SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 7, 1996
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VIRAGEN, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-10252 59-2101668
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(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
2343 West 76th Street, Hialeah, Florida 33016
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 557-6000
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5 - OTHER EVENTS
On June 7, 1996, the Company entered into a Securities Purchase
Agreement (the "Agreement") with GFL Performance Ltd., GFL Advantage Fund Ltd.
and Proton Global Asset Management, LDC (collectively the "Purchaser") pursuant
to which the Purchaser acquired 15,000 shares of the Company's recently
established 5% Cumulative Convertible Preferred Stock, Series B (the "Series B
Preferred Stock") for $15,000,000. The sale of the Series B Preferred Stock
represented the completion of the first stage of a $50 million financing
commitment. The Company expects to complete the balance of the financing,
subject to market and other conditions, as follows: $20 million prior to
December 31, 1996 and $15 million prior to April 30, 1997.
Under the terms of the Series B Preferred Stock, the holders will be
entitled to receive a cash dividend equal to 5% of the stated value of the
Series B Preferred Stock payable quarterly commencing September 7, 1996,
although the Company has the option to utilize shares of its Common Stock, under
certain conditions, to satisfy the dividend requirement. The Purchaser has the
right to convert the Series B Preferred Stock commencing August 21, 1996 into
shares of Common Stock of the Company at a conversion price equal to the lesser
of 85% of the average market price for the Company's Common Stock, as described
in the Agreement, prior to the conversion date or $8.74. The Company also has a
right to require the Purchaser, under certain terms and conditions, to convert
the Series B Preferred Stock commencing 180 days following the effective date of
a Registration Statement registering the resale of the shares of Common Stock of
the Company underlying the Series B Preferred Stock. The Series B Preferred
Stock does not carry any voting rights except as required under the Delaware
General Corporation Law.
In connection with the sale and issuance of the Series B Preferred
Stock, the Company issued warrants to purchase 225,000 shares of Common Stock of
the Company along with certain cash fees to certain finders and an investor
representative who participated in the transaction.
ITEM 7 - FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
EXHIBITS:
(A) Securities Purchase Agreement
(B) Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Series B Preferred Stock
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SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
VIRAGEN, INC.
By: /s/ Charles F. Fistel
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Charles F. Fistel
Executive Vice President
DATED: June 25, 1996
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June
7, 1996 by and among Viragen, Inc., a Delaware corporation, with headquarters
located at 2343 West 76th Street, Hialeah, FL 33016 (the "Company"), and the
undersigned (collectively, the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms
and conditions stated in this Agreement, shares of the Company's 5% Cumulative
Convertible Preferred Stock, Series B, $1.00 par value per share (the "Preferred
Shares"), which shall be convertible into shares of the Company's Common Stock
(the "Common Stock"), $.01 par value, (as converted, the "Conversion Shares"),
and pursuant to which certain shares of Common Stock may be issued to the Buyer
in payment of dividends (the "Dividend Shares") and in accordance with Section
2(c) of the Certificate of Designation, Preferences and Rights therefor (the
"Additional Shares"); and
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "Registration Rights Agreement") pursuant to which the Company
has agreed to provide certain registration rights under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws;
NOW THEREFORE, the Company and the Buyer hereby agrees as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. PURCHASE OF PREFERRED SHARES. The Company shall issue and sell to
the Buyer and the Buyer shall purchase 15,000 Preferred Shares which shall be
convertible into Conversion Shares in accordance with the terms of the
Certificate of Designations, Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series B in the form attached hereto as EXHIBIT A (the
"Certificate of Designation"). The per share purchase price of the Preferred
Shares shall be One Thousand Dollars ($1,000). The Preferred Shares shall be
allocated among each of the entities constituting the Buyer as specified on
their respective counterpart signature pages.
c. FORM OF PAYMENT. The Buyer shall pay the purchase price for
the Preferred Shares (the "Purchase Price") by wire transfer of immediately
available United States Dollars to the Company on the Closing Date (as defined
below). The Company shall promptly deliver stock certificates, duly executed on
behalf of the Company, representing the Preferred Shares (the "Stock
Certificates") to the Buyer.
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d. CLOSING DATE. The date and time of the issuance and sale of
the Preferred Shares shall be 5:00 p.m. Eastern Standard Time on June 7, 1996
(the "Closing Date").
2. BUYER'S REPRESENTATIONS AND WARRANTIES
Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. INVESTMENT PURPOSE. The Buyer is purchasing the Preferred Shares
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof except
pursuant to sales registered under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the Preferred
Shares are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Shares.
