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) December 9, 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 December 9, 1996, the Company issued 5,000 shares of its Series C
Convertible Preferred Stock in consideration for $5,000,000. The purchases were
made by Strome Hedgecap Limited, Strome Offshore Limited, Strome Partners, L.P.
and Strome Susskind Hedgecap, L.P. (collectively the "Purchasers"), pursuant to
separate Securities Purchase Agreements. In addition, Warrants to purchase an
aggregate of 214,593 shares of Common Stock, exercisable at $2.00 per share on
or prior to December 9, 1999, were issued to the Purchasers.
At the option of each of the Purchasers, up to 25% of their shares of
Series C Preferred Stock may be convertible, on or after 10 days from the date
that the underlying shares of Common Stock have been registered with the SEC for
public resale, into shares of the Company's Common Stock on the basis of one
share of Series C Preferred Stock for shares of Common Stock equal in number to
the amount determined by dividing $1,000 (representing the stated value thereof)
by the closing price of the Company's Common Stock over the five-day trading
period ending on the day prior to the conversion of the Series C Preferred
Stock. An additional 25% of the Series C Preferred Stock will be convertible on
or after the 30th, 60th and 90th day thereafter on a cumulative basis. The
conversion price per share may not be less than $3.46 nor more than $7.00;
provided, however, in the event the conversion price would be less than $3.46
but for such minimum conversion price, the difference between $3.46 and what the
conversion price would have been except for such minimum price, multiplied by
the number of shares of Common Stock issued upon conversion, will be paid to the
holder in cash upon conversion. Any shares of Series C Preferred Stock which are
outstanding on December 5, 1997 will be automatically converted into shares of
Common Stock based on the conversion price at such time computed in accordance
with the above procedure.
With respect to the Warrants, as to each of the Purchasers, an amount
equal to 25% of such Warrants are exercisable on or after the first conversion
date of the Series C Preferred Stock, with an additional 25% becoming
exercisable, 30, 60 and 90 days following the first exercise date on a
cumulative basis. The holders of the Warrants are not entitled to any rights of
a stockholder of the Company. In addition, the Purchasers are entitled to an
adjustment in the exercise price and/or the number of shares of Common Stock to
be received upon exercise of the Warrants in the event the Company undertakes
certain transactions including payment of dividends or distributions with
respect to its Common Stock, subdivisions or combinations of its outstanding
Common Stock and recapitalizations in connection with a consolidation or merger
in which the Company is the continuing corporation.
On February 5, 1997, the Company issued 15,000 shares of its Series D
Convertible Preferred Stock to P.R.I.F., L.P., in consideration for $15,000,000.
In addition, the Company issued warrants to purchase up to 375,00 shares of
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Common Stock exercisable at $6.00 per share on or prior to the June 30, 1998.
The Company is also obligated to issue additional warrants to purchase up to
100,000 shares of Common Stock in the event the Company undertakes certain
additional financings. The exercise price of all such warrants is subject to
adjustments in the event of such additional financings. The funds and the
Certificates representing the Series D Preferred Stock and warrants have been
placed in escrow pending approval by the stockholders of the Company at the
forthcoming Annual Meeting of Stockholders to be held on February 28, 1997 of
the proposed Amendment to the Company's Certificate of Incorporation which would
increase the authorized Common Stock to seventy-five million shares. The Company
has also placed in escrow a commitment fee of $300,000 which would be paid to
P.R.I.F., L.P. in the event authorization is not obtained by the specified date.
The Series D Preferred Stock (as represented by the stated value) is
convertible into shares of Common Stock of the Company by dividing the stated
value of the Series D Preferred Stock to be converted by the conversion price in
effect at the time of conversion. The conversion price shall be calculated at
18% discounted from the average closing bid price of the Company's Common Stock,
as reported by Bloomberg L.P., over the five-day trading period on the day prior
to conversion (the "Conversion Price"). Notwithstanding the foregoing, the
Conversion Price may not be more than $7.00 per share of Common Stock nor less
than $2.00 per share of Common Stock (the "Floor"). In addition, the holder may
not convert any Series D Preferred Stock during the conversion period if the
Conversion Price, averaged over any rolling consecutive five-day trading period,
falls below the Floor (a "Non-Converting Period"). Upon occurrence of the
twenty-first Non-Converting Period, the holder shall thereafter have the right
to convert, but the Company shall have the right to (i) pay to the holder cash
equal to the amount originally paid by the holder for the outstanding Series D
Preferred Stock to be converted plus 10% of such amount (the "Cash-Out Option"),
or (ii) convert the outstanding Series D Preferred Stock held by the holder to
be converted into the full amount of Common Stock to which the holder would be
entitled at the Conversion Price irrespective of the Floor. Any Series D
Preferred Stock remaining outstanding on February 5, 1999 will be automatically
converted into Common Stock of the Company on such date subject to certain
limitations. The holder of the Series D Preferred Stock may not convert his/her
shares if, as a result thereof, the shares of Common Stock beneficially owned by
the holder will exceed 4.9% of the outstanding shares of Common Stock of the
Company.
The Series D Preferred Stock provides for a cash dividend of 6% per annum
of the stated value of the Series D Preferred stock on a cumulative basis.
Dividends accrue from the date of issuance and are payable quarterly commencing
March 31, 1997. Except as otherwise provided by law, the holders of Series D
Preferred stock do not have voting rights. Upon liquidation, dissolution or
winding-up of the Company, no distribution may be made to the holders of shares
of capital stock ranking junior to the Series D Preferred Stock unless, prior
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thereto, the holders of the Series D Preferred Stock shall have received $1,000
per share, plus an amount equal to declared and unpaid dividends thereon to the
date of such payment. A vote of not less than two-thirds of then outstanding
shares of Series D Preferred Stock is required prior to any amendment,
alteration, change or repeal of any of the designations of the Series D
Preferred Stock.
The proceeds from the sale of the Series C and Series D Preferred Stock
are expected to be used for the continued development of the Company's Omniferon
product including the funding of EU clinical trials, completion of the Scottish
production facility, pre-clinical Phase I and Phase II trials and Phase III
studies, the establishment of domestic manufacturing capacity, joint research
and development projects, product development research and general working
capital purposes including administrative support functions and the possible
acquisition of one or more businesses complementary to the Company's operations.
The Company has also agreed to file separate registration statements in the
proximate future covering the resale of shares of Common Stock underlying the
aforementioned securities.
ITEM 7 - FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND
EXHIBITS
EXHIBITS:
1. Certificate of Designation Preferences and Rights for Series C
Convertible Preferred Stock.
2. Certificate of Designations Preferences and Rights for Series D
Convertible Preferred Stock.
3. Securities Subscription Agreement dated November 27, 1996 and
related Registration Rights Agreement and Common Stock Purchase
Warrant.
4. Securities Subscription Agreement dated December 31, 1996,
Registration Rights Agreement and related agreements.
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SIGNATURES
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/ Dennis W. Healey
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Dennis W. Healey, Executive Vice
President and Principal Financial Officer
DATED: February 14, 1997.
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CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE SERIES C CONVERTIBLE PREFERRED STOCK
OF
VIRAGEN, INC.
I, Gerald Smith, President of Viragen, Inc., a Delaware corporation, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Articles of Incorporation of the Corporation, the Board of Directors on
December 5, 1996, adopted the following resolutions creating a series of 20,000
Preferred Shares, $1.00 par value per share, designated as the Series C
Convertible Preferred Shares.
The relative rights and preferences of the Series C Convertible Preferred
Shares are as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
as the Series C Convertible Preferred Shares (the "Series C Preferred Shares"),
and the number of shares constituting such series shall be 20,000. The number of
shares constituting such series may, unless prohibited by the Certificate of
Incorporation, be decreased by resolution of the Board of Directors; PROVIDED
that no decrease shall reduce the number of Series C Preferred Shares to a
number less than the number of shares then outstanding.
2. DIVIDENDS AND DISTRIBUTIONS. The holders of Series C Preferred
Shares shall not be entitled to receive any dividends.
3. VOTING RIGHTS. Except as otherwise provided by law, the holders of
Series C Preferred Shares shall have no voting rights and their consent shall
not be required (except to the extent required by law) for taking any corporate
action.
4. REACQUIRED SHARES. Any Series C Preferred Shares purchased or otherwise
acquired by the Corporation in any manner whatsoever shall constitute authorized
but unissued preferred shares and may be reissued as part of a new series of
preferred shares by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of preferred shares or as otherwise required by law.
5. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (upon liquidation, dissolution or
winding up) to the Series C Preferred Shares unless, prior thereto, the holders
<PAGE>
of Series C Preferred Shares shall have received $1,000 per share, plus an
amount equal to declared and unpaid distributions thereon to the date of such
payment. The Series C Preferred Shares are subordinated to the Company's Series
B Convertible Preferred Shares solely upon any liquidation, dissolution or
winding up of the Company.
6. CONSOLIDATION, MERGER, EXCHANGE, ETC.. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series C preferred shares shall at the same time be similarly exchanged
or changed into preferred shares of the surviving entity providing the holders
of such preferred shares with (to the extent possible) the same relative rights
and preferences as the Series C Preferred Shares.
7. CONVERSION.
(a) At the option of the holder of the Series C Preferred Shares, up
to twenty-five (25%) percent of the Series C Preferred Shares held by such
holder may be convertible, on or after ten days from the date the underlying
Common Shares have been registered with the Securities Exchange Commission for
public sale (the "Effective Date"), into shares of the Company's Common Stock on
the basis of one share of Series C Preferred Shares for shares of Common Stock
equal in number to the amount determined by dividing $1,000 by the Closing Price
of the Corporation's Common Shares. Thereafter, an additional twenty-five (25%)
percent of the Preferred Shares shall be convertible on or after each of the
30th, 60th and 90th days thereafter on a cumulative basis. The term "Closing
Price" is defined as the average closing price of the Corporation Common Shares
over the five-day trading period ending on the day prior to the conversion of
the Series C Preferred Shares. Notwithstanding the above, the conversion price
may not be less than $3.46 nor more than $7.00. Any Series C Preferred Shares
which are outstanding on the first anniversary of the Closing for the offering
of the Series C Preferred Shares will be automatically converted into shares of
the Corporation's Common Stock as provided above.
(b) In the event the Corporation shall at any time after such
Closing declare or pay any dividend on Common Shares payable in Common Shares,
or effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise) into a greater or lesser number
of Common Shares, then in each such case the number of Common Shares issuable
upon the conversion of the Series C Preferred Shares shall be determined as
follows:
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X $
----- ------ Shares of Common Stock Issuable Upon
Y x % x CP = Conversion of Preferred Stock
X = the number of Common Shares outstanding immediately after such
event
Y = The number of Common Shares that were outstanding
immediately prior to such event.
$ = $1,000
% = 100%
CP = Closing Price, as defined in Section 7(a)
Notwithstanding the above, the conversion price (% x CP) may not be less
than $3.46 nor more than $7.00.
(c) The foregoing notwithstanding, in the event the conversion price would
be less than $3.46 but for such minimum conversion price, the difference between
$3.46 and what the conversion price would have been except for such minimum
price, multiplied by the number of shares issued conversion, shall be paid to
the holder in cash upon conversion.
8. VOTE TO CHANGE THE TERMS OF SERIES C 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 Series C Preferred Shares shall be required to amend,
alter, change or repeal any of the powers, designations, preferences and rights
of the Series C Preferred Shares.
IN WITNESS WHEREOF, I have executed this Certificate of Designations,
Preferences and Rights this 5th day of December, 1996.
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Gerald Smith, Presidet
3
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE SERIES D CONVERTIBLE PREFERRED STOCK
OF
VIRAGEN, INC.
I, Gerald Smith, President of Viragen, Inc., a Delaware corporation, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
November 8, 1996, adopted the following resolutions creating a series of 15,000
Preferred Shares, $1.00 par value per share, stated value $1,000 per share,
designated as the Series D Convertible Preferred Shares.
The relative rights and preferences of the Series D Convertible Preferred
Shares are as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
as the Series D Convertible Preferred Shares (the "Series D Preferred Shares"),
and the number of shares constituting such series shall be 15,000 and shall not
be subject to increase. The number of shares constituting such series may,
unless prohibited by the Certificate of Incorporation, be decreased by
resolution of the Board of Directors; PROVIDED that no decrease shall reduce the
number of Series D Preferred Shares to a number less than the number of shares
then outstanding.
2. DIVIDENDS AND DISTRIBUTIONS. The holders of Series D Preferred Shares
shall be entitled to receive a dividend of six percent (6%) per annum of the
stated value of the Series D Preferred Shares, to accrue commencing February 5,
1997 and payable quarterly in arrears, in cash, commencing March 31, 1997. Upon
conversion, any accrued but unpaid dividends will be added to the stated value
of the Series D Preferred Shares converted.
3. VOTING RIGHTS. Except as otherwise provided by law, the holders of
Series D Preferred Shares shall have no voting rights and their consent shall
not be required (except to the extent required by law) for taking any corporate
action.
4. REACQUIRED SHARES. Any Series D Preferred Shares purchased or otherwise
acquired by the Corporation in any manner whatsoever shall constitute authorized
but unissued preferred shares and may be reissued as part of a new series of
preferred shares by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of preferred shares or as otherwise required by law.
