<PAGE> 1
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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 DECEMBER 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>
<S> <C>
DELAWARE 13-3647113
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) 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 February 5, 2000, 15,282,683 shares of the registrant's Common Stock,
$.001 par value, were issued and outstanding.
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AVIGEN, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Balance Sheets
December 31, 1999 and June 30, 1999....................... 3
Condensed Statements of Operations
Three- and six-month periods ended December 31, 1999 and
1998 and for the period from October 22, 1992 (inception)
through December 31, 1999................................. 4
Condensed Statements of Cash Flows
Six-months ended December 31, 1999 and 1998 and for the
period from October 22, 1992 (inception) through December
31, 1999.................................................. 5
Notes to Condensed Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 10
Item 2. Changes in Securities and Use of Proceeds................... 10
Item 3. Defaults upon Senior Securities............................. 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 5. Other Information........................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
Signatures.............................................................. 12
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS
AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JUNE 30, 1999
----------------- -------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 19,501 $ 2,945
Investment in marketable securities....................... 29,362 11,936
Accounts receivable....................................... 64 185
-------- --------
Total current assets.............................. 48,927 15,066
Property and equipment, net................................. 1,073 1,050
Deposits and other assets................................... 396 67
-------- --------
Total assets...................................... $ 50,396 $ 16,183
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 222 $ 251
Accrued compensation and related expenses................. 268 343
Other accrued liabilities................................. 410 304
Capital lease obligations -- current portion.............. 419 697
-------- --------
Total current liabilities......................... 1,319 1,595
Accrued rent.............................................. 133 153
Capital lease obligations (less current portion).......... 43 112
Stockholders' equity:
Common stock, $.001 par value, 30,000,000 shares
authorized, 14,925,492 shares issued and outstanding at
December 31, 1999, 12,358,898 shares issued and
outstanding at June 30, 1999........................... 15 12
Additional paid-in capital................................ 90,506 51,087
Deferred compensation..................................... -- (5)
Deficit accumulated during the development stage.......... (41,620) (36,771)
-------- --------
Total stockholders' equity........................ 48,901 14,323
-------- --------
Total liabilities and stockholders' equity........ $ 50,396 $ 16,183
======== ========
</TABLE>
See accompanying notes.
3
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AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22,
1992
THREE MONTHS ENDED SIX MONTHS ENDED (INCEPTION)
DECEMBER 31 DECEMBER 31 THROUGH
------------------------ ------------------------ DECEMBER 31,
1999 1998 1999 1998 1999
----------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Grant revenue..................... $ 39 $ 25 $ 39 $ 174 $ 587
Expenses:
Research and development........ 1,856 1,433 3,378 3,097 28,466
General and administrative...... 1,096 841 2,006 1,597 15,050
----------- ---------- ----------- ---------- --------
Total expenses.......... 2,952 2,274 5,384 4,694 43,516
----------- ---------- ----------- ---------- --------
Loss from operations.............. (2,913) (2,249) (5,345) (4,520) (42,929)
Interest expense.................. (27) (49) (55) (102) (1,185)
Interest income................... 464 66 557 148 2,340
Other income (expense)............ (6) -- (6) (2) 154
----------- ---------- ----------- ---------- --------
Net loss.......................... $ (2,482) $ (2,232) $ (4,849) $ (4,476) $(41,620)
=========== ========== =========== ========== ========
Basic and diluted net loss per
share........................... $ (0.18) $ (0.25) $ (0.37) $ (0.54)
=========== ========== =========== ==========
Shares used in calculation of
basic and diluted net loss per
share........................... 13,742,249 8,822,396 13,104,592 8,310,267
=========== ========== =========== ==========
</TABLE>
See accompanying notes.
