER. 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 Holder are limited to those expressed in this Warrant. Nothing
contained in this Warrant shall be construed as conferring upon Holder hereof
the right to vote or to consent or to receive notice as a
<PAGE> 18
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 Warrant Shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.
SECTION 6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
beginning of certain events, as follows:
(a) Adjustment for Change in Capital Stock. If at any time after
the date hereof the Company:
(A) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(B) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(C) combines its outstanding shares of Common Stock into
a smaller number of shares;
(D) makes a distribution on its Common Stock in shares
of its capital stock other than Common Stock; or
(E) issues by reclassification of its Common Stock any
shares of its capital stock;
then the number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price in effect immediately prior to such action shall
be adjusted so that Holder may receive upon exercise of this Warrant and payment
of the same aggregate consideration the number of shares of capital stock of the
Company which Holder would have owned immediately following such action if
Holder had exercised this Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
(b) Current Market Price. The "current market price" per share
of Common Stock on any date is the average of the Quoted Prices of the Common
Stock for the 30 consecutive trading days commencing 45 trading days before the
date in question. The "Quoted Price" of the Common Stock is the last reported
sales price of the Common Stock as reported by the Nasdaq National Market, or
the primary national securities exchange on which the Common Stock is then
quoted; provided, however, that if the Common Stock is neither traded on the
Nasdaq National Market nor on a national securities exchange, the price referred
to above shall be the price reflected on the Nasdaq National Market, or if the
Common Stock is not then traded on the Nasdaq National Market, the price
reflected in the over-the counter market as reported by the National Quotation
Bureau, Inc. or any organization performing a similar function.
(c) Minimum Adjustment. No adjustment in the Exercise Price of
this Section 6 shall be required unless such adjustment would require an
increase or decrease of at least twenty-five cents ($.25) in such Exercise
Price; provided, however, that any adjustments which by reason of this
subsection are not required to be made, shall be carried forward and taken into
<PAGE> 19
account in any subsequent adjustment. All calculations under this Section 6
shall be made to the nearest cent or to the nearest share, as the case may be.
(d) Deferral of Issuance or Payment. In any case in which an
event covered by this Section 6 shall require that an adjustment in the Exercise
Price be made effective as of a record date, the Company may elect to defer
until the occurrence of such event (i) issuing to Holder, if this Warrant is
exercised after such record date, the shares of Common Stock and other capital
stock of the Company, if any, issuable upon such exercise over and above the
shares of Common Stock or other capital stock of the Company, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment, and (ii) paying to Holder by check any amount in lieu of the
issuance of fractional shares pursuant to Section 3.
(e) When No Adjustment Required. No adjustment need be made for
a change in the par value of the Common Stock. To the extent this Warrant
becomes exercisable into cash, no adjustment need be made thereafter as to the
cash, and interest will not accrue on the cash.
(f) Notice of Certain Actions. In the event that:
(A) the Company shall authorize the issuance to all
holders of its Common Stock of rights, warrants, options or convertible
securities to subscribe for or purchase shares of its Common Stock or of any
other subscription rights, warrants, options or convertible securities; or
(B) the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than dividends paid in or distributions of the Company's capital stock for which
the Exercise Price shall have been adjusted pursuant to subsection (a) of this
Section 6 or cash dividends or cash distributions payable out of consolidated
current or retained earnings as shown on the books of the Company and paid in
the ordinary course of business); or
(C) the Company shall authorize any capital
reorganization or reclassification of the Common Stock (other than a subdivision
or combination of the outstanding Common Stock and other than a change in par
value of the Common Stock) or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification or
change of the Common Stock outstanding), or of the conveyance or transfer of the
properties and assets of the Company as an entirety or substantially as an
entirety; or
(D) the Company is the subject of a voluntary or
involuntary dissolution, liquidation or winding-up procedure; or
(E) the Company proposes to take any action that would
require an adjustment of the Exercise Price pursuant to this Section 6;
then the Company shall cause to be mailed by first-class mail to Holder, at
least twenty (20) days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date as of which the holders of
Common Stock of record to be entitled to receive any such rights, warrants or
distributions are to be determined, or (y) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
<PAGE> 20
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up.
SECTION 7. OFFICERS' CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 6, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office an officers' certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the chairperson, president or chief financial
officer of the Company and by the secretary or any assistant secretary of the
Company. Each such officers' certificate shall be made available at all
reasonable times for inspection by Holder.