<PAGE>
5. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (upon liquidation, dissolution or
winding up) to the Series D Preferred Shares unless, prior thereto, the holders
of Series D Preferred Shares shall have received $1,000 per share, plus an
amount equal to declared and unpaid dividends thereon to the date of such
payment. The Series D Preferred Shares shall rank junior to the Company's Series
B Convertible Preferred Shares solely upon any liquidation, dissolution or
winding up of the Company, and no amount shall be paid to any holder of Series D
Preferred Shares in connection therewith unless all amounts payable to holders
of the Company's Series B Convertible Preferred Shares have been paid in full.
6. CONSOLIDATION, MERGER, EXCHANGE, ETC.. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series D preferred shares shall at the same time be similarly exchanged
or changed into preferred shares of the surviving entity providing the holders
of such preferred shares with (to the extent possible) the same relative rights
and preferences as the Series D Preferred Shares.
7. CONVERSION.
(i) The Series D Preferred Shares will be convertible at the option
of the holder or holders (the "Holders"), on or after the earlier of (x) the
date which is 30 days after the Series D Preferred Shares are delivered from
escrow to the initial holder thereof and (y) the date following the date that
the registration statement for the shares of Common Stock, $.01 par value,
underlying the Series D Preferred Shares (the "Common Shares") has been declared
effective by the Securities and Exchange Commission (the "Conversion Period"),
by dividing the stated value of the Series D Preferred Stock to be converted by
the conversion price, which shall be calculated at eighteen percent (18%) off
the average closing bid price of the Corporation's Common Stock, as reported by
Bloomberg, L.P., over the five-day trading period ending on the day prior to
conversion (the "Conversion Price"). Notwithstanding the above, the Conversion
Price may not be more than Seven Dollars ($7.00) U.S. per Common Share nor less
than Two Dollars ($2.00) U.S. per Common Share (the "Floor"); provided, however,
that the Holder may not convert any Series D Preferred Shares during the
Conversion Period if the Conversion Price, averaged over any rolling consecutive
5-day trading period, falls below the Floor (each such period of 5 consecutive
days so used for determining such average being a "Nonconverting Period"). Upon
occurrence of the twenty-first Nonconverting Period, the Holder shall thereafter
have the right to convert and the Corporation will be obligated, upon receipt of
a notice of conversion from the Holder to effect such conversion; provided,
however, that if the Conversion Price would be below the Floor, the Company,
shall have the right to (a) pay to the Holder cash equal to the amount
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originally paid by the Holder for the outstanding Series D Preferred Shares to
be converted plus ten percent (10%) of such amount (the "Cash-Out Option"), or
(b) convert the outstanding Series D Preferred Shares held by the Holder to be
converted into the full number of Common Shares to which the Holder would be
entitled at the Conversion Price, irrespective of the Floor (the "Stock
Conversion Option"). The Corporation must notify the Holder of its intent with
regard to such options within one (1) business day of receipt of the notice of
conversion, and must effect such cash payment or stock conversion within three
(3) business days of receipt of the notice of conversion.
(ii) Any Series D Preferred Shares remaining outstanding on the
second anniversary of the issuance of the Series D Preferred Shares will be
automatically converted into Common Shares on such date, subject to the
limitation of Section 7 (vi) hereof. The Series D Preferred Shares shall have a
liquidation preference over the Common Shares in the event of any liquidation,
dissolution or winding up of the Corporation or the sale of the Corporation.
(iii) In connection with any conversion of the Series D Preferred
Shares by a Holder or in the event the Corporation elects the Stock Conversion
Option as defined in Section 7(i) above, the Corporation shall issue and deliver
to the Holder an unlegended certificate or certificates for the number of Common
Shares to which the Holder shall be entitled within three (3) business days (the
"Deadline") after receipt by the Corporation of the duly executed notice of
conversion and the original Series D Preferred Shares being converted, with an
executed stock power. The Holder understands that a delay in the issuance of the
Common Shares beyond the Deadline could result in economic loss to the Holder.
As compensation to the Holder for such loss, and not as a penalty, the
Corporation agrees to pay liquidated damages to the Holder for late delivery of
Common Shares upon conversion in the amount of one percent (1%) of the requested
conversion amount, per day, beginning on the fourth (4th) business day after the
Deadline in the event the Common Shares are not received within seven (7)
business days after said Deadline. Said liquidated damages shall accrue each day
through the date the Common Shares are delivered to the Holder upon conversion,
and shall be paid by wire transfer to an account designated by the Holder upon
the earlier to occur of (i) delivery of the Common Shares to the Holder or (ii)
each weekly anniversary of the Deadline. Nothing herein shall waive the
Corporation's obligations to deliver Common Shares upon conversion of the Series
D Preferred Shares or limit the Holder's right to pursue actual damages for the
Corporation's failure to issue and deliver Common Shares to the Holder in
accordance with the terms of the Series D Preferred Shares.
(iv) The Corporation agrees that, in addition to any other remedies
which may be available to the Holder in the event the Corporation fails for any
reason to effect delivery to the Holder of unlegended certificates representing
Common Shares within seven (7) business days following receipt by the
Corporation of notice of conversion, the Holder may revoke the notice of
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conversion by delivering a notice to such effect to the Corporation, whereupon
the Corporation and the Holder shall each be restored to their respective
positions immediately prior to delivery of such notice of conversion.
(v) In the event the Corporation shall at any time after issuance of
the Series D Preferred Stock declare or pay any dividend on Common Shares
payable in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in each such
case the number of Common Shares issuable upon the conversion of the Series D
Preferred Shares shall be determined as follows:
X $
---- ------ Shares of Common Stock Issuable Upon
Y x % x CP = Conversion of Series D Preferred Stock
X = the number of Common Shares outstanding immediately after such
event
Y = The number of Common Shares that were outstanding
immediately prior to such event.
$ = $1,000
% = 100%
CP = Conversion Price, as defined in Section 7(i)
Notwithstanding the above, the conversion price (% x CP) may not be less
than $2.00 nor more than $7.00 except as otherwise provided in Section 7(i).
(vi) Notwithstanding any other provision of this Certificate, in no
event shall any holder of Series D Preferred Shares be entitled to any time to
convert any Series D Preferred Shares (and accrued and unpaid dividends thereon)
in excess of that number of Series D Preferred Shares (and accrued and unpaid
dividends thereon) upon conversion of which the sum of (1) the number of Common
Shares beneficially owned by such holder and any person whose beneficial
ownership of Common Shares would be aggregated with such holder's beneficial
ownership of Common Shares for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and Regulation 13D-G
thereunder (each a "Restricted Holder") (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted Series D
Preferred Shares and accrued and unpaid dividends thereon and through the
ownership of unexercised warrants to purchase Common Shares which contain
limitations similar to this Section 7(vi) and (2) the number of Common Shares
issuable upon conversion of the number of Series D Preferred Shares and accrued
and unpaid dividends thereon with respect to which the determination in this
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Section 7(vi) is being made, would result in beneficial ownership by such
Restricted Holder of more than 4.9% of the outstanding Common Shares. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the 1934 Act, and Regulation
13D-G thereunder, except as otherwise provided in clause (1) of the immediately
preceding sentence.
8. VOTE TO CHANGE THE TERMS OF SERIES D 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 Series D Preferred Shares shall be required to amend,
alter, change or repeal any of the powers, designations, preferences and rights
of the Series D Preferred Shares.
IN WITNESS WHEREOF, I have executed this Certificate of Designations,
Preferences and Rights this ____ day of January, 1997.
------------------------------
Gerald Smith, Presidet
5
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
VIRAGEN, INC./[BUYER]
December 31, 1996
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the
"Agreement") has been executed by the undersigned in connection with the sale in
a private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), of certain shares of Series C Convertible
Preferred Stock (hereinafter the "Preferred Shares"), convertible into shares of
common stock (hereinafter the "Common Shares") of Viragen, Inc. (VRGN), 2343
West 76th Street, Hialeah, FL 33942, a corporation organized under the laws of
Delaware (hereinafter "SELLER") to [BUYER], located at [ADDRESS], a corporation
organized under the laws of [INCORP] (hereinafter "BUYER"). SELLER and BUYER
(hereinafter collectively the "parties") each hereby represents, warrants and
agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
(i) SELLER and 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 under the Securities Act; and
(ii) BUYER hereby subscribes for Three Hundred (300) Preferred Shares, at
a purchase price of One Thousand Dollars ($1,000) U.S. per share, convertible
into Common Shares in accordance with the terms set forth in the Certificate of
Designation attached as Exhibit A to this Agreement, for an aggregate purchase
price of Three Hundred Thousand Dollars ($300,000) payable in United States
Dollars at the Closing, as defined in Paragraph 5 hereof.
(iii) BUYER shall pay the purchase price by delivering same day funds in
United States Dollars to an escrow agent or as otherwise agreed between the
parties, to be delivered to the order of SELLER upon delivery of the Shares.
(iv) BUYER shall receive from SELLER at Closing, for no additional
consideration, a number of three-year warrants ("Warrant" or "Warrants") to
purchase one Common Share for every four Common Shares that BUYER would have
received had BUYER converted the Preferred Shares at Closing (the "Warrant
Shares"; the Common Shares and the Warrant Shares are sometimes hereinafter
collectively referred to as the "Shares"). The Warrants shall have a strike
price of $2.00 per share, and shall be exercisable as set forth in the form of
Common Stock Purchase Warrant Certificate attached as Exhibit B to this
Agreement.
<PAGE>
2. BUYER'S REPRESENTATIONS AND AGREEMENTS
BUYER represents, warrants and agrees as follows:
(i) BUYER understands that the Preferred Shares, Warrants, Common Shares,
and the Warrant Shares have not been registered under the Securities Act, or any
other applicable securities law, and, accordingly, none of the Preferred Shares,
Warrants, Common Shares or Warrant Shares may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless registered pursuant to, or
in a transaction exempt from registration under, the Securities Act and any
other applicable securities law;
(ii) BUYER is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3), or (7) of Regulation D (an "Accredited Investor") that is
acquiring the Shares either for its own account or as a fiduciary or agent for
one or more institutional accounts as to which it exercises sole discretion,
each of which is an Accredited Investor. BUYER has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Shares. BUYER has had a reasonable opportunity
to ask questions of and receive answers from SELLER concerning SELLER and the
offering of the Shares and Warrants. BUYER is not subscribing for the Shares and
Warrants as a result of or pursuant to any advertisement, article, notice, or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio. BUYER is aware that it (or such
institutional account) may be required to bear the economic risk of an
investment in the Shares for an indefinite period, and it (or such institutional
account ) is able to bear such risk for an indefinite period;
(iii) BUYER is acquiring the Preferred Shares, Warrants and underlying
Shares for its own account or for one or more institutional accounts as
described in Paragraph 2(ii) hereof, in each case for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution
thereof (subject to any requirement of law that the disposition of its property
or the property of such institutional account or accounts remain within its or
their control). BUYER agrees on its own behalf and on behalf of any such
institutional account for which it is acquiring the Preferred Shares and
Warrants to offer, sell or otherwise transfer any Preferred Shares and Warrants
only to Accredited Investors (subject to any requirement of law that the
disposition of its property or the property of such institutional account or
accounts remain within its or their control) in conformity with the Securities
Act and any other applicable securities law and with the restrictions on
transfer set forth on the certificates evidencing such securities. BUYER
acknowledges that each certificate evidencing such securities shall bear a
legend substantially to the effect of the foregoing paragraphs 2(i) and 2(ii)
and this paragraph 2(iii). Such legend shall be in substantially the following
form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET
FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY
AND [BUYER] DATED [DATE]. A COPY OF THE PORTION OF THE AFORESAID
SUBSCRIPTION AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM
THE COMPANY'S EXECUTIVE OFFICES.
<PAGE>
Upon conversion of the Preferred Shares, SELLER shall issue a common stock
certificate without such legend to the holder of such shares if (a) such Shares
are sold pursuant to an effective registration statement under the Securities
Act, or (b) such holder provides SELLER with an opinion of counsel reasonably
acceptable to SELLER to the effect that a public sale or a transfer of such
security may be made without registration under the Securities Act, or (c) such
holder provides SELLER with reasonable assurances that such security can be sold
free of any volume limitations pursuant to Rule 144 under the Securities Act (or
a successor thereto).
(iv) BUYER acknowledges that each Warrant shall bear a legend
substantially to the effect of the foregoing paragraphs 2(i) and 2(ii) and this
paragraph 2(iv). Such legend shall be in substantially the following form:
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER
(THE "SECURITIES ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE OFFERED, SOLD, OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
SUCH OFFER, SALE OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
Upon exercise of the Warrant, SELLER shall issue a common stock
certificate without such legend to the holder of such Warrant if (a) the Warrant
Shares are sold pursuant to an effective registration statement under the
Securities Act, or (b) such holder provides SELLER with an opinion of counsel
reasonably acceptable to SELLER to the effect that a public sale or a transfer
of such security may be made without registration under the Securities Act, or
(c) such holder provides SELLER with reasonable assurances
that such security can be sold free of any volume limitations pursuant to Rule
144 under the Securities Act (or a successor thereto).