4
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AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED OCTOBER 22, 1992
DECEMBER 31, (INCEPTION)
------------------ THROUGH
1999 1998 DECEMBER 31, 1999
-------- ------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $ (4,849) $(4,476) $ (41,620)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization......................... 212 278 3,039
Amortization of deferred compensation................. 5 20 162
Write-off of organization costs....................... -- -- 146
Noncash interest expense.............................. -- -- 510
Common stock issued for services...................... -- -- 11
Stock options issued for services..................... -- -- 68
Changes in operating assets and liabilities:
Deposits and other assets............................. (329) (288) (514)
Accounts receivable................................... 121 -- 54
Accounts payable, other accrued liabilities and
accrued compensation and related expenses........... 2 277 1,197
Accrued rent.......................................... (20) (20) 133
-------- ------- ---------
Net cash used in operating activities...................... (4,858) (4,208) (36,814)
INVESTING ACTIVITIES
Purchases of property and equipment........................ (235) (39) (3,861)
Disposal of property and equipment......................... -- -- 47
Organization costs......................................... -- -- (219)
Purchase of marketable securities.......................... (93,192) (4,276) (166,724)
Sale and maturity of marketable securities................. 75,766 5,473 137,363
-------- ------- ---------
Net cash provided by (used in) investing activities........ (17,661) 1,158 (33,394)
FINANCING ACTIVITIES
Proceeds from notes payable................................ -- -- 2,133
Repayment of notes payable................................. -- -- (1,710)
Proceeds from 1996 bridge financing........................ -- -- 1,937
Payment of bridge financing costs.......................... -- -- (194)
Repayment of 1996 bridge financing......................... -- -- (1,937)
Payments on capital lease obligations...................... (347) (309) (1,691)
Proceeds from sale-leaseback of equipment.................. -- -- 1,927
Proceeds from issuance of preferred stock, net of issuance
costs.................................................... -- -- 9,885
Proceeds from issuance of common stock, net of issuance
costs.................................................... 39,422 8,007 79,359
-------- ------- ---------
Net cash provided by financing activities.................. 39,075 7,698 89,709
Net (decrease) increase in cash and cash equivalents....... 16,556 4,648 19,501
Cash and cash equivalents, beginning of period............. 2,945 1,280 --
-------- ------- ---------
Cash and cash equivalents, end of period................... $ 19,501 $ 5,928 $ 19,501
======== ======= =========
</TABLE>
See accompanying notes.
5
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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., hereafter referred to as the
Company, considers necessary for a fair presentation of its financial position
as of December 31, 1999 and its results of operations and cash flows for the
three- and six-month periods ended December 31, 1999 and 1998. 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, 1999,
filed with the Securities and Exchange Commission.
2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
The Company considers all highly liquid investments, with a maturity of
three months or less when purchased, to be cash equivalents. The Company
accounts for its marketable securities in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company's marketable securities consist principally of
available-for-sale government and corporate debt securities with a minimum
short-term rating of A1/P1 and a minimum long-term rating of A, and with
maturities of less than one year. Realized and unrealized gains and losses have
been insignificant to the results of operations and to the financial position of
the Company. All investments are classified as available for sale.
3. STOCKHOLDERS' EQUITY
In November 1999, the Company completed a private placement by issuing
2,033,895 shares of common stock and 406,779 warrants for an aggregate offering
price of approximately $37.3 million, net of issuance costs.
4. COMPREHENSIVE LOSS VERSUS NET LOSS
There is no difference between the Company's net loss and comprehensive
loss for either of the three- or six-month periods ended December 31, 1999 and
December 31, 1998.
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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 of financial conditions and results of operations
contained in the Company's Annual Report on Form 10-K for the year ended June
30, 1999, filed with the Securities and Exchange Commission.
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, including statements regarding Avigen's
drug development programs, clinical trials, receipt of regulatory approval,
capital needs, intellectual property, expectations and intentions. The words
"believe," "anticipate," "expect," "intend," and words of similar import are
intended to identify these statements as forward-looking statements. The
Company's actual results could differ materially from the 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, 1999 filed with the Securities and Exchange Commission.
OVERVIEW
Avigen is a leader in the development of gene therapy products derived from
adeno-associated virus, referred to as AAV, for the treatment of inherited and
acquired diseases. Avigen's proposed gene therapy products are designed for in
vivo administration to achieve the production of therapeutic proteins within the
body. Avigen has honed its strategic focus on developing a broad-based
proprietary gene delivery technology, AAV vector. Avigen believes AAV vectors
can be used to deliver genes for the treatment of hemophilia, thalassemia,
hereditary emphysema and Gaucher's disease.
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 December 31, 1999, the Company had an
accumulated deficit of $41.6 million.
RESULTS OF OPERATION
Three-Months Ended December 31, 1999 and 1998
Grant revenue was $39,000 for the three-month period ended December 31,
1999 compared to $25,000 for the same period in 1998. Grant revenue consisted of
reimbursements under a National Institutes of Health grant. Revenues earned
under research grants are determined by the timing and amounts of the award from
the issuing agency and achievement of milestones by the Company. 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 totaled $1.9 million for
the three-month period ended December 31, 1999, an increase of $422,000, or 30%,
from the prior year. This increase was related to the Company's initiation of a
clinical trial for the treatment of Hemophilia B, which had not yet been
approved prior to December 31, 1998. The increased costs include payments under
research agreements to the hospitals performing the study, as well as
independent data analyses and related toxicology studies. The increase in
research and development expenses also included increased purchases of supplies
and materials necessary for the production of AAV vector used in the trial.