SECTION 8. RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER. In
the event of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (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 the event of any consolidation or merger of the
Company with or into another corporation (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
event of any sale, lease, transfer or conveyance to another corporation 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
effective provisions to be made so that Holder shall have the right thereafter,
by exercising this Warrant, to purchase the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been received upon exercise of this Warrant immediately prior to
such reclassification, capital reorganization, change, consolidation, merger,
sale or conveyance. Any such provision shall include provisions for adjustments
in respect of such shares of stock and other securities and property that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. The foregoing provisions of this Section 8 shall similarly apply
to successive reclassifications, capital reorganizations and changes of shares
of Common Stock and to successive consolidations, mergers, sales or conveyances.
In the event that in connection with any such capital reorganization, or
reclassification, 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 the Company other than
Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of subsection (a) of Section 6.
SECTION 9. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This
Warrant may not be exercised and neither this Warrant nor any of the Warrant
Shares, nor any interest in either, may be offered, sold, assigned, pledged,
hypothecated, encumbered or in any other manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal and
state securities or Blue Sky laws, including Regulation S under the Act, and the
terms and conditions hereof. Each Warrant shall bear the legends in
substantially the same form as the legends set forth on the first page of this
Warrant. Each certificate for Warrant Shares issued upon exercise of this
Warrant, unless at the time of exercise such Warrant Shares are acquired
pursuant to a registration statement that has been declared effective under the
Act, and applicable blue sky laws shall bear a legend substantially in the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED PURSUANT TO
REGULATION S OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, MORTGAGED,
<PAGE> 21
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH, PURSUANT TO A REGISTRATION UNDER THE ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN
ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE
SECURITIES UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE ACT.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
(except a new certificate for any Warrant Shares issued after the acquisition of
such Warrant Shares pursuant to a registration statement that has been declared
effective under the Act) shall also bear such legend unless, in the opinion of
counsel for the Company, the Warrant Shares represented thereby need no longer
be subject to the restriction contained herein. The provision of this Section 9
shall be binding upon all subsequent holders of certificates for Warrant Shares
bearing the above legend and all subsequent holders of this Warrant, if any.
SECTION 10. MODIFICATION AND WAIVER. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by Holder.
SECTION 11. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to Holder or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to Holder at its address as
shown on the books of the Company or to the Company at the address indicated
therefor in the first paragraph of this Warrant.
SECTION 12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California, without
regard to its conflicts of laws principles.
<PAGE> 22
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of [_________ ___],
1999.
AVIGEN, INC.
By:
---------------------------------
John Monahan, Ph.D.
President and Chief Executive
Officer
<PAGE> 23
PURCHASE FORM
Dated ___________, 19____
The undersigned hereby irrevocably elects to exercise the within Warrant
No. _________ to purchase _________ shares of Common Stock and hereby makes
payment of $_____________ in payment of the exercise price thereof. In addition,
the undersigned represents that it is not a U.S. Person within the meaning
specified in Regulation S under the Securities Act of 1933, as amended, that it
is not exercising the Warrant on behalf of a U.S. Person, and that it is
exercising the Warrant outside of the United States.
HOLDER
By:
---------------------------------
Print Name:
-------------------------
Title:
------------------------------
<PAGE> 24
ASSIGNMENT FORM
Dated _________, 19____
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers
unto __________________________________________________ (the "Assignee"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to _______ shares of Common Stock represented by this
Warrant No. _________ and does hereby irrevocably constitute and appoint
____________________________ attorney, to transfer the same on the books of the
Company, with full power of substitution in the premises. HOLDER
By:
---------------------------------
Print Name:
-------------------------
Title:
------------------------------
<PAGE> 25
EXHIBIT C
SCHEDULE OF EXCEPTIONS
The inclusion of any matter as part of this Schedule should not be
interpreted as indicating that the Company has determined that such matter is
necessarily material to the Purchaser.
SECTIONS 4.4; 4.5; AND 4.6
ADDITIONAL INFORMATION; NO MATERIAL CHANGE; SEC REPORTS
[The Company is currently exploring potential strategic transactions
such as corporate partnerships, collaborations and mergers and acquisitions.
There can be no assurance that the Company's efforts in this regard will result
in the consummation of any such transaction.]