(v) BUYER acknowledges that SELLER or any transfer agent of SELLER shall
register the transfer or exchange of any of the Preferred Shares or Warrants
only upon receipt of the respective (A) certificates evidencing such Preferred
Shares with the transfer notice set forth thereon appropriately completed, or
(B) the Warrants, and upon receipt in writing from the transferee or the
recipient of such Preferred Shares or Warrants in such transfer or exchange (as
the case may be) of a certificate setting forth the representations in Paragraph
2 hereof;
(vi) If BUYER is acquiring any Preferred Shares, Warrants or the
underlying Shares as fiduciary or agent for one or more institutional accounts,
BUYER represents that it has sole investment discretion with respect to each
such account and that it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such institutional account;
(vii) BUYER acknowledges that SELLER and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and agreements
and further agrees that if, prior to the closing, any of such acknowledgments,
representations and agreements made by BUYER are no longer accurate, BUYER will
promptly notify SELLER;
<PAGE>
(viii) BUYER has received all information necessary to make an informed
business decision with respect to an investment in the Preferred Shares,
Warrants and underlying Shares, including but not limited to SELLER'S latest
Form 10-K, all Forms 10-Q and 8-K filed thereafter, and the Proxy Statement for
its latest fiscal year (collectively, the "Public Documents") and the Private
Placement Memorandum prepared by SELLER. Neither the Public Documents nor the
Private Placement Memorandum include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading;
(ix) This Agreement has been duly authorized, validly executed, and
delivered on behalf of BUYER and is a valid and binding agreement enforceable in
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally; and
(x) BUYER has not engaged and agrees not to engage in any short sales or
other hedging transactions with respect to SELLER'S common stock; provided
however, that BUYER may enter into such transactions involving a number of
common shares not to exceed the number of Common Shares or Warrant Shares for
which a Notice of Conversion or Election to Purchase with regard to the
Preferred Shares or Warrants, respectively, has been submitted to SELLER.
3. SELLER'S REPRESENTATIONS AND AGREEMENTS
SELLER represents, warrants and agrees as follows:
(i) SELLER has not conducted any general solicitation or general
advertising (as defined in Regulation D) with respect to any of its
securities;
(ii) The Preferred Shares, the Warrants, and the Shares, when issued and
delivered, will be duly and validly authorized and issued, fully-paid and
nonassessable, and will not subject the holders thereof to personal liability by
reason of being such holders. In addition, the Preferred Shares, Warrants, and
Shares, when issued and delivered, shall be free and clear of any liens,
encumbrances, charges, or adverse claims of any nature whatsoever. There are no
preemptive rights of any shareholder of SELLER with respect to the Preferred
Shares, Warrants, and the Shares;
(iii) This Agreement has been duly authorized, validly executed and
delivered on behalf of SELLER and is a valid and binding agreement in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally;
(iv) The execution and delivery of this Agreement and the consummation of
the issuance of the Preferred Shares, the Warrants, and the Shares, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by SELLER of any of the terms or provisions of, or constitute
a default under, the articles of incorporation (or charter) or bylaws of SELLER,
<PAGE>
or any indenture, mortgage, deed of trust or other material agreement or
instrument to which SELLER is a party or by which it or any of its properties or
assets are bound, or any existing applicable decree, judgment or order of any
court, federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over SELLER or any of its properties or
assets;
(v) No authorization, approval or consent of or filing with any federal,
state or local governmental body of the United States is legally required for
the issuance and sale of the Shares as contemplated by this Agreement;
(vi) The information provided by or on behalf of SELLER to BUYER and
referred to in Section 2(viii) of this Agreement does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are made, not misleading. Since June 30, 1996, there has been no
material adverse development in the business, properties, operations, financial
condition or results of operations of Seller, except as disclosed in the
documents referred to in Section 2(viii) hereof.
(vii) SELLER will issue one or more certificates representing the
Preferred Shares in the name of BUYER in such denominations to be specified by
BUYER prior to closing. The Preferred Shares will bear the restrictive legend
specified in Section 2(iii) of this Agreement. SELLER further warrants that no
instructions other than these instructions and stop transfer instructions to
give effect to Section 2(i) hereof will be given to the transfer agent and also
warrants that the Shares shall otherwise be transferable on the books and
records of SELLER as and to the extent provided in this Agreement, subject to
compliance with Federal and State securities laws. Nothing in this Section shall
affect in any way BUYER'S obligations and agreement to comply with all
applicable securities laws upon resale of the Shares.
(viii) Prior to Closing, SELLER will issue a Common Stock Purchase Warrant
Certificate entitling BUYER to purchase one (1) common share for every four (4)
Common Shares that BUYER would have received had BUYER converted the Preferred
Shares at Closing. The Common Stock Preferred Warrant Certificate will bear the
restrictive legend specified in Section 2(iv) of this Agreement. SELLER further
warrants that no instructions other than these instructions and stop transfer
instructions to give effect to Section 2(i) hereof will be given to the transfer
agent and also warrants that the Shares shall otherwise be transferable on the
books and records of SELLER as and to the extent provided in this Agreement,
subject to compliance with Federal and State securities laws. Nothing in this
Section shall affect in any way BUYER'S obligations and agreement to comply with
all applicable securities laws upon resale of the Shares.
4. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that Shoreline
Pacific, the Institutional Division of Financial West Group ("Shoreline
Pacific"), shall be deemed a third party beneficiary of SELLER'S agreements and
representations set forth in this Agreement, entitled to enforce the terms
thereof, and to indemnification for any damages resulting to Shoreline Pacific
from any actual or threatened breach thereof by SELLER, both in Shoreline
Pacific's personal capacity and, should Shoreline Pacific so elect, on behalf of
BUYER.
<PAGE>
5. CLOSING. Preferred Share certificates and Warrants shall be delivered
to BUYER and the funds therefor shall be delivered to SELLER on [DATE] (the
"Closing") or at such time to be mutually agreed by the parties.
6. CONDITIONS TO CLOSING
(i)...BUYER understands that SELLER'S obligation to sell the Preferred
Shares and to issue the Warrants is conditioned upon delivery into escrow, or
otherwise as agreed between BUYER and SELLER, by BUYER of the amount set forth
in Paragraph 1 hereof.
(ii)..SELLER understands that BUYER'S obligation to purchase the Preferred
Shares is conditioned upon delivery of certificates representing the Preferred
Shares as described in Paragraph 1(ii) and the Warrants as described in
Paragraph 1(iv), and upon provision of an opinion of counsel confirming the
matters set out in Section 3(ii), (iii), (iv) and (v) above. With respect to the
opinion of counsel concerning Section 3(iv), said opinion shall be qualified as
to the best of counsel's knowledge, except with respect to conflicts or defaults
under SELLER'S Articles of Incorporation and/or Bylaws.
(iii) SELLER understands that BUYER'S obligation to purchase the Preferred
Shares and Warrants is conditioned upon SELLER and BUYER entering into a
Registration Rights Agreement substantially in the form of Annex I hereto.
7. GOVERNING LAW; INTERPRETATION. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without giving
effect to rules governing the conflict of laws. The parties jointly consent to
personal jurisdiction in any state or federal court located in the state of
California, waive any objection as to jurisdiction or venue, and agree not to
assert any defense based on lack of jurisdiction or venue. Facsimile signatures
of this Agreement shall be binding on all parties hereto.
8. CONVERSION. SELLER shall use its best efforts to issue and deliver to BUYER a
certificate or certificates for the number of Common Shares to which BUYER shall
be entitled within seven (7) business days after BUYER has fulfilled all
conditions required for conversion as set forth in this Agreement (the
"Deadline"). SELLER understands that a delay in the issuance of the Common
Shares beyond the Deadline could result in economic loss to BUYER. As
compensation to BUYER for such loss, and not as a penalty, SELLER agrees to pay
liquidated damages to BUYER for late issuance of Common Shares upon conversion,
or exercise, in the amount of one percent (1%) of the requested conversion
amount, per day, beginning on the eighth (8th) business day from the date of
receipt by SELLER of a duly executed notice of conversion or exercise, provided
that the original Preferred Shares to be converted, or Warrants to be exercised
have been delivered to SELLER within such time period, all in accordance with
this Agreement, the Preferred Shares or the Warrants, respectively, and the
requirements of SELLER'S transfer agent. Said liquidated damages shall accrue
each day through the date the Common
<PAGE>
Shares are issued to BUYER upon conversion or exercise, and shall be paid by
wire transfer to an account designated by BUYER upon the earlier to occur of (i)
issuance of the Shares to BUYER, or (ii) each monthly anniversary of the receipt
by SELLER of such BUYER'S notice of conversion or exercise. In the event that
SELLER has taken all steps reasonably necessary to effect such conversion or
exercise, but due to circumstances completely and totally beyond the control of
SELLER, such conversion has not taken place by the Deadline, then the liquidated
damages referred to above shall not begin to accrue until the fifteenth business
day after receipt by SELLER of the duly executed Notice of Conversion. Nothing
herein shall waive SELLER'S obligations to deliver Common Shares upon conversion
of the Preferred Shares or limit BUYER'S right to pursue actual damages for
SELLER'S failure to issue and deliver Common Shares to BUYER in accordance with
the terms of this Agreement and the Preferred Shares.
SELLER agrees that, in addition to any other remedies which may be available to
BUYER, in the event SELLER fails for any reason to effect delivery to Buyer of
certificates representing Common Shares within seven (7) business days following
receipt by SELLER of a notice of conversion, BUYER may revoke the notice of
conversion by delivering a notice of such effect to SELLER, whereupon SELLER and
BUYER shall each be restored to their respective positions immediately prior to
delivery of such notice of conversion.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
Official Signatory of BUYER:
[BUYER]
BY:___________________________
[NAME]
[TITLE]
Official Signatory of SELLER:
VIRAGEN, INC.
BY:___________________________
Gerald Smith
President
<PAGE>
ANNEX I
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of [DATE] (this "Agreement"),
is made by and among Viragen, Inc. a Delaware corporation (the "Company"), and
the person named on the signature page hereto (referred to herein as "Initial
Investor" or "Buyer").
W I T N E S S E T H :
WHEREAS, in connection with the Private Securities Subscription
Agreement, dated as of [DATE], between the Initial Investor and the
Company (the "Subscription Agreement"), the Company has agreed, upon the
terms and subject to the conditions of the Subscription Agreement, to
issue and sell to the Initial Investor Warrants to purchase Common Stock
("Warrants") and shares of Preferred Stock (the "Preferred Shares"),
convertible into shares of Common Stock, $.01 par value (the "Common
Stock"); and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), and applicable state securities laws
with respect to the Preferred Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
the Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act on such appropriate
registration form promulgated by the Commission as shall be selected by
the Company, and, when requested by the Initial Investor or any Investor
<PAGE>
pursuant to Section 2 hereof, shall (A) be reasonably acceptable to the
holders of a majority of the Registrable Securities to which such
registration relates, and (B) shall permit the disposition of Registrable
Securities in accordance with the intended method or methods specified in
the Investor's request for such registration, and the declaration or
ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission ("SEC").
(iii) "Registrable Securities" means the Common Stock underlying
the Preferred Shares and Warrants.
(iv) "Registration Statement" means a registration statement under
the Securities Act registering securities of the Company.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9
of this Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription
Agreement.
2. REGISTRATION.
(A) PAYMENTS BY THE COMPANY. The Company must file a Registration
Statement with the SEC within 20 business days of the last Closing
registering the Common Stock underlying the Preferred Shares and Warrants
for resale. The Company shall use its best efforts to have the
Registration Statement declared effective as soon as possible after
filing. If the Registration Statement covering the Registrable Securities
is not effective within 110 days after the last Closing, then the Company
will make payments to Buyer in such amounts and at such times as shall be
determined pursuant to this Section 2(a). The amount to be paid by the
Company to the Buyer shall be a use of funds fee equal to 1/2% of the
subscription price for the first and second months following said 110-day
period, which use of funds fee shall be prorated on a daily basis.
Thereafter, the Company shall pay a penalty to Buyer equal to 2% of the
subscription price for each month, prorated on a daily basis, until the
Registration Statement is declared effective by the SEC. Said penalty
shall not exceed the maximum amount allowed by law. The amounts referred
to in this section shall be paid by the Company within five business days
after the end of the applicable month beginning with the 30 day period
beginning on the first day following the 110-day period referred to above
and shall be payable in cash; provided, however, that the Company may
elect in lieu of payment of any such amount in cash to deliver to the
Initial Investor shares of Common Stock having an Aggregate Market Value
equal to the amount of the Periodic Amount if, but only if, (1) such
shares are freely tradable by the Initial Investor without any restriction
under the Securities Act or any state securities or "blue sky" law and (2)
after the issuance of such shares to the Holder, the aggregate number of
shares of Common Stock beneficially owned by the Holder (determined in
accordance with Section 13(d) of, and Regulations 13 D-G under, the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) would
not exceed 4.9% of the outstanding shares of Common Stock.
<PAGE>
(B) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under
the Securities Act any of its equity securities, other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other
employee benefit plans, the Company shall send to each Investor, who is
entitled to registration rights under this Section 2(b) written notice of
such determination and, if within twenty (20) days after receipt of such
notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on
the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such Registration Statement only
such limited portion, if any, of the Registrable Securities with respect
to which such Investor has requested inclusion hereunder. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking
to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in
such Registration Statement; and provided, further, however, that, after
giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement to the extent such pro rata allotment is permitted under the
Company's currently existing agreements with such holders of the Company's
securities. No right to registration of Registrable Securities under this
Section 2(b) shall be construed to limit any registration required under
Section 2(c) hereof. The obligations of the Company under this Section
2(b) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire (i) after the Company has afforded
the opportunity for the Investors to exercise registration rights under
this Section 2(b) for two registrations; provided, however, that any
Investor who shall have had any Registrable Securities excluded from any
Registration Statement in accordance with this Section 2(b) shall be
entitled to include in an additional Registration Statement filed by the
Company the Registrable Securities so excluded or (ii) when all of the
Registrable Securities held by any Investor may be sold by such Investor
under Rule 144 under the Securities Act ("Rule 144") within any
three-month period.