General and administrative expenses totaled $1.1 million for the
three-month period ended December 31, 1999, an increase of $255,000, or 30%,
from the prior year. The increase was primarily due to higher license and legal
fees related to the Company's patents and other intellectual property, as well
as higher filing fees and other costs incurred in December 1999 in connection
with the registration of newly issued stock and new and
7
<PAGE> 8
existing warrants for the purchase of common stock. The increase in total
general and administrative expenses also includes higher costs related to the
compensation of key employees.
Interest expense was $27,000 for the period, a decline of $22,000, or 45%,
primarily as a result of scheduled payments reducing the Company's equipment
lease obligation with Transamerica Business Credit.
Interest income totaled $464,000, up significantly from $66,000 earned in
the three-months ended December 31, 1998, primarily resulting from the increase
in short term investments from the application of the proceeds received from
private placement of common stock and warrants since December 31, 1998.
Six Months Ended December 31, 1999 and 1998
Grant revenue was $39,000 for the six-month period ended December 31, 1999
compared to $174,000 for the same period in 1998. Grant revenue consisted of
reimbursements under the National Institutes of Health grant described above.
The Company's research and development expenses totaled $3.4 million for
the six-month period ended December 31, 1999, an increase of $281,000, or 9%,
from the prior year. This increase was primarily due to costs associated with
the Company's clinical trial, described above, and the recruitment of additional
scientific staff. These increases were partially reduced by a lower depreciation
charges from leasehold improvements and lab equipment which have been fully
depreciated, as well as lower expenses for external scientific consultants.
General and administrative expenses totaled $2.0 million for the six-month
period ended December 31, 1999, an increase of $409,000, or 26%, from the prior
year. The increase was primarily due to higher license and legal fees related to
the Company's patents and other intellectual property, as well as higher filing
fees and other costs incurred in December 1999 in connection with the
registration of newly issued stock and new and existing warrants for the
purchase of common stock. The increase in total general and administrative
expenses also includes higher costs related to the compensation of key employees
and external business consultants.
Interest expense was $55,000 for the period, a decline of $47,000, or 46%,
primarily as a result of scheduled payments reducing the Company's equipment
lease obligation with Transamerica Business Credit.
Interest income totaled $557,000 for the period, up from $148,000 earned in
the six-months ended December 31, 1998, primarily resulting from the increase in
short term investments from the application of the proceeds received from the
private placement of common stock and warrants since December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In October and November 1999, the Company completed a private placement
with a series of closing dates. This private placement raised approximately $37
million, net of issuance costs. In connection with the private placement the
Company issued 2,033,895 shares of Common Stock at the reported closing Nasdaq
National Market prices on each of the closing dates, with the exercise prices
ranging from $16.19 to $25.56 per share. For every five shares purchased, each
investor also acquired a five-year warrant to purchase one share of the
Company's common stock at a twenty-five percent premium to the corresponding
closing price of the private placement.
Cash used in operating activities was $4.9 million during the six-month
period ended December 31, 1999, compared to $4.2 million during the same period
in 1998, an increase of $650,000, or 15%. The change was primarily due to the
increase in net loss resulting from higher expenses related to the Company's
clinical trial activities, as well as a decline in accounts payable, accrued
compensation and other accrued expenses.
At December 31, 1999, the Company had cash, cash equivalents and
investments in marketable securities of approximately $48.9 million compared to
approximately $14.9 million at June 30, 1999. This increase resulted from the
Company's private placement of common stock and warrants described above,
partially offset by cash used in operating activities. 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
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through at least 2001. The Company will require substantial funds to conduct the
research and development activities, preclinical studies, and clinical testing
of its potential products, as well as to manufacture and market any products
that are developed.
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.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funding in order to
complete the research and development activities currently contemplated and to
commercialize its proposed products.
The Company's future operating and capital requirements. The Company
anticipates that its capital resources as of December 31, 1999, will be adequate
to fund its needs through at least 2001. However, the Company's future operating
and 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 and
other intellectual property rights;
- competing technological developments;
- the cost of manufacturing scale-up;
- the cost of commercialization activities; and
- other factors which may not be within the Company's control.
The Company intends to seek additional funding through public or private
equity or debt financing, when market conditions allow, and has recently
announced its intention to conduct a public offering of its common stock. If the
Company raises additional funds by issuing equity securities, there may be
further dilution to existing stockholders. The Company cannot assure its
investors that it will be able to enter into such financing arrangements on
acceptable terms or at all. Without such additional funding, the Company may be
required to delay, reduce the scope of, or eliminate one or more of its research
or development programs.
