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EXHIBIT 10.1
March 22, 1999
AVANIR Pharmaceuticals, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
RE: CLASS A COMMON STOCK INVESTMENT AGREEMENT
Dear Xx. Xxxxxx:
We refer to the Class A Common Stock Investment Agreement dated as of
January 22, 1999 (the "Investment Agreement") by and among AVANIR
Pharmaceuticals, Inc. (the "Company") and Promethean Investment Group, L.L.C.
(the "Investor") relating to the investment by the Investor of up to $10,000,000
of the Company's Class A common stock, no par value per share. Contemporaneously
with the execution and delivery of the Investment Agreement, the Company and the
Investor executed a Registration Rights Agreement (the "Registration Rights
Agreement") pursuant to which the Company agreed to provide certain registration
rights under the 1933 Act, and the rules and regulations promulgated thereunder,
and applicable state securities laws.
The Company and the Investor have agreed to the following changes to the
Investment Agreement:
1. The first sentence of Section 1(c) is amended to read as follows:
At least 10 days but not more than 20 days prior to the Company's
delivery of a Put Notice to the Investor, the Company shall deliver
written notice to the Investor (a "PRELIMINARY PUT NOTICE") stating
that the Company may deliver a Put Notice to the Investor; provided,
however, that, following a Purchase Period, the Company shall not
deliver a Preliminary Put Notice on or prior to the date which is 5
Business Days after the last day of the Purchase Period.
2. Section 1(e) is amended and restated in its entirety as follows:
Limitation on Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, in no
event shall the Investor be required to purchase, and a Required
Dollar Amount may not include, an amount, which when added to the sum
of (i) the additional number of Shares which the Investor has the
right to purchase with respect to such Required Dollar Amount (as set
forth in the second sentence of Section 1(d)), (ii) all other Shares
acquired by the Investor pursuant to this Agreement during the 61
days preceding the Put Notice Date with respect to which this
determination of the permitted Required Dollar Amount is being made
and (iii) the number of shares of Class A Common Stock acquired by
any affiliate of the Investor pursuant to conversion of the Company's
Series D Convertible Preferred Stock (the "PREFERRED STOCK") or
exercise of the warrants issued pursuant to the Securities Purchase
Agreement (as defined below) or otherwise during the 61 days
preceding the Put Notice Date with respect to which this
determination of the permitted Required Dollar Amount is being made,
would exceed 4.99% of the number of shares of Class A Common Stock
outstanding on the Put Notice Date for such Purchase Period, as
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 ACT"). Each Put Notice
shall include a representation of the Company as to the number of
shares of Class A Common Stock outstanding on the related Put Notice
Date as determined in accordance with Section 13(d) of the 1934 Act.
In the event that the number of shares of Class A Common Stock
outstanding as determined in accordance with Section 13(d) of the
1934 Act is different on any date during a Purchase Period than on
the Put Notice Date associated with such Purchase Period, then the
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AVANIR Pharmaceuticals, Inc.
March 22, 1999
Page 4
number of shares of Class A Common Stock outstanding on such date
during such Purchase Period shall govern for purposes of determining
whether the Investor, when aggregating all purchases of shares of
Class A Common Stock by the Investor and its affiliates in the 61
days preceding such date, would have acquired more than 4.99% of the
number of shares of Class A Common Stock outstanding during such
period.