(C) DEMAND REGISTRATION. If, at any time after the date which is 30
days after the closing under the Subscription Agreement, any Investor
holding a majority of the Registrable Securities shall notify the Company
in writing that it intends to offer or cause to be offered for public sale
Registrable Securities held by such Investor, the Company shall cause such
of the Registrable Securities as may be requested by any Investor to be
registered, on one occasion only, under the Securities Act and applicable
state laws as expeditiously as possible. Once the right for registration
<PAGE>
of any Registrable Securities under this Section 2(c) has been exercised
by any Investor, the Company shall prepare and file a Registration
Statement covering such Registrable Securities with the SEC within twenty
(20) days of the exercise of such registration right.
(D) If any offering pursuant to a Registration Statement pursuant to
Section 2(c) hereof involves (at the Company's election) an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to
select one legal counsel and an investment banker or bankers and manager
or managers to administer the offering, which investment banker or bankers
or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and
other fees and expenses of such investment banker or bankers and manager
or managers so selected in accordance with this Section 2(d) (other than
fees and expenses relating to registration of Registrable Securities under
federal or state securities laws which are payable by the Company pursuant
to Section 5 hereof) with respect to their Registrable Securities and the
fees and expenses of such legal counsel selected by the Investors.
As used in this Section 2(a), the following terms shall have the
following meanings:
"Aggregate Market Value" of any shares of Common Stock as of any
Computation Date means the product obtained by multiplying (a) such number
of shares of Common Stock times (b) the Average Market Price of the Common
Stock for the Measurement Period for such Computation Date.
"Average Market Price" of any security for any period shall be
computed as the average closing price of the shares over the five
trading-day period ending on the relevant Computation Date, as reported by
Bloomberg, L.P.
"Measurement Period" means the period of ten consecutive trading
days for the Common Stock ending on (or on the last trading day preceding)
each Computation Date.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event
later than 20 days) after a request in accordance with Section 2(b) hereof
a Registration Statement or Statements with respect to all Registrable
Securities to be included therein, and thereafter use its best efforts to
cause the Registration Statement to become effective as soon as reasonably
possible after such filing. If such Registration Statement is filed
pursuant to Rule 415, the Company shall keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is three
years after the date such Registration Statement is first ordered
effective by the SEC. In any case, the Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein)
filed by the Company shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that, subject to
<PAGE>
the conditions set forth in Section 4(a) below, each Investor may notify
the Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such Registration Statement; provided further,
however, that if at any time the Investors shall be entitled to sell all
Registrable Securities held by them pursuant to Rule 144 promulgated under
the Securities Act or any other similar rule or regulation of the SEC that
may at any time permit the Investors to sell securities of the Company to
the public without registration and without imposing restrictions arising
under the federal securities laws on the purchases thereof in a period of
three consecutive months, then the Company shall, so long as it meets the
current public information requirements of Rule 144, thereafter no longer
be required to maintain the registration of Registrable Securities
pursuant to this Agreement;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
until such date as is three years after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Investors
who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until such date as
is the earlier of three years after the date such Registration Statement
is first ordered effective by the SEC or is three years after the Initial
Investor acquired the Shares and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (I) qualify
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (II) subject itself to
general taxation in any such jurisdiction, (III) file a general consent to
service of process in any such jurisdiction, (IV) provide any undertakings
that cause more than nominal expense or burden to the Company or (V) make
any change in its charter or by-laws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests
of the Company and its stockholders;
<PAGE>
(e) in the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters
for the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant
to such registration of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant
to such registration (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the SEC of any stop order or
other suspension of effectiveness of the Registration Statement at the
earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of
the Registrable Securities being sold pursuant to such registration to
review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC,
and shall not file any document in a form to which such counsel reasonably
objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering the fiscal year
period beginning not later than the first day of the Company's fiscal
quarter next following the date of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest
of the Registrable Securities being sold pursuant to such registration,
furnish on the date that Registrable Securities are delivered to an
underwriter for sale in connection with the Registration Statement (i) a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters; and (ii) an opinion, dated such
date, from counsel representing the Company for purposes of such
Registration Statement, in form and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and
Investors;
<PAGE>
(k) make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the Registration Statement,
and any attorney, accountant or other agent retained by any such Investor
or underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith
to be confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor
agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from
a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a
national securities exchange, which shall include the Nasdaq Small-Cap
Market, and on each additional national securities exchange on which
similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules
<PAGE>
of such exchange, or (ii) secure designation of all the Registrable
Securities covered by the Registration Statement as a National Association
of Securities Dealers Automated Quotations System ("Nasdaq") "national
market system security" within the meaning of Rule 11Aa2-1 of the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Nasdaq
National Market System or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to secure listing on a
national securities exchange or Nasdaq authorization and quotation for
such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities
being sold and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request; and
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement;
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have
the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended
method of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of the Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least fifteen (15)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the
Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement. If within five (5) business days
prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
<PAGE>
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services
of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(f) or
3(g) and, if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions and other fees and expenses of investment bankers and any
manager or managers of such underwriting and legal expenses of the
underwriter applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of
this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than underwriting
discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees,
printers and accounting fees and the fees and disbursements of counsel for
the Company, shall be borne by the Company; provided, however, that the
Investors shall bear the fees and out-of-pocket expenses of the one legal
counsel selected by the Investors pursuant to Section 3(h) hereof.
<PAGE>
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the
meaning of the Securities Act or the Exchange Act, any underwriter (as
defined in the Securities Act) for the Investors, the directors, if any,
of such underwriter and the officers, if any, of such underwriter, and
each person, if any, who controls any such underwriter within the meaning
of the Securities Act or the Exchange Act (each, an "Indemnified Person"),
against any losses, claims, damages, expenses or liabilities (joint or
several) (collectively "Claims") to which any of them become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment
thereof or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law or any rule
or regulation (the matters in the foregoing clauses (i) through (iv)
being, collectively, "Violations"). Subject to the restrictions set forth
in Section 6 (d) with respect to the number of legal counsel, the Company
shall reimburse the Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and payable,
for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) (I) shall not apply to a Claim arising out
of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof;
(II) with respect to any preliminary prospectus shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement
or omission of material fact contained in the preliminary prospectus was
<PAGE>
corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section
3(c) hereof; and (III) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Persons and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section
6(a), the Company, each of its directors, each of its officers who signs
the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person
who controls such stockholder or underwriter within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act
or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs (I) in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement or (II) the Investor's
violation of Rules 10-b-6 or 10-b-7 under the Exchange Act; and such
Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Section
6(b) for only that amount of a Claim as does not exceed the net proceeds
to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to
any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing by such persons expressly for inclusion in the
Registration Statement.
<PAGE>
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against
any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and this indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that
an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and other party represented by
such counsel in such proceeding. The Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be
selected by the Investors holding a majority in interest of the
Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except
to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability
is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for
herein is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted
by law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration, until such
time as the Investors have sold all the Registrable Securities pursuant to
a Registration Statement or Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
<PAGE>
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as
may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to transferees or assignees of
all or any portion of such securities only if: (a) the Company is, within
a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee
and (ii) the securities with respect to which such registration rights are
being transferred or assigned, (b) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state
securities laws, and (c) at or before the time the Company received the
written notice contemplated by clause (a) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who hold a majority in interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement,
entitled to enforce the terms thereof, and to indemnification for any
damages resulting to Shoreline Pacific from any actual or threatened
breach thereof by the Company, both in Shoreline Pacific's personal
capacity and, should Shoreline Pacific so elect, on behalf of the
Investor.
12. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of
such Registrable Securities.
<PAGE>
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested,
addressed (i) if to the Company, at Viragen, Inc2343 West 76th Street,
Hialeah, FL 33942, Attention: Gerald Smith, President, (ii) if to the
Initial Investor, at the address set forth under its name in the
Subscription Agreement and (iii) if to any other Investor, at such address
as such Investor shall have provided in writing to the Company, or at such
other address as each such party furnishes by notice given in accordance
with this Section 12(b), and shall be effective, when personally
delivered, upon receipt, and when so sent by certified mail, four business
days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to the
agreements made and to be performed entirely within such state, without
giving effect to rules governing the conflict of laws. In the event that
any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in the Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
VIRAGEN, INC.
By_______________________
Gerald Smith
President
[BUYER]
By_______________________
[NAME]
[TITLE]
<PAGE>
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR SUCH OFFER, SALE OR TRANSFER IS EXEMPT
FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: December 6, 1996
______________ Warrants
to Purchase ____________ Shares
of Common Stock, $.01 Par Value Per Share
VIRAGEN, INC., a Delaware corporation (the "Company"), hereby certifies
that _________________, its permissible transferees, designees, successors and
assigns (collectively, the "Holder"), for value received, is entitled to
purchase from the Company at any time commencing on December 6, 1996 up through
December 6, 1999, ______________ shares (the "Warrant Shares") of the Company's
common stock, par value $.01 per share (the "Common Stock"), at $2.00 per share
(the "Exercise Price").
1. Exercise of Warrants. Upon presentation and surrender of this Common
Stock Purchase Warrant Certificate ("Warrant Certificate" or "this
Certificate"), with the attached Purchase Form duly executed, at the principal
office of the Company at 2343 West 76th Street, Hialeah, Florida 33016, together
with a bank check, certified check or other form of payment acceptable to the
Company in the amount of the Exercise Price multiplied by the number of Warrant
Shares being purchased, the Company, or the Company's Transfer Agent as the case
may be, shall deliver to the holder hereof, certificates of Common Stock which
in the aggregate represent the number of Warrant Shares being purchased. This
Warrant Certificate may be exercised as to 25% of the underlying shares of
Common Stock on or after the tenth day following the date that a Registration
Statement covering the resale of the Common Stock underlying this Warrant
Certificate shall have been declared effective by the Securities and Exchange
Commission (the "First Conversion Date"), with an additional 25% of this Warrant
Certificate becoming exercisable 30, 60 and 90 days following the First
Conversion Date, respectively. To the extent that this Warrant Certificate shall
not have been exercised to the full extent permitted by the terms hereof as of
the respective dates provided above, the amount of Warrant Shares with respect
to which this Warrant Certificate shall be exercisable shall be cumulative.
<PAGE>
All or less than all of the Warrants represented by this Certificate, as
provided above, may be exercised and, in case of the exercise of less than all,
the Company, upon surrender hereof, will deliver to the holder a new Warrant
Certificate or Certificates of like tenor and dated the date hereof entitling
said holder to purchase the number of Warrant Shares represented by this
Certificate which have not been exercised and to receive Registration Rights
with respect to such Warrant Shares.
2. Exchange and Transfer. This Certificate at any time prior to the
exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Certificates of like tenor registered in the name
of the same holder, for another Certificate or Certificates of like tenor in the
name of such holder exercisable for the aggregate number of Warrant Shares as
the Certificate or Certificates surrendered.
3. Rights and Obligations of Holder of this Certificate.
(a) The Holder of this Certificate shall not, by virtue hereof, by
entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, that in the event any certificate representing shares
of Common Stock or other securities is issued to the holder hereof upon exercise
of some or all of the Warrants, such holder shall, for all purposes, be deemed
to have become the holder of record of such Common Stock on the date on which
this Certificate, together with a duly executed Purchase Form, was surrendered
and payment of the aggregate Exercise Price was made, irrespective of the date
of delivery of such share certificate.
(b) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) subdivide its outstanding Common Stock
into a greater number of shares, or (iii) combine its outstanding Common Stock
into a smaller number of shares (including a recapitalization in connection with
a consolidation or merger in which the Company is the continuing corporation),
then (x) the Exercise Price on the record date of such division on the effective
date of such action shall be adjusted by multiplying such Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event, and
(y) the number of shares of Common Stock for which this Warrant Certificate may
be exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event as provided in subitem (x) hereinabove.
2
<PAGE>
(c) In case of any consolidation or merger of the Company with or
into another corporation (other than any consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion of
such outstanding shares of Common Stock into shares or other stock or other
securities or property), or the sale or transfer of the property of the Company
as an entirety or substantially as an entirety, there shall be delivered upon
exercise of the Warrant Certificate the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
would have been entitled upon such action if this Warrant Certificate had been
exercised immediately prior to such action.
4. Common Stock.
(a) The Company covenants and agrees that all shares of Common Stock
issuable upon exercise of this Warrant Certificate will, upon delivery, be duly
and validly authorized and issued, fully-paid and non-assessable.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of all
outstanding options, warrants and rights, including the Warrants.
5. Registration Rights. The Holder shall be entitled to registration
rights with respect to the Warrant Shares underlying this Warrant as provided in
that certain Registration Rights Agreement dated even date herewith.
6. Issuance of Certificates. As soon as possible after full or partial
exercise of this Warrant, but in any event not more than three (3) business days
of receipt of payment by the Company for such exercise, the Company, at its
expense, will cause to be issued in the name of and delivered to the holder of
this Warrant, a certificate or certificates for the number of fully paid and
non-assessable shares of Common Stock to which that holder shall be entitled on
such exercise. No fractional shares will be issued on exercise of this Warrant.
