As filed with the Securities and Exchange Commission on December 18, 1996.
File No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
VIRAGEN, INC.
(Exact name of issuer as specified in its charter)
Delaware 59-2101668
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2343 West 76th Street
Hialeah, Florida 33016
(Address of principal executive offices) (Zip Code)
______________
CONSULTING AGREEMENT
WITH GIRMON INVESTMENT CO., LIMITED
AND
COMMON STOCK PURCHASE OPTION GRANTED TO
KEY EMPLOYEE
(Full title of the plans)
______________
Gerald Smith, Chairman of the Board
2343 West 76th Street
Hialeah, Florida 33016
Telephone No.: (305) 557-6000
(Name and address of agent for service)
Copy to:
James M. Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, FL 33301
(954) 763-1200
______________
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to be price per offering registration
to be registered registered (1) share price fee (1)
================================================================================
Common Stock 250,000
($.01 par value) shares $5.53 (1) $1,382,500 (1) $419.00
Common Stock 120,000
($.01 par value) shares $2.79 (2) $ 334,800 (2) $101.00
---------- -------
$1,717,300 $520.00
========== =======
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(1) Pursuant to Rule 457(c), the maximum offering price was calculated based
upon the average of the high and low prices of the Company's Common Stock
on the National Association of Securities Dealers Automated Quotation
System (SmallCap) on December 16, 1996.
(2) Pursuant to Rule 457(h), the maximum offering price was calculated based
on the exercise price of the Option described herein.
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VIRAGEN, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
Form S-8 Item Number
and Caption Caption in Prospectus
-------------------- ---------------------
1. Forepart of Registration State- Facing Page of Registration
ment and Outside Front Cover Statement and Cover Page of
Page of Prospectus Prospectus
2. Inside Front and Outside Back Inside Cover Page of Pro-
Cover Pages of Prospectus spectus and Outside Cover
Page of Prospectus
3. Summary Information, Risk Fac- Not Applicable
tors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page of Prospectus
9. Description of Securities to be Description of Securities;
Registered Consulting Agreement with
Girmon Investmen Co.,
Limited; Common Stock
Purchase Option Granted
to Key Employee
10. Interests of Named Experts and Legal Matters
Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Infor- Incorporation of Certain
mation by Reference Documents by Reference
13. Disclosure of Commission Posi- Indemnification of Direc-
tion on Indemnification for tors and Officers; Under-
Securities Act Liabilities takings
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PROSPECTUS
VIRAGEN, INC.
370,000 Shares of Common Stock
($.01 par value)
Issued Pursuant to the Exercise of Warrants under the Company's
Consulting Agreement with Girmon Investment Co., Limited
and Common Stock Purchase Option Granted to Key Employee
This Prospectus is part of a Registration Statement which registers an
aggregate of 370,000 shares of Common Stock, $.01 par value (such shares being
referred to as the "Shares"), of Viragen, Inc. (the "Company" or "Viragen")
which have been issued to Girmon Investment Co., Limited ("Girmon") pursuant to
the exercise of warrants (the "Warrants") in accordance with a written
Consulting Agreement dated October 13, 1995 (the "Consulting Agreement"),
providing for the issuance of Warrants to purchase up to 250,000 of such Shares.
All of the Warrants have subsequently been exercised. In addition, this
Registration Statement also registers an aggregate of 120,000 shares of Common
Stock of the Company underlying a Common Stock purchase option granted to Mr.
Stephen Sanders, an employee of the Company, pursuant to a written Common
Stock purchase option issued August 15, 1996. Such Common Stock purchase option
is sometimes hereinafter referred to as the "Option", and the shares of Common
Stock underlying the Option is sometimes hereinafter referred to as the "Option
Shares." The Consultant and such key employee, in their capacities as
selling stockholders, may sometimes hereafter be collectively referred to as
the "Selling Security Holders." The Company has been advised by the Selling
Security Holders that they may sell all or a portion of the Shares and Option
Shares from time to time in the over-the-counter market, in negotiated
transactions, directly or through brokers or otherwise, and that such Shares or
Option Shares will be sold at market prices prevailing at the time of such sales
or at negotiated prices, and the Company will not receive any proceeds
from such sales.
No person has been authorized by the Company to give any information or to
make any representation other than as contained in this Prospectus, and if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor any
distribution of the Shares or Option Shares issuable under the terms of the
Consulting Agreement or Option shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is December 18, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. Copies
of such material may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains a web site on the internet
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-8 (the "Registration Statement") under the Securities Act of 1933 with respect
to the resale of up to an aggregate of up to 250,000 shares of the Company's
Common Stock, issued to a Consultant of the Company following exercise of
certain Warrants pursuant to a written Consulting Agreement with Viragen. In
addition, the Registration Statement also covers the resale of 120,000 shares of
Common Stock to be issued to an employee of the Company under the terms of a
written option. This Prospectus, which constitutes part of a Registration
Statement filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Act"), omits certain information contained in the
Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby. Statements in this Prospectus as to any
document are not necessarily complete, and where any such document is an exhibit
to the Registration Statement or is incorporated by reference herein, each such
statement is qualified in all respects by the provisions of such exhibit or
other document, to which reference is hereby made, for a full statement of the
provisions thereof. A copy of the Registration Statement, with exhibits, may be
obtained from the Commission's office in Washington, D.C. (at the above address)
upon payment of the fees prescribed by the rules and regulations of the
Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference:
(a) Annual Report of the Company on Form 10-K/A1, as amended, for the
fiscal year ended June 30, 1996.
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(b) The Company's Quarterly Report on Form 10-Q/A for the quarterly
period ended September 30, 1996.
(c) The description of the Company's Common Stock contained in a
registration statement filed under the Securities Exchange Act of
1934, as amended, including any amendment or report filed for the
purpose of updating such description.
(d) All reports and documents filed by the Company pursuant to Section
13, 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference herein and to be a part hereof from the
respective date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.
