PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Purchase Agreement") is made as of the
15th day of December, 1999 by and between AVI BioPharma, Inc., a corporation
organized under the laws of Oregon, with headquarters located at Portland,
Oregon (the "Company"), and the persons identified on the signature pages
hereto (each an "Investor" and collectively, the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering
this Purchase Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the U.S. Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended;
B. The Investors wish to purchase, and the Company wishes to
sell and issue to the Investors, upon the terms and conditions stated in this
Purchase Agreement, up to 2.0 million shares of the Company's Common Stock,
par value $.0001 per share (the "Common Stock") and up to 600,000 warrants to
acquire shares of Common Stock in the form attached hereto as EXHIBIT A (the
"Warrants"); and
C. Contemporaneous with the execution and delivery of this
Purchase Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as EXHIBIT B (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws;
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Purchase Agreement, the
following terms shall have the meanings here set forth:
1.1 "AFFILIATE" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "AGREEMENTS" means this Purchase Agreement, the Registration
Rights Agreement, the Warrant Agreement and the Escrow Agreement.
1
1.3 "CLOSING" means the consummation of the transactions
contemplated by this Agreement, and "CLOSING DATE" means the date of such
Closing.
1.4 "CONTROL" means the possession , direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
1.5 "MATERIAL ADVERSE EFFECT" means a material adverse effect on
the (i) condition (financial or otherwise), business, assets, or results of
operations of the Company and its subsidiaries, taken as a whole; (ii)
ability of the Company to perform any of its material obligations under the
Agreements; or (iii) rights and remedies of the Investor under the Agreements.
1.6 "PERSON" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.7 "SEC FILINGS" has the meaning set forth in Section 4.6.
1.8 "SECURITIES" means the Shares, the Warrants and the Warrant
Shares (defined below).
1.9 "SHARES" means the shares of Common Stock being purchased by
the Investor hereunder.
1.10 "WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of or otherwise pursuant to the Warrants.
1.11 "1933 ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.12 "1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF THE SHARES AND WARRANTS. Subject to the terms
and conditions of this Purchase Agreement, each Investor severally hereby
agrees to purchase and the Company hereby agrees to sell and issue to such
Investor, the number of Shares and Warrants to purchase the number of shares
of Common Stock set forth on such Investor's Counterpart Execution Page
attached hereto. The number of Shares to be purchased by such Investor shall
be determined by dividing such Investor's aggregate purchase price (as the
aggregate purchase price is set forth on such Investor's signature page
attached hereto), by $3.50 per share. The number of shares of Common Stock
purchasable by the Investor pursuant to the Warrants shall be equal to 30% of
the number of Shares purchased by the Investor, with an initial exercise
price equal to $4.025.
2
3. CLOSING AND DELIVERY.
3.1 ESCROW OF PURCHASE PRICE. Each Investor understands
and agrees that upon the execution and delivery hereof, the Investor shall
deposit the purchase price for the Securities subscribed for, in immediately
available funds, with the Escrow Agent under that certain Escrow Agreement
dated December 15, 1999, by and among the Company, Cruttenden Xxxx
Incorporated and City National Bank, a form of which is attached hereto as
EXHIBIT C (the "Escrow Agreement"). The Company will use its best efforts to
satisfy all of the conditions to the Closing (as defined herein) within five
(5) business days of the receipt of funds by the Escrow Agent. If the Closing
does not occur within five (5) business days of the receipt of funds into
escrow, the Investors shall have the right to request the return of their
deposits together with any interest income generated thereon and this
Purchase Agreement will be terminated and have no force or effect after such
date except to the Company's obligation to return to each Investor the
purchase price together with interest thereon. In addition, Investors will be
entitled to receive, on a pro-rata basis based on the number of days held by
the Escrow Agent, interest income generated on their cash balances held by
the Escrow Agent prior to the Closing. It will be the responsibility of
Cruttenden Xxxx Incorporated to calculate the "pro rata" amounts of interest
income due each Investor and the responsibility of the Company to return the
interest income to each Investor within five (5) business days of the Closing.
3.2 CLOSING. The escrow account described in Exhibit C to this
Purchase Agreement will remain open until five o'clock P.M. on December 31,
1999, unless extended by the Company to a date no later than January 31,
2000, or unless the offering is closed. The closing of the purchase and sale
of Securities pursuant to this Purchase Agreement (the "Closing") shall be
held as soon as practicable after the satisfaction or waiver of all
conditions to Closing, including the filing of the Registration Statement (as
defined herein) with the Securities and Exchange Commission (the "SEC"), at
10:00 a.m. (Pacific Time) at the offices of the Company, located at One S.W.
Columbia Street, Suite 1105, Xxxxxxxx, Xxxxxx 00000, or on such other date
and place as may be agreed to by the Company and the Investors. Prior to the
Closing, each Investor shall execute any related agreements or other
documents required to be executed hereunder.
3.3 DELIVERY OF SHARES AT THE CLOSING. Proximate to the Closing,
the Company shall deliver to each Investor stock certificate(s) and Warrant
Agreement(s) registered in the name of such Investor, or in such nominee
name(s) as designated by such Investor, representing the Shares and Warrants
to be purchased by such Investor at the Closing as set forth on each
Counterpart Execution Page hereto, against payment of the Purchase Price.
The name(s) in which the stock certificate(s) and Warrant Agreement(s) are to
be issued to each Investor are set forth in the Investor's Counterpart
Execution Page hereto, as completed by each Investor.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investors that:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly incorporated, validly existing and in good standing under the
laws of Oregon
3
and has all requisite power and authority to carry on its business and own
its properties as now conducted and owned. The Company is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or licensing necessary unless
the failure to so qualify or be licensed would not have a Material Adverse
Effect. SCHEDULE 4.1 lists all subsidiaries of the Company. Except when the
context otherwise requires, representations and warranties in this Section 4
by the Company shall be deemed to include representations and warranties as
to its subsidiaries as well.
4.2 AUTHORIZATION. The Company has full power and authority and
has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Agreements, (ii) the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Agreements
constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally.
4.3 CAPITALIZATION. Set forth on SCHEDULE 4.3 hereto is (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the
number of shares of capital stock issuable and reserved for issuance pursuant
to securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth on SCHEDULE 4.3, no Person is
entitled to preemptive or similar statutory or contractual rights with
respect to any securities of the Company, including the Shares, the Warrants
and the Warrant Shares. Except as set forth on SCHEDULE 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company is or may
be obligated to issue any equity securities of any kind, or to transfer any
equity securities of any kind, and except as contemplated by this Agreement,
the Company does not have any present plan or intention to issue any equity
securities of any kind, or to transfer any equity securities of any kind
owned by it. Except as set forth on SCHEDULE 4.3, the Company does not know
of any voting agreements, buy-sell agreements, option or right of first
purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities held by them.