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares which have been requested by the Buyer. The Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries. The Buyer
understands that its investment in the Preferred Shares involves a high degree
of risk. The Buyer has sought such accounting, legal and tax advice as it has
considered necessary to an informed investment decision with respect to its
acquisition of the Preferred Shares.
e. GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Preferred Shares or
the fairness or suitability of the investment in the Preferred Shares, nor have
such authorities passed upon or endorsed the merits of the offering of the
Preferred Shares.
f. TRANSFER OR RESALE. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Preferred Shares, the
Conversion Shares, the Dividend Shares and the Additional Shares have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be transferred unless (a) subsequently registered
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thereunder, or (b) the Buyer shall have delivered to the Company an opinion of
counsel, reasonably satisfactory in form, scope and substance to the Company, to
the effect that the securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
g. LEGENDS. The Buyer understands that the Preferred Shares and,
until such time as the Conversion Shares, the Dividend Shares and the Additional
Shares (the Conversion Shares and the Additional Shares are collectively
referred to as the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE BORROWER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or any
Registrable Securities upon which it is stamped, if, unless otherwise required
by state securities laws, (a) the sale of such Preferred Shares or Registrable
Securities is registered and effected under the 1933 Act, or (b) in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel, in form, substance and scope reasonably acceptable to the Company, to
the effect that a public sale or transfer of the Preferred Shares or such
Registrable Securities may be made without registration
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under the 1933 Act, or (c) such holder provides the Company with reasonable
assurances that the Preferred Shares or such Registrable Securities can be sold
pursuant to Rule 144 under the 1933 Act (or a successor rule thereto) without
any restriction as to the number of securities acquired as of a particular date
that can then be immediately sold.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
i. RESIDENCY. The Buyer is a resident of that country specified
in its address on the signature page hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its subsidiaries
are corporations duly organized and existing in good standing under the laws of
the jurisdiction in which they are incorporated, except, in the case of any such
subsidiaries, as would not have a Material Adverse Effect (as defined below),
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary and where the failure so to qualify would
have a Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the operations, properties or financial condition of the
Company and its subsidiaries taken as a whole.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue the Preferred Shares and the
Registrable Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required, (iii) this
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company, and (iv) this Agreement and the Registration Rights
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. CAPITALIZATION. As of June 6, 1996, the authorized capital
stock of the Company consists of (i) 50,000,000 shares of Common Stock of which
___________ shares were
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issued and outstanding, and (ii) 1,000,000 shares of preferred stock, $1.00 par
value per share ("Preferred Stock") of which ________ shares were issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances. Except as disclosed in Schedule 3(c),
as of the effective date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities, and (iii) there are
no agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of its or their securities under the
1933 Act (except the Registration Rights Agreement). The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended, as in effect on the date hereof ("Articles of Incorporation") and
the Company's Bylaws, as in effect on the date hereof (the "Bylaws"). The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
d. ISSUANCE OF SECURITIES. The Registrable Securities and Preferred
Shares are duly authorized and, upon issuance in accordance with the terms
hereof and thereof, shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
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f. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since June 30, 1992, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer and referred to in Section 2(d) of this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
g. ABSENCE OF CERTAIN CHANGES. Since March 31, 1996, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company.
h. ABSENCE OF LITIGATION. Except as set forth in its Form 10-Q for
the quarter ended March 31, 1996, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, wherein
an unfavorable decision, ruling or finding would have a Material Adverse Effect
or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of the documents contemplated herein.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
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b. FORM D. The Company agrees to file a Form D with respect to the
Preferred Shares as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
c. REPORTING STATUS. Until the earlier of (i) the date as of which
the Investors (as that term is defined in the Registration Rights Agreement) 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 Investors have sold all the Registrable Securities and (B) none
of the Preferred Shares is outstanding (the "Registration Period"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Preferred Shares for the Company's working capital purposes and shall
not, directly or indirectly, use such proceeds for any loan to or investment in
any other corporation, partnership, enterprise or other person unrelated to the
business and direct operations of the Company or for repayment of any existing
debt obligations, except that the Company shall be permitted to use up to an
aggregate of $500,000 of the proceeds for the repayment of debt obligations
existing as of the Closing Date.
e. FINANCIAL INFORMATION. The Company agrees to send the following
reports to the Buyer during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Report on Form 10-K,
its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii)
within one day after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries.
f. RESERVATION OF SHARES. The Company shall at times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Additional Shares.
g. LISTING. The Company shall promptly secure the listing of the
Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. PRE-CLOSING ACTIVITY. The Buyer shall not trade in the Common
Stock for the period of five (5) trading days immediately preceding the Closing
Date.
i. OFFERINGS OR SALES OF SECURITIES. The Company shall make no
offerings or sales of any of its securities which offerings or sales could be
deemed to be integrated (as defined in Rule 502(a) of Regulation D) with the
offer and sale of the Preferred Shares.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares,
Dividend Shares and Additional Shares in such amounts as specified from time to
time by the Buyer to the Company. Prior to registration of the Registrable
Securities pursuant to an effective registration statement, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company shall provide instructions and opinions of counsel to its
transfer agent in accordance with Section 3(p) of the Registration Rights
Agreement. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof, in the case of the Registrable Securities, prior to
registration and sale of the Registrable Securities under the 1933 Act, will be
given by the Company to its transfer agent and that the Preferred Shares and the
Registrable Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Registrable Securities. If the Buyer provides the
Company with an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, that registration of a resale by the Buyer of any of
the Preferred Shares or the Registrable Securities is not required under the
1933 Act, the Company shall permit the transfer, and promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell the Preferred Shares
is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of Delaware.
c. The Buyer shall have delivered the Purchase Price to the Company
by wire transfer of immediately available funds pursuant to the wiring
instructions provided by the Company.
d. The representations and warranties of each Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
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7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase the Preferred Shares is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been accepted for
filing with the Secretary of State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to the Buyer.