All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 and 15(d) of the 1934 Act prior to the
filing of a Post-Effective Amendment to this Registration Statement on Form S-8
of which this Prospectus is a part which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and
made a part hereof from their respective dates of filing such documents (such
documents, and the documents enumerated above, being hereinafter referred to as
"Incorporated Documents"); provided, however, that the documents enumerated
above or subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the 1934 Act in each year during which the offering made by this
Prospectus is in effect prior to the filing with the Commission of the Company's
Annual Report on Form 10-K, as amended, covering such year shall not be
Incorporated Documents or be incorporated by reference in this Prospectus or be
a part hereof from and after the filing of such Annual Report on Form 10-K.
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
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delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Viragen,
Inc. at the Company's principal executive office, 2343 West 76th Street,
Hialeah, Florida 33016, Telephone (305) 557-6000.
THE COMPANY
Viragen, Inc. was organized in December 1980 to engage in research,
development and manufacture of certain immunological products for commercial
application, particularly human leukocyte interferon, for antiviral and
therapeutic applications and as anticancer agents. Viragen's primary product
(the "Product") is a natural human leukocyte alpha interferon ("Natural
Interferon"). Natural Interferon is a protein substance that inhibits malignant
cell growth without materially interfering with normal cells. Natural Interferon
stimulates and modulates the human immune system and, in addition, impedes the
growth and propagation of various viruses. The Product is a natural product
produced from human white blood cells. Alpha Leukoferon(TM) and Omniferon(TM)
are the trade names for Viragen's Product in injectable form. The Company's
Product has not been approved by the United States Food and Drug Administration
("FDA") or the European Union ("EU"), and there can be no assurances that
approval of the Product will be obtained at any time in the future.
The Company intends to seek to obtain FDA and EU approvals for various
uses of its Omniferon product in the future. Such approval is expected to
require several years of clinical trials and substantial additional funding. To
date, Viragen has not distributed the Product other than for research and
pursuant to its investigatory license from the Florida Department of Health and
Rehabilitative Services and until May 1993, Viragen had not actively operated
due to insufficient funds. Viragen expects to concentrate its efforts in
preparing, filing and processing its applications and obtaining approvals for
its Product from the FDA and the EU. The Company has assembled an advisory
committee consisting of scientists, medical researchers and clinicians to assist
the Company in its applications to the FDA and the EU.
The Company's majority owned subsidiary, Viragen (Europe) Ltd., acting
through its wholly-owned subsidiary Viragen (Scotland) Ltd. ("VSL"), entered
into a License and Manufacturing Agreement with The Common Services Agency of
Scotland (the "Agency") an agent acting on behalf of the Scottish National Blood
Transfusion Service ("SNBTS"). Pursuant to such Licensing and Manufacturing
Agreement, SNBTS on behalf of VSL, will assist in the manufacture of VSL's
OmniferonTM product for exclusive distribution within the EU and non-exclusively
worldwide in return for certain royalties and preferential access to the Product
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for Scottish Agency patients at preferential prices. The Agency has committed to
assist in the manufacture of Omniferon in sufficient scale to accommodate the EU
Clinical Trials and, subsequently, for limited commercial sales in amounts to be
agreed upon by the parties. The Agency will also work with the Company in
conducting studies relevant to Omniferon and cooperate with the Company to
enable it to comply with the laws and regulations of the EU in connection with
production, clinical trials and distribution of Omniferon.
In June 1996, the Company entered into a Letter of Intent with the
American Red Cross -- Biomedical Services Division. It is the Company's
intention to form a strategic alliance with the American Red Cross focusing on
joint research projects relating to the development of blood-derived products
and processes including the Company's Omniferon product in the United States.
The Company is currently negotiating the terms of the agreement establishing the
scope of the relationship and respective obligations of the parties.
Viragen's administrative office and research facilities are located at
2343 West 76th Street, Hialeah, Florida 33016 (Telephone No. (305) 557-6000;
Facsimile No. (305) 364-8158).
CONSULTING AGREEMENT WITH GIRMON INVESTMENT CO., LTD.
AND
COMMON STOCK PURCHASE OPTION GRANTED TO KEY EMPLOYEE
Consulting Agreement
On October 13, 1995, the Company entered into a Consulting Agreement with
Girmon Investment Co. Ltd., a company incorporated in the Republic of Ireland
and acting solely by and through its Chairman of the Board, Mr. Moty Hermon.
Pursuant to the Consulting Agreement, the Company agreed to issue to the
Consultant, Warrants to purchase up to an aggregate of 250,000 shares of Common
Stock of the Company in consideration for consulting services to be provided to
the Company over an anticipated 24-month period commencing on October 13, 1995.
The Consultant is wholly-owned by Mr. Moty Hermon, who is the principal
executive officer of the Consultant. During the term of the Consulting
Agreement, the Consultant will provide the services of Moty Hermon, and Mr.
Hermon will devote at least 50% of his business time and effort, representing
not less than 80 hours per calendar month, exclusively to perform services for
the Company in accordance with the terms of the Consulting Agreement.
In particular, the Consultant will provide advice to, undertake for and
consult with the Company concerning international, financial and business
development matters with a particular emphasis on international marketing,
strategic planning, investor relations, corporate structure and methodology for
purposes of obtaining international agreements, relationships and participation
by non-U.S. based corporations, organizations and regulatory authorities. In
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connection with the foregoing, the Consultant will advise the Company concerning
international management and operational planning, expansion of services and
development of a stockholder base on an international level as well as reviewing
and advising the Company regarding its overall progress, needs and condition. As
consideration for its services, the Consultant received the Warrants described
hereafter which have been subsequently exercised as well as reimbursement for
its out-of-pocket expenses incurred in the performance of its services under the
Consulting Agreement up to an aggregate of $20,000.00 during each 12-month
period during the term of the Consulting Agreement.
In connection with the Consulting Agreement, the Company issued to the
Consultant Warrants to purchase 250,000 shares of Common Stock of the Company.
The specific terms of the Warrants were as follows:
(a) WARRANT PRICE. Warrants to purchase 250,000 shares of Common Stock
exercisable at a price per share of $1.00.
(b) VESTING. The Warrants vested (i) as to 83,334 Shares on October 1,
1995, (ii) as to 83,333 Shares on April 13, 1996 and (iii) as to
83,333 Shares on October 13, 1996.