If on any exercise of this Warrant a fraction of a share results, the Company
will pay the cash value of that fractional share, calculated on the basis of the
Exercise Price. Prior to registration of the shares of Common Stock underlying
this Warrant Certificate, as provided in Section 5 hereof, all such certificates
shall bear a restrictive legend to the effect that the Shares represented by
such certificate have not been registered under the Securities Act of 1933, as
amended (the "Act"), and the Shares may not be sold or transferred in the
absence of such registration or an exemption therefrom, such legend to be
substantially in the form of the bold face language appearing on Page 1 of this
Warrant Certificate.
3
<PAGE>
7. Disposition of Warrants or Shares. The holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Warrant
Shares, by his or its acceptance thereof, agrees that no public distribution of
Warrants or Warrant Shares will be made in violation of the provisions of the
Act. Furthermore, it shall be a condition to the transfer of the Warrants that
any transferee thereof deliver to the Company his, her or its written agreement
to accept and be bound by all of the terms and conditions contained in this
Warrant Certificate.
8. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered mail, return receipt requested, postage prepaid, or by U.S. express
mail service or private overnight mail service (e.g. Federal Express). Any such
notice shall be deemed to have been given (a) on the business day immediately
subsequent to mailing, if sent by U.S. express mail service or private overnight
mail service, or (b) three (3) business days following the mailing thereof, if
mailed by certified or registered mail, postage prepaid, return receipt
requested, and all such notices shall be sent to the following addresses (or to
such other address or addresses as a party may have advised the other in the
manner provided in this Section 8):
If to the Company: VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016
If to the Holder: Strome Hedgecap Limited
c/o Citco Fund Services
(Cayman Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31006 SMB, Grand Cayman
Cayman Islands
9. Governing Law. This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by the laws of the State
of California without giving effect to the conflicts of laws provisions. The
Holder hereby irrevocably consents to the venue and jurisdiction of the State
and Federal Courts located in the State of California, County of Marin.
10. Successors and Assigns. This Warrant Certificate shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
11. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not be a part of this
Certificate.
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or by facsimile, by one of its officers thereunto duly
authorized.
VIRAGEN, INC.
Date: December 6, 1996 By:_________________________
Gerald Smith, President
5
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise _____ of the
Warrants represented by this Common Stock Warrant Certificate, and to purchase
the shares of Common Stock issuable upon the exercise of such Warrants and
requests that certificates for securities be issued in the name of:
------------------------------------
(Please type or print name and address)
------------------------------------
-------------------------------------
-------------------------------------
(Social Security or tax identification number)
and delivered to _______________________________________________
________________________________________________________________
(Please type or print name and address)
and, if such number of Warrants shall not be all the Warrants evidenced by this
Common Stock Warrant Certificate, that a new Common Stock Warrant Certificate
for the balance of such Warrants be registered in the name of, and delivered to,
the Holder at the address stated below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$_____________ by check or money order payable in United States currency to the
order of [Company].
[HOLDER]
Dated:_________________ By:____________________________
Name:
Title:
_____________________________________
(Address)
_____________________________________
_____________________________________
(Social Security or tax identifica-
tion number
6
EXHIBIT (4)
Securities Subscription Agreement dated December 31, 1996
Registration Rights Agreement and Related Agreements
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
VIRAGEN, INC./P.R.I.F., L.P.
December 31, 1996
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the
"Agreement") has been executed by the undersigned in connection with the sale in
a private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), of certain shares of Series D Convertible
Preferred Stock (hereinafter the "Preferred Shares"), convertible into shares of
common stock (hereinafter the "Common Shares") of Viragen, Inc. (VRGN), 2343
West 76th Street, Hialeah, FL 33016, a corporation organized under the laws of
Delaware (hereinafter "SELLER") to P.R.I.F., L.P., located at 175 Bloor Street
East, South Tower, 6th Floor, Toronto, Ontario M4W 3R8, Canada, a limited
partnership organized under the laws of Ontario, Canada (hereinafter "BUYER").
SELLER and BUYER (hereinafter collectively the "parties") each hereby
represents, warrants and agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
(i) SELLER and BUYER are executing and delivering this Agreement, which
includes the Registration Rights Agreement annexed hereto, and by this reference
incorporated herein, 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 under the Securities Act; and
(ii) BUYER hereby subscribes for Fifteen Thousand (15,000) Preferred
Shares (the "Preferred Shares"), at a purchase price of One Thousand Dollars
($1,000) U.S. per share, convertible into Common Shares, or subject to
redemption by SELLER pursuant to the provisions of Section 4(i) hereof, and in
accordance with the terms set forth in the Certificate of Designation attached
as Exhibit A to this Agreement, for an aggregate purchase price of Fifteen
Million Dollars ($15,000,000) payable in United States Dollars at the Closing,
as defined in Section 6 hereof.
(iii) BUYER shall pay the purchase price by delivering same day funds in
United States Dollars into an escrow (the "Escrow") established pursuant to an
Escrow Agreement ("Escrow Agreement") dated as of the date hereof among SELLER,
BUYER and Royal Bank of Scotland plc ("Escrow Agent"), all as more fully
described in said Escrow Agreement.
(iv) At the Closing, SELLER will deliver into Escrow, the certificates for
the Preferred Shares and, for no additional consideration, a number of eighteen
(18) month warrants ("Warrant" or "Warrants") to purchase Three Hundred
Seventy-Five Thousand (375,000) shares of SELLER'S common stock (the "Warrant
Shares"; the Common Shares and the Warrant Shares are sometimes hereinafter
collectively referred to as the "Shares"). The Warrants shall have a exercise
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 2
price of $6.00 per share, subject to adjustment pursuant to Section 5(iii)
hereof, and shall be released from Escrow to BUYER at the same time as the
Preferred Shares and shall be exercisable as set forth in the form of Common
Stock Purchase Warrant Certificate attached as Exhibit B to this Agreement.
2. BUYER'S REPRESENTATIONS AND AGREEMENTS
BUYER represents, warrants and agrees as follows:
(i) BUYER understands that the Preferred Shares, Warrants, Common Shares,
and the Warrant Shares have not been registered under the Securities Act, or any
other applicable securities law, and, accordingly, none of the Preferred Shares,
Warrants, Common Shares or Warrant Shares may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless registered pursuant to, or
in a transaction exempt from registration under, the Securities Act and any
other applicable securities law;
(ii) BUYER is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3), or (7) of Regulation D (an "Accredited Investor") that is
acquiring the Shares either for its own account or as a fiduciary or agent for
one or more institutional accounts as to which it exercises sole discretion,
each of which is an Accredited Investor. BUYER has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Shares. BUYER has had a reasonable opportunity
to ask questions of and receive answers from SELLER concerning SELLER and the
offering of the Shares and Warrants. BUYER is not subscribing for the Shares and
Warrants as a result of or pursuant to any advertisement, article, notice, or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio. BUYER is aware that it (or such
institutional account) may be required to bear the economic risk of an
investment in the Shares for an indefinite period, and it (or such institutional
account ) is able to bear such risk for an indefinite period;
(iii) BUYER is acquiring the Preferred Shares, Warrants and underlying
Shares for its own account or for one or more institutional accounts as
described in Paragraph 2(ii) hereof, in each case for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution
thereof (subject to any requirement of law that the disposition of its property
or the property of such institutional account or accounts remain within its or
their control) except only, in the case of the Shares, a distribution registered
under the Securities Act or exempt from registration. BUYER agrees on its own
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 3
behalf and on behalf of any such institutional account for which it is acquiring
the Preferred Shares and Warrants to offer, sell or otherwise transfer any
Preferred Shares and Warrants only to Accredited Investors (subject to any
requirement of law that the disposition of its property or the property of such
institutional account or accounts remain within its or their control) in
conformity with the Securities Act and any other applicable securities law and
with the restrictions on transfer set forth on the certificate(s) evidencing
such securities. BUYER acknowledges that each Preferred Share certificate shall
bear a legend substantially to the effect of the foregoing paragraphs 2(i) and
2(ii) and this paragraph 2(iii). Such legend shall be in substantially the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET
FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY
AND P.R.I.F., L.P. DATED DECEMBER 31, 1996. A COPY OF THE PORTION OF THE
AFORESAID SUBSCRIPTION AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES."
Upon conversion of the Preferred Shares into Common Shares, subject to the
provisions of Section 4(i) hereof, SELLER shall issue a common stock certificate
without such legend to the holder of such shares provided that the Registration
Statement covering the Common Shares has been declared effective by the SEC and
remains in effect at the time of conversion.
(iv) BUYER acknowledges that each Warrant shall bear a legend
substantially to the effect of the foregoing paragraphs 2(i) and 2(ii) and this
paragraph 2(iv). Such legend shall be in substantially the following form:
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER
(THE "SECURITIES ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 4
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR SUCH OFFER, SALE OR TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
Upon exercise of the Warrant, SELLER shall issue a common stock
certificate without such legend to the holder of such Warrant provided that the
Registration Statement covering the Common Shares underlying the Warrant has
been declared effective by the SEC and remains in effect at the date of
exercise.
(v) BUYER acknowledges that SELLER or any transfer agent of SELLER shall
register the transfer or exchange of any of the Preferred Shares or Warrants
only upon receipt of the respective (A) certificate(s) evidencing such Preferred
Shares with the transfer notice set forth thereon appropriately completed, or
(B) the Warrants, and upon receipt in writing from the transferee or the
recipient of such Preferred Shares or Warrants in such transfer or exchange (as
the case may be) of a certificate setting forth the representations in Paragraph
2 hereof;
(vi) If BUYER is acquiring any Preferred Shares, Warrants or the
underlying Shares as fiduciary or agent for one or more institutional accounts,
BUYER represents that it has sole investment discretion with respect to each
such account and that it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such institutional account;
(vii) BUYER acknowledges that SELLER and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and agreements
and further agrees that if, prior to the closing, any of such acknowledgments,
representations and agreements made by BUYER are no longer accurate, BUYER will
promptly notify SELLER;
(viii) BUYER has received all information necessary to make an informed
business decision with respect to an investment in the Preferred Shares,
Warrants and underlying Shares, including but not limited to SELLER'S latest
Form 10-K, all Forms 10- Q and 8-K filed thereafter, and the Proxy Statement for
its latest fiscal year (collectively, the "Public Documents") and the Private
Placement Memorandum prepared by SELLER. Neither the Public Documents nor the
Private Placement Memorandum include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading;
(ix) This Agreement has been duly authorized, validly executed, and
delivered on behalf of BUYER and is a valid and binding agreement enforceable in
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 5
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally; and
(x) BUYER has not engaged and agrees not to engage in any short sales or
other hedging transactions with respect to SELLER'S common stock; provided
however, that BUYER may enter into such transactions involving a number of
common shares not to exceed the number of Common Shares or Warrant Shares for
which a notice of conversion or Election to Purchase with regard to the
Preferred Shares or Warrants, respectively, has been submitted to SELLER;
(xi) BUYER understands and acknowledges that SELLER currently has an
insufficient number of authorized common shares available for issuance upon
conversion of the Preferred Shares and exercise of the Warrants purchased
hereunder. BUYER understands that SELLER has agreed to take all steps reasonably
necessary to gain such approval as may be required to issue additional common
shares to BUYER in accordance with the terms of this Agreement. In the event
such approval is not obtained from SELLER'S shareholders, SELLER shall pay to
BUYER Three Hundred Thousand U.S. Dollars ($300,000) in accordance with the
terms of the Escrow Agreement.
3. SELLER'S REPRESENTATIONS AND AGREEMENTS
SELLER represents, warrants and agrees as follows:
(i) SELLER has not conducted any general solicitation or general
advertising (as defined in Regulation D) with respect to any of its securities;
(ii) SELLER acknowledges that it currently has an insufficient number of
authorized common shares available for issuance upon conversion of the Preferred
Shares and exercise of the Warrants purchased hereunder and represents and
warrants that its Board of Directors has approved an increase in the number of
SELLER'S authorized common shares from 50 million to 75 million. SELLER warrants
and agrees to take all steps reasonably necessary to gain approval by the
stockholders of SELLER of such increase in SELLER'S authorized common shares
from fifty million (50,000,000) to seventy-five million (75,000,000) on or
before February 28, 1997 and, if such approval is obtained, to deliver to the
BUYER a copy of an Amendment to the Certificate of Incorporation of SELLER, in
the form annexed as Exhibit "A" to the Escrow Agreement (the "Certificate of
Amendment"), certified as filed with the Secretary of State of the State of
Delaware, not later than March 5, 1997. In the event that, on or before March 5,
1997, SELLER'S shareholders fail to approve the increase in the number of
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 6
SELLER'S authorized common stock from 50 million to 75 million shares, or if
SELLER does not comply with its obligations pursuant to Section 3 of the Escrow
Agreement, SELLER shall pay to BUYER Three Hundred Thousand U.S. Dollars
($300,000) ("Commitment Fee").