The Company's facility is approximately 23,000 square feet leased through
May 2003. The Company believes that it will be able to renew the lease for this
facility or find suitable alternate facilities in the same general area without
a material disruption of its operations. It is anticipated that the Company
would be required to pay a premium for new facilities, as the overall rates in
the area have increased and are expected to increase, but at a lesser rate;
however, 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.
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YEAR 2000
The costs experienced by the Company in relation to its internal computer
software programs and operating systems as a result of the publicized Year 2000
Issue were immaterial.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not hold derivative financial investments, derivative
commodity investments or other financial investments or engage in foreign
currency hedging or other transactions that exposes it to material market risk.
The Company has also evaluated the risk associated with its Wells Capital
Management investments in marketable securities and, due to the short term
nature of these debt instruments, has concluded that such risks are immaterial.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company completed a private placement which raised $40 million in gross
proceeds in October and November 1999. After incurring approximately $2.8
million in expenses for placement agent fees and commissions, the net proceeds
to the Company was approximately $37.3 million.
Pursuant to the common stock and warrant purchase agreement dated as of
October 29, 1999, the Company issued in multiple closings from October 29
through November 12, 1999, a total of 2,033,895 shares of common stock, as well
as warrants to acquire 406,779 additional shares, for an aggregate offering
price of approximately $40.0 million. The warrants are exercisable for five
years from the date of purchase. An additional 198,056 warrants were issued to
Americal Securities and UI, Inc., as placement agents, as partial consideration
for their services. The five-year warrants issued to the placement agents were
issued with exercise prices at a ten percent premium of the reported closing
Nasdaq market prices on the corresponding closing dates of the private
placement. The exercise prices of these warrants range from $17.81 to $28.12 per
share. The securities were issued in Reliance on Rule 506 of Regulation D and
Section 4(2) under the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Avigen, Inc. was held on November
12, 1999.
(b) - (e) The matters voted upon at the meeting and the voting of
stockholders with respect thereto are as follows:
Drs. Zola Horovitz and Yuichi Iwaki were elected as Class I directors of
the Company to hold office until the 2002 Annual Meeting of Stockholders and
until his successor is elected and has qualified, or until such directors'
earlier death, resignation or removal. The voting results, with approximately
57.4% of the shares voting, was as follows:
<TABLE>
<S> <C>
For......................................................... 6,888,048
Withhold.................................................... 288,251
Abstain..................................................... -0-
Broker nonvotes............................................. -0-
</TABLE>
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Class II directors, Philip J. Whitcome, Ph.D. and John K.A. Prendergast,
Ph.D. will each continue to serve on the Board of Directors until the 2000
Annual Meeting of Stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Class
III director, John Monahan, Ph.D. will continue to serve on the Board of
Directors until the 2001 Annual Meeting of Stockholders and until his successor
is elected and has qualified, or until his earlier death, resignation or
removal.
The amendment to the Company's 1996 Equity Incentive Plan to increase the
aggregate number of shares of common stock authorized for issuance under such
plan from 1,300,000 shares to 1,900,000 shares, and increase the maximum number
of shares that may be covered by stock options or stock appreciation rights
granted to a plan participant in a calendar year from 100,000 shares to 500,000
shares was approved. The voting results were as follows:
<TABLE>
<S> <C>
For......................................................... 6,096,997
Against..................................................... 994,162
Abstain..................................................... 85,140
Broker nonvotes............................................. -0-
</TABLE>
The amendment to the Company's 1996 Non-Employee Directors' Stock Option
Plan to increase the size of automatic annual grants of nonstatutory stock
options under such plan from 5,000 shares to 7,500 shares was approved. The
voting results were as follows:
<TABLE>
<S> <C>
For......................................................... 6,656,906
Against..................................................... 456,458
Abstain..................................................... 62,935
Broker nonvotes............................................. -0-
</TABLE>
The selection of Ernst & Young LLP as the Company's Auditors for its fiscal
year ending June 30, 2000 was ratified. The voting results were as follows:
<TABLE>
<S> <C>
For......................................................... 7,165,404
Against..................................................... 4,310
Abstain..................................................... 6,585
Broker nonvotes............................................. -0-
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.3 1996 Equity Incentive Plan, as amended
10.4 Form of Common Stock and Warrant Purchase Agreement, dated
October 29, 1999
10.6 1996 Non-Employee Director Stock Option Plan, as amended
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
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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: February 11, 2000 /s/ JOHN MONAHAN
--------------------------------------
John Monahan
Chief Executive Officer and President
Date: February 11, 2000 /s/ THOMAS J. PAULSON
--------------------------------------
Thomas J. Paulson
Vice President Finance,
Chief Financial and Accounting
Officer, and Secretary
12
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EXHIBIT 10.3
AVIGEN, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED MARCH 29, 1996
APPROVED BY STOCKHOLDERS APRIL 30, 1996
AMENDED SEPTEMBER 12, 1997
APPROVED BY STOCKHOLDERS NOVEMBER 20, 1997
AMENDED SEPTEMBER 24, 1999
APPROVED BY STOCKHOLDERS NOVEMBER 12, 1999
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the stock of the
Company through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, (iv) rights to purchase restricted stock,
and (v) Stock Appreciation Rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) Stock
Appreciation Rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Avigen, Inc., a Delaware corporation.