3. Section 1(f) is amended and restated in its entirety as follows:
Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the
Company shall not be entitled to deliver a Put Notice and require the
Investor to purchase any Shares at a Closing (as defined in Section
1(h)) unless each of the following conditions are satisfied: (i) the
Applicable Trading Price of the Class A Common Stock on the Business
Day immediately preceding the Put Notice Date shall not be less than
$1.00 (equitably adjusted for stock splits, stock dividends,
combinations and similar transactions); (ii) a Registration Statement
shall have been declared effective and shall remain effective and
available for sale of all the Registrable Securities (as defined in
the Registration Rights Agreement) at all times during the period
beginning on the date of delivery of the related Preliminary Put
Notice and ending on and including the related Closing Date (as
defined in Section 1(h)); (iii) at all times during the period
beginning on the date that the Company delivers the related
Preliminary Put Notice and ending on and including the related
Closing Date, the Class A Common Stock shall have been listed on The
American Stock Exchange, Inc. or The New York Stock Exchange, Inc. or
designated on the Nasdaq National Market (the "PRINCIPAL MARKET") and
shall not have been suspended from trading thereon and the Company
shall not have been notified of any pending or threatened (except as
set forth in the letter to the Company dated February 8, 1999 from
the Nasdaq Stock Market, Inc., provided that the Company has
satisfied the requirements set forth in such letter) proceeding or
other action to delist or suspend the Class A Common Stock; (iv)
during the period beginning on the date of this Agreement and ending
on and including the applicable Closing Date, there shall not have
occurred a Major Transaction (as defined below) or the public
announcement of a pending Major Transaction which has not been
abandoned or terminated; (v) the Company has complied with its
obligations and is otherwise not in breach of, or in default under,
this Agreement, the Registration Rights Agreement, the Securities
Purchase Agreement dated as of March 22, 1999 between the Company and
the buyers named therein relating to the sale by the Company of the
Preferred Stock and related warrants (the "SECURITIES PURCHASE
AGREEMENT"), and the Certificate of Determination of the Company's
Series D Convertible Preferred Stock; (vi) during the period
beginning on the date of this Agreement and ending on and including
the applicable Closing Date, there shall not have occurred a
Triggering Event (as defined in the Securities Purchase Agreement);
and (vii) if any shares of Preferred Stock are outstanding or if any
Additional Preferred Shares (as defined in the Securities Purchase
Agreement) are issuable pursuant to the Securities Purchase
Agreement, then the Company shall have obtained the approval of its
shareholders for the Company's issuance of (A) all of the Class A
Common Stock as described in this Agreement and (B) all of the
Securities (as defined in the Securities Purchase Agreement) as
described in the Securities Purchase Agreement. If any of the
conditions described in clauses (ii) through (vi) is not satisfied
after an effective Put Notice is so delivered, and if any such
condition described above is not satisfied at all times before the
entire Required Dollar Amount of Class A Common Stock covered by such
Put Notice shall have been purchased during the Purchase Period, then
the Investor shall have no further obligation to purchase the balance
of such Required Dollar Amount of Class A Common Stock during such
Purchase Period; provided, however, that on any day during the
balance of such Purchase Period upon which such conditions described
in clauses (ii) through (vi) above are not satisfied, the Investor
may, in its sole discretion, but shall not be required to, give the
Company one or more Purchase Notices
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AVANIR Pharmaceuticals, Inc.
March 22, 1999
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(as defined in Section 1(h)) covering some or all of such balance of
the Required Dollar Amount, as well as some or all of the additional
amounts of Class A Common Stock which the Investor may elect to
purchase during such Purchase Period pursuant to Section 1(d) above.
The "APPLICABLE TRADING PRICE" with respect to the Class A Common
Stock on any Business Day, shall mean the Weighted Average Price (as
defined below) of the Class A Common Stock on such Business Day.
"WEIGHTED AVERAGE PRICE" means, for any security as of any date, the
dollar volume-weighted average price for such security on the
Principal Market (as reported by Bloomberg through its "Volume at
Price" function) or, if the Principal Market is not the principal
securities exchange or trading market for such security, the dollar
volume-weighted average price of such security on the principal
securities exchange or trading market where such security is listed
or traded (as reported by Bloomberg through its "Volume at Price"
function), or if the foregoing do not apply, the dollar
volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg, the average
of the bid prices of any market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If the
Weighted Average Price cannot be calculated for such security on such
date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually
determined by the Company and the Investor.
For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed
to have occurred at the closing of any of the following events: (i)
the consolidation, merger or other business combination of the
Company with or into another person (other than pursuant to a
migratory merger effected solely for the purposes of changing the
jurisdiction of incorporation of the Company); (ii) the sale or
transfer of all or substantially all of the Company's assets; or
(iii) the consummation of a purchase, tender or exchange offer made
to, and accepted by, the holders of more than 30% of the economic
interest in, or the combined voting power of all classes of voting
stock of, the Company.
4. Section 1(l) is amended and restated in its entirety as follows:
Overall Limit on Class A Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of Shares
issuable by the Company and purchasable by the Investor hereunder
shall not exceed that number of shares of Class A Common Stock which
the Company may issue hereunder without breaching the Company's
obligations, if any, under the rules or regulations of the Nasdaq
Stock Market or such exchange on which the stock is then traded (the
"MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance of Shares
hereunder in excess of the Maximum Common Stock Issuance shall first
be approved by the Company's shareholders in accordance with
applicable law and the By-laws and Articles of Incorporation of the
Company. Without limiting the generality of the foregoing, such
shareholders' approval must duly authorize the issuance by the
Company of shares of Class A Common Stock totaling 19.99% or more of
the shares of Class A Common Stock outstanding on the date hereof.