(iii) The Preferred Shares, the Warrants, and the Shares, when issued and
delivered, will be duly and validly authorized and issued, fully-paid and
nonassessable, and will not subject the holders thereof to personal liability by
reason of being such holders. In addition, the Preferred Shares, Warrants, and
Shares, when issued and delivered, shall be free and clear of any liens,
encumbrances, charges, or adverse claims of any nature whatsoever. There are no
preemptive rights of any shareholder of SELLER with respect to the Preferred
Shares, Warrants, and the Shares;
(iv) This Agreement has been duly authorized, validly executed and
delivered on behalf of SELLER and is a valid and binding agreement in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally;
(v) The execution and delivery of this Agreement and the consummation of
the issuance of the Preferred Shares, the Warrants, and the Shares, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by SELLER of any of the terms or provisions of, or constitute
a default under, the articles of incorporation (or charter) or bylaws of SELLER,
or any indenture, mortgage, deed of trust or other material agreement or
instrument to which SELLER is a party or by which it or any of its properties or
assets are bound, or any existing applicable decree, judgment or order of any
court, federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over SELLER or any of its properties or
assets;
(vi) No authorization, approval or consent of or filing with any federal,
state or local governmental body of the United States is legally required for
the issuance and sale of the Shares as contemplated by this Agreement, except as
noted in Section 3(ii) above;
(vii) The information provided by or on behalf of SELLER to BUYER and
referred to in Section 2(viii) of this Agreement does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are made, not misleading. Since June 30, 1996, there has been no
material adverse development in the business, properties, operations, financial
condition or results of operations of SELLER, except as disclosed in the
documents referred to in Section 2(viii) hereof;
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 7
(viii) SELLER will issue one or more certificates representing the
Preferred Shares in the name of BUYER in such denominations to be specified by
BUYER prior to closing. The Preferred Shares will bear the restrictive legend
specified in Section 2(iii) of this Agreement. SELLER further warrants that no
instructions other than these instructions and stop transfer instructions to
give effect to Section 2(i) hereof will be given to the transfer agent and also
warrants that the Shares shall otherwise be transferable on the books and
records of SELLER as and to the extent provided in this Agreement, subject to
compliance with Federal and State securities laws. Nothing in this Section shall
affect in any way BUYER'S obligations and agreement to comply with all
applicable securities laws upon resale of the Shares.
(ix) Prior to or at Closing, SELLER will issue a Common Stock Purchase
Warrant Certificate ("Warrant Certificate") entitling BUYER to purchase Three
Hundred Seventy-Five Thousand (375,000) shares of SELLER'S common stock, which
Warrant certificate shall be delivered to the Escrow Agent at Closing. The
Warrants shall be exercisable at Six Dollars ($6.00) U.S. per Warrant Share,
subject to adjustment pursuant to Section 5(iii) hereof. The Warrant Certificate
will bear the restrictive legend specified in Section 2(iv) of this Agreement.
SELLER further warrants that no instructions other than these instructions and
stop transfer instructions to give effect to Section 2(i) hereof, prior to
registration of the resale of the Shares under the Securities Act, will be given
to the transfer agent and also warrants that the Shares shall otherwise be
transferable on the books and records of SELLER as and to the extent provided in
this Agreement, subject to compliance with Federal and State securities laws.
Nothing in this Section shall affect in any way BUYER'S obligations and
agreement to comply with all applicable securities laws upon resale of the
Shares.
(x) SELLER warrants that it currently meets the requirements for filing a
Registration Statement on Form S-3, and that it will make timely filings and
take all other steps necessary to maintain such eligibility until such time as
BUYER has fully converted its Preferred Shares and Warrants acquired pursuant to
this Agreement.
4. CONVERSION AND OTHER TERMS.
(i) The Preferred Shares will be convertible at the option of BUYER on or
after the day following the date that the registration statement for the Shares
underlying the Preferred Shares and Warrants has been declared effective by the
SEC (the "Conversion Period"), at eighteen percent (18%) off the average closing
bid price of SELLER'S common stock, as reported by Bloomberg, L.P., over the
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 8
five-day trading period ending on the trading day prior to conversion (the
"Conversion Price"). Notwithstanding the above, the Conversion Price may not be
more than Seven Dollars ($7.00) U.S. per Common Share nor less than Two Dollars
($2.00) U.S. per Common Share (the "Floor"); provided, however, that BUYER may
not convert any Preferred Shares during the Conversion Period if the Conversion
Price (a) averaged over any consecutive 5-trading day period or (b) on any
single trading day, as averaged over the prior 5-day trading period, falls below
the Floor (each such period of 5 consecutive days so used for determining such
average being a "Nonconverting Period"). Upon occurrence of the twenty-first
Nonconverting Period, BUYER shall thereafter have the right to convert, and
SELLER will be obligated upon receipt of a notice of conversion from BUYER, for
which the applicable Conversion Price would be below the Floor, to (a) pay to
BUYER cash equal to the amount originally paid by BUYER for the outstanding
Preferred Shares, plus ten percent (10%) of such amount (the "Cash-Out Option"),
or (b) convert the outstanding Preferred Shares held by BUYER into the full
number of Common Shares to which BUYER would be entitled at the Conversion
Price, irrespective of the Floor (the "Stock Conversion Option"). SELLER must
notify BUYER of its intent with regard to such options within one (1) business
day of receipt of the notice of conversion, and must effect such cash payment or
stock conversion within three (3) business days following actual receipt of the
notice of conversion.
(ii) Any Preferred Shares remaining outstanding on the second anniversary
of the Closing, as defined in Section 6 hereof, will be automatically converted
into Common Shares on such date. The Preferred Shares shall have a liquidation
preference over the Common Shares in the event of any liquidation or sale of
SELLER. The Preferred Shares will pay a dividend of six percent (6%) per annum,
payable quarterly in arrears, in cash. Upon conversion, any accrued but unpaid
dividends will be added to the stated value of the Preferred Shares converted.
(iii) In the event SELLER elects the Stock Conversion Option as defined in
Section 4(i) above, SELLER shall use its best efforts to issue and deliver to
BUYER a certificate or certificates for the number of Common Shares to which
BUYER shall be entitled within three (3) business days after BUYER has fulfilled
all conditions required for conversion as set forth in this Agreement (the
"Deadline"), which conditions shall include actual receipt by SELLER of the duly
executed notice of conversion and the original Preferred Shares being converted,
with an executed stock power, and any other items reasonably required by
SELLER'S transfer agent. SELLER understands that a delay in the issuance of the
Common Shares beyond the Deadline could result in economic loss to BUYER. As
compensation to BUYER for such loss, and not as a penalty, SELLER agrees to pay
liquidated damages to BUYER for late delivery of Common Shares upon conversion
in the amount of one percent (1%) of the requested conversion amount, per day,
beginning on day after the Deadline in the event the Common Shares are not
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 9
delivered within seven (7) business days after the Deadline. Said liquidated
damages shall accrue each day through the date the Common Shares are delivered
to BUYER upon conversion, and shall be paid by wire transfer to an account
designated by BUYER upon the earlier to occur of (i) delivery of the Shares to
BUYER, or (ii) each weekly anniversary of the Deadline. Nothing herein shall
waive SELLER'S obligations to deliver Common Shares upon conversion of the
Preferred Shares or exercise of the Warrants or limit BUYER'S right to pursue
actual damages for SELLER'S failure to issue and deliver Common Shares to Buyer
in accordance with the terms of this Agreement, the Preferred Shares, and the
Warrants.
(iv) SELLER agrees that, in addition to any other remedies which may be
available to BUYER, in the event SELLER fails for any reason to effect delivery
to BUYER of certificates representing Common Shares within seven (7) business
days following actual receipt by SELLER of a notice of conversion, BUYER may
revoke the notice of conversion by delivering a notice of such effect to SELLER,
whereupon SELLER and BUYER shall each be restored to their respective positions
immediately prior to delivery of such notice of conversion.
(v) See Page 9A attached hereto and made a part hereof.
5. PROSPECTIVE FINANCINGS AND LIMITATIONS THEREON.
(i) SELLER agrees not to issue any additional shares of its common stock,
nor securities convertible into, exchangeable for or otherwise entitling the
holders to acquire shares of its common stock (each a "Prospective Financing"),
for a period of one hundred eighty (180) calendar days after the Closing, as
defined in Section 6 hereof, other than pursuant to:
(a) compensating stock options or stock-based plans;
(b) binding agreements in effect on the Closing;
(c) any financing agreements of $5,000,000 U.S. Dollars or less
entered into by and between SELLER and State Capital Markets,
Ltd.; or
(d) any financing arrangement related to:
1. the American Red Cross ("ARC");
2. Independent (non-ARC) or governmental
blood collection, blood fractionation, or blood
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 10
services/management entities, and independent blood
industry trade entities in the United States; 3. the
Canadian Red Cross ("CRC"); 4. Independent (non-CRC) or
governmental blood collection entities, blood fractionation
entities, or blood services/management entities, and
independent blood industry trade entities in Canada.
(ii) If, prior to 180 days following Closing, SELLER enters into an
agreement for any Prospective Financing other than as set forth in Section 5(i)
hereof, BUYER shall receive, for no additional consideration, warrants (the
"Prospective Financing Warrants") to purchase an additional number of shares of
SELLER'S common stock equal to:
(a) 100,000 common shares, for Prospective Financings contracted
within 30 days of Closing;
(b) 66,000 common shares, for Prospective Financings contracted on
or after 31 days from Closing but within 60 days following Closing;
and
(c) 33,000 common shares, for Prospective Financings contracted on
or after 61 days from Closing but within 90 days following Closing.
In addition, the provisions of this Section 5(ii) shall apply in the event
Seller enters into an agreement for any Prospective Financing described under
Section 5(i)(d) above. The Prospective Financing Warrants issuable pursuant to
this Section 5(ii) shall be in the same form and shall be exercisable upon the
same terms and conditions as the Warrants as set forth in this Agreement and the
form of Common Stock Purchase Warrant Certificate annexed hereto as Exhibit B,
provided however, that all Prospective Financing Warrants issued pursuant to
this Section 5(ii) shall have an exercise price of $1.00 U.S.
(iii) If SELLER enters into an agreement for any Prospective Financing in
an amount less than or equal to $15,000,000 U.S., other than as set forth in
clauses (a), (b) or (c) of Section 5(i) hereof, the exercise price of the
Warrants and all Prospective Financing Warrants issuable pursuant to Section
5(iv) hereof shall be reduced as follows:
(a) for any Prospective Financings contracted within 90 days of
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 11
Closing, the exercise price of the Warrants shall be $1.00 U.S.;
(b) for Prospective Financings contracted on or after 90 days from
Closing but before 120 days from Closing, the exercise price of
the Warrants shall be $2.00 U.S.;
(c) for Prospective Financings contracted on or after 120 days from
Closing but before 150 days from Closing, the exercise price of
the Warrants shall be $3.00 U.S.;
(d) for Prospective Financings contracted on or after 150 days from
Closing but before 180 days from Closing, the exercise price of
the Warrants shall be $4.00 U.S.; and
(e) for Prospective Financings contracted on after 180 days from
Closing, the exercise price of the Warrants shall be $6.00 U.S.
(iv) If, prior to 180 days following Closing, SELLER enters into agreement
for any Prospective Financing in an amount greater than $15,000,000 U.S., other
than as set forth in clauses (a), (b) or (c) of Section 5(i) hereof, then BUYER
shall receive, for no additional consideration, and in addition to the
Prospective Financing Warrants, warrants (the "Additional Prospective Financing
Warrants") to purchase an additional Twenty Five Thousand (25,000) shares of
SELLER'S common stock per each $1,000,000 (or portion thereof) U.S. by which the
amount of such Prospective Financing exceeds $15,000,000 U.S. The Additional
Prospective Financing Warrants issuable pursuant to this Section 5(iv) shall be
exercisable upon the same terms and conditions as the Warrants, provided
however, that the exercise price of the Additional Prospective Financing
Warrants issuable pursuant to this Section 5(iv) shall be the same exercise
price of the Warrants as shall be determined by Section 5(iii) hereof.
(v) SELLER warrants and agrees that it will promptly notify BUYER upon
entering into a contract for any Prospective Financing, and will provide BUYER
with the amount, completion date, and terms of such Prospective Financing.
(vi) SELLER covenants and agrees that all shares of common stock issuable
upon exercise of any Prospective Financing Warrants issued hereunder will, upon
delivery to the BUYER, be duly and validly authorized and issued, fully-paid and
non-assessable, and registered for resale with the SEC.
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 12
6. CLOSING. The Preferred Share certificates and the Warrant Certificate shall
be delivered by the Company to the Escrow Agent, and the aggregate purchase
price for the Preferred Shares and the Warrants shall be delivered by the BUYER
to the Escrow Agent, on or before February 5, 1997 (the "Closing"), or such
other date as agreed to by BUYER and SELLER. The release of Preferred Share
Certificates and the Warrant Certificate, and the funds held in escrow will
occur as specified in paragraph 7(ii) hereof and in the Escrow Agreement.
7. CONDITIONS TO CLOSING; RELEASE OF SHARES AND PAYMENT
OF PURCHASE PRICE
(i) BUYER understands that SELLER'S obligation to sell the Preferred
Shares and to issue the Warrants is conditioned upon delivery into Escrow of the
amount set forth in Paragraph 1(ii) hereof, all pursuant to the terms of the
Escrow Agreement.