(c) TERMS OF WARRANTS. The Warrants would have expired on October 13,
2000.
(d) PAYMENT FOR SHARES. The purchase price for the exercise of the
Warrants was payable in cash, certified check or official bank
check, and the price for the shares of Common Stock was paid in full
upon exercise of the Warrants.
(e) TRANSFERABILITY. The Warrants were not transferable by the holder
thereof except to the Consultant's sole shareholder, pursuant to the
laws of descent and distribution or with the approval of the
Company.
(f) REDEMPTION. There were no redemption rights afforded to the Company
in connection with the Warrants.
(g) ADJUSTMENTS. The number of shares of Common Stock of the Company
purchasable upon exercise of the Warrants and the exercise price of
the Warrants were subject to adjustment upon the occurrence of
specified events primarily involving stock dividends, stock splits,
reorganizations, reclassifications, consolidations and mergers.
There was no adjustment for the payment of cash dividends by the
Company on its Common Stock. The Company was not
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required to issue fractional shares. Warrants for fractional shares
amounting to less than one share were disregarded.
(h) MISCELLANEOUS. It is intended that the resale of the shares of
Common Stock issued on exercise of the Warrants would be fully
registered under the Securities Act of 1933.
Between August 6, 1996, and November 21, 1996 all of the Warrants were
exercised by the Consultant.
Common Stock Purchase Option
On August 15 1996, the Company issued a Common Stock purchase option to
Mr. Stephen Sanders, a full time employee of the Company who serves as Special
Assistant to the President of the Company, to purchase 120,000 shares of Common
Stock at an exercise price of $2.79 per share. The Options were fully vested as
of the date of grant and expire on August 15, 2001. The purchase price for the
exercise of the Options is payable in cash, certified check, official bank check
or promissory note of Mr. Sanders. The Options are not transferrable except
pursuant to the laws of descent and distribution or with the approval of the
Company. The Options have not been exercised as of the date hereof.
Federal Income Tax Effects
A Warrant holder does not recognize taxable income on the date of the
grant of the Warrant, which is a non-statutory option, but recognizes ordinary
income generally at the date of exercise in the amount of the difference between
the Warrant exercise price and the fair market value of the Common Stock on the
date of exercise. However, if the holder is subject to the restrictions on
resale of common stock under Section 16 of the Securities Exchange Act of 1934,
such person generally recognizes ordinary income at the end of the six-month
period following the date of exercise in the amount of the difference between
the Warrant exercise price and the fair market value of the Common Stock at the
end of the six-month period. Nevertheless, such holder may elect within 30 days
after the date of exercise to recognize ordinary income as of the date of
exercise. The amount of ordinary income recognized by the Warrant holder is
deductible by the Company in the year that income is recognized.
Restrictions Under Securities Laws
The sale of any shares of Common Stock acquired upon the exercise of the
Warrant must be made in compliance with federal and state securities laws.
Officers, directors and 10% or greater stockholders of the Company, as well as
certain other persons or parties who may be deemed to be "affiliates" of the
Company under the Federal Securities Laws, should be aware that resales by
affiliates can only be made pursuant to an effective Registration Statement,
Rule 144 or any other applicable exemption. Officers, directors and 10% and
greater stockholders are also subject to the "short swing" profit rule of
Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) of the
Exchange Act generally provides that if an officer, director or 10% and greater
stockholder sold any Common Stock of the Company acquired pursuant to the
exercise of a stock option or warrant, he would generally be required to pay to
the Company any "profits" resulting from the sale of the stock and receipt of
the stock option. Section 16(b) exempts all option exercises from being treated
as purchases and, instead, treats an option grant as a purchase of the
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underlying security, which grant/purchase may be matched with any sale of the
underlying security within six months of the date of grant.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 50,000,000 shares of
Common Stock, par value $.01 per share, of which 38,254,239 shares were
outstanding as of November 11, 1996. The Company is also authorized to issue up
to 1,000,000 shares of Preferred Stock, par value $1.00 per share, of which
2,650 shares of Series A Preferred Stock and 15,000 shares of Series B Preferred
Stock were outstanding as of November 11, 1996.
Common Stock
Subject to the dividend rights of the holders of Preferred Stock, holders
of shares of Common Stock are entitled to share, on a ratable basis, such
dividends as may be declared by the Board of Directors out of funds, legally
available therefor. Upon liquidation, dissolution or winding up of the Company,
after payment to creditors and holders of Preferred Stock that may be
outstanding, the assets of the Company will be divided pro rata on a per share
basis among the holders of the Common Stock.
Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of Directors
can elect all of the Directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any Directors. The
By-Laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock of the Company need be represented to
constitute a quorum and to transact business at a stockholders' meeting. The
Common Stock has no preemptive, subscription or conversion rights and is not
redeemable by the Company.
Preferred Stock
The Company is authorized to issue a total of 1,000,000 shares of
Preferred Stock, par value $1.00 per share. The Preferred Stock may be issued by
resolutions of the Company's Board of Directors from time to time without any
action of the stockholders. Such resolutions may authorize issuances of such
Preferred Stock in one or more series and may fix and determine dividend and
liquidation preferences, voting rights, conversion privileges, redemption terms
and other privileges and rights of the shares of each authorized series. While
the Company includes such Preferred Stock in its capitalization in order to
enhance its financial flexibility, such Preferred Stock could possibly be used
by the Company as a means to preserve control by present management in the event
of a potential hostile takeover of the Company. In addition, the issuance of
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large blocks of Preferred Stock could possibly have a dilutive effect with
respect to the existing holders of Common Stock of the Company.
The Company is authorized to issue 375,000 shares of Series A Preferred
Stock. The Company currently has 2,650 shares of Series A Preferred Stock
outstanding. The Series A Preferred Stock was established by the Board of
Directors in January 1984. Each share of Series A Preferred Stock is immediately
convertible into 4.26 shares of Common Stock. Dividends on the Series A
Preferred Stock are cumulative, have priority to the Common Stock and are
payable in either cash or Common Stock, at the option of the Company.