c. Until the Closing Date, the Common Stock shall be authorized for
quotation on the National Association of Securities Dealers Automated Quotation
System Small Cap Market (the "NASDAQ Small Cap") and trading in the Common Stock
on the NASDAQ Small Cap shall not have been suspended by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT B.
f. The Buyer shall have received the officer's certificate described
in Section 3(c) above, dated as of the Closing Date.
g. The Company shall have executed and delivered the Stock
Certificates to the Buyer.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
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b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by telefacsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
2343 West 76th Street
Hialeah, FL 33016
Telephone: (305) 557-6000
Telecopy: (305) 828-4324
Attention: Gerald Smith or Charles Fistel
With copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center
200 East Las Olas Blvd.
Fort Lauderdale, FL 33331
Telephone: (305) 763-1200
Telecopy: (305) 766-7800
Attention: James Schneider, Esq.
10
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If to the Buyer, at the addresses on the signature pages.
With copy to:
Genesee Advisers
12007 Sunrise Valley Drive, Suite 460
Reston, VA 22091
Telephone: (703) 476-5898
Telecopy: (703) 476-7720
Attention: Neil T. Chau
And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-6060
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esq.
Each party shall provide notice to the other party of any change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent may be withheld for any reason in the sole discretion of the party from
whom consent is sought). Notwithstanding the foregoing, a Buyer may assign its
rights hereunder to any of its "affiliates," as that term is defined under the
1934 Act, without the consent of the Company, provided, however, that any such
assignment shall be in writing (and Buyer shall give the Company at least
fifteen (15) days prior notice thereof) and shall not release such Buyer of its
obligations hereunder unless such obligations are assumed in writing by such
affiliate.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company and
the Buyer contained in Sections 2 and 3 and the agreements and covenants set
forth in Sections 4, 5, 8(g), 8(h), 8(k) and 8(l), and this subsection shall
survive the closing. Each party which constitutes the Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
k. PUBLICITY. The Company and the Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions
11
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contemplated hereby; PROVIDED, HOWEVER, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release with respect
to such transactions as is required by applicable law and regulations (although
the Buyer shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof).
l. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. TERMINATION. In the event that the closing shall not have
occurred on or before five (5) days from the date hereof, this Agreement shall
terminate at the close of business on such date.
12
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
VIRAGEN, INC.
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
GFL PERFORMANCE FUND LTD.
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 10,000 Preferred Shares
13
<PAGE>
GFL ADVANTAGE FUND LTD.
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 4,000 Preferred Shares
PROTON GLOBAL ASSET MANAGEMENT
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
Address: CITCO Fund Services
Corporate Center
Leeward One
P.O. Box 31106
SMB
Grand Cayman, British West Indies
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Allocated Portion of Preferred Shares: 1,000 Preferred Shares
14
<PAGE>
Exhibit B
to
Securities Purchase
Agreement
[Date of Closing]
GFL Performance Fund Ltd.
GFL Advantage Fund Ltd.
Proton Global Asset Management
Re: Viragen, Inc.
Ladies and Gentlemen:
We have acted as counsel to Viragen, Inc., a _________ corporation
(the "Company"), in connection with the Securities Purchase Agreement, dated as
of ____________, 1996, between you and the Company (the "Agreement") and the
transactions contemplated therein. The Agreement and the Registration Rights
Agreement are herein collectively referred to as the "Documents." Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings assigned to such terms in the Documents.
In so acting, we have examined the Documents, and we have examined
and considered such corporate records, certificates and matters of law as we
have deemed appropriate as a basis for our opinions set forth below.
Based upon the foregoing and subject to the assumptions,
limitations, qualifications and exceptions stated herein, we are of the opinion
that as of the date hereof:
(1) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to conduct its business as described in the
Company's Annual Report on Form 10-K for its fiscal year ended ______________,
and is duly qualified as a foreign corporation to do business in each
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary.
(2) The Company has the requisite corporate power and authority to
enter into and perform the Agreement and the Registration Rights Agreement, and
to issue the Registrable Securities and the Preferred Shares, in accordance with
the terms thereof, (ii) the execution and delivery of the Documents by the
Company and the consummation by it of the transactions contemplated therein have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) the Documents have been duly executed and delivered by the
Company, and (iv)
15
<PAGE>
the Documents constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(3) The Preferred Shares are duly authorized, validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with respect
to the issue thereof. The Registrable Securities are duly authorized and, upon
issuance in accordance with the terms thereof, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with respect
to the issue thereof. The Certificate of Designation was accepted for filing by
the Secretary of State for the State of ____________ on __________, 1996, a
certified copy of which is attached hereto.
(4) As of the date hereof, the authorized capital stock of the
Company consists of (i) ____________ shares of Common Stock, $ _____ par value
of which ____________ shares were issued and outstanding, and (ii) __________
shares of Preferred Stock $___ par value, of which _________ shares were issued
and outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights of the stockholders of
the Company pursuant to the Company's Certificate of Incorporation or Bylaws or
by statute, and to our knowledge are not subject to any liens or encumbrances.
To our knowledge, (i) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
Stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement). The Company has reserved for the purpose of issuance a sufficient
number of shares of Common Stock to provide for the issuance of the Conversion
Shares and the Additional Shares.