The parties understand and agree that the Company's failure to seek
or obtain such shareholder approval shall in no way adversely affect
the validity and due authorization of the issuance and sale of Shares
hereunder or the Investor's obligation in accordance with the terms
and conditions hereof to purchase a number of Shares in the aggregate
up to the Maximum Common Stock Issuance limitation, and that such
approval pertains only to the applicability of the Maximum Common
Stock Issuance limitation provided in this Section 1(l).
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AVANIR Pharmaceuticals, Inc.
March 22, 1999
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5. Section 8(b) is amended and restated in its entirety as follows:
Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto upon the earlier of
(i) when the Investor has purchased an aggregate of $10,000,000 in
the Class A Common Stock of the Company pursuant to this Agreement,
apart from additional amounts which may be purchased pursuant to
Section 1(d); provided that the representations, warranties and
covenants contained in this Agreement insofar as applicable to the
transactions consummated hereunder prior to such termination, shall
survive the termination of this Agreement for the period of any
applicable statute of limitations, (ii) on the date which is 24
months after the Effective Date or (iii) on the date which is 30
months after the date hereof.
All representations, warranties and covenants shall survive the
termination of this Agreement.
6. Section 10(b)(i) is amended and restated in its entirety as follows:
As an inducement to the Investor to enter into this Agreement, the
Company shall deliver to the Investor on the date hereof an amount
equal to $100,000 by wire transfer of immediately available funds. As
a further inducement to the Investor to enter into this Agreement,
the Company shall pay to the Investor the "SECOND INSTALLMENT," the
definition of which will depend on whether or not the Registration
Statement is filed with the SEC on or prior to August 15, 1999. If
the Registration Statement is not filed on or prior to August 15,
1999, then the Second Installment shall mean that the Company shall
deliver to the Investor an amount equal to $150,000 by wire transfer
of immediately available funds within one Business Day of August 15,
1999. If the Registration Statement is filed on or prior to August
15, 1999, then the Second Installment shall mean (A) if the
Registration Statement is declared effective by the SEC on or before
the date which is 45 days after the date the Registration Statement
is filed with the SEC, then within one Business Day of the date that
the Registration Statement is declared effective by the SEC, the
Company shall deliver to the Investor either (x) an amount equal to
$150,000 by wire transfer of immediately available funds or (y) stock
certificates representing the number of Shares (the "FIRST COMMITMENT
SHARES") having an aggregate price (based on a price per First
Commitment Share equal to 94% of the lowest Applicable Trading Price
during the six consecutive trading days ending on and including the
date the Registration Statement is declared effective) of $150,000,
and (B) if the Registration Statement is not declared effective on or
before the date which is 45 days after the date the Registration
Statement is filed with the SEC, then (x) the Company, on the first
Business Day after such 45th day, shall pay to the Investor an amount
equal to $50,000 by wire transfer of immediately available funds and
(y) on the earlier of the date on which the Registration Statement is
declared effective by the SEC and the date which is 75 days after the
date the Registration Statement is filed with the SEC, the Company,
on the first Business Day after such date, shall deliver to the
Investor either (i) an amount equal to $100,000 by wire transfer of
immediately available funds or (ii) provided that the Registration
Statement is declared effective by the SEC on or before the date
which is 75 days after the date the Registration Statement is filed
with the SEC, stock certificates representing the number of Shares
(the "SECOND COMMITMENT SHARES" and, collectively with the First
Commitment Shares, the "COMMITMENT SHARES") having an aggregate price
(based on a price per Second Commitment Share equal to 94% of the
lowest Applicable Trading Price during the six consecutive trading
days ending on and including the date the Registration Statement is
declared effective) of $100,000 (in any such case, and along with the
amount described in the first sentence of this Section 10(b)(i), the
"COMMITMENT FEE"). The Company shall notify the Investor of the
Company's election to make the payments described in the immediately
preceding sentence in cash or in Commitment Shares by delivering
written notice to the Investor at least three Business Days prior to
the date that such payment is due. Notwithstanding
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AVANIR Pharmaceuticals, Inc.