The Series A Preferred Stock has voting rights only if dividends are in
arrears for five annual dividends. Upon such occurrence, the voting would be
limited to the election of two directors. Voting rights terminate upon payment
of the cumulative dividends. The Series A Preferred Stock is redeemable at the
option of the Company at any time after expiration of ten consecutive business
days during which the bid or last sale price for the Common Stock is $6.00 per
share or higher. There is no mandatory redemption or sinking fund obligation
with respect to the Series A Preferred Stock.
Owners of the Series A Preferred Stock, of which there are eight record
holders, will be entitled to receive $10.00 per share (plus accrued and unpaid
dividends) before any distribution or payment is made to holders of the Common
Stock or other stock of the Company junior to the Series A Preferred Stock upon
liquidation, dissolution or winding up of the Company. Cumulative dividends of
$18,600 were declared and paid to the holders of Series A Preferred Stock on
October 11, 1996. If in any such event the assets of the Company distributable
among the holders of Series A Preferred Stock or any stock of the Company
ranking on a par with the Series A Preferred Stock upon liquidation, dissolution
or winding up are insufficient to permit such payment, the holders of the Series
A Preferred Stock and of such other stock will be entitled to ratable
distribution of the available assets in accordance with the respective amounts
that would be payable on such shares if all amounts payable thereon were paid in
full.
Over-The-Counter Market
The Company's Common Stock is traded on the NASDAQ (SmallCap) under the
symbol "VRGN." If for any reason the Common Stock does not remain accepted for
inclusion on the NASDAQ System, then in such case the Company's Common Stock
would be expected to continue to be traded in the over-the-counter markets
through the "pink sheets" or the NASD's OTC Bulletin Board. In the event the
Common Stock were not included in the NASDAQ System, the Company's Common Stock
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would be covered by a Securities and Exchange Commission rule that imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently, the rule may affect the ability of broker-dealers to sell
the Company's securities and also may affect the ability of purchasers in this
offering to sell their shares in the secondary market. The ability of the
Company to secure a symbol on the NASDAQ System does not imply that a meaningful
trading market in its Common Stock will ever develop.
Transfer Agent
The Transfer Agent for the shares of Common Stock is Chase Mellon
Shareholder Services, Overpeck Centre, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Certain legal matters in connection with the Shares and Option Shares
being offered hereby will be passed upon for the Company by Atlas, Pearlman,
Trop & Borkson, P.A., 200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale,
Florida 33301. Members of that firm or members of their family own an aggregate
of 37,000 shares of Common Stock of the Company.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
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action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Article VII of the By-Laws of the Company require the Company to indemnify
its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, that in the case of an action or suit by or in the right of
the corporation, (a) such person shall be indemnified only to the extent of his
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any judgments,
fines or amounts paid in settlement and (b) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
14
<PAGE>
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
The indemnification provided herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware or of
these By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in this Article VII, or elsewhere in these By-Laws,
shall operate to indemnify any director or officer of such indemnification is
for any reason contrary to law, either as a matter of public policy, or under
the provisions of the Federal Securities Act of 1933, the Securities Exchange
Act of 1934, or any other applicable state or federal law.
For the purposes of this Article, references to "the corporation" include
all constituent corporations absorbed in a consolidation or merger as well as
15
<PAGE>
the resulting or surviving corporations so that any person who is or was a
director, officer, employee or agent of such a constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity."
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a Director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
16
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
- ------- ---------------------------------------
The documents listed in below are incorporated by reference in the
Registration Statement. All documents subsequently filed by the Registrant
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the filing of a Post-Effective
Amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in the Registration Statement and to be part thereof
from the date of filing of such documents.
The following documents filed with the Commission are incorporated herein
by reference:
(a) Annual Report of the Company on Form 10-K/A1, as amended, for the
fiscal year ended June 30, 1996.
(b) The Company's Quarterly Report on Form 10-Q/A for the quarterly
period ended September 30, 1996.
(c) The description of the Company's Common Stock contained in a
registration statement filed under the Securities Exchange Act of
1934, as amended, including any amendment or report filed for the
purpose of updating such description.
(d) All reports and documents filed by the Company pursuant to Section
13, 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference herein and to be a part hereof from the
respective date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.
Item 4. Description of Securities
- ------- -------------------------
The class of securities to be offered hereby is registered under Section
12(g) of the Securities Exchange Act of 1934, as amended. A description of the
Company's securities is set forth in the Company's Registration Statement filed
under the Securities Act of 1934 and the Company's Annual Report incorporated as
a part of this Registration Statement.
i
<PAGE>
Item 5. Interests of Named Experts and Counsel
- ------- --------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
- ------- -----------------------------------------
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Article VII of the By-Laws of the Company require the Company to indemnify
its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent of the
ii
<PAGE>
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, that in the case of an action or suit by or in the right of
the corporation, (a) such person shall be indemnified only to the extent of his
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any judgments,
fines or amounts paid in settlement and (b) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
The indemnification provided herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
iii
<PAGE>
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware or of
these By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in this Article VII, or elsewhere in these By-Laws,
shall operate to indemnify any director or officer of such indemnification is
for any reason contrary to law, either as a matter of public policy, or under
the provisions of the Federal Securities Act of 1933, the Securities Exchange
Act of 1934, or any other applicable state or federal law.
For the purposes of this Article, references to "the corporation" include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporations so that any person who is or was a
director, officer, employee or agent of such a constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity."
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a Director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
iv
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 7. Exemption from Registration Claimed
- ------- -----------------------------------
Inasmuch as the Consultant who received the Warrant of the Company and
the employee who received the Option were knowledgeable, sophisticated and had
access to comprehensive information relevant to the Company, such transactions
were undertaken in reliance on the exemption from registration provided by
Section 4(2) of the Act. As a condition precedent to such grants, the Consultant
and Mr. Sanders were required to express an investment intent as to the Shares
and Option Shares a to be received from the Company except upon sale of the
underlying shares of Common Stock pursuant to a registration statement.