(5) Based upon your representations, warranties and covenants set
forth in the Agreement, the Securities may be issued to you pursuant to the
Agreement without registration under the 1933 Act.
(6) Except as required by the 1933 Act, no authorization approval or
consent of any court, governmental body, regulatory agency, self-regulatory
organization or stock exchange or market, or the stockholders of the Company,
or, to our knowledge, any third party is required to be obtained by the Company
for the issuance and sale of the Registrable Securities and the Preferred Shares
as contemplated by the Documents, except that we express no opinion on the
securities or blue sky laws of any state or territory of the United States or
any jurisdiction outside the United States.
16
<PAGE>
(7) Except as disclosed in the documents referred to in Section 2(d)
of the Agreement, to our knowledge, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending or
threatened against or affecting the Company or any of its subsidiaries, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the property, business, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries taken as a whole or which would
adversely affect the validity or enforceability of or the authority or ability
of the Company to perform its obligations under the Documents.
These opinions are limited to the matters expressly stated herein
and are rendered solely for your benefit and may not be quoted or relied upon
for any other purpose or by an other person, except that the opinions expressed
in paragraphs (3), (4) and (6) above may be relied upon by
_______________________________________ as Transfer Agent.
The opinions expressed herein are subject to the following
assumptions, limitations, qualifications and exceptions:
(a) We have relied upon the factual representations of the
Company in the Documents with regard to those matters of fact expressly
represented in the Documents and we have not undertaken any independent
investigation to determine the existence or absence of those facts, and no
inference as to our knowledge of the existence or absence of those facts should
be drawn from our representation of the Company.
(b) We have assumed the genuineness of all signatures the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies, the authenticity of
certificates of public officials and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Documents).
(c) We have assumed that each of the parties to the Documents
other than the Company (the "Other Parties") has the legal right, capacity and
power to enter into, enforce and perform all of its obligations under the
Documents. Furthermore, we have assumed the due authorization by each of the
Other Parties of all requisite action and the due execution and delivery of the
Documents by each of the Other Parties, and that the Documents are valid and
binding upon each of the other Parties and are enforceable against each Other
Party in accordance with their terms.
(d) Certain rights, remedies and waivers contained in the
Documents may be rendered ineffective, or may be limited, by applicable laws or
judicial decisions governing such provisions but such law and judicial decisions
do not, in our opinion, make the Documents inadequate for the practical
realization of the benefits which the Documents purport to provide, other than
in respect of the adverse economic consequences of any delay in such realization
which may result from applicable judicial decisions relating thereto.
17
<PAGE>
(e) Requirements in any of the Documents specifying that
provisions thereof any be amended or waived only in writing may not be
enforceable.
(f) No opinion is expressed as to the enforceability of any
choice of law provisions.
(g) Whenever a statement herein is qualified by the phrases
"to our knowledge," or similar phrases, it in intended to indicate that during
the course of our representation of the Company in the transactions contemplated
by the Documents, and having made inquiry of certain officers of the Company as
to such matters, no information that would give us current actual knowledge of
the inaccuracy of such statement has come to the attention of those attorneys
presently in this firm who have rendered legal services in connection with the
representation described in the introductory paragraph of this opinion letter.
However, we have not undertaken any independent investigation or review to
determine the accuracy of any such statements and any limited inquiry undertaken
by us during the preparation of this opinion letter should not be regarded as
such an investigation or review. No inference as to our knowledge of any matters
bearing on the accuracy of any such statement should be drawn from the fact of
our representation of the Company.
(h) In the process of our review of the Company's Annual
Report on Form 10-K for the fiscal year ended _____________ (the "Form 10-K"),
and any of the other reports filed by the Company pursuant to Sections 13 or
15(d) of the Securities Exchange Act of 1934, as amended, since the date of the
filing of the Form 10-K, although we have not engaged in any independent
investigation, and do not assume any responsibility for the accuracy or
completeness of the information contained therein, nothing has come to our
attention that would lead us to believe that any of such reports contains any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of circumstances
under which they were made, not misleading, as of its filing date.
(i) Our examination of law relevant to the matters covered by
this opinion is limited to the laws of ___________ and the federal law of the
United States, and we express no opinion an to the affect on the matters covered
by this opinion of the laws of any other jurisdiction. In furnishing the opinion
regarding the valid existence and good standing of the Company, we have relied
solely upon a good standing certificate issued by the Secretary of State of
_______________ on ______________, 1996.
This opinion in given as of the date hereof and we assume no
obligation, to update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention or any changes in laws
which may hereafter occur.
Very truly yours,
18
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE, SERIES B
PREFERRED STOCK
OF
VIRAGEN, INC.
Viragen, Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held on June 6, 1996, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Fifteen Thousand (15,000) shares of 5% Cumulative
Convertible Preferred Stock, Series B of the Company, as follows:
RESOLVED, that the Company is authorized to issue 15,000 shares of
5% Cumulative Convertible Preferred Stock, Series B, $1.00 par value
(the "Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends. The holders of the Preferred Shares shall be
entitled to a cash dividend of five percent (5%) per annum of the
Stated Value (as defined below), on a cumulative basis. Dividends
shall accrue from the date of issuance of the Preferred Shares and
shall be payable quarterly commencing September 7, 1996, through and
including the date on which the Preferred Shares are converted.