March 22, 1999
Page 7
anything herein to the contrary, the Company may pay the portion of
the Commitment Fee described in the second sentence of this Section
10(b)(i) in Commitment Shares if, and only if, at the time of their
delivery, such Commitment Shares are registered for public resale
under the 1933 Act and state securities laws and listed or quoted on
the Principal Market. If the Company fails to pay any portion of the
Commitment Fee when due, then the Company shall pay to the Investor,
on the first Business Day following the date such payment was due (in
addition to and not in lieu of any remedy the Investor may have in
law or in equity) an amount equal to 2% of the Commitment Fee, in
cash by wire transfer, plus compounded annual interest of 18% on such
portion of the Commitment Fee during the period, beginning on the
Business Day after such portion of the Commitment Fee was due, during
which such amount, or any portion thereof, is outstanding. In the
event that the Company elects to pay any the portion of the
Commitment Fee described in the second sentence of this Section
10(b)(i) in Commitment Shares, then to the extent possible the
Company shall deliver such Commitment Shares through DTC.
In addition, the Company and Promethean have agreed to the following
change to the Registration Rights Agreement:
1. Section 2(a) is amended and restated in its entirety as follows:
Mandatory Registration. The Company shall prepare, and, on or prior
to August 15, 1999, file with the SEC a Registration Statement or
Registration Statements (as is necessary) (provided, however, that in
no event shall such Registration Statement be filed prior to the date
which is 45 days after the date the Convertible Registration
Statement (as defined below) is declared effective by the SEC) on
Form S-3 (or, if such forms is unavailable for such a registration,
on such other form as is available for such a registration, subject
to the consent of the Holders holding a majority of the Registrable
Securities, which consent shall not be unreasonably withheld),
covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule
416 promulgated under the 1933 Act, such Registration Statement(s)
also covers such indeterminate number of additional shares of Class A
Common Stock as may become issuable upon stock splits, stock
dividends or similar transactions. Such Registration Statement shall
initially register for resale 19.99% of the shares of Class A Common
Stock outstanding (not including the 234,000 shares of common stock
of the Company held by Xxxxx X. Xxxx as to which there is a dispute
as to their class) on the date the Registration Statement is filed
with the SEC. The Company shall use its best efforts to have the
Registration Statement(s) declared effective by the SEC as soon as
practicable. The "CONVERTIBLE REGISTRATION STATEMENT" shall mean the
Initial Registration Statement referred to in the registration rights
agreement dated as of March 22, 1999 executed in connection with the
Securities Purchase Agreement dated as of March 22, 1999 between the
Company and the buyers named therein relating to the sale by the
Company of shares of its Series D Convertible Preferred Stock, and
related warrants.
Section 3(a) is amended and restated in its entirety as follows:
The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the sale by the Holders of the
Registrable Securities on or prior to August 15, 1999; provided,
however, that in no event shall such Registration Statement be filed
prior to the date which is 45 days after the date the Convertible
Registration Statement is declared effective by the SEC; and use its
best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as practicable
after the date hereof for the registration of Registrable Securities
pursuant to Section 2(a), and keep such Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i)
the date as of which the Holders may sell all of the Registrable
Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Holders shall have sold all
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AVANIR Pharmaceuticals, Inc.
March 22, 1999
Page 8
the Registrable Securities and (B) the Investor has no right to
acquire any additional shares of Class A Common Stock under the
Investment Agreement (the "REGISTRATION PERIOD"), which Registration
Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
Except as modified above, the Investment Agreement and the Registration
Rights Agreement remain in full force and effect in accordance with their terms.
The Company agrees that, on or before the first (1st) Business Day after
the Initial Closing Date (as defined in the Securities Purchase Agreement, dated
March 22, 1999, among the Company and the Buyers named therein relating to the
Company's Series D Convertible Preferred Stock), the Company shall publicly
disclose the terms of this letter agreement by filing a Current Report on Form
8-K, which Current Report on Form 8-K shall include a description of the
material terms of this letter agreement and shall include as an exhibit a copy
of this letter agreement.
This letter agreement is effective March 22, 1999 and shall be binding
upon the parties and their successors and assigns and may be amended or
terminated only by a writing signed by all the parties hereto.
* * *
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Please indicate your agreement to the above by signing in the space
provided below and faxing a signed copy to each of the Buyers listed below.
PROMETHEAN INVESTMENT GROUP, L.L.C.:
By: \s\E. Xxxx Xxx
Name: E. Xxxx Xxx
Title: Authorized Signatory
Accepted and agreed to this
22nd day of March, 1999:
AVANIR PHARMACEUTICALS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chief Financial Officer