Item 8. Exhibits
- ------- --------
Exhibit Description
- ------- -----------
(4) (a) Consulting Agreement with Girmon Investment Co., Limited
(4) (b) Common Stock purchase option granted to Stephen Sanders
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to the
issuance of shares pursuant to the above Consulting Agreement and
Common Stock purchase option
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in the
opinion filed as exhibit (5) hereto
(23.2) Consent of independent certified public accountants
Item 9. Undertakings
- ------- ------------
(a) The undersigned Company hereby undertakes:
(i) to file, during any period in which it offers or sells
securities, a Post-Effective Amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution;
(ii) that, for determining any liability under the Securities Act,
treat each such Post-Effective Amendment as a new Registration Statement of the
securities offered at that time shall be deemed to be the initial bona fide
offering thereof;
(iii) to file a Post-Effective Amendment to remove from registration
any of the securities that remain unsold at the end of the offering; and
(iv) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
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<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
vi
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hialeah and the State of Florida, on the 12th
day of December, 1996
VIRAGEN, INC.
By: /s/Gerald Smith
------------------------------------
Gerald Smith
Chairman of the Board
Principal Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1993, this Amendment
to its Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Chairman of the
/s/Gerald Smith Board of Directors,
- ------------------------ Principal Executive
Gerald Smith Officer and President December 12, 1996
/s/Robert H. Zeiger Chief Executive Office
- ------------------------ Chief Operating Office
Robert H. Zeiger and Director December 12, 1996
Executive Vice
President, Treasurer,
/s/Dennis W. Healey Principal Financial
- ------------------------ Officer and Accounting
Dennis W. Healey Officer and Director December 12, 1996
/s/Charles F. Fistel
- ------------------------ Executive Vice-President
Charles F. Fistel and Director December 12, 1996
vii
<PAGE>
/s/Sidney Dworkin
- ------------------------
Sidney Dworkin Director December 12, 1996
/s/Peter D. Fischbein
- ------------------------
Peter D. Fischbein Director December 12, 1996
/s/Jay M. Haft
- ------------------------
Jay M. Haft Director December 12, 1996
- ------------------------
Fred D. Hirt Director December __, 1996
/s/William B. Saeger
- ------------------------
William B. Saeger Director December 12, 1996
viii
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT entered into as of October 13, 1995 (the "Agreement") by and
between Viragen, Inc. (the "Company") and Girmon Investment Co., Limited, a
company incorporated in Ireland, Company No. 233671 ("Girmon"), acting solely by
and through its Chairman of the Board and Chief Executive Officer, Mr. Moty
Hermon ("Hermon") (collectively the "Consultant"), hereby agree to the
following:
1. APPOINTMENT OF CONSULTANT. The Company hereby engages Consultant, on a
non-exclusive basis, and Consultant hereby agrees to render services to the
Company through Hermon as an international financial and business development
consultant on a worldwide basis.
2. DUTIES. During the term of this Agreement, Consultant, solely by and
through Hermon, shall provide advice to, undertake for and consult with the
Company concerning international, financial and business development matters,
including but not limited to, financial and investor relations, international
marketing, strategic planning, and corporate organization and structure. Hermon
shall devote and spend a minimum of 50% of his business time and effort,
representing not less than eighty (80) hours per calendar month, exclusively to
perform services for the Company in accordance with this Agreement, subject to
an appropriate and proportional reduction for U.S. legal holidays and equivalent
of three (3) vacation weeks per twelve (12) month period. Consultant shall use
its best efforts to at all times promote the best interests of the Company.
3. TERM. Subject to the provisions of paragraph 8 herein, the term of
this Agreement shall be for a two (2) year period commencing on the date hereof.
4. COMPENSATION. For the services described herein, Consultant shall
receive as sole and aggregate compensation from the Company, including its
subsidiaries and affiliates, for all services rendered to and on behalf of the
Company, a Warrant, attached hereto as Exhibit A and made a part hereof, for the
purchase of up to 250,000 shares of the Company's Common Stock, irrevocably
exercisable for a period of five (5) years following the dates of vesting as
described herein. The purchase price of the shares underlying the Warrant shall
be $1.00 per share. The Warrant shall VEST and become exercisable by Consultant
(a) as to 83,334 shares on the date hereof, (b) as to 83,333 shares on April 13,
1996, and (c) as to 83,333 shares on October 13, 1996. The Company acknowledges
that this compensation shall be in addition to any compensation, including
warrants, previously received by Hermon for prior services performed for the
Company.
5. EXPENSES. Consultant shall be promptly reimbursed by the Company for
reasonable, documented, out-of-pocket expenses it shall incur in performing its
services under this Agreement up to an aggregate of $20,000 per 12-month period
of this Agreement. Travel and related expenses shall be limited to those
incurred by Hermon. Receipts for reimbursable expenses shall be provided by
Consultant in accordance with Company policy.
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<PAGE>
6. REGISTRATION. The Company agrees to provide Consultant with certain
registration rights as defined in Exhibit A attached hereto.
7. CONFIDENTIALITY. Consultant agrees to execute the Company's
Confidentiality Agreement attached hereto as Exhibit B and made a part hereof.
In view of the Confidential Information to be obtained by or disclosed to
Consultant, because of the know-how acquired and to be acquired by Consultant,
and as a material inducement to the Company to enter into this Agreement and
continue to engage Consultant, Consultant covenants and agrees that, so long as
Consultant is engaged by the Company and for a period of two (2) years after
Consultant ceases for any reason to be engaged by the Company, Consultant shall
not, directly or indirectly (i) divert business from, (ii) solicit or transact
any business competitive with the Company or its affiliates with, or (iii) sell
any products or services sold or offered by the Company or its affiliates to,
any customer or former customer of the Company or its affiliates. In addition,
Consultant covenants and agrees that, so long as Consultant is engaged by the
Company and for a period of two (2) years after Consultant ceases for any reason
to be engaged by the Company, Consultant hereby agrees to refrain from, anywhere
in the world (the "Geographical Area"), directly or indirectly owning, managing,
operating, controlling or financing, or participating in the ownership,
management, control or financing, or participating in the ownership, management,
control or financing of, or being connected with or having an interest in, or
otherwise taking any part as a stockholder, director, officer, employee, agent,
consultant, partner or otherwise in, any business competitive with that engaged
in or being developed by the Company or its affiliates during Consultant's term
of engagement. The Company's business is acknowledged to include, but not be
limited to, the development, manufacture and distribution of human
leukocyte-derived interferon therapy products and other derivative natural or
recombinant technologies aimed at enhancing the human immune system, including
cosmetic applications. Consultant acknowledges that the Company's business is
international in scope, that a similar business could effectively compete with
the Company and its affiliates' businesses from any location in the world, and
that, therefore, the restricted Geographical Area is reasonable in scope to
protect the Company and its affiliates' trade secrets and legitimate business
interests. Any advice rendered by Consultant pursuant to this Agreement may not
be disclosed publicly in any manner without the prior written approval of the
Company. The provisions of this paragraph 7 shall survive the termination and
expiration of this Consulting Agreement.