Except as set forth on SCHEDULE 4.3, the Company has not granted any Person
the right to require the Company to register any securities of the Company
under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the
account of any other Person.
4.4 VALID ISSUANCE. The Company has reserved a sufficient number
of shares of Common Stock for issuance pursuant to this Agreement and upon
exercise of the Warrants. The Company will take such steps as may be necessary
to reserve sufficient shares for issuance pursuant to Section 7 below when such
issuance is determinable. The Shares and Warrants are duly authorized, and such
Securities, along with the Warrant Shares when issued in accordance
4
herewith and with the terms of the Warrants, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws.
4.5 CONSENTS. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any
Person, governmental body, agency, or official other than (i) filings that
have been made pursuant to applicable state securities laws and the
requirements of the Nasdaq Stock Market and (ii) post-sale filings pursuant
to applicable state and federal securities laws and the requirements of the
Nasdaq Stock Market which the Company undertakes to file within the
applicable time periods.
4.6 DELIVERY OF SEC FILINGS; BUSINESS. The Company has provided
each Investor with copies of the Company's most recent Annual Report on Form
10K for the fiscal year ended December 31, 1998, and all other reports filed
by the Company pursuant to the 1934 Act since the filing of the Annual Report
on Form 10K (collectively, the "SEC Filings"). In addition, the Company has
not distributed any other offering materials in connection with the Offering
other than the Private Placement Memorandum dated November 19, 1999 (the
"Memorandum"). The Company has filed in a timely manner all documents that
the Company was required to file with the SEC under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during the twelve months preceding the date of this Purchase
Agreement. The Company is engaged only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description of
the business of the Company. The Company has not provided to any Investor
(i) any information required to be filed under the 1934 Act that has not been
so filed or (ii) any non-public information.
4.7 USE OF PROCEEDS. The proceeds of the sale of the Securities
hereunder shall be used by the Company for working capital and general
corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Since the filing of the
Company's most recent Annual Report on Form 10K or as otherwise identified
and described in subsequent reports filed by the Company pursuant to the 1934
Act, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected
in the financial statements included in the Company's most recent Report on
Form 10Q, other than continuing operating losses that have not exceeded $2.3
million from the most recent financial statements reported in such Form 10Q
and except for changes in the ordinary course of business which have not had,
in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or
not covered by insurance to any assets or properties of the Company or any of
its subsidiaries;
5
(iv) any waiver by the Company of a valuable right or of a
material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
taken as a whole (as such business is presently conducted and as it is
proposed to be conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or
properties is bound or subject;
(vii) any labor difficulties or labor union organizing
activities with respect to employees of the Company;
(viii) any transaction entered into by the Company other than
in the ordinary course of business; or
(ix) any other event or condition of any character that
might have a Material Adverse Effect.
4.9 SEC FILINGS; MATERIAL CONTRACTS.
(a) As of its filing date, each report filed by the
Company with the SEC pursuant to the 1934 Act, complied as to form in all
material respects with the requirements of the 1934 Act and did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment thereto
filed by the Company pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933
Act, as of its issue date and as of the closing of any sale of securities
pursuant thereto did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading.
(c) Except as set forth on SCHEDULE 4.3 hereto, there are
no agreements or instruments currently in force and effect that constitute a
warrant, option, convertible security or other right, agreement or
arrangement of any character under which the Company is or may be obligated
to issue any material amounts of any equity security of any kind, or to
transfer any material amounts of any equity security of any kind.
4.10 FORM S-3 ELIGIBILITY.
6
The Company is currently eligible to register the resale of its
Common Stock on a registration statement on Form S-3 under the 1933 Act.
4.11 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. (a) The
execution, delivery and performance of the Agreements by the Company and the
issuance and sale of the Securities will not conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Company's Certificate of Incorporation ("Articles") or
Bylaws, each as in effect on the date hereof, or (ii) except where it would
not have a Material Adverse Effect, (a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any of its properties, or (b) any
agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties of the Company are subject.
(b) Except as set forth on SCHEDULE 4.11 hereto, or where
it would not have a Material Adverse Effect, the Company (i) is not in
violation of any statute, rule or regulation applicable to the Company or its
assets, (ii) is not in violation of any judgment, order or decree applicable
to the Company or its assets; and (iii) is not in breach or violation of any
agreement, note or instrument to which it or its assets are a party or are
bound. The Company has not received notice from any Person of any claim or
investigation that, if adversely determined, would render the preceding
sentence untrue or incomplete.
4.12 TAX MATTERS. The Company has correctly and timely prepared
and filed or timely obtained extensions for, all tax returns required to have
been filed by it with all appropriate governmental agencies and timely paid
all taxes owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all
material respects, and there are no material unpaid assessments of the
Company nor, to the knowledge of the Company, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits
by any federal, state or local taxing authority except such as which are not
material. All material taxes and other assessments and levies that the
Company is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third
party. There are no tax liens or claims pending or threatened against the
Company or any of its assets or property. There are no outstanding tax
sharing agreements or other such arrangements between the Company and any
other corporation or entity.
4.13 TITLE TO PROPERTIES. Except as disclosed in the SEC Filings,
the Company has good and marketable title to all real properties and all
other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made
thereof by them; and except as disclosed in the SEC Filings, the Company
holds any leased real or personal property under valid and enforceable leases
with no exceptions that would materially interfere with the use made or
currently planned to be made thereof by them.
4.14 CERTIFICATES, AUTHORITIES AND PERMITS. The Company possesses
adequate certificates, authorizations or permits issued by appropriate
governmental agencies or bodies necessary to conduct its business as presently
operated and has not received any written notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
7
that, if determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect.
4.15 NO LABOR DISPUTES. No labor dispute with the employees of
the Company or any subsidiary exists or, to the knowledge of the Company, is
imminent.
4.16 INTELLECTUAL PROPERTY. The Company owns or possesses
adequate trademarks and trade names and have all other rights to inventions,
know-how, patents, copyrights, trademarks, trade names, confidential
information and other intellectual property (collectively, "Intellectual
Property Rights"), free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims, necessary to conduct the
business now operated by it, or presently employed by it, and presently
contemplated to be operated by it, and has not received any notice of
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property Rights. SCHEDULE 4.16 sets forth a list by serial
number and title of the patents and/or patent applications owned or possessed
by the Company. No proprietary technology of any Person was used in the
design or development by the Company of (or otherwise with respect to) any of
the Intellectual Property Rights, which technology was not properly acquired
by the Company from such Person.
4.17 ENVIRONMENTAL MATTERS. The Company is not in violation of
any statute, rule, regulation, decision or order of any governmental agency
or body or any court, U.S. or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "Environmental Laws"), does not own or operate any
real property contaminated with any substance that is subject to any
Environmental Laws, is not liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is not subject to any claim relating
to any Environmental Laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation that might lead to such
a claim.
