EQUITY LINE OF CREDIT AGREEMENT
On September 18, 2000, we signed a private equity line of credit
agreement with Spinneret Financial Systems, Inc. Pursuant to this equity line of
credit agreement and subject to the satisfaction of certain conditions, Advanced
Viral may sell and issue to Spinneret, from time to time, up to an aggregate of
$20,000,000 of our common stock. Beginning on the date that a registration
statement covering the resale of the shares issuable pursuant to the equity line
of credit is declared effective by the Commission, and continuing for thirty
(30) months thereafter, we may, from time to time, in our sole discretion, sell
or "put" shares of our common stock to Spinneret Financial Systems at a price
equal to the market price of the common stock. Under the equity line of credit
agreement, the market price of Advanced Viral common stock, for purposes of
determining the purchase price, is the average of the six lowest closing bid
prices, as reported by Bloomberg, L.P., of our common stock for the 25 trading
day period ending on the date we notify Spinneret of our intention to put common
stock to it, or, in other words, request an advance.
The maximum advance amount on any advance notice date is equal to the
difference between (i) the amount indicated in the Maximum Advance Amount column
opposite the range of the 25 Day Average Daily Volume Traded on such advance
notice date, as set forth in the table below and (ii) the sum of the advances
made pursuant to the agreement, in the 15 trading days immediately preceding the
advance notice date:
25-DAY AVERAGE VOLUME TRADED(1) MAXIMUM ADVANCE AMOUNT
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$ 25,000 - $50,000 $ 100,000
$ 50,001 - $100,000 $ 200,000
$ 100,001 - $200,000 $ 350,000
$ 200,001 - $300,000 $ 500,000
$ 300,001 - $400,000 $ 650,000
$ 400,001 - $500,000 $ 900,000
$ 500,001 - $600,000 $1,200,000
$ 600,001 - $800,000 $1,500,000
$ 800,001 - $1,000,000 $1,750,000
$1,000,000 plus $2,000,000
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(1) The 25-Day Average Volume Traded is equal to the bid price multiplied by the
volume for each of the 25 trading days preceding the advance notice date.
Our ability to put shares of common stock to Spinneret Financial
Systems is subject to certain conditions and limitations, including, but not
limited to, the following:
o the registration statement covering the resale of the
shares must have previously become effective and
shall remain effective and available for making
resales of the put shares;
o our representations and warranties to Spinneret
Financial Systems contained in the equity line of
credit agreement must be accurate as of the date of
each put;
o no statute, rule, regulation, executive order,
decree, ruling, or injunction may be in effect which
prohibits or directly and adversely affects any of
the transactions contemplated by the equity line of
credit agreement;
o at the time of an advance, there must not have been
any material adverse change in our business,
operations, properties, prospects, or financial
condition since the date of filing of our most recent
report with the SEC;
o our common stock must not have been delisted from the
Bulletin Board or suspended from trading by the SEC
or the Bulletin Board; and
o at least fifteen (15) trading days must have elapsed
since the last date Advanced Viral put shares to
Spinneret Financial Systems.
We cannot assure you that we will satisfy all of the conditions
required under the equity line of credit agreement or that Spinneret Financial
Systems will have the ability to purchase all or any of the shares of common
stock put to it thereunder.
Under the equity line of credit agreement, we agreed to register the
common stock for resale by Spinneret Financial Systems, which will permit
Spinneret Financial Systems to resell the common stock from time to time in the
open market or in privately-negotiated transactions. We will prepare the
registration statement and file amendments and supplements thereto as may be
necessary in order to keep it effective as long as the equity line of credit
agreement remains in effect or Spinneret Financial Systems owns any of our
common stock. We have agreed to bear certain expenses, other than broker
discounts and commissions, if any, in connection with the preparation and filing
of the registration statement and any amendments to it.
In addition, pursuant to the equity line of credit agreement, each
officer, director and affiliate of Advanced Viral has agreed that he, she or it
will not, directly or indirectly, without the prior written consent of
Spinneret, issue, offer, agree or offer to sell, sell, grant an option for the
purchase or sale of, transfer, pledge, assign, hypothecate, distribute or
otherwise encumber or dispose of (whether pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended, or otherwise) any shares of common
stock, including options, rights, warrants or other securities underlying,
convertible into, exchangeable or exercisable for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned by
the undersigned), or any beneficial interest therein for a period of 10 trading
days following the receipt of an advance notice by Advanced Viral pursuant to
the agreement.
In conjunction with the equity line of credit agreement, we entered
into an agreement with May Davis Group, Inc., our placement agent, pursuant to
which May Davis will receive five percent (5%) of the proceeds from the sale of
common stock to Spinneret Financial Systems under the equity line of credit
agreement. May Davis initiated contact with Spinneret Financial Systems and
assisted Advanced Viral in negotiating the equity line of credit agreement. The
fees will be paid by Advanced Viral upon receipt of funds from Spinneret
Financial Systems. May Davis is not obligated to purchase any of our shares, but
as an additional placement fee, we have issued to May Davis a Class A Warrant to
purchase 5,000,000 shares of our common stock at an exercise price per share
equal to $1.00, exercisable in part or in whole at any time by May Davis at its
discretion until September 18, 2005, and a Class B Warrant to purchase 5,000,000
shares of our common stock at an exercise price equal to the greater of $1.00 or
110% of the bid price of the common stock on the applicable advance date,
exercisable pro rata on the basis of the number of shares of common stock
issuable on each advance date for a period of sixty months from the date of
issuance. We may redeem the warrants at a redemption price of $.01 per share
provided that the bid price for our common stock equals at least $4.00 per share
for a period of ten (10) consecutive trading days, as described therein. The
warrants contain provisions that adjust the purchase price and number of shares
issuable to May Davis upon the occurrence of certain events, such as a stock
split, reverse stock split, stock dividend, merger, or recapitalization.
Assuming a registration statement covering the resale of the shares underlying
the warrants and the equity line of credit is effective and not suspended, May
Davis may effect a cashless exercise of the warrant commencing with the first
advance date. May Davis is also entitled to certain "piggyback" registration
rights with respect to the shares of common stock issuable upon exercise of the
warrants pursuant to a registration rights agreement. |