8. TERMINATION.
A. EVENTS. Notwithstanding any provisions of this Agreement (and its
Exhibits) to the contrary, Consultant's engagement may be terminated by the
Company with Cause (as hereinafter defined), effective upon the delivery of
written notice to Consultant. In addition, Consultant's engagement shall
automatically terminate (i) upon Consultant filing for protection of any kind
under bankruptcy law in any jurisdiction (ii) upon Hermon leaving the post of
Chairman or CEO of Girmon, leaving the employ of Girmon or directly or
2
<PAGE>
indirectly disassociating himself in any way with Girmon (iii) upon a change of
control of Girmon from Hermon to any other person or entity (iv) upon Hermon's
death or (v) upon Hermon becoming Disabled (as hereinafter defined).
B. DEFINITION OF CAUSE. For purposes of this Agreement, "Cause"
shall include, but not be limited to: (a) conviction for fraud or criminal
conduct (other than conviction of, or a plea of guilty to, a non-DUI related
traffic violation) (b) habitual drunkenness or drug addiction; (c) embezzlement;
(d) sanctions against Consultant in its capacity as a advisor to the Company by
regulatory agencies governing the Company or against Consultant because of
wrongful acts or misconduct of Consultant (e) breach or default by Consultant of
any of the terms or conditions of Section 7 of this Agreement, (f) material
breach or default by Consultant of any of the terms or conditions of the
Confidentiality Agreement attached as Exhibit B hereto or (g) resignation by
Consultant prior to the end of the term of this Agreement (in this last event,
Consultant's engagement is deemed terminated with Cause on the date that it
resigns).
C. DEFINITION OF DISABLED. For purposes of this Agreement, Hermon
shall be deemed to be "Disabled" when, by reason of physical or mental illness
or of injury, he is unable to perform substantially all of the duties and
responsibilities required of him in connection with his employment hereunder. No
disability shall be deemed to exist until after Hermon shall be unable to
perform his duties hereunder for ninety (90) consecutive days (the "Disability
Period"). If Hermon shall have been under a disability but shall have returned
to work prior to the end of the Disability Period, any new disability commencing
within thirty (30) days of the termination of the prior disability shall be a
continuation of the prior disability, and the period of all such disabilities
shall be added together to determine whether, or how much of, the Disability
Period has elapsed.
9. IRREVOCABILITY OF WARRANTS FOLLOWING VESTING. Consultant and the
Company agree that, subject to termination pursuant to Section 8 of the Warrant
attached as Exhibit A hereto, upon the vesting of the Warrant pursuant to its
terms, such Warrant shall be irrevocable for a period of five (5) years.
10. INDEPENDENT CONTRACTOR. Consultant and the Company hereby acknowledge
that Consultant is an independent contractor. Unless directed by the Company in
writing, Consultant shall not hold itself out as, nor shall it take any action
from which others might infer, that it is an agent of or a joint venture of the
Company. Consultant and the Company hereby acknowledge that Consultant is acting
solely as an independent contractor and as an independent advisor.
11. MISCELLANEOUS. This Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and supersedes and cancels
any prior communications, understandings and agreements between the parties,
except for any warrant agreements existing prior to the date hereof between
Hermon and the Company. This Agreement cannot be modified or changed, nor can
any of its provisions be waived, except by written agreement signed by all
parties. This Agreement shall be governed by the laws of the State of Florida.
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<PAGE>
In the event of any dispute as to the terms of this Agreement, the prevailing
party in any litigation shall be entitled to reasonable attorney's fees.
12. NOTICES. Any notices or communications with respect to this
Agreement shall be delivered to the following addresses:
As to the Company: Viragen, Inc.
Attn: Gerald Smith, President
2343 West 76th Street
Hialeah, Florida 33016
As to Consultant: Girmon Investment Co., Limited
Attn: Moty Hermon, Chairman of the Board
and Chief Executive Officer
c/o Mr. Alan Gainsford
Gainsford, Elliott & Co.
Chartered Accountants
4 Brook Street, Hanover Square
London WI, United Kingdom
IN WITNESS WHEREOF, the parties and their duly authorized representatives have
executed this Agreement as of the day and year first above written.
VIRAGEN, INC.
By: /S/ GERALD SMITH
----------------
Gerald Smith, President
GIRMON INVESTMENT CO., LIMITED,
a company incorporated in Ireland
By: /S/ MOTY HERMON
---------------
Moty Hermon, Individually and as
Chairman of the Board and Chief
Executive Officer
4
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of August 15, 1996 (the "Effective Date")
between Viragen, Inc. a Delaware Corporation (the "Company") and Steven Sanders
("Optionee").
The Company, hereby grants to Optionee a Non-Statutory Option ("NSO") to acquire
Common Stock, par value $.01 per share, of the Company (the "Common Stock"),
subject to the following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to Optionee an NSO (the
"Option") to purchase up to 150,000 shares (30,000 options issued pursuant to
the provisions of the Company's 1995 Stock Option Plan (the "1995 Plan")) of
Common Stock (the "Shares"), to be transferred upon the exercise thereof, fully
paid and nonassessable.
2. EXERCISE PRICE. The exercise price of the Shares subject to the
Option shall be $2.79 per share. The Company shall pay all original issue or
transfer taxes upon the exercise of the Option by Optionee.
3. EXERCISABILITY OF OPTION; RIGHTS AND PRIVILEGES. Subject to the
provisions of Paragraph 6 hereof, the Option shall be exercisable by Optionee in
whole or in part, at any time and from time to time, commencing from the
Effective Date for a period of five (5) years.