4.18 LITIGATION. Except as disclosed in the SEC Filings, there
are no pending actions, suits or proceedings against or affecting the
Company, or any of its properties that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse
Effect or would materially and adversely affect the ability of the Company to
perform its obligations under the Agreements, or which are otherwise material
in the context of the sale of the Securities; and to the Company's knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.19 FINANCIAL STATEMENTS. The financial statements included in
each SEC Filing present fairly and accurately the consolidated financial
position of the Company as of the dates shown and its results of operations
and cash flows for the periods shown, and such financial statements have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis. Except as set forth on SCHEDULE 4.19 or in the
financial statements of the Company included in the SEC Filings filed prior
to the date hereof, the Company has no liabilities, contingent or otherwise,
except those which individually or in the aggregate are not material to the
financial condition or operating results of the Company.
8
4.20 INSURANCE COVERAGE. The Company maintains in full force and
effect insurance coverage that is customary for comparably situated companies
for the business being conducted, and properties owned or leased, by the
Company, and the Company reasonably believes such insurance coverage to be
adequate against all liabilities, claims and risks against which it is
customary for comparably situated companies to insure.
4.21 COMPLIANCE WITH NASDAQ CONTINUED LISTING REQUIREMENTS. The
Company is in compliance with all applicable Nasdaq continued listing
requirements for the Nasdaq Stock Market and is listed in good standing on
the Nasdaq Stock Market. There are no proceedings pending or, to the
Company's knowledge, threatened against the Company relating to the continued
listing of the Company's Common Stock on the Nasdaq Stock Market and the
Company has not received any notice of, nor to the knowledge of the Company
is there any basis for, the delisting of the Common Stock from the Nasdaq
Stock Market.
4.22 ACKNOWLEDGEMENT OF DILUTION. The number of shares of Common
Stock issuable pursuant to this Agreement may increase significantly. The
Company's executive officers and directors have studied and fully understand
the nature of the transactions being contemplated hereunder and recognize
that they have a potential dilutive effect.
4.23 BROKERS AND FINDERS. The Investors shall have no liability or
responsibility for the payment of any commission or finder's fee to any third
party in connection with or resulting from this Agreement or the transactions
contemplated by this Agreement by virtue of any agreement made by the Company
to a third party, and except as set forth in Section 11.5 below.
4.24 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION. Neither
the Company nor, to its knowledge, any Person acting on its behalf has
conducted any general solicitation or general advertising (as those terms are
used in Regulation D) in connection with the offer or sale of any of the
Securities.
4.25 NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would adversely affect reliance
by the Company on Section 4(2) for the exemption from registration for the
transactions contemplated hereby or would require registration of the
Securities under the 1933 Act; or would require the integration of this
offering with any other offering of securities for purposes of determining
the need to obtain shareholder approval of the transactions contemplated
hereby under the rules of the Nasdaq Stock Market.
4.26 DISCLOSURES. No representation or warranty made under any
Section hereof and no information furnished by the Company pursuant hereto,
or in any other document, certificate or statement furnished by the Company
to the Investors or any authorized representative of any of the Investors,
pursuant to the Agreements or in connection therewith, contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the respective statements contained herein or therein, in light of the
circumstances under which the statements were made, not misleading.
9
4.27 CORPORATE PARTNER FINANCING. In the fourth quarter of
calendar year 1999, the Company closed a transaction with a strategic
investor which included the purchase by such investor of 1.0 million shares
of Common Stock at $5.00 per share. The Company has received the full $5.0
million investment, and the 1.0 million shares have been issued and are
outstanding.
4.28 NO DEFAULTS. Neither the Company nor any of its subsidiaries
is (a) in violation of its certificate of Incorporation or bylaws or (b) in
default (upon notice or lapse of time or both) in the performance or
observance of any obligation, agreement, covenant or condition contained in
any bond, debenture, note or other evidence of indebtedness, or in any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture
or other agreement or instrument to which it is a party or by which its
properties may be bound, or (c) in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Company, any of its subsidiaries or their properties except in the case
of (b) or (c) for any default or violation not reasonably likely to have a
Material Adverse Effect.
4.29 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement ("Consents") except for (a) such
Consents which are not material, (b) compliance with the securities and Blue
Sky laws in the states and other jurisdictions in which Securities are
offered and/or sold, which compliance will be effected in accordance with
such laws, (c) Consents required by the NMS and the SEC, and (d) the filing
of the Registration Statement with the SEC. The Company has not been
advised, and has no reason to believe, that either it or any of its
subsidiaries is not conducting business in compliance in all material
respects with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including but not limited to, all
applicable federal, Canadian, state, provincial and local environmental laws
and regulations, except for any failure to comply which is not reasonably
likely to have a Material Adverse Effect.
4.30 INVESTMENT COMPANY ACT. The Company has been advised
concerning the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations thereunder, and is not, and intends in the
future to conduct its and its subsidiaries' affairs in such a manner as to
ensure that it is not and will not become, an "investment company" within the
meaning of the 1940 Act and such rules and regulations.
4.31 NO ILLEGAL CONTRIBUTIONS. Neither the Company nor any of its
subsidiaries has at any time during the last five (5) years (i) made any
unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment
to any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
4.32 NO MANIPULATION. Neither the Company nor any of its
subsidiaries has taken, and neither the Company nor any of its subsidiaries
will take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of Shares.
10
4.33 TRANSACTIONS WITH AFFILIATES. There are no outstanding
loans, advances (except normal advances for business expenses in the ordinary
course of business) or guarantees of indebtedness by the Company or any of
its subsidiaries to or for the benefit of any of the officers or directors of
the Company or any of its subsidiaries or any shareholder who owns
beneficially more than five percent (5%) of the Common Stock of the Company
or any of the members of the families of any of them, except as disclosed in
the Memorandum or except as disclosed on Schedule 4.19. No relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand and the directors, officers, shareholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, that is required by the Securities Act or the Exchange Act or the Rules
and Regulations promulgated thereunder to be described in the Registration
Statement or documents incorporated by reference therein (as of the date
hereof) that is not described in the Memorandum.
4.34 REGULATORY MATTERS.
(a) The Company is not aware of any rule making or similar
proceedings before the United States Food and Drug Administration ("FDA") or
comparable federal, state, local or foreign government bodies which involve
or affect the Company or any of its subsidiaries which, if the subject of an
action unfavorable to the Company or any of its subsidiaries, would have a
Material Adverse Effect.