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(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(2) If the Common Stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the bid and asked prices for
the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
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(3) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(u) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PLAN" means this Avigen, Inc. 1996 Equity Incentive Plan.
(x) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
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(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(aa) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
14.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees of the Board composed of two (2) or more members (the "Committee"),
all of the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of the administrative powers the Committee is
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<PAGE> 5
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything to the contrary contained herein, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Stock Awards to eligible persons who (1) are not then subject to Section
16 of the Exchange Act and/or (2) are either (i) not then Covered Employees and
are not expected to be Covered Employees at the time of recognition of income
resulting from such Stock Award, or (ii) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate one million nine hundred thousand (1,900,000)
shares of the Company's Common Stock. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. Shares subject to Stock
Appreciation Rights exercised in accordance with Section 8 of the Plan shall not
be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the Fair Market Value
of such stock at the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than five hundred thousand (500,000)
shares of the Company's Common Stock in any calendar year.
6. OPTION PROVISIONS.
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<PAGE> 6
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of a Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the Common
Stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other Common Stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option may be
transferred to the extent provided in the Option Agreement; provided that if the
Option Agreement does not expressly permit the transfer of a Nonstatutory Stock
Option, the Nonstatutory Stock Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person or any
transferee pursuant to a domestic relations order. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option
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<PAGE> 7
Agreement may provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect to some or all
of the shares allotted to that period, and may be exercised with respect to some
or all of the shares allotted to such period and/or any prior period as to which
the Option became vested but was not fully exercised. The Option may be subject
to such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not
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<PAGE> 8
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
common stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(d) of the Plan and in Section
422(d) of the
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Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and the limits on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the Common Stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates,
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the Company may repurchase or otherwise reacquire any or all of the shares of
stock held by that person which have not vested as of the date of termination
under the terms of the stock bonus or restricted stock purchase agreement
between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees, Directors and Consultants. To exercise any outstanding Stock
Appreciation Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the Stock Award Agreement
evidencing such right. Except as provided in subsection 5(d), no limitation
shall exist on the aggregate amount of cash payments the Company may make under
the Plan in connection with the exercise of a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They shall
be denominated in share equivalents. The appreciation distribution
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payable on the exercised Independent Right shall be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Company stock equal
to the number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising the
Independent Right on such date, over (B) the aggregate Fair Market Value (on the
date of the grant of the Independent Right) of such number of shares of Company
stock. The appreciation distribution payable on the exercised Independent Right
shall be in cash or, if so provided, in an equivalent number of shares of stock
based on Fair Market Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of any adversely affected holders of Options and/or Stock Appreciation Rights,
the cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than:
eighty-five percent (85%) of the Fair Market Value for a Nonstatutory Stock
Option, one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of an Incentive Stock Option held by a
10% stockholder (as described in subsection 5(b)), not less than one hundred ten
percent (110%) of the Fair Market Value per share of stock on the new grant
date. Notwithstanding the foregoing, the Board or the Committee may grant an
Option and/or Stock Appreciation Right with an exercise price lower than that
set forth above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Right; in the event of such repricing, both the original and
the substituted Options and Stock Appreciation Rights shall be counted against
the maximum awards of Options and Stock Appreciation Rights permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not
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require the Company to register under the Securities Act of 1933, as amended
(the "Securities Act") either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director nor Consultant nor any person to whom
a Stock Award is transferred in accordance with the Plan shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate or to continue acting as a Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance with
the Plan, as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of
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evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(d), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards for those outstanding under the Plan, or (ii) such
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<PAGE> 14
Stock Awards shall continue in full force and effect. In the event any surviving
corporation and its Affiliates refuse to assume or continue such Stock Awards,
or to substitute similar options for those outstanding under the Plan, then,
with respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such Stock Awards may
be exercised shall be accelerated and the Stock Awards terminated if not
exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary in order for the
Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any
Nasdaq of securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
or Consultants with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
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<PAGE> 15
16. EFFECTIVE DATE OF PLAN.
The Plan, as amended, shall become effective on such date, but no
Options granted under the Plan, as amended, shall be exercised unless and until
the Plan, as amended, has been approved by the stockholders of the Company.