All granted but unexercised Options shall continue to be fully exercisable in
accordance with the provisions herein:
(i) if there occurs any corporate transaction (which shall
include a series of corporate transactions occurring within 60 days or occurring
pursuant to a plan), that has the result that shareholders of the Company
immediately before such transaction cease to own at least 66 2/3 percent of the
voting stock of the Company in a (a) reorganization, (b) consolidation, (c)
merger, (d) liquidation or (e) a similar of corporate transaction;
(ii) if the shareholders of the Company shall approve a plan
of merger, consolidation, reorganization, liquidation or dissolution in which
the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) if the shareholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or substantially all
the property and assets of the Company (unless such plan is subsequently
abandoned).
<PAGE>
4. NON-ASSIGNABILITY OF OPTION. The Option shall not be given, granted,
sold, exchanged, transferred, pledged, encumbered, assigned or otherwise
disposed of by Optionee, other than by will or the laws of descent and
distribution, and during the lifetime of Optionee, shall not be exercisable by
any other person, but only by Optionee.
5. METHOD OF EXERCISE OF OPTION. Optionee shall notify the Company by
written notice, in the form of the Notice of Exercise attached hereto
(Attachment A), delivered to the Company's principal office, attention: Chief
Financial Officer. At the Optionee's option, the payment for the Shares may be
made either by Optionee's check payable to the order to the Company in full
payment for the total exercise price of the number of Shares purchased or by
execution and delivery by the Optionee to the Company of a Note(s), in similar
form and content as Notes previously used by the Company for similar purposes
("Note(s)"), dated as of each Notice of Exercise. As soon as practicable after
the receipt of such Notice of Exercise and accompanying payment for the purchase
of Shares, the Company shall, at its principal office, tender to Optionee a
certificate or certificates issued in Optionee's name evidencing the Shares
purchased by Optionee hereunder.
6. TERMINATION OF OPTION. To the extent exercisable but not
exercised, the Option shall terminate upon the first to occur of the
following dates:
(a) five (5) years from the Effective Date as defined herein; or
(b) the expiration of ninety (90) days following the date Optionee's
employment terminates with the Company and/or any of its subsidiaries included
in the Plan with Cause, as defined in Optionee's Employment Agreement.
Subject to the provisions of this paragraph, in the event of Optionee's death,
the exercisable but unexercised portion of the Option may be exercised by the
estate of Optionee, or by the person who acquired the right to exercise the
Option by bequest or inheritance or by reason of the death of Optionee.
In the event of Optionee's termination without Cause, all granted but
unexercised Options shall continue to be fully exercisable in accordance with
the provisions herein. Additionally, in the event this Agreement is not renewed
at the end of the Optionee's Employment Term, then all granted but unexercised
Options shall continue to be fully exercisable in accordance with the provisions
herein.
7. PLEDGE OF SHARES. If payment for the purchase of Shares under this
Option is made through execution and delivery of a Note(s), effective upon
Optionee's purchase(s) of the Shares and the delivery of the Note(s), in order
to secure the Company's obligations under the Note(s), Optionee hereby pledges,
assigns and sets over to the Company, and grants to the Company a security
interest in, the Shares. The Shares pledged pursuant hereto shall be maintained
in escrow with Atlas, Pearlman, Trop & Borkson, P.A. pursuant to the terms of a
Pledge and Escrow Agreement previously used by the Company for similar purposes,
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<PAGE>
which shall be executed by Optionee and the Company upon delivery of a Note(s).
As long as any Shares remain subject to the lien of the Pledge, such Shares may
not be further pledged or encumbered in any manner, and shall not be sold,
transferred or otherwise disposed of. The Escrow Agent shall not be required to
relinquish the Pledge or the Escrow Agent's possession of the certificates
evidencing the Shares, unless no later than concurrently with the sale of the
Shares pursuant to the current S-8 registration, (to the extent of the 30,000
options included in the 1995 Plan or any future registration which includes the
120,000 options not included in the 1995 Plan) all Notes which are secured by
such Shares are paid in full. In the event any of the Shares are to be titled in
the name of an immediate family member of Optionee or a trust pursuant to the
terms herein, as a condition thereto the designated title holder(s) of such
Shares shall execute and deliver to the Company a pledge and escrow agreement,
in form and content reasonably satisfactory to the Company and its counsel,
consistent with the terms herein. No transfer of Shares to, or designation by
Optionee of (for the purposes of owning Shares) any person or entity shall
relieve Optionee of any of his obligations under the Note(s) or this Agreement.
With respect to each Note under which a voluntary prepayment is made by
Optionee, provided that interest payments on such Note are current through the
date of prepayment and such Note is not in default and has not been accelerated,
for each $27,900 of principal paid by Optionee under such Note, 10,000 Shares of
the Shares pledged to secure such Note shall be released from the lien of the
Pledge. As long as no event of default has occurred with respect to a Note and
no event giving right to accelerate such Note has occurred, Optionee shall
retain all voting rights with respect to all Shares securing such Note.
Following an event of default or an acceleration event, the Company shall have
and may exercise all voting rights with respect to such Shares. Optionee hereby
irrevocably appoints the Company Optionee's attorney-in-fact for such purpose,
it being acknowledged that such appointment is coupled with an interest. Any
dividends or distributions payable in respect of any Shares subject to the
Pledge shall automatically be applied to pay down the Note(s) in inverse order
of their respective maturity date(s). In the event of a default under any Note,
in addition to and not in limitation or lieu of any other rights or remedies the
Company may have against Optionee as a result of such default, the Company may
exercise all of its rights at law and in equity as a secured party, including
without limitation under the Uniform Commercial Code, with respect to all Shares
then securing the Note with respect to which the default has occurred. Upon a
default, without limiting any of the Company's other rights and remedies, the
Company may conduct a public or private foreclosure sale of the Shares securing
the Note with respect to which the default has occurred. Optionee agrees that 10
days notice to him of any private sale is fair and reasonable. The Company may
be the purchaser at any public foreclosure sale, and may bid any commercially
reasonable amount at such sale. In all events, in the event of a public or
private foreclosure sale, Optionee shall be liable for any deficiency. All of
the Company's rights and remedies under the Note(s), the Pledge and this
Agreement, and at law or in equity, are cumulative, and none is intended to be
in substitution or in lieu of, nor is the exercise of one intended to be a
waiver of, any other. The Company shall have no obligation to proceed against
the Shares before proceeding against Optionee with respect to any default under
any of the Notes.