(b) The descriptions of the results of tests or
evaluations contained in the Memorandum are accurate and complete in all
material respects, and the Company has no knowledge of any other tests or
evaluations, the results of which reasonably call into question the results
described or referred to in the Memorandum. Except as set forth in Schedule
4.34, neither the Company nor any of its subsidiaries has received any
notices or correspondence from the FDA or any other governmental agency
requiring the termination, suspension or modification of any tests or
evaluations conducted on behalf of the Company or any of its subsidiaries
that are described in the Memorandum or the results of which are referred to
in the Memorandum.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Each Investor
hereby severally represents and warrants to the Company as to itself that:
5.1 ORGANIZATION AND EXISTENCE. The Investor is a validly
existing company and has all requisite corporate or limited liability company
power and authority to invest in the Securities pursuant to this Purchase
Agreement.
5.2 AUTHORIZATION. The execution, delivery and performance by
the Investor of the Agreements have been duly authorized and the Agreements
will each constitute the valid and legally binding obligation of the
Investor, enforceable against the Investor in accordance with their terms.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
received by the Investor hereunder will be acquired for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of securities laws, and the
Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same in violation of securities laws.
11
5.4 INVESTMENT EXPERIENCE. The Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment
contemplated hereby.
5.5 DISCLOSURE OF INFORMATION. The Investor has had an
opportunity to receive documents related to the Company and to ask questions
of and receive answers from the Company regarding the Company, its business
and the terms and conditions of the offering of the Securities. Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Purchase Agreement or made
pursuant to this Purchase Agreement.
5.6 RESTRICTED SECURITIES. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration
under the 1933 Act only in certain limited circumstances.
5.7 LEGENDS. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement or until sales under
Rule 144 are permitted, certificates evidencing the Securities will bear one
or all of the following legends or legends substantially similar thereto:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH
RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING
OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT."
Upon registration for resale pursuant to the Registration Rights
Agreement, or when sales under Rule 144 are permitted, the Company shall
promptly cause certificates evidencing the Shares previously issued hereunder
to be replaced with certificates which do not bear such restrictive legends.
5.8 ACCREDITED INVESTOR. The Investor is an accredited investor
as defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 NO GENERAL SOLICITATION. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
6. REGISTRATION RIGHTS AGREEMENT. The parties acknowledge and agree that
part of the inducement for the Investors to enter into this Purchase Agreement
is the Company's execution and delivery of the Registration Rights Agreement.
The parties acknowledge and
12
agree that simultaneously with the execution hereof, the Registration Rights
Agreement is being duly executed and delivered by the parties thereto.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
7.1 SUBSEQUENT SALE AT LOWER PRICE.
(a) REQUIRED ADJUSTMENTS. Subject to the exclusions
contained in Section 7.1(f) below, if during the period ending on the later
of (i) thirty-six (36) months following the Closing Date or (ii) thirty-three
(33) months following the effective date of the Registration Statement
contemplated by the Registration Rights Agreement (the "MFN Period"), the
Company sells any shares of its Common Stock at a per share selling price
("Per Share Selling Price") lower than the Purchase Price per share set forth
in Section 2 hereof, the Purchase Price per share of the Shares originally
sold to an Investor hereunder shall be adjusted downward to equal such lower
Per Share Selling Price and such Investor shall be entitled to receive the
additional shares as provided by Section 7.1(c); provided, however, in the
event the Investor then owns less than 250,000 Shares, such Investor shall be
entitled to additional shares only with respect to the number of Shares
originally acquired and then owned by the Investor as provided in Section
7.1(c). For so long as such Investor owns at least 250,000 Shares originally
acquired by such Investor hereunder, the Investor shall be entitled to the
full benefit of the Purchase Price adjustment required by this Section 7.1.
The Company shall give to each Investor written notice of any such sale
within 24 hours of the closing of any such sale and shall within such 24 hour
period issue a press release announcing such sale.
(b) DEFINITIONS.
(i) For the purposes of this Section 7.1, the term
"Per Share Selling Price" as used in this Section 7.1 shall mean the amount
actually paid by third parties for each share of Common Stock. A sale of
shares of Common Stock shall include the sale or issuance of rights, options,
warrants or convertible securities ("derivative securities") under which the
Company is or may become obligated to issue shares of Common Stock, and in
such circumstances the sale of Common Stock shall be deemed to have occurred
at the time of the issuance of the derivative securities and the Per Share
Selling Price of the Common Stock covered thereby shall also include the
exercise or conversion price thereof (in addition to the consideration per
underlying share of Common Stock received by the Company upon such sale or
issuance of the derivative security, less the fee amount as provided above).
In case of any such security issued within the MFN Period in a "Variable Rate
Transaction" or an "MFN Transaction" (each as defined below), the Per Share
Selling Price shall be deemed to be the lowest conversion or exercise price
at which such securities are converted or exercised or might have been
converted or exercised in the case of a Variable Rate Transaction, or the
lowest adjustment price in the case of an MFN Transaction. If shares are
issued for a consideration other than cash, the per share selling price shall
be the fair value of such consideration as determined in good faith by the
Board of Directors of the Company.
(ii) The term "Variable Rate Transaction" shall mean
a transaction in which the Company issues or sells (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares
13
of Common Stock either (x) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Common Stock at any time after the initial issuance of
such debt or equity securities, or (y) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Stock (but excluding standard
stock split anti-dilution provisions), or (b) any securities of the Company
pursuant to an "equity line" structure which provides for the sale, from time
to time, of securities of the Company which are registered for resale
pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean a
transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions (the "New Offering")
which grants to an investor (the "New Investor") the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to the New Investor in the New Offering.
(iv) The term "MFN Period" shall have the meaning set
forth in Section 7.1(a), above.
(c) ADJUSTMENT MECHANISM. If an adjustment of the
Purchase Price is required pursuant to Section 7.1(a), the Company shall
deliver to the Investor within eight calendar days of the closing of the
transaction giving rise to the adjustment or by such other date as may be
required by Section 7.1(d) ("Delivery Date") the Investor's share of such
number of additional shares of Common Stock equal to (i) the aggregate
Purchase Price paid by the Investor divided by the adjusted Per Share
Purchase Price as required under Section 7.1(a), minus (ii) the total number
of shares of Common Stock previously delivered to the Investor hereunder;
PROVIDED HOWEVER, that the Company shall delay effecting such adjustment, in
whole or in part, to the extent required by Section 7.1(d). In the event the
Company fails to deliver the additional shares by the applicable Delivery
Date, the Company shall be liable to the Investor for a delay payment equal
to 2% of the Purchase Price per month payable in Common Stock or cash, at the
Investor's election. If at the time of any adjustment the proviso of the
first sentence of Section 7.1(a) is applicable, then the number of additional
shares otherwise determined as deliverable under this Section 7.1(c) shall be
adjusted so that it is equal to such number, multiplied by a fraction, the
numerator of which is the number of Shares acquired on the Closing Date and
still owned at the time of the adjustment and the denominator is the total
number of Shares acquired on the Closing Date.