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<PAGE> 1
EXHIBIT 10.4
AVIGEN, INC.
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
OCTOBER 29, 1999
<PAGE> 2
NOTICE TO ALL PURCHASERS:
IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
<PAGE> 3
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 29 day of October 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"), each of those persons and entities,
severally and not jointly, that have signed this agreement as a Placement Agent
on the signature page hereof (each, a "Placement Agent" and collectively, the
"Placement Agents"), 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 (each, a "Purchaser" and collectively, the "Purchasers").
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 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 the Nasdaq National Market ("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 the first Units to
be sold pursuant to this Agreement (the "Initial Units") shall be held on
October 29, 1999, at the offices
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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."
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
2
<PAGE> 5
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 9.4 hereof may be legally unenforceable.
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, 1999 (without exhibits unless specifically requested);
(b) the Company's Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the SEC since June 30, 1998, if any (without
exhibits unless specifically requested); and
(c) Notice of Annual Meeting and Proxy Statement for the
Company's 1999 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, 1999, or end of the quarter for which the Company has
filed a Quarterly Report on Form 10-Q, if later, 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
(the "Exchange Act") since June 30, 1999. 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
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<PAGE> 6
consistently applied throughout the period indicated ("GAAP"), except that
unaudited financial statements are subject to normal recurring year-end audit
adjustments and do not contain the footnotes required under 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, in each case except that unaudited
financial statements are subject to normal recurring year-end audit adjustments
and do not contain the footnotes required under GAAP.
(b) No event has occurred since June 30, 1999 requiring the
filing of an SEC Report that has not heretofore been filed and furnished or made
available 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).
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS AND
PLACEMENT AGENTS.
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.
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<PAGE> 7
(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.
(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.
For purposes of this Section 5, the term "Purchaser" shall also refer to
each Placement Agent with respect to the warrants issued to the Placement Agent
in connection with the transactions under this Agreement and the shares of
Common Stock issuable upon exercise thereof as fully as of such warrants were
Warrants and such shares were Shares.
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 and
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<PAGE> 8
Placement Agent herein and in the certificates for the securities delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Purchasers and Placement Agents 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 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 states 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 Closing Date for the last sale of Units hereunder or (ii) January 14, 2000
(the "Filing Date"), the Company shall use its reasonable efforts to prepare and
file with the Commission a registration statement
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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 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
7
<PAGE> 10
and commissions) in connection with the procedures in paragraphs (a) through (d)
of this Section 9.1.
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 meaning of 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
(ii) 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.
9.3 LEGENDS. 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 BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER
WRITTEN EVIDENCE IN THE FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN COMPLIANCE THEREWITH.
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, 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
8
<PAGE> 11
(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 from and against any losses, claims, damages or liabilities to which
such Selling Stockholder 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 Stockholder
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 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 specifically for use in
preparation of the Registration Statement, or the failure of such Selling
Stockholder 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 prior to the pertinent sale or sales by the Selling
Stockholder.
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.
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 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
9
<PAGE> 12
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, the Company
will furnish, upon request, to the Purchasers:
(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, excluding exhibits, 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; and (iv) its
current reports on Form 8-K, if any;
(b) upon the request of any Purchaser, all exhibits excluded by
the parenthetical to subparagraph (a) of this Section 9.6, in the form generally
available to the public; and
(c) upon the reasonable request of any Purchaser, 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 set forth in
such Registration Statement.
10
<PAGE> 13
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 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.
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: Thomas J. Paulson
Facsimile: (510) 748-7155
with a copy so mailed to:
Cooley Godward LLP
Five Palo Alto Square, 4th Floor
Palo Alto, California 94306
11
<PAGE> 14
Attention: Alan C. Mendelson
Facsimile: (650) 857-0663
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.
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 each Placement Agent will receive a cash commission
equal to 7.0% of the aggregate gross proceeds
12
<PAGE> 15
from the sale of the Units for which they acted as placement agent, and common
stock warrants equal to 10.0% of the number of Shares sold, for which they acted
as placement agent, at an exercise price equal to 110% of the closing price. 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.
13
<PAGE> 16
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:
AVIGEN, INC.
By:
--------------------------------------------
John Monahan, Ph.D.