Dividends may be paid at the Company's option in cash or Common
Stock valued based on the Average Market Price (as defined below) of
the Common Stock for the period of five (5) consecutive trading days
ending on the trading day before the dividend payment date or the
date of conversion, as the case may be; provided, however, that in
no event shall accrued dividends be paid in shares of Common Stock
if, after giving effect to such distribution, the number of shares
of Common Stock beneficially owned by such holder and all other
holders whose holdings would be aggregated with such holder for
purposes of calculating beneficial ownership in accordance with
1
<PAGE>
Sections 13(d) and 16 of the Securities Exchange Act of 1934, as
amended, and the regulations thereunder ("Section 13(d) and 16"),
including, without limitation, any person serving as an adviser to
any holder (collectively, the "Related Persons"), would exceed four
and nine-tenths percent (4.9%) of the outstanding shares of Common
Stock (calculated in accordance with Sections 13(d) and 16) (Common
Stock issuable upon conversion of the Preferred Shares shall not be
deemed beneficially owned by such holder or the Related Persons for
this purpose) and cash shall be paid in lieu of any shares which
cannot be issued pursuant to this proviso; and provided further,
however, that in no event shall accrued dividends be paid in shares
of Common Stock if, on the dividend payment date, such shares of
Common Stock would not be freely tradeable because the registration
statement (the "Registration Statement") covering the shares of
Common Stock issuable hereunder and required to be filed by the
Company pursuant to the Registration Rights Agreement between the
Company and the initial holders of the Preferred Shares (the
"Registration Rights Agreement") has not been declared effective by
the U.S. Securities and Exchange Commission ("SEC"; the date on
which the Registration Statement is declared effective by the SEC is
hereinafter referred to as the "Effective Date"), or if, after the
Effective Date, sales cannot be made pursuant to the Registration
Statement by reason of stop order, the Company's failure to update
the Registration Statement in accordance with the rules and
regulations of the SEC or otherwise, or if the Common Stock is not
then listed or included for quotation on the National Market of the
National Association of Securities Dealers Automated Quotation
System (the "NASDAQ-NM"), the New York Stock Exchange (the "NYSE"),
the American Stock Exchange (the "AMEX"), the NASDAQ Small Cap
Market (the "NASDAQ SmallCap") or the NASDAQ Bulletin Board ("NASDAQ
Bulletin Board"). The Company shall not issue any fraction of a
share of Common Stock in payment of a dividend, but shall pay cash
therefor. The Company shall, so long as any of the Preferred Shares
are outstanding, reserve and keep available out of its authorized
and unissued Common Stock, such number of shares of Common Stock as
shall from time to time be sufficient to pay dividends hereunder.
Every reference herein to the Common Stock of the Company (unless a
different intention is expressed) shall be to the shares of the
Common Stock of the Company, $.01 par value, as such stock exists
immediately after the issuance of the Preferred Shares provided for
hereunder, or to stock into which such Common Stock may be changed
from time to time thereafter.
2
<PAGE>
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the closing bid prices for
such security for each trading day in such period on the NASDAQ-NM,
or, if the NASDAQ-NM is not the principal trading market for such
security, on the principal trading market for such security, or, if
market value cannot be calculated for such period on any of the
foregoing bases, the Average Market Price shall be the average fair
market value during such period as reasonably determined in good
faith by the Board of Directors of the Company (all as appropriately
adjusted for any stock dividend, stock split or other similar
transaction during such period or between the end of such period and
the date of conversion of dividend payment, as applicable.)
(2) CONVERSION OF PREFERRED SHARES. The holders of the
Preferred Shares shall have the right, at their option, to convert
the Preferred Shares into shares of Common Stock on the following
terms and conditions:
(a) CONVERSION RIGHT. Each Preferred Share shall be
convertible at any time after the seventy-fifth (75th) day following
the date of issuance (or, if such Preferred Share is called for
conversion pursuant to Section 3 hereof, at any time up to and
including, but not after, the close of business on the fifth (5th)
full trading day prior to the date fixed for the conversion) into
fully paid and nonassessable shares (calculated to the nearest whole
share) of Common Stock, at the conversion price in effect at the
time of conversion determined as hereinafter provided (the
"Conversion Price"); PROVIDED, HOWEVER, that in no event shall any
holder be entitled to convert Preferred Shares if, after giving
effect to such conversion, the number of shares of Common Stock
beneficially owned by such holder and all Related Persons, would
exceed four and nine-tenths percent (4.9%) of the outstanding shares
of Common Stock (calculated in accordance with Sections 13(d) and
16). Common Stock issuable upon conversion of the Preferred Shares
shall not be deemed to be beneficially owned by such holder or the
Related Persons for this purpose. Each Preferred Share shall have a
value of One Thousand Dollars ($1,000) (the "Stated Value") for the
purpose of such conversion and the number of shares of Common Stock
issuable upon conversion of each of the Preferred Shares shall be
determined by dividing the Stated Value thereof by the Conversion
Price then in effect.