(d) LIMITATION ON NUMBER OF SHARES.
(i) If by way of any adjustment required by this
Section 7.1, the Investor would receive a number of shares of Common Stock
such that the total number of such shares beneficially owned (within the
meaning of Section 13(d) of the 0000 Xxx) by the Investor as of the date of
such adjustment would be greater than 9.90% of the total outstanding shares
of Common Stock of the Company, then the Company shall not effect the
adjustment required by this Section to the extent necessary to avoid causing
the aforesaid limitation to be exceeded and shall agree to effect such
adjustment at the earliest possible time when such adjustment would not
exceed the aforementioned limitations. This limitation may not be
14
amended except with the consent of the stockholders of the Company and they
are intended third-party beneficiaries of this provision.
(ii) In no event shall the Company issue to an
Investor additional shares pursuant to an adjustment required by this Section
7.1 such that the total number of shares issued to such Investor (when added
to the Warrant Shares actually received upon exercise of Warrants by such
Investor) would exceed such Investor's "pro rata" share of the Shares
acquired through this Purchase Agreement (the "allocation") (subject to
appropriate adjustment for stock splits or stock dividends). Instead, the
Company shall redeem excess shares at 110% of the Per Share Purchase Price,
as adjusted. At such time as an Investor owns neither any Shares that were
originally acquired pursuant to this Agreement nor any Warrants, it shall
notify the Company, who shall then notify the other Investors. At such time,
to the extent such Investor's allocation has not been exhausted, it shall be
divided pro rata, among the remaining Investors. An Investor's pro rata share
shall be the portion determined by dividing its aggregate Purchase Price by
the total Purchase Price of all Investors holding shares at the time the pro
rata share is being determined. Each Investor's initial allocation is listed
on the signature page for such Investor. Only Shares acquired pursuant to
this Agreement or upon exercise of Warrants will be included in determining
whether the limitations would be exceeded for purposes of this Section
7.1(d)(iii).
(e) CAPITAL ADJUSTMENTS. In case of any stock split or
reverse stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment
affecting the Common Stock of the Company, the provisions of Section 7.1
shall be applied in a fair, equitable and reasonable manner so as to give
effect, as nearly as may be, to the purposes hereof.
(f) EXCLUSIONS. Section 7.1(a) shall not apply to (i)
sales of shares of Common Stock by the Company upon conversion or exercise of
any convertible securities, options or warrants outstanding prior to the date
hereof; or (ii) sales of shares of Common Stock by the Company pursuant to
the provisions of any shareholder-approved option or similar plan heretofore
adopted by the Company.
(g) RULE 144. The Company agrees to take the position
that, for purposes of determining the holding period under Rule 144 for
shares of Common Stock issued pursuant to Section 7.1(a), the holding period
of such shares shall be tacked to the holding period of the Shares.
7.2 LIMITATION ON TRANSACTIONS.
(a) From the Closing through the expiration of the MFN
Period contemplated by the Registration Rights Agreement, without the prior
written consent of the Investors (which consent may be withheld in each
Investor's discretion), the Company shall not (i) issue or sell or agree to
issue or sell any securities for cash in a non-public MFN Transaction; (ii)
issue or sell, or agree to issue or sell, any securities for cash in a
non-public Variable Rate Transaction.
(b) From the Closing until three (3) months after the date
of
15
effectiveness of the Registration Statement contemplated by the Registration
Rights Agreement, without the prior written consent of the Investors (which
consent may be withheld in each Investor's discretion), the Company shall not
issue or sell or agree to issue or sell any shares or securities convertible
into shares of Common Stock at a price per share below the average closing
bid price for the five (5) trading days immediately preceding such issuance
or sale.
(c) Except as contemplated by the Supplement to the
Memorandum dated December 16, 1999, the Company shall not issue any
securities in any transaction that would be integrated with the Securities
issued pursuant to this Agreement.
(d) For a period of one-year following the Closing, the
Company agrees that it will not enter into any agreement for the issuance of
securities pursuant to an "equity line" financing (as described in Section
7.1(b)(ii) above).
7.3 RIGHT OF INVESTOR TO PARTICIPATE IN FUTURE TRANSACTIONS. The
Company agrees that during the MFN Period the Investor will have a right to
participate in future non-public capital raising transactions as set forth in
this Section 7.3. The Company shall give not less than ten business (10)
days advance written notice to each Investor prior to any offer or sale of
any of its equity securities or any securities convertible into or
exchangeable or exercisable for such securities in a non-public capital
raising transaction. Prior to the closing of any such transaction, each
Investor shall have the right to participate in its pro rata share of up to
50% of such new offering (or in the case of a Variable Rate Transaction, up
to 75% of such new offering) and purchase such securities for the same
consideration and on the same terms and conditions as contemplated for such
third-party sale. In order to exercise this right, an Investor must give
written notice to the Company of the Investor's election to participate and
such notice must be given within ten business (10) days following receipt of
the notice from the Company. In the event the Company gives notice to the
Investor of an expected transaction pursuant to this Section 7.3 but cannot
consummate such transaction, the Company will give the Investor prompt
written notice of the cancellation of such transaction. If, subsequent to
the Company giving notice to the Investor hereunder, the terms and conditions
of the proposed third-party sale are changed in any way, the Company shall be
required to provide a new notice to the Investor hereunder and the Investor
shall have the right to participate in the offering on such changed terms and
conditions as provided hereunder.
7.4 RESERVATION OF COMMON STOCK PURSUANT TO SECTION 7.1 AND
EXERCISE OF WARRANTS. The Company hereby agrees, at all times with respect
to shares issuable upon exercise of the Warrants, and at all appropriate
times with respect to shares issuable pursuant to Section 7.1, to reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of providing for the additional issuance(s) of Common
Stock pursuant to Section 7.1 and exercise of the Warrants, such number of
shares of Common Stock as shall from time to time equal the number of shares
sufficient to permit the issuance, if any, required pursuant to Section 7.1
plus the number of shares of Common Stock as shall be necessary to permit the
exercise of the Warrants in accordance with the terms of the Warrants.
7.5 REPORTS. Within one week of filing the following reports
with the SEC, or in the absence of such filing within the time periods
specified below, the Company shall send a copy of the following reports to
each Investor by regular mail:
16
(a) QUARTERLY REPORTS. As soon as available the Company's
quarter-annual report on Form 10-Q or, in the absence of such report,
consolidated balance sheets of the Company and its subsidiaries as at the end
of such period and the related consolidated statements of operations,
stockholders' equity and cash flows for such period and for the portion of
the Company's fiscal year ended on the last day of such quarter, all in
reasonable detail and certified by a principal financial officer of the
Company to have been prepared in accordance with generally accepted
accounting principles, subject to year-end and audit adjustments.