<PAGE> 26
APPENDIX I
AVIGEN, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares and Warrants are _______________________
to be registered in (this is the name that will
appear on your stock certificate(s) and
warrant(s)). You may use a nominee name if
appropriate:
2. The relationship between the Purchaser of the _______________________
Securities and the Registered Holder listed in
response to item 1 above:
3. The mailing address of the Registered Holder
listed in response to item 1 above: _______________________
_______________________
_______________________
4. The Social Security Number or Tax Identification _______________________
Number of the Registered Holder listed in the
response to item 1 above:
Signature:___________________________
Print Name:__________________________
Title:_______________________________
<PAGE> 27
APPENDIX II
AVIGEN, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the following information, as of ________ ___, 1999:
(1) (2)
<TABLE>
<S> <C>
Number (or Percentage) of Number of shares, if any, which will be
Shares acquired which are owned after completion of sale of Shares
being included in the included in the Registration Statement
Registration Statement
</TABLE>
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Proxy Statement in connection with the
Company's 1998 Annual Meeting of Stockholders?
Yes [ ] No [ ]
If yes, please indicate the nature of any such relationships: __________
________________________________________________________________________________
Signature:___________________________
Print Name:__________________________
Title:_______________________________
<PAGE> 28
APPENDIX III
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
________________________________________________________________________________
[fill in official name of
________________hereby certifies that he/she [said institution] is the Purchaser
individual or institution]
of the Shares evidenced by the attached stock certificate(s) and as such, sold
such Shares on ______________________ in accordance with registration statement
[date]
number _________________________________________________________________ and the
[fill in the number of or otherwise identify registration statement]
requirement of delivering a current prospectus and current annual, quarterly and
reports (Forms 10-K, 10-Q, and 8-K) by the Company has been complied with in
connection with such sale.
Print or Type:
Name of Purchaser (Individual or Institution):
Name of Individual representing Purchaser
(if an Institution):________________________________
Title of Individual representing Purchaser
(if an Institution):________________________________
Signature by:
Individual Purchaser or Individual
representing Purchaser:______________________________
Title:_______________________________________________
<PAGE> 29
APPENDIX IV
CERTAIN DEFINITIONS
As used in the Agreement, the following terms shall have the meanings
indicated:
U.S. PERSON.
(1) "U.S. person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or
incorporated under the laws of the United States;
(iii) Any estate of which any executor or administrator
is a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in
the United States;
(vi) Any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) Any discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; and
(viii) Any partnership or corporation if:
(A) Organized or incorporated under the laws of
any foreign jurisdiction; and
(B) Formed by a U.S. person principally for the
purpose of investing in securities not registered under the Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Section 230.501(a)) who are not natural persons, estates or trusts.
(2) The following are not "U.S. persons":
(i) Any discretionary account or similar account (other
than an estate or trust) held for the benefit or account of a non-U.S. person by
a dealer or other professional fiduciary organized, incorporated, or (if an
individual) resident in the United States;
(ii) Any estate of which any professional fiduciary
acting as executor or administrator is a U.S. person if:
<PAGE> 30
(A) An executor or administrator of the estate
who is not a U.S. person has sole or shared investment discretion with respect
to the assets of the estate; and
(B) The estate is governed by foreign law;
(iii) Any trust of which any professional fiduciary
acting as trustee is a U.S. person, if a trustee who is not a U.S. person has
sole or shared investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settler if the trust is revocable) is a U.S.
person;
(iv) An employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country;
(v) Any agency or branch of a U.S. person located
outside the United States if:
(A) The agency or branch operates for valid
business reasons; and
(B) The agency or branch is engaged in the
business of insurance or banking and is subject to substantive insurance or
banking regulation, respectively, in the jurisdiction where located; and
(vi) The International Monetary Fund, the International
Bank for Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, the African Development Bank, the United Nations,
and their agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension plans.
UNITED STATES
"United States" means the United States of America, its territories and
possessions, any State of the United States, and the District of Columbia.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,556,669
<SECURITIES> 4,344,910
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,906,609
<PP&E> 3,721,210
<DEPRECIATION> 2,647,681
<TOTAL-ASSETS> 7,454,055
<CURRENT-LIABILITIES> 596,508
<BONDS> 806,144
0
0
<COMMON> 10,318
<OTHER-SE> 5,834,731
<TOTAL-LIABILITY-AND-EQUITY> 7,454,055
<SALES> 0
<TOTAL-REVENUES> 199,185
<CGS> 0
<TOTAL-COSTS> 7,230,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142,615
<INCOME-PRETAX> (6,933,108)
<INCOME-TAX> 8,572
<INCOME-CONTINUING> (6,941,680)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,941,680)
<EPS-PRIMARY> (.78)
<EPS-DILUTED> 0
</TABLE>