(b) CONVERSION PRICE. The Conversion Price shall be the
lesser of (i) an amount equal to of the Average Market Price for the
Common Stock for the five (5) consecutive trading days ending one
trading day prior to the date of the Conversion Notice (as defined
below) multiplied by (A) eighty five percent (85%), subject to
adjustment as provided herein,
3
<PAGE>
if on the date of the Conversion Notice shares of Common Stock are
traded on NASDAQ-NM or NASDAQ SmallCap or (B) eighty percent (80%),
subject to adjustment as provided herein, if on the date of the
Conversion Notice shares of Common Stock are traded on the NASDAQ
Bulletin Board (the percentage then in effect is referred to
hereinafter as the "Conversion Percentage"), or (ii) $8.74 (the
"Fixed Conversion Price"), subject to adjustment as provided herein.
(c) ADJUSTMENT TO CONVERSION PERCENTAGE AND FIXED
CONVERSION PRICE. If the Effective Date has not occurred within
ninety (90) days after the date of issuance of the Preferred Shares
(which period shall be extended to the extent that any delay in the
occurrence of the Effective Date is attributable to the action or
inaction of the holders or their counsel), or if, after the
Effective Date, sales cannot be made pursuant to the Registration
Statement by reason of stop order, the Company's failure to update
the Registration Statement in accordance with the rules and
regulations of the SEC or otherwise, or if the Common Stock is not
listed or included for quotation on the NASDAQ-NM, NYSE, AMEX,
NASDAQ SmallCap or NASDAQ Bulletin Board, then, as partial relief
for the damages to the holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common
Stock (which remedy shall not be exclusive of any other remedies
available at law or in equity):
(i) The Conversion Percentage shall be reduced by
a number of percentage points equal to two (2) multiplied by the sum
of: (i) the number of months (prorated for partial months) after the
end of such 90 day period and prior to the Effective Date; (ii) the
number of months (prorated for partial months) that sales cannot be
made pursuant to the Registration Statement (by reason of stop
order, the Company's failure to update the Registration or
otherwise) or Rule 144 promulgated under the Securities Act of 1933,
as amended (or successor rule or regulation, "Rule 144")after the
Effective Date; and (iii) the number of months (prorated for partial
months) that the Common Stock is not listed or included for
quotation on the NASDAQ-NM, NYSE, AMEX, NASDAQ SmallCap or NASDAQ
Bulletin Board after the Effective Date. (For example, if the
Effective Date occurs one and one-half (1 1/2) months after the end
of such 90 day period, the Conversion Percentage would be 82% (under
the circumstances set forth in Section 2(b)(i)(A)) or 77% (under the
circumstances set forth in Section 2(b)(i)(B)) until any subsequent
adjustment; if thereafter sales could not be made pursuant to the
Registration Statement for a period of two (2) additional months,
the Conversion Percentage would then be 78% (under the circumstances
set forth in Section 2(b)(i)(A)) or 73% (under the circumstances set
forth in Section 2(b)(i)(B))). If the holder converts Preferred
Shares into Common
4
<PAGE>
Stock and an adjustment to the Conversion Percentage is required
subsequent to such conversion, but prior to the sale of such Common
Stock by such holder, the Company shall pay to such holder, within
five (5) days after receipt of a notice of the sale of such Common
Stock from such holder, an amount equal to the Average Market Price
of the Common Stock obtained upon conversion of such Preferred
Shares for the five (5) trading days ending one (1) trading day
prior to the date of conversion multiplied by two-hundredths (.02)
times the number of months (prorated for partial months) for which
an adjustment was required. Such amount may be paid at the Company's
option in cash or Common Stock whose value is based on the Average
Market Price of the Common Stock for the period of five (5)
consecutive trading days ending on the date of the sale of such
Common Stock; PROVIDED, HOWEVER, that any amounts due as to that
period during which the shares are not traded or included for
quotation on the NASDAQ-NM, NYSE, AMEX, NASDAQ SmallCap, or NASDAQ
Bulletin Board shall be paid in cash only; PROVIDED, FURTHER,
HOWEVER, that in no event shall shares be issued hereunder if, after
giving effect to such issuance, the number of shares of Common Stock
beneficially owned by such holder and all Related Persons would
exceed four and nine tenths percent (4.9%) of the outstanding shares
of Common Stock (calculated in accordance with Sections 13(d) and
16); cash shall be paid in lieu of any shares which cannot be issued
pursuant to this second proviso. Common Stock issuable upon
conversion of Preferred Shares held by such holder or the Related
Persons shall not be deemed to be beneficially owned by such holder
or the Related Persons for this purpose. (For example, if the
Conversion Percentage was 82% at the time of conversion of
$1,000,000 in Stated Value of Preferred Shares (such that such
Preferred Shares were converted into Common Stock having an Average
Market Price for the applicable period in aggregate of
$1,219,512.10) and subsequent to conversion there was a further two
(2) month delay in the Registration Statement's being declared
effective, and such Common Stock was sold at the end of such two (2)
month period, the Company would pay to the holder $48,780.48 in cash
or Common Stock) and
(ii) The Fixed Conversion Price shall be reduced
by a number of percentage points equal to two (2) multiplied by the
sum of: (i) the number of months (prorated for partial months) after
the end of such 90 day period and prior to the Effective Date; (ii)
the number of months (prorated for partial months) that sales cannot
be made pursuant to the Registration Statement (by reason of stop
order, the Company's failure to update the Registration or
otherwise) or Rule 144 after the Effective Date; and (iii) the
number of months (prorated for partial months) that the Common Stock
is not listed or included for quotation on the NASDAQ-NM, NYSE,
AMEX, NASDAQ SmallCap or NASDAQ Bulletin Board after the Effective
Date. (For example, if the Effective Date occurs one
5
<PAGE>
and one-half (1 1/2) months after the end of such 90 day period, the