(b) ANNUAL REPORTS. As soon as available after the end of
each fiscal year of the Company, the Company's Form 10K or, in the absence of
a Form 10K, consolidated balance sheets of the Company and its subsidiaries
as at the end of such year and the related consolidated statements of
earnings, stockholders' equity and cash flows for such year, all in
reasonable detail and accompanied by the report on such consolidated
financial statements of an independent certified public accountant selected
by the Company and reasonably satisfactory to the Investor.
(c) SECURITIES FILINGS. As promptly as practicable and in
any event within one week after the same are issued or filed, copies of (i)
all notices, proxy statements, financial statements, reports and documents as
the Company or any subsidiary shall send or make available generally to its
stockholders or to financial analysts, and (ii) all periodic and special
reports, documents and registration statements which the Company or any
subsidiary furnishes or files, or any officer or director of the Company or
any of its subsidiaries (in such person's capacity as such) furnishes or
files with the SEC.
(d) OTHER INFORMATION. Such other information relating to
the Company or its subsidiaries as from time to time may reasonably be
requested by the Investor provided the Company produces such information in
its ordinary course of business, and further provided that the Company,
solely in its own discretion, determines that such information is not
confidential in nature and disclosure to the Investor would not be harmful to
the Company.
(e) RULE 144. The Company agrees to make publicly
available on a timely basis the information necessary to enable Rule 144 to
be available for resale.
7.6 PRESS RELEASES. Any press release or other publicity
concerning this Purchase Agreement or the transactions contemplated by this
Purchase Agreement shall be submitted to the Investor for comment at least
two (2) business days prior to issuance, unless the release is required to be
issued within a shorter period of time by law or pursuant to the rules of a
national securities exchange. The Company shall issue a press release
concerning the fact and material terms of this Purchase Agreement within one
business day of the Closing.
7.7 NO CONFLICTING AGREEMENTS. The Company will not, and will
not permit its subsidiaries to, take any action, enter into any agreement or
make any commitment that would conflict or interfere in any material respect
with the obligations to the Investor under the Agreements.
7.8 INSURANCE. For so long as any Investor beneficially owns any
of the Securities, the Company shall, and shall cause each subsidiary to, have
in full force and effect (a)
17
insurance reasonably believed to be adequate on all assets and activities of
a type customarily insured, covering property damage and loss of income by
fire or other casualty, and (b) insurance reasonably believed to be adequate
protection against all liabilities, claims and risks against which it is
customary for companies similarly situated as the Company and the
subsidiaries to insure.
7.9 COMPLIANCE WITH LAWS. For so long as any Investor
beneficially owns any of the Securities, the Company will use reasonable
efforts, and will cause each of its subsidiaries to use reasonable efforts,
to comply with all applicable laws, rules, regulations, orders and decrees of
all governmental authorities, except to the extent non-compliance (in one
instance or in the aggregate) would not have a Material Adverse Effect.
7.10 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. The
Company hereby agrees, promptly following the Closing of the transactions
contemplated by this Purchase Agreement, to take such action to cause the
Shares, the Warrant Shares and the shares of Common Stock issuable under
Section 7.1(a) hereof to be listed on the Nasdaq Stock Market as promptly as
possible but no later than the effective date of the registration
contemplated by the Registration Rights Agreement. The Company further
agrees that if the Company applies to have its Common Stock or other
securities traded on any other principal stock exchange or market, it will
include in such application the Common Stock underlying the Warrants, and
will take such other action as is necessary to cause such Common Stock to be
so listed. The Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq Stock Market and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such exchange, as applicable, to
ensure the continued eligibility for trading of the Shares and the Warrant
Shares thereon.
7.11 CORPORATE EXISTENCE. So long as any Investor beneficially
owns any of the Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or
successor entity in such transaction (a) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith, regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to fulfill its obligations hereunder and effect the
exercise in full of all Warrants outstanding as of the date of such
transaction; (b) has no legal, contractual or other restrictions on its
ability to perform the obligations of the Company hereunder and under the
agreements and instruments entered into in connection herewith; and (c) (i)
is a publicly traded corporation whose common stock and the shares of capital
stock issuable upon exercise of the Warrants are (or would be upon issuance
thereof) listed for trading on the Nasdaq Stock Market, New York Stock
Exchange or American Stock Exchange, or (ii) if not such a publicly traded
corporation, then the buyer agrees that it will, at the election of the
Investor, purchase such Investor's Shares (and Warrant Shares) at a price
equal to 120% of the Per Share Purchase Price of such Shares.
7.12 COMPETING FINANCINGS. Except for the issuance of securities
described in the Supplement to the Memorandum dated December 16, 1999, the
Company will not enter into, or agree to enter into, any agreement related to
a financing transaction prior to the Closing of the transactions contemplated
hereunder.
18
8. CONDITIONS TO INVESTORS' OBLIGATIONS AT THE CLOSING. Each
Investor's obligation to accept delivery of and to pay for the Securities
shall be subject to the following conditions (to the extent not waived by
such Investor in writing):
8.1 REGISTRATION RIGHTS AGREEMENT. The Company shall have
executed and delivered the Registration Rights Agreement, substantially in
the form attached hereto as Exhibit B.
8.2 THE WARRANT AGREEMENT. The Company shall have executed and
delivered the Warrant Agreement, substantially in the form attached hereto as
Exhibit A.
8.3 ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by all of the parties thereto in the form attached in
Exhibit C.
8.4 REGISTRATION STATEMENT FILED. The Company shall have filed
with the SEC a registration statement covering the Common Shares and the
shares of Common Stock underlying the Warrants (the "Registration Statement").
8.5 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 4 shall be true and correct
when made and as of the Closing and each Investor shall have received a
certificate signed by the chief executive officer and president of the
Company, or such other officers of the Company as agreed upon by the parties
hereto, that each of such representations and warranties, as appropriate, is
true and correct in all material respects on and as of the Closing with the
same effect as though such representations and warranties had been made or
given on and as of the Closing (except for any representations and warranties
given as of a specified date), and that the Company has performed and
complied in all material respects with all of its obligations under this
Purchase Agreement which are to be performed or complied with on or prior to
the Closing.
8.6 LEGAL OPINIONS (SCHEDULE 8.6).
(a) Investors shall have received from Xxxx Xxxxx LLP,
counsel to the Company, an opinion letter addressed to the Investors, dated
as of the date of the Closing, in a form reasonably acceptable to Cruttenden
Xxxx Incorporated (the "Placement Agent") and its counsel, covering customary
matters and subject to customary assumptions and qualifications.
(b) Investors shall have received from Xxxxxxxxx &
Associates, counsel to the Company, an opinion letter relating to
intellectual property matters addressed to the Investors, dated as of the
date of the Closing, in a form reasonably acceptable to the Placement Agent
and its counsel, subject to customary assumptions and qualifications.
9. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive
the execution and delivery of this Purchase Agreement.
19
10. ARBITRATION.
10.1 SCOPE. Resolution of any and all disputes arising from or in
connection with the Agreements, whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise ("Disputes"), shall be
exclusively governed by and settled in accordance with the provisions of this
Section 10; provided, that the foregoing shall not preclude equitable or
other judicial relief to enforce the provisions hereof or to preserve the
status quo pending resolution of Disputes hereunder.
10.2 BINDING ARBITRATION. The parties hereby agree to submit all
Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in New York,
New York by a sole arbitrator selected by agreement of the parties not later
than 10 days after delivery of the Arbitration Demand, or, failing such
agreement, appointed pursuant to the Commercial Arbitration Rules of the
America Arbitration Association, as amended from time to time (the "AAA
Rules"). If the arbitrator becomes unable to serve, his successor(s) shall
be similarly selected or appointed.
10.3 PROCEDURE. The arbitration shall be conducted pursuant to
the Federal Arbitration Act and such procedures as the parties may agree or,
in the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing, (a) each party shall have the right to conduct
limited discovery of information relevant to the Dispute; (b) each party
shall provide to the other, reasonably in advance of any hearing, copies of
all documents that a party intends to present in such hearing; (c) all
hearings shall be conducted on an expedited schedule; and (d) all proceedings
shall be confidential, except that either party may at its expense make a
stenographic record thereof.
10.4 TIMING. The arbitrator shall use best efforts to complete
all hearings not later than 90 days after his or her selection or
appointment, and shall use best efforts to make a final award not later than
30 days thereafter. The arbitrator shall apportion all costs and expenses of
the arbitration, including the arbitrator's fees and expenses, and fees and
expenses of experts ("Arbitration Costs") between the prevailing and
non-prevailing party as the arbitrator shall deem fair and reasonable. In
circumstances where a Dispute has been asserted or defended against on
grounds that the arbitrator deems manifestly unreasonable, the arbitrator may
assess all Arbitration Costs against the non-prevailing party and may include
in the award the prevailing party's attorney's fees and expenses in
connection with any and all proceedings under this Section 10.
Notwithstanding the foregoing, in no event may the arbitrator award multiple
or punitive damages.
11. MISCELLANEOUS.
11.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by a party hereto without the prior written consent of the other party
hereto, except that without the prior written consent of the Company, but
after notice duly given, an Investor may assign its rights hereunder in whole
or in part to any purchaser of Securities from the Investor. The terms and
conditions of this Purchase Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Purchase Agreement,
20
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Purchase
Agreement, except as expressly provided in this Purchase Agreement.
11.2 COUNTERPARTS. This Purchase Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.3 TITLES AND SUBTITLES. The titles and subtitles used in this
Purchase Agreement are used for convenience only and are not to be considered
in construing or interpreting this Purchase Agreement.
11.4 NOTICES. Unless otherwise provided, any notice required or
permitted under this Purchase Agreement shall be given in writing and shall
be deemed effectively given only upon delivery to each party to be notified
by (i) personal delivery, (ii) telex or telecopier, upon receipt of the
electronically generated confirmation of delivery, or (iii) a recognized
overnight air courier, addressed to the party to be notified at the address
as follows, or at such other address as such party may designate by ten days'
advance written notice to the other party:
If to the Company:
AVI BioPharma, Inc.
Xxx XX Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
Chief Financial Officer
with a copy to:
Xxxx Xxxxx LLP
000 XX Xxxxxxxx Xx., Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to the Investor:
To the address specified therefor on the applicable Counterpart
Execution Page.
11.5 FEES AND EXPENSES.
(a) Except as set forth below, the parties hereto shall pay
their own costs and expenses in connection herewith.
21
(b) European American Securities, Inc. (EASI), a member firm
of the NASD, and a regulated entity of the Securities and Futures Authority
of Great Britain, will act as agent for the Tail Wind Inc. in the
transaction. EASI shall be entitled to a fee equal to $0.28 per share, which
shall be paid by the Company at the Closing.
(c) Cruttenden Xxxx Incorporated was retained by the Company
as placement agent and shall be entitled to a placement fee as described in
the Memorandum, which shall be paid by the Company at the Closing.
(d) Tail Wind Inc. shall receive an expense allowance to
cover due diligence expenses and legal expenses, in an amount equal to 1% of
the aggregate Purchase Price (not to exceed $40,000) less the portion of the
expense allowance previously paid ($13,000). Such expense allowance shall be
paid by the Company at the Closing.
11.6 AMENDMENTS AND WAIVERS. Any term of this Purchase Agreement
may be amended and the observance of any term of this Purchase Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and 75% in interest (based on pro rata share) of the Investors. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Purchase
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
11.7 SEVERABILITY. If one or more provisions of this Purchase
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Purchase Agreement and the balance of this
Purchase Agreement shall be interpreted as if such provision were so excluded
and shall be enforceable in accordance with its terms.
11.8 ENTIRE AGREEMENT. This Purchase Agreement, including the
Exhibits and Schedules hereto, and the Registration Rights Agreement
constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to
the subject matter hereof and thereof.
11.9 FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby
and to evidence the fulfillment of the Agreements herein contained.
11.10 APPLICABLE LAW. This Purchase Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
without regard to principles of conflicts of laws.
11.11 REMEDIES.
(a) The Investors shall be entitled to specific performance
of the Company's obligations under the Agreements.
(b) The representations, warranties, agreements and
covenants of the
22
Company in this Purchase Agreement shall survive the Closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of
the Investors. The Company agrees to indemnify and hold harmless the
Investors and each of the Investors' officers, directors, shareholders,
members, employees, partners, agents and affiliates and any direct or
indirect investors, shareholders, officers, directors, agents, partners,
employees, members, agents or affiliates of any of the foregoing for loss or
damage arising as a result of or related to (a) any breach by the Company of
any of its representations or covenants set forth herein or the
unenforceability or invalidity of any provision of any of the Agreements, (b)
any cause of action, suit or claim brought or made against such indemnitee
(other than directly by the Company solely for breach of this Purchase
Agreement, the Warrant, or the Registration Rights Agreement by the
indemnitee or by governmental or regulatory authorities), and arising out of
or resulting from (whether in whole or in part) the execution, delivery,
performance or enforcement of the Agreements or any other instrument,
document or agreement executed pursuant hereto or thereto or contemplated
hereby or thereby (including without limitation the acquisition of the
Warrants and/or the Warrant Shares), any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or the status of the purchaser as an investor
in the Company, except to the extent that such actual loss or damage directly
results from a breach by such indemnitee of the Agreements or from a
violation of law, or (c) any characterization concerning any of the
Agreements other than as expressly provided herein or therein, as the case
may be, including, without limitation, any characterization that the exercise
of Investor rights and remedies under any of the Agreements (or through a
combination results in an Investor acting (or agreeing to act) other than
independently and on its own behalf. The right to indemnification shall
include the right to advancement of expenses as they are incurred.