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<PAGE>
8. PIGGYBACK REGISTRATION RIGHTS. The Company hereby grants Piggyback
Registration Rights to Optionee with respect to any registration statement filed
by the Company on Form S-8, S-3, S-1, or SB-2 following the Effective Date for
any and all shares purchased by Optionee hereunder. In the event that the
Option(s) has not been exercised, in whole or in part, the Company agrees to
include in such registrations any and all such shares underlying the Option(s).
In the case of any registrations pursuant to this Paragraph 8, the Company (i)
will keep Optionee advised as to the initiation and progress of proceedings for
such registrations and as to the completion thereof and (ii) at its expense will
keep such registrations effective for a period of at least nine months from the
initial effective date of the registrations. Optionee agrees to provide such
information to the Company as is reasonably requested by the Company which the
Company believes is necessary in order for the Company to register the stock,
and Optionee shall execute such documents, certificates and other instruments as
the Company reasonably determines is necessary or appropriate in connection
therewith.
9. INCLUSION IN FUTURE STOCK OPTION PLANS. To the extent permitted by
Federal Securities Regulations and Internal Revenue Service guidelines, the
Company intends to include Optionees 120,000 options (not included in the 1995
Plan) in any Stock Option Plan established by the Company and approved by
shareholders subsequent to the effective date.
10. SECURITIES LAWS. The Company represents and warrants that with respect
to 30,000 options (i) the shares underlying the Options will be issued from
shares authorized by and subject to the provisions of the 1995 Plan (ii) the
1995 Plan and the shares underlying the Options have been registered under the
applicable regulations of the Securities and Exchange Commission on Form S-8
(iii) such registration is effective as of the Effective Date, and (iv) such
registration covering the shares underlying the Options will be maintained as
effective for the longer of (a) the Employment Term as stated in Optionee's
Employment Agreement or (b) the Exercise Period of the Options as defined
herein.
11. ADJUSTMENT OF SHARES. If at any time prior to the expiration or
exercise in full of the Option, there shall be any increase or decrease in the
number of issued and outstanding shares of the Common Stock through the
declaration of a stock dividend or through any recapitalization resulting in a
stock split-up, combination or exchange of the Common Stock, then and in such
event:
(i) appropriate adjustment shall be made in the maximum number of
Shares available for grant, so that the same percentage of the Company's issued
and outstanding Shares shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of Shares,
and the exercise price per Share thereof, that remain unexercised under the
Option, so that the same percentage of the Company's issued and outstanding
shares of Common Stock shall remain subject to purchase at the same aggregate
exercise price.
4
<PAGE>
Except as otherwise expressly provided herein, the issuance by the Company of
shares of its capital stock of any class, or securities convertible into shares
of capital stock of any class, either in connection with a direct sale of upon
the exercise of rights or warrants to subscribe therefore, or upon conversions
of shares or obligations the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of exercise price of the Shares that remain
unexercised under the Option.
Without limiting the generality of the foregoing, the existence of unexercised
Shares under the Option shall not affect in any manner the right or power of the
Company to make, authorize or consummate (i) any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business; (ii) any merger or consolidation of the Company;
(iii) any issue by the Company of debt securities, or preferred or preference
stock that would rank above the Shares issuable upon exercise of the Option;
(iv) the dissolution or liquidation of the Company; (v) any sale, transfer or
assignment of all or any part of the assets or business of the Company; or (vi)
any other corporate act or proceeding, whether of a similar character or
otherwise.
12. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder of the Company in respect of the Shares as to which the Option shall
not have been exercised and payments made therefore as herein provided.
13. BINDING EFFECT. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, their
heirs, legal representatives, successors and permitted assigns. Optionee
acknowledges that Optionee has read and understands the Plan and agrees to abide
by its terms.
5
<PAGE>
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the conflict of laws principles thereof. All terms not defined in this Agreement
shall have the same meaning as in the Plan.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
VIRAGEN, INC.
By: /S/ DENNIS W. HEALEY
--------------------
Dennis W. Healey
Executive Vice President
OPTIONEE
By: /S/ STEVEN SANDERS
------------------
Steven Sanders
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Direct Line: (954) 766-7858
December 18, 1996
Viragen, Inc.
2343 West 76th Street
Hialeah, Florida 33016
Re: Registration Statement on Form S-8 - Viragen, Inc. -
Common Stock issued pursuant to a Consulting Agreement with
Girmon Investment Co., Limited and Common Stock Purchase Option
granted to Stephen Sanders
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission (the "Commission") with respect to the
registration by Viragen, Inc. (the "Company") of an aggregate of 370,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), issued pursuant
to a Consulting Agreement with Girmon Investment Co., Limited (the "Agreement")
and Common Stock purchase option (the "Option") with Stephen Sanders.
In our capacity as special counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Agreement, the
Option, the Company's Certificate of Incorporation (as amended), By-Laws and
corporate minutes provided to us by the Company. In all such examinations, we
have assumed the genuineness of all signatures on original documents, and the
conformity to originals or certified documents of all copies submitted to us as
conformed, photostat or other copies. In passing upon certain corporate records
and documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company and we
express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the shares of Common Stock issued pursuant to the Agreement is, and the Common
Stock when issued in accordance with the terms of the Option will be, validly
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion in the Registration Statement
on Form S-8 filed with the Commission and the reference to this firm under the
heading "Legal Matters" in the Registration Statement on Form S-8.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
JMS/bb
3760.01
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Viragen, Inc. consulting agreement with Girmon Investment
Co., Limited and Common Stock Purchase Option Granted to Key Employee of our
report dated August 16, 1996, with respect to the consolidated financial
statements of Viragen, Inc. included in the Annual Report (Form 10-K/A1) for the
year ended June 30, 1996.
Ernst & Young LLP
December 17, 1996
Miami, Florida