Fixed Conversion Price would be $8.48 until any subsequent
adjustment; if thereafter sales could not be made pursuant to the
Registration Statement for a period of two (2) additional months,
the Fixed Conversion Price would then be $8.14.) If the holder
converts Preferred Shares into Common Stock and an adjustment to the
Fixed Conversion Price is required subsequent to such conversion,
but prior to the sale of such Common Stock by such holder, the
Company shall pay to such holder, within five (5) days after receipt
of a notice of the sale of such Common Stock from such holder, an
amount equal to the Fixed Conversion Price then in effect multiplied
by two-hundredths (.02) times the number of months (prorated for
partial months) for which an adjustment was required. Such amount
may be paid at the Company's option in cash or Common Stock whose
value is based on the Average Market Price of the Common Stock for
the period of five (5) consecutive trading days ending on the date
of the sale of such Common Stock; PROVIDED, HOWEVER, that any
amounts due as to that period during which the shares are not traded
or included for quotation on the NASDAQ-NM, NYSE, AMEX, NASDAQ
SmallCap or NASDAQ Bulletin Board shall be paid in cash only;
PROVIDED, FURTHER, HOWEVER, that in no event shall shares be issued
hereunder if, after giving effect to such issuance, the number of
shares of Common Stock beneficially owned by such holder and all
Related Persons would exceed four and nine tenths percent (4.9%) of
the outstanding shares of Common Stock (calculated in accordance
with Sections 13(d) and 16); cash shall be paid in lieu of any
shares which cannot be issued pursuant to this second proviso.
Common Stock issuable upon conversion of Preferred Shares held by
such holder or the Related Persons shall not be deemed to be
beneficially owned by such holder or the Related Persons for this
purpose.
(d) ADJUSTMENT TO CONVERSION PRICE. In case the Company
shall (i) declare a dividend or make a distribution on the
outstanding shares of its Common Stock in shares of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price
in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision or
combination shall be proportionately adjusted so that the holder of
any Preferred Shares surrendered for conversion after such time
shall be entitled to receive the aggregate number of shares of
Common Stock which the holder would have owned or been entitled to
receive had such Preferred Shares been converted immediately prior
to such record date or effective date and the resulting Common Stock
had been subject to such dividend, distribution, subdivision or
combination. Such adjustment shall be made successively whenever any
event specified above shall occur.
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(e) CONVERSION NOTICE. On presentation and surrender to
the Company (or at any office or agency maintained for the transfer
of the Preferred Shares) of the certificates of Preferred Shares so
to be converted, duly endorsed in blank for transfer or accompanied
by proper instruments of assignment or transfer in blank (a
"Conversion Notice"), the holder of such Preferred Shares shall be
entitled, subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for fully paid and
nonassessable shares, which certificates shall be delivered by the
fourth trading day after the date of delivery of the Conversion
Notice, and cash for fractional shares, of Common Stock on the
foregoing basis. The Preferred Shares shall be deemed to have been
converted, and the person converting the same to have become the
holder of record of Common Stock, for all purposes as of the date of
delivery of the Conversion Notice.
(f) MAJOR TRANSACTIONS. If the Company shall consolidate
with or merge into any corporation or reclassify its outstanding
shares of Common Stock (other than by way of subdivision or
reduction of such shares) (each a "Major Transaction"), then each
Preferred Share shall thereafter be convertible into the number of
shares of stock or securities (the "Resulting Securities") or
property of the Company, or of the entity resulting from such
consolidation or merger, to which a holder of the number of shares
of Common Stock delivered upon conversion of such Preferred Share
would have been entitled upon such Major Transaction had the holder
of such Preferred Share exercised its right of conversion and had
such Common Stock been issued and outstanding and had such holder
been the holder of record of such Common Stock at the time of such
Major Transaction, and the Company shall make lawful provision
therefor as a part of such consolidation, merger or
reclassification; PROVIDED, HOWEVER, that the Company shall give the
holders of the Preferred Shares written notice of any Major
Transaction promptly upon the execution of any agreement whether or
not binding in connection therewith (including without limitation a
letter of intent or agreement in principle) and in no event shall a
Major Transaction be consummated prior to forty-five (45) days after
such notice.
(g) RESERVATION OF SHARES. The Company shall, so long as
any of the Preferred Shares are outstanding, reserve and keep
available out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Shares,
such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Preferred Shares
then outstanding.
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(h) FRACTIONAL SHARES. The Company shall not issue any
fraction of a share of Common Stock upon any conversion, but shall
pay in cash therefor at the Conversion Price then in effect
multiplied by such fraction.
(i) TAXES. The Company shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of
Common Stock upon the conversion of the Preferred Shares as herein
provided. The Company shall not be required in any event to pay any
transfer or other taxes by reason of the issuance of such Common
Stock in names other than those in which the Preferred Shares
surrendered for conversion are registered on the Company's records,
and no such conversion or issuance of Common Stock shall be made
unless and until the person requesting such issuance has paid to the
Company the amount of any such tax, or has established to the
satisfaction of the Company and its transfer agent, if any, that
such tax has been paid.