11.12 KNOWLEDGE. The phrases "knowledge," "to the Company's
knowledge," "to our knowledge" and similar language as used herein shall mean
the actual knowledge and current awareness, or knowledge which a reasonable
person would have acquired following a reasonable investigation.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
23
If this Purchase Agreement is satisfactory to you, please so
indicate your acceptance by signing the Counterpart Execution Pages to this
Purchase Agreement and returning such pages to the Company whereupon this
Purchase Agreement will become binding between us in accordance with its
terms.
AVI BIOPHARMA, INC.
an Oregon corporation
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
-------------------------------
Title: CEO
------------------------------
24
PURCHASE AGREEMENT
COUNTERPART EXECUTION PAGE
______________________________________________________________________
By signing below, the undersigned agrees to the terms of the AVI BIOPHARMA, INC.
Purchase Agreement and to purchase the number of Common Shares and Warrants set
forth below.
The undersigned acknowledge that City National Bank is acting solely as Escrow
Holder in connection with the Offering and makes no recommendation with respect
thereto. City National Bank has made no investigation regarding the offering,
the partnership, general partner or any other person or entity involved in the
offering.
Number of shares of Common Stock being purchased:
428,570
------------------------------------
Number of Warrants being purchased:*
128,571
------------------------------------
INVESTOR:
Castle Creek Heathcare Partners LLC
------------------------------------
By: Castle Creek Partners LLC
---------------------------------
Its: Investment Manager
--------------------------------
Name: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Title: Managing Member
------------------------------
Facsimile: 312-449-6999
--------------------------
*THREE WARRANTS FOR EVERY TEN SHARES OF COMMON STOCK PURCHASED. THE TERMS AND
CONDITIONS OF THE WARRANTS ARE CONTAINED IN EXHIBIT A.
25
Please complete the following:
1. The exact name that your
Securities are to be registered in
(this is the name that will appear on
your certificates for both the shares
of Common Stock and Warrants.) You
may use a nominee name if Castle Creek Healthcare Partners LLC
appropriate: -----------------------------------
2. The relationship between the
purchaser of the Securities and the
Registered Holder listed in response Same
to item 1 above: ---------------------------------
3. The mailing address and 00 Xxxx Xxxxxx Xx., Xxxxx 0000
facsimile number of the Registered ---------------------------------
Holder listed in response to item 1 Xxxxxxx, Xxxxxxxx 00000
above (if different from above): ---------------------------------
Facsimile: 000-000-0000
-----------------------
4. (For United States Investors:)
The Social Security Number or Tax
Identification Number of the
Registered Holder listed in the 00-0000000
response to item 1 above: ---------------------------------
26
PURCHASE AGREEMENT
COUNTERPART EXECUTION PAGE
______________________________________________________________________
By signing below, the undersigned agrees to the terms of the AVI BIOPHARMA, INC.
Purchase Agreement and to purchase the number of Common Shares and Warrants set
forth below.
The undersigned acknowledge that City National Bank is acting solely as Escrow
Holder in connection with the Offering and makes no recommendation with respect
thereto. City National Bank has made no investigation regarding the offering,
the partnership, general partner or any other person or entity involved in the
offering.
Number of shares of Common Stock being purchased:
146,860
------------------------------------
Number of Warrants being purchased:*
42,858
------------------------------------
INVESTOR:
/s/ Xxxxxxx X. Xxxxxxx TTE
------------------------------------
By:
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
-------------------------------
Title: Trustee
------------------------------
Facsimile: 000-000-0000
--------------------------
*THREE WARRANTS FOR EVERY TEN SHARES OF COMMON STOCK PURCHASED. THE TERMS AND
CONDITIONS OF THE WARRANTS ARE CONTAINED IN EXHIBIT A.
27
Please complete the following:
1. The exact name that your
Securities are to be registered in
(this is the name that will appear on
your certificates for both the shares
of Common Stock and Warrants.) You Xxxxxxx X. Xxxxxxx Trustee,
may use a nominee name if New Technology Fund
appropriate: ---------------------------------
2. The relationship between the
purchaser of the Securities and the
Registered Holder listed in response Trustee
to item 1 above: ---------------------------------
3. The mailing address and 0 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
facsimile number of the Registered ---------------------------------
Holder listed in response to item 1 Xxx Xxxxxxxxx, XX 00000
above (if different from above): ---------------------------------
Facsimile: 000-000-0000
-----------------------
4. (For United States Investors:)
The Social Security Number or Tax
Identification Number of the
Registered Holder listed in the ###-##-####
response to item 1 above: ---------------------------------
28
PURCHASE AGREEMENT
COUNTERPART EXECUTION PAGE
______________________________________________________________________
By signing below, the undersigned agrees to the terms of the AVI BIOPHARMA, INC.
Purchase Agreement and to purchase the number of Common Shares and Warrants set
forth below.
The undersigned acknowledge that City National Bank is acting solely as Escrow
Holder in connection with the Offering and makes no recommendation with respect
thereto. City National Bank has made no investigation regarding the offering,
the partnership, general partner or any other person or entity involved in the
offering.
Number of shares of Common Stock being purchased:
142,860
------------------------------------
Number of Warrants being purchased:*
42,858
------------------------------------
INVESTOR:
JALAA Equities, LP
------------------------------------
By: /s/ Xxxxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
-------------------------------
Title: General Partner
------------------------------
Facsimile: (000) 000-0000
--------------------------
*THREE WARRANTS FOR EVERY TEN SHARES OF COMMON STOCK PURCHASED. THE TERMS AND
CONDITIONS OF THE WARRANTS ARE CONTAINED IN EXHIBIT A.
29
Please complete the following:
1. The exact name that your
Securities are to be registered in
(this is the name that will appear on
your certificates for both the shares
of Common Stock and Warrants.) You
may use a nominee name if JALAA Equities, LP
appropriate: ---------------------------------
2. The relationship between the
purchaser of the Securities and the
Registered Holder listed in response (Same)
to item 1 above: ---------------------------------
3. The mailing address and 000 Xxxxxxxxx Xxx. (0xx Xxx)
facsimile number of the Registered ---------------------------------
Holder listed in response to item 1 Xxxxxxxxx, XX 00000
above (if different from above): Attn. Xxxxxxxx
---------------------------------
Facsimile: (000) 000-0000
-----------------------
4. (For United States Investors:)
The Social Security Number or Tax
Identification Number of the
Registered Holder listed in the 00-0000000
response to item 1 above: ---------------------------------
30