President and Chief Executive Officer
Address: 1201 Harbor Parkway, Suite #1000
Alameda, CA 94502
Facsimile: (510) 748-7155
14
<PAGE> 17
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):
---------------------
PLACEMENT AGENT:
Signature:
---------------------------------
Print Name:
--------------------------------
Print Title:
-------------------------------
Print Company:
-----------------------------
Print Address:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Date:
--------------------------------------
15
<PAGE> 18
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
NAME NO. OF UNITS TOTAL COST OF
SHARES
<S> <C> <C>
TOTAL
</TABLE>
A-1
<PAGE> 19
EXHIBIT B
FORM OF WARRANT
<PAGE> 20
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. 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.
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 [__________
___], 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
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
1.
<PAGE> 21
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
2.
<PAGE> 22
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
3.
<PAGE> 23
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
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
4.
<PAGE> 24
(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,
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
5.
<PAGE> 25
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 and the terms and conditions hereof. Each
Warrant shall bear a legend in substantially the same form as the legend 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 NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. 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.
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.
6.
<PAGE> 26
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.
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
7.
<PAGE> 27
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.
HOLDER
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
<PAGE> 28
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> 29
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> 30
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:
-----------------------------
<PAGE> 31
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 October 31, 1999:
(1) (2)
Number (or Percentage) of shares Number of shares, if any, which
acquired which are being included will be owned after completion
in the Registration Statement of sale of Shares included in
the Registration Statement
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 1999 Annual Meeting of Stockholders?
Yes____No____
If yes, please indicate the nature of any such relationships:
-------------------
- --------------------------------------------------------------------------------
<PAGE> 32
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:
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES...........................................1
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES.....................................1
2.1 Sale of Units.................................................................1
2.2 Separate Agreement............................................................1
SECTION 3 CLOSING AND DELIVERY...............................................................1
3.1 Closing.......................................................................1
3.2 Delivery of the Units at the Closing..........................................2
3.3 Subsequent Sales of Shares....................................................2
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY..........................2
4.1 Organization and Qualification................................................2
4.2 Due Execution, Delivery and Performance of the Agreements.....................2
4.3 Issuance, Sale and Delivery of the Shares and the Warrants....................3
4.4 Additional Information........................................................3
4.5 No Material Change............................................................3
4.6 SEC Reports...................................................................3
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
AND PLACEMENT AGENTS.........................................................4
SECTION 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS............................5
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING................................6
7.1 Receipt of Payment............................................................6
7.2 Representations and Warranties Correct........................................6
7.3 Covenants Performed...........................................................6
7.4 No General Solicitation; Blue Sky.............................................6
SECTION 8. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING..............................6
8.1 Representations and Warranties Correct........................................6
8.2 Covenants Performed...........................................................6
SECTION 9. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT....................6
9.1 Registration Procedures and Expenses..........................................6
9.2 Transfer of Securities After Registration.....................................8
9.3 Legends.......................................................................8
</TABLE>
<PAGE> 34
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
PAGE
<S> <C>
9.4 Indemnification...............................................................8
9.5 Termination of Conditions and Obligations....................................10
9.6 Information Available........................................................10
9.7 Changes in Purchaser Information.............................................10
9.8 Liquidated Damages...........................................................11
SECTION 10. BROKER'S FEE....................................................................11
SECTION 11. NOTICES.........................................................................11
SECTION 12. MISCELLANEOUS...................................................................12
12.1 Waivers and Amendments.......................................................12
12.2 Headings.....................................................................12
12.3 Severability.................................................................12
12.4 Governing Law................................................................12
12.5 Counterparts.................................................................12
12.6 Successors and Assigns.......................................................12
12.7 Entire Agreement.............................................................12
12.8 Payment of Fees and Expenses.................................................12
</TABLE>
ATTACHMENTS:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Warrant
Exhibit C - Schedule of Exceptions
Appendix I - Stock Certificate and Warrant Questionnaire
Appendix II - Registration Statement Questionnaire
Appendix III - Purchaser's Certificate of Subsequent Sale
ii
<PAGE> 1
EXHIBIT 10.6
AVIGEN, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED MARCH 29, 1996
APPROVED BY STOCKHOLDERS APRIL 30, 1996
AMENDED BY THE BOARD OF DIRECTORS ON SEPTEMBER 24, 1999
APPROVED BY STOCKHOLDERS NOVEMBER 12, 1999
1. PURPOSE.
(a) The purpose of the Avigen, Inc. 1996 Non-Employee Directors' Stock
Option Plan (the "Plan") is to provide a means by which each director of Avigen,
Inc. a Delaware corporation (the "Company") who is not otherwise an employee of
the Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated
<PAGE> 2
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate two hundred thousand (200,000)
(after giving effect to the 4.43-for-1 reverse split of the Company's Common
Stock) shares of the Company's Common Stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, after the Effective Date, elected for the first
time to be a Non-Employee Director automatically shall, upon the date of initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase fifteen thousand (15,000) (after
giving effect to the 4.43-for-1 reverse split of the Company's Common Stock)
shares of Common Stock of the Company on the terms and conditions set forth
herein.