(3) CONVERSION AT THE COMPANY'S OPTION. The Company may, at
any time subsequent to one hundred eighty (180) days after the
Effective Date, require the holders of the then outstanding
Preferred Shares to convert all, but not less than all, of such
Preferred Shares into Common Stock by delivering written notice to
such holder (the "Mandatory Conversion Notice") in accordance with
the terms hereof; PROVIDED, HOWEVER, that in no event shall the
Company be entitled to require any holder to convert its Preferred
Shares if, and no such conversion shall be effective to the extent
that, after giving effect to such conversion, the number of shares
of Common Stock issued in such conversion and otherwise beneficially
owned by such holder and all Related Persons, would exceed four and
nine-tenths percent (4.9%) of the outstanding shares of Common Stock
(calculated in accordance with Sections 13(d) and 16) and that as to
those Preferred Shares which the Company is prohibited from
converting by operation of this proviso, the Company's obligation to
pay dividends thereon shall terminate as of the date of the
Mandatory Conversion Notice. The Conversion Price for the purposes
of this Section 3 shall be the lesser of (i) the product obtained by
multiplying the Average Market Price for the Common Stock for the
five (5) consecutive trading days ending one day prior to the
conversion date specified in the Mandatory Conversion Notice by the
Conversion Percentage then in effect, or (ii) the Fixed Conversion
Price then in effect. Any Mandatory Conversion Notice shall be given
by facsimile and U.S. mail to the holders of the then outstanding
Preferred Shares at least fifteen (15) trading days prior to the
date fixed as the date for the conversion thereof and shall state
that the then outstanding Preferred Shares shall be converted at the
Conversion Price in effect on the date fixed for the conversion,
upon the surrender, at the time
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and place designated in such notice, of the certificates therefor.
Within four (4) business days after the date fixed for conversion,
the Company shall deliver to the holders (i) that number of shares
of Common Stock for the Preferred Shares converted as shall be
determined in accordance herewith, and (ii) payment of the accrued
and unpaid dividends thereon (which payment of dividends may be made
in accordance with Section 1 hereof if the requirements thereof are
satisfied). Notwithstanding the foregoing, if, at the time fixed for
such conversion, the Common Stock to be issued pursuant thereto is
not listed or included for quotation on the NASDAQ-NM, NYSE, AMEX,
NASDAQ SmallCap or NASDAQ Bulletin Board, then the Mandatory
Conversion Notice shall be null and void.
(4) VOTING RIGHTS. Holders of Preferred Shares shall have
no voting rights, except as required by law and by Section 7 hereof.
(5) LIQUIDATION, DISSOLUTION, WINDING UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of the Preferred Shares shall be entitled
to receive in cash out of the assets of the Company, whether from
capital or from earnings available for distribution to its
stockholders (the "Preferred Funds"), before any amount shall be
paid to the holders of the Common Stock, an amount equal to the
Stated Value per Preferred Share plus any accrued and unpaid
dividends, provided that, if the Preferred Funds are insufficient to
pay the full amount due to the holders of Preferred Shares and
holders of shares of other classes or series of preferred stock of
the Company that are of equal rank with the Preferred Shares as to
payments of Preferred Funds (the "Pari Passu Shares"), then each
holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of
Preferred Funds payable to such holder as a percentage of the full
amount of Preferred Funds payable to all holders of Preferred Shares
and Pari Passu Shares. The purchase or redemption by the Company of
stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Company. Neither the consolidation nor merger of
the Company with or into any other corporation or corporations, nor
the sale or transfer by the Company of less than substantially all
of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company. No holder of
Preferred Shares shall be entitled to receive any amounts with
respect thereto upon any liquidation, dissolution or winding up of
the Company other than the amounts provided for herein.
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(6) PREFERRED RANK. All shares of Common Stock shall be of
junior rank to all Preferred Shares in respect to the preferences as
to distributions and payments upon the liquidation, dissolution or
winding up of the Company. The rights of the shares of Common Stock
shall be subject to the preferences and relative rights of the
Preferred Shares. The Company may only authorize and issue
additional or other preferred stock which is of junior rank with the
Preferred Shares in respect of the preferences as to distributions
and payments upon the liquidation, dissolution or winding up of the
Company. Notwithstanding the foregoing, the Company may issue to the
original holders of the Preferred Shares or affiliates thereof
preferred stock which is of equal rank with the Preferred Shares in
respect of the preferences as to distributions and payments upon the
liquidation, dissolution or winding up of the Company. In the event
of the merger or consolidation of the Company with or into another
corporation, the Preferred Shares shall maintain their relative
powers, designations and preferences provided for herein.
(7) VOTE TO CHANGE THE TERMS OF PREFERRED SHARES. The approval
of the Board of Directors and the affirmative vote at a meeting duly
called by the Board of Directors for such purpose or the written
consent without a meeting of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares shall be required to
amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares.
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IN WITNESS WHEREOF, the Company has caused this certificate to be signed
by Gerald Smith, its President this 7th day of June, 1996.
VIRAGEN, INC.
By:
----------------------------
President
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