2
<PAGE> 3
(b) At each annual meeting of the Company's stockholders after the
Effective Date (i) each person who is then a Non-Employee Director and
continuously has been a Non-Employee Director since the preceding annual meeting
of the Company's stockholders automatically shall be granted an option to
purchase seven thousand five hundred (7,500) (after giving effect to the
4.43-for-1 reverse split of the Company's Common Stock) shares of Common Stock
of the Company on the terms and conditions set forth herein, and (ii) each other
person who is then a Non-Employee Director automatically shall be granted an
option to purchase, on the terms and conditions set forth herein, the number of
shares of Common Stock of the Company (rounded up to the nearest whole share)
determined by multiplying the seven thousand five hundred (7,500) shares by a
fraction, the numerator of which is the number of days the person continuously
has been a Non-Employee Director as of the date of such grant and the
denominator of which is 365.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date of termination of all such service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate only as to that number of shares as to
3
<PAGE> 4
which it was exercisable on the date of termination of such service under the
provisions of subparagraph 6(e).
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is fewer than 1,000 shares. However, when the number of shares being purchased
upon an exercise is 1,000 or more shares, the optionee may elect to make payment
of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash or
by check at the time of exercise; or
(ii) Provided that at the time of the exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of shares of Common Stock of the Company
already owned by the optionee, held for the period required to avoid a charge to
the Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which Common Stock shall be valued at its
fair market value on the date preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the receipt of cash (or check) by the Company prior to
the issuance of shares of the Company's Common Stock.
4
<PAGE> 5
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 under the Securities Exchange Act of
1934 ("Rule 16b-3") and shall be exercisable during the lifetime of the person
to whom the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order. Notwithstanding the
foregoing, the optionee may, by delivering written notice to the Company in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.
(e) The option shall become exercisable in installments over a period
of three (3) years from the date of grant commencing on the date one (1) year
after the date of grant of the option, with thirty-three percent (33%) becoming
exercisable one (1) year after the date of the grant, thirty-four percent (34%)
becoming exercisable two (2) years after the date of grant and the remaining
thirty-three percent (33%) becoming exercisable three (3) years after the date
of grant; provided that the optionee has, during the entire period prior to such
vesting date, continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate of the Company, whereupon such option
shall become fully exercisable in accordance with its terms with respect to that
portion of the shares represented by that installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
5
<PAGE> 6
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
(h) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that any optionee
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of
6
<PAGE> 7
stock upon exercise of the options granted under the Plan; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any option granted under the Plan, or any stock
issued or issuable pursuant to any such option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any
7
<PAGE> 8
Affiliate or shall affect any right of the Company, its Board or stockholders or
any Affiliate to terminate the service of any Non-Employee Director.
(d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of Common Stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(f) As used in this Plan, "fair market value" means, as of any date,
the value of the Common Stock of the Company determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market , the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling
8
<PAGE> 9
prices are not reported, the Fair Market Value of a share of Common Stock shall
be the mean between the bid and asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.
Notwithstanding the foregoing, the Fair Market Value of the Common
Stock for an option granted on the Effective Date shall be the price per share
at which shares of Common Stock are first sold to the public in the Company's
initial public offering.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding options will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding options.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) any other capital reorganization (including a sale of
stock of the Company to a
9
<PAGE> 10
single purchaser or single group of affiliated purchasers) after which less than
fifty percent (50%) of the outstanding voting shares of the new or continuing
corporation are owned by stockholders of the Company immediately before such
transaction, the time during which options outstanding under the Plan may be
exercised shall be accelerated to permit the optionee to exercise all such
options in full prior to such event, and the options shall terminate if not
exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the Plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, or applicable regulations or rulings thereunder. Except as provided in
paragraph 10 relating to adjustments upon changes in stock, no amendment shall
be effective unless approved by the stockholders of the Company within twelve
(12) months before or after the adoption of the amendment, where the amendment
will modify the Plan in any way if such modification requires stockholder
approval in order for the Plan to comply with the requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
10
<PAGE> 11
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective on the same day that the Company's
initial public offering of shares of Common Stock becomes effective (the
"Effective Date"), subject to the condition that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
11
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