(ii) SELLER understands that BUYER'S obligation to purchase the Preferred
Shares is conditioned upon the filing of the Certificate of Designations with
the Secretary of State of the State of Delaware, and delivery into Escrow of
certificate(s) representing the Preferred Shares as described in Paragraph
1(ii); the Warrants as described in Paragraph 1(iv); a copy of the Certificate
of Amendment, in the form annexed to the Escrow Agreement as Exhibit "A" and
certified as filed with the Secretary of State of the State of Delaware; and an
opinion of counsel for the SELLER, dated the date of the Closing, substantially
in the form of Exhibit C hereto, confirming the matters set out in Section
3(iii), (iv) (v), and (vi) above. With respect to the opinion of counsel
concerning Section 3(v), said opinion shall be qualified as to the best of
counsel's knowledge, except with respect to conflicts or defaults under SELLER'S
Articles of Incorporation and/or Bylaws.
(iii) SELLER understands that BUYER'S obligation to purchase the Preferred
Shares is conditioned upon SELLER and BUYER entering into the Registration
Rights Agreement substantially in the form of Annex I hereto.
(iv) The parties to this Agreement agree to enter into the Escrow
Agreement on or prior to placing funds or Certificates for Preferred Shares or
Warrants in escrow.
8. MISCELLANEOUS.
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 13
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Florida without giving effect to
rules governing the conflict of laws.
(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. A telephone line facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(c) Headings. The headings in 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 SELLER nor 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 charge with enforcement. In the event any provision of this
Agreement is inconsistent with a provision of the Registration Rights Agreement,
the Escrow Agreement, the Warrants, or the Certificate of Designation, such
other agreements and documents shall be controlling.
(f) Enforcement: Course of Dealing. Failure of any party to exercise any
right or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, or any course of dealing between the parties,
shall not operate as a waiver thereof or an amendment hereof, nor shall any
single or partial exercise of any such right or power, preclude any other
further exercise thereof or exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally, by courier or
by telephone line facsimile transmission and shall be effective and deemed
delivered as follows: five (5) calendar days after being placed in the mail, if
mailed, certified, return receipt requested; or upon receipt, if delivered
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 14
personally, by courier or by telephone line facsimile transmission. The
addresses for such communications shall be as follows:
If to SELLER:
2343 West 76th Street
Hialeah, FL 33016
Telephone: (305) 557-6000
Facsimile: (305) 828-4324
Attention: Mr. Gerald Smith or Mr. 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
Facsimile: (305) 766-7800
Attention: James Schneider, Esq.
If to BUYER:
P.R.I.F., L.P.
175 Bloor Street, East
South Tower, 6th Floor
Toronto, Ontario M4W3R8
Canada
Telephone: (416) 926-1626
Facsimile: (416) 929-5314
Attention: Henry Brachfeld
With copy to:
Refco Capital Markets, Ltd.
Attn: Santo Maggio
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 15
Suite No. 542 48 Par-La-Ville Road
Hamilton HM 11
Bermuda
Telephone: (441) 295-6960
Facsimile: (441) 295-8684
Each party shall provide five days' notice to the other party of any change in
address.
(h) Buyer's Delivery and Payment Instructions. Buyer hereby irrevocably
instructs Seller, and Seller agrees that:
(1) All certificates for securities, including, without limitation, the
Preferred Shares, the Warrants, and any shares of Common Stock, $.01 par value,
of the Seller issued upon conversion of the Preferred Shares or exercise of the
Warrants required to be delivered to Buyer pursuant to the terms of this
Agreement and the Escrow Agreement, the Registration Rights Agreement, the
Certificate of Designations and the Warrants shall be registered in the name of
the Buyer and delivered directly to:
Refco Capital Markets, Ltd.
c/o Refco Group Ltd.
Attn: Santo Maggio
One World Financial Center
Tower A
200 Liberty Street
New York, NY 10281
(2) All cash, funds and payments required to be paid to Buyer pursuant to
the terms of this Agreement and the Escrow Agreement, the Registration Rights
Agreement, the Certificate of Designations and the Warrants, including, without
limitation, interest, dividends, Preferred Share redemption payments, funds
released from the escrow created by the Escrow Agreement, liquidated damages,
and payments by the Seller pursuant to Section 2(a) of the Registration Rights
Agreement, if any, shall be paid directly to the account of Refco Capital
Markets by wire transfer to:
Chase Bank NY
ABA No. : 021 000 021
Account No. : Refco Capital Markets 066 2905 70
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 16
Reference: EQ: Account No. : 4217
Account Name: PRIFL.P.
(j) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
SELLER may not assign this Agreement or any rights or obligations hereunder.
BUYER may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of SELLER (which consent may be withheld for
any reason in the sole discretion of the party from whom consent is sought).
Notwithstanding the foregoing, BUYER may assign its rights hereunder to any of
its "affiliates," as the term is defined under the Securities Exchange Act of
1934, as amended, without the consent of SELLER; provided, however, that any
such assignment shall be in writing (and BUYER shall give SELLER at least
fifteen (15) days prior notice thereof); shall not release BUYER from its
obligations hereunder unless such obligations are assumed in writing by such
affiliate; and shall be to an Accredited Investor and, at the option of SELLER,
may be accompanied by an opinion of BUYER'S Counsel in form and substance
satisfactory to SELLER to the effect that such assignments may be made without
registration under the Securities Act.
(k) 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.
(l) Survival. The respective representations, warranties, covenants and
agreements of BUYER and SELLER contained in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares, delivery of the Warrants and
release of the Escrow and shall remain in full force and effect regardless of
any nvestigation made by or on behalf of them or any person controlling or
advising any of them.
(m) 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.
(n) Termination. If the Escrow Agreement is terminated pursuant to the
terms thereof, this Agreement and the Registration Rights Agreement shall also
be terminated and the SELLER and the BUYER shall have no further obligations or
liabilities, one to the other, under this Agreement or the Registration Rights
Agreement or in connection with the transactions contemplated hereby or thereby
except as provided in the Escrow Agreement and except for liabilities or
<PAGE>
Private Sec. Sub. Agreement: Viragen, Inc./P.R.I.F., L.P.
December 31, 1996
Page 17
obligations relating to any breach of this Agreement or the Registration Rights
Agreement which occurred prior to such termination.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
Official Signatory of BUYER:
P.R.I.F., L.P.
BY:___________________________
Henry Brachfeld
President, HB and Co., Inc.
General Partner, P.R.I.F., L.P.
Official Signatory of SELLER:
VIRAGEN, INC.
BY:___________________________
Dennis Healey
Executive Vice President and CFO
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
<PAGE>
EXHIBIT B
FORM OF COMMON STOCK PURCHASE WARRANT CERTIFICATE
<PAGE>
EXHIBIT C
OPINION OF COUNSEL
<PAGE>
ANNEX I
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 31, 1996 (this
"Agreement"), is made by and among Viragen, Inc. a Delaware corporation (the
"Company"), and the person named on the signature page hereto (referred to
herein as "Initial Investor" or "Buyer").
W I T N E S S E T H :
WHEREAS, in connection with the Private Securities Subscription
Agreement, dated as of December 31, 1996, between the Initial Investor and
the Company (the "Subscription Agreement"), the Company has agreed, upon
the terms and subject to the conditions of the Subscription Agreement, to
issue and sell to the Initial Investor Warrants to purchase Common Stock
("Warrants") and shares of Preferred Stock (the "Preferred Shares"),
convertible into shares of Common Stock, $.01 par value (the "Common
Stock"); and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), and applicable state securities laws
with respect to the shares of Common Stock underlying the Preferred Shares
and Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
the Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 2
(ii) "register," "registered," and "registration" refer to a regis-
tration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act on such appropriate
registration form promulgated by the Commission as shall be selected by
the Company, and, when requested by the Initial Investor or any Investor
pursuant to Section 2 hereof, shall (A) be reasonably acceptable to the
holders of a majority of the Registrable Securities to which such
registration relates, and (B) shall permit the disposition of Registrable
Securities in accordance with the intended method or methods specified in
the Investor's request for such registration, and the declaration or
ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission ("SEC").
(iii) "Registrable Securities" means the Common Stock underlying the
Preferred Shares and Warrants.
(iv) "Registration Statement" means a registration statement under
the Securities Act registering securities of the Company.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9
of this Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription
Agreement.
2. REGISTRATION.
(A) PAYMENTS BY THE COMPANY. The Company must file a Registration
Statement with the SEC within 20 business days of the Closing, as defined
in Section 6 of the Subscription Agreement, registering the Common Stock
underlying the Preferred Shares and Warrants for resale. The Company shall
use its best efforts to have the Registration Statement declared effective
as soon as possible after filing and shall keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is three
(3) years after the date the Registration Statement is first ordered
effective by the SEC. In the event the Company receives a "no action" or
"no review" letter from the SEC with regard to the Registration Statement,
the Company shall cause the Registration Statement to be effective within
five (5) business days of the receipt of such letter. If the Registration
Statement covering the Registrable Securities is not effective within 75
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 3
days after the Closing, then the Company will make payments to Buyer in
such amounts and at such times as shall be determined pursuant to this
Section 2(a). The amount to be paid by the Company to the Buyer shall be a
use of funds fee equal to 1% of the subscription price for the first
fifteen (15) days following said 75-day period, and 2% for the 30-day
period following said 90-day period, which use of funds fee shall be
prorated on a daily basis. Thereafter, the Company shall pay a penalty to
Buyer equal to 3% of the subscription price for each 30-day period,
prorated on a daily basis, until the Registration Statement is declared
effective by the SEC. Said penalty shall not exceed the maximum amount
allowed by law. The amounts referred to in this section shall be paid by
the Company within five business days after the end of the applicable
period beginning with the 15 day period beginning on the first day
following the 75 -day period referred to above and shall be payable in
cash.
(B) PIGGY-BACK REGISTRATIONS. If at any time the Company shall
determine to prepare and file with the SEC a Registration Statement
relating to an offering, for its own account or the account of others
under the Securities Act, of any of its equity securities, other than on
Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, the Company shall send to each
Investor, who is entitled to registration rights under this Section 2(b),
written notice of such determination and, if within twenty (20) days after
receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of
the Registrable Securities such Investor requests to be registered, except
that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included
in the Registration Statement because, in such underwriter(s)' judgment,
such limitation is necessary to effect an orderly public distribution,
then the Company shall be obligated to include in such Registration
Statement only such limited portion, if any, of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder. Any
exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities, in proportion to the
number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding
securities the holders of which are not entitled by right to inclusion of
securities in such Registration Statement; and provided, further, however,
that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of
other securities having the right to include such securities in the
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 4
Registration Statement to the extent such pro rata allotment is permitted
under the Company's currently existing agreements with such holders of the
Company's securities. No right to registration of Registrable Securities
under this Section 2(b) shall be construed to limit any registration
required under Section 2(c) hereof. The obligations of the Company under
this Section 2(b) may be waived by Investors holding a majority in
interest of the Registrable Securities and shall expire (i) after the
Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(b) for two registrations;
provided, however, that any Investor who shall have had any Registrable
Securities excluded from any Registration Statement in accordance with
this Section 2(b) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded or (ii) when all of the Registrable Securities held by any
Investor may be sold by such Investor under Rule 144 under the Securities
Act ("Rule 144") within any three-month period.
(C) DEMAND REGISTRATION. If, at any time after the date which is 30
days following the release of purchase price funds from Escrow as set
forth in the Subscription Agreement, any Investor holding a majority of
the Registrable Securities shall notify the Company in writing that it
intends to offer or cause to be offered for public sale Registrable
Securities held by such Investor, the Company shall cause such of the
Registrable Securities as may be requested by any Investor to be
registered, on one occasion only, under the Securities Act and applicable
state laws as expeditiously as possible. Once the right for registration
of any Registrable Securities under this Section 2(c) has been exercised
by any Investor, the Company shall prepare and file a Registration
Statement covering such Registrable Securities with the SEC within twenty
(20) days of the exercise of such registration right.
(D) If any offering pursuant to a Registration Statement pursuant to
Section 2(c) above involves (at the Company's election) an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to
select one legal counsel and an investment banker or bankers and manager
or managers to administer the offering, which investment banker or bankers
or manager or managers shall be reasonably satisfactory to the Company.
The Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and
other fees and expenses of such investment banker or bankers and manager
or managers so selected in accordance with this Section 2(d) (other than
fees and expenses relating to registration of Registrable Securities under
federal or state securities laws which are payable by the Company pursuant
to Section 5 hereof) with respect to their
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 5
Registrable Securities and the fees and expenses of such legal counsel
selected by the Investors.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities and in addition to the requirements of
Section 2(a) above, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event later
than 20 days) after a request in accordance with Section 2(c) hereof a
Registration Statement or Statements with respect to all Registrable
Securities to be included therein, and thereafter use its best efforts to
cause the Registration Statement to become effective as soon as reasonably
possible after such filing. The Company shall keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as
is three years after the date such Registration Statement is first ordered
effective by the SEC. In any case, any Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein)
filed by the Company shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading. Subject to the conditions set forth
in Section 4(a) below, each Investor may notify the Company in writing
that it wishes to exclude all or a portion of its Registrable Securities
from such Registration Statement. Notwithstanding the foregoing provisions
of Section 3(a), if at any time the Investors shall be entitled to sell
all Registrable Securities held by them pursuant to Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration and without imposing
restrictions arising under the federal securities laws on the purchases
thereof in a period of three consecutive months, then the Company shall,
so long as it meets the current public information requirements of Rule
144, thereafter no longer be required to maintain the registration of
Registrable Securities pursuant to this Agreement;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
until such date as is three years after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 6
Securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Investors
who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until such date as
is the earlier of three years after the date such Registration Statement
is first ordered effective by the SEC or is three years after the Initial
Investor acquired the Shares and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (I) qualify
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (II) subject itself to
general taxation in any such jurisdiction, (III) file a general consent to
service of process in any such jurisdiction, (IV) provide any undertakings
that cause more than nominal expense or burden to the Company or (V) make
any change in its charter or by-laws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests
of the Company and its stockholders;
(e) in the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters
for the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant
to such registration of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of
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December 31, 1996
Page 7
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold pursuant
to such registration (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the SEC of any stop order or
other suspension of effectiveness of the Registration Statement at the
earliest possible time;
(h) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of
the Registrable Securities being sold pursuant to such registration to
review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC,
and shall not file any document in a form to which such counsel reasonably
objects;
(i) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering the fiscal year
period beginning not later than the first day of the Company's fiscal
quarter next following the date of the Registration Statement;
(j) at the request of the Investors who hold a majority in interest
of the Registrable Securities being sold pursuant to such registration,
furnish on the date that Registrable Securities are delivered to an
underwriter for sale in connection with the Registration Statement (i) a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters; and (ii) an opinion, dated such
date, from counsel representing the Company for purposes of such
Registration Statement, in form and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and
Investors;
(k) make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the Registration Statement,
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 8
and any attorney, accountant or other agent retained by any such Investor
or underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith
to be confidential, and of which determination the Inspectors are so
notified, unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor
agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from
a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 9
national securities exchange, which shall include the Nasdaq Small-Cap
Market, and on each additional national securities exchange on which
similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules
of such exchange, or (ii) secure designation of all the Registrable
Securities covered by the Registration Statement as a National Association
of Securities Dealers Automated Quotations System ("Nasdaq") "national
market system security" within the meaning of Rule 11Aa2-1 of the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Nasdaq
National Market System or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to secure listing on a
national securities exchange or Nasdaq authorization and quotation for
such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities;
(m) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable Securities
being sold and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request; and
(o) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended
method of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of the Registrable
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 10
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least fifteen (15)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the
Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of such Investor's Registrable Securities
included in the Registration Statement. If within five (5) business days
prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services
of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(f) or
3(g) and, if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 11
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions and other fees and expenses of investment bankers and any
manager or managers of such underwriting and legal expenses of the
underwriter applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of
this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than underwriting
discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees,
printers and accounting fees and the fees and disbursements of counsel for
the Company, shall be borne by the Company; provided, however, that the
Investors shall bear the fees and out-of-pocket expenses of the one legal
counsel selected by the Investors pursuant to Section 3(h) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the
meaning of the Securities Act or the Exchange Act, any underwriter (as
defined in the Securities Act) for the Investors, the directors, if any,
of such underwriter and the officers, if any, of such underwriter, and
each person, if any, who controls any such underwriter within the meaning
of the Securities Act or the Exchange Act (each, an "Indemnified Person"),
against any losses, claims, damages, expenses or liabilities (joint or
several) (collectively "Claims") to which any of them become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment
thereof or the omission or alleged omission to state therein a material
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 12
fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law or any rule
or regulation (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth
in Section 6 (d) with respect to the number of legal counsel, the Company
shall reimburse the Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and payable,
for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) (I) shall not apply to a Claim arising out
of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof;
(II) with respect to any preliminary prospectus shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section
3(c) hereof; and (III) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Persons and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section
6(a), the Company, each of its directors, each of its officers who signs
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 13
the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person
who controls such stockholder or underwriter within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act
or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs (I) in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement or (II) the Investor's
violation of Rules 10-b-6 or 10-b-7 under the Exchange Act; and such
Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Section
6(b) for only that amount of a Claim as does not exceed the net proceeds
to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to
any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing by such persons expressly for inclusion in the
Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against
any indemnifying party under this Section 6, deliver to the indemnifying
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 14
party a written notice of the commencement thereof and this indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that
an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and other party represented by
such counsel in such proceeding. The Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be
selected by the Investors holding a majority in interest of the
Registrable Securities. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except
to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability
is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for
herein is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted
by law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration, until such
time as the Investors have sold all the Registrable Securities pursuant to
a Registration Statement or Rule 144, the Company agrees to:
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 15
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as
may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to transferees or assignees of
all or any portion of such securities only if: (a) the Company is, within
a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee
and (ii) the securities with respect to which such registration rights are
being transferred or assigned, (b) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state
securities laws, and (c) at or before the time the Company received the
written notice contemplated by clause (a) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who hold a majority in interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of the
<PAGE>
Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 16
Company's agreements and representations set forth in this Agreement,
entitled to enforce the terms thereof, and to indemnification for any
damages resulting to Shoreline Pacific from any actual or threatened
breach thereof by the Company, both in Shoreline Pacific's personal
capacity and, should Shoreline Pacific so elect, on behalf of the
Investor.
12. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of
such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested,
addressed (i) if to the Company, at VIRAGEN, INC., 2343 West 76th Street,
Hialeah, Florida, 33016, Attention: Gerald Smith, Chairman and President,
(ii) if to the Initial Investor, at the address set forth under its name
in the Subscription Agreement with such copies as required pursuant to the
notice provisions of the Subscription Agreement and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing
to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 12(b), and shall be
effective, when personally delivered, upon receipt, and when so sent by
certified mail, four business days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Florida applicable to the
agreements made and to be performed entirely within such state, without
giving effect to rules governing the conflict of laws. In the event that
any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
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Viragen, Inc./P.R.I.F., L.P. Registration Rights Agreement
December 31, 1996
Page 17
hereof which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in the Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
day and year first above written.
VIRAGEN, INC. P.R.I.F., L.P.
By_____________________________________ By_______________________________
Dennis Healey Henry Brachfeld
Executive Vice President and CFO President, HB and Co., Inc.
General Partner, P.R.I.F., L.P.
<PAGE>
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECURITIES ACT OR SUCH OFFER, SALE OR TRANSFER IS EXEMPT
FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: December 31,1996
Warrant
to Purchase 375,000 Shares
of Common Stock, $.01 Par Value Per Share
VIRAGEN, INC., a Delaware corporation (the "Company"), hereby certifies
that P.R.I.F., L.P., its permissible transferees, designees, successors and
assigns (collectively, the "Holder"), for value received, is entitled to
purchase from the Company at any time commencing on the day following the date
that the registration statement for the common shares underlying this Common
Stock Purchase Warrant Certificate ("Warrant" or "Warrant Certificate") has been
declared effective by the Securities and Exchange Commission, and terminating
June 30, 1998, three hundred and seventy-five thousand (375,000) shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), at $6.00 per share (the "Exercise Price"); except as otherwise provided
in Section 2 hereof.
1. Exercise of Warrants.
(a) Upon presentation and surrender of this Common Stock Purchase Warrant
Certificate, with the attached Election to Purchase form duly executed, at the
principal office of the Company at 2343 West 76th Street, Hialeah, Florida,
33016, together with a check payable to the Company in the amount of the
Exercise Price multiplied by the number of Shares being purchased, the Company,
or the Company's Transfer Agent as the case may be, shall deliver to the Holder
hereof, certificates of Common Stock which in the aggregate represent the number
of Shares being purchased. All or less than all of the Warrants represented by
this Warrant Certificate may be exercised and, in case of the exercise of less
than all, the Company, upon surrender hereof, will deliver to the Holder a new
Warrant Certificate or Certificates of like tenor and dated the date hereof
entitling said Holder to purchase the number of Shares represented by this
Warrant Certificate which have not been exercised and to receive registration
rights with respect to such Shares.
(b) Notwithstanding any other provision of this Warrant, in no event shall
the Holder be entitled at any time to exercise any portion of this Warrant in
excess of that portion of this Warrant upon exercise of which sum of (1) the
number of Common Shares beneficially owned by such Holder and any person whose
beneficial ownership of Common Shares would be aggregated with such Holder's
beneficial ownership of Common Shares for the purposes of Section 13(d) of the
<PAGE>
Common Stock Purchase Warrant Certificate
Page 2
Securities Exchange Act of 1934, as amended (the "1934 Act"), and Regulation
13D-G thereunder (other than shares of Common Stock deemed beneficially owned
through the ownership of unconverted Series D Preferred Shares of the Company
and accrued and unpaid dividends thereon and through the ownership of
unexercised Warrants) and (2) the number of Common Shares issuable upon exercise
of the portion of this Warrant with respect to which the determination in this
Section 1(b) is being made, would result in beneficial ownership by the Holder
of more than 4.9% of the outstanding Common Shares. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act, and Regulation 13D-G thereunder,
except as otherwise provided in clause (1) of the immediately preceding
sentence.
2. Potential Decrease to Exercise Price. In the event the Company
contracts to issue any additional shares of its common stock or securities
convertible into, exchangeable for, or otherwise entitling the Holders thereof
to acquire shares of its common stock (each a "Prospective Financing"), within
180 days from the closing of the transaction pursuant to which this Warrant
Certificate was issued ("Closing"), the exercise price of this Warrant
Certificate shall be reduced as follows:
(a) if a Prospective Financing is contracted for within 90 days of
the Closing , the exercise price of the Warrants shall be $1.00 U.S.;
(b) if a Prospective Financing is contracted for on or after 90 days
from the Closing but before 120 days from the Closing, the exercise price
of the Warrants shall be $2.00 U.S.;
(c) if a Prospective Financing is contracted for on or after 120
days from the Closing but before 150 days from the Closing, the exercise
price of the Warrants shall be $3.00 U.S.;
(d) if a Prospective Financing is contracted for on or after 150
days from the Closing but before 180 days from the Closing, the exercise
price of the Warrants shall be $4.00 U.S.; and
(e) if a Prospective Financing is contracted for on after 180 days
from the Closing, the exercise price of the Warrants shall be $6.00 U.S.;
provided, however, that the above provisions will not apply to certain
Prospective Financings as set forth in clauses (a), (b) and (c) of Section 5(i)
of the Private Securities Subscription Agreement between the original parties
hereto dated December 31, 1996.
<PAGE>
Common Stock Purchase Warrant Certificate
Page 3
3. Exchange and Transfer. This Warrant Certificate at any time prior to
the exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Warrant Certificates of like tenor registered in
the name of the same Holder, for another Warrant Certificate or Certificates of
like tenor in the name of such Holder exercisable for the aggregate number of
Shares as the Warrant Certificate or Certificates surrendered.
4. Rights and Obligations of Holders of this Warrant Certificate.
(a) The Holder of this Warrant Certificate shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, that in the event any certificate representing shares
of Common Stock or other securities is issued to the Holder hereof upon exercise
of some or all of the Warrants, such Holder shall, for all purposes, be deemed
to have become the Holder of record of such Common Stock on the date on which
this Warrant Certificate, together with a duly executed Election to Purchase,
was surrendered and payment of the aggregate Exercise Price was made,
irrespective of the date of delivery of such share certificate.
(b) In case the Company shall (i) pay a dividend in Common Stock or make a
distribution in Common Stock, (ii) subdivide its outstanding Common Stock into a
greater number of shares, or (iii) combine its outstanding Common Stock into a
smaller number of shares (including a recapitalization in connection with a
consolidation or merger in which the Company is the continuing corporation),
then (x) the Exercise Price on the record date of such division or the effective
date of such action shall be adjusted by multiplying such Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event and
(y) the number of shares of Common Stock for which this Warrant Certificate may
be exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(c) In case of any consolidation or merger of the Company with or into
another corporation (other than any consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification
of the outstanding shares of Common Stock or the conversion of such outstanding
shares of Common Stock into shares or other stock or other securities or
property), or the sale or transfer of the property of the Company as an entirety
or substantially as an entirety, there shall be deliverable upon exercise of the
Warrant Certificate (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property to
which a Holder of the number of shares of Common Stock which would otherwise
have been deliverable upon the exercise of this Warrant Certificate would have
been entitled upon such action if this Warrant Certificate had been exercised
immediately prior to such action.
<PAGE>
Common Stock Purchase Warrant Certificate
Page 4
5. Common Stock.
(a) The Company covenants and agrees that all shares of Common Stock
issuable upon exercise of this Warrant Certificate will, upon delivery to the
Holder, be duly and validly authorized and issued, fully-paid and
non-assessable.
(b) The Company acknowledges that it currently has an insufficient number
of authorized shares of Common Stock available for issuance upon conversion of
this Warrant Certificate. The Company warrants and agrees to take all steps
reasonably necessary to gain such approval as may be required to issue
additional shares of Common Stock to the Holder in accordance with the terms of
this Warrant Certificate.
6. Registration Rights. In the event the Company files a Registration
Statement with the Securities and Exchange Commission for registration of any
shares of the Company's Common Stock, the Company agrees to include the number
of shares of Common Stock represented by this Warrant Certificate in any such
Registration Statement.
7. Issuance of Certificates. As soon as possible after full or partial
exercise of this Warrant Certificate, but in any event not more than three (3)
business days, the Company, at its expense, will cause to be issued in the name
of and delivered to the Holder of this Warrant Certificate, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock to which that Holder shall be entitled on such exercise. No fractional
shares will be issued on exercise of this Warrant Certificate. If on any
exercise of this Warrant Certificate a fraction of a share results, the Company
will pay the cash value of that fractional share, calculated on the basis of the
Exercise Price. Prior to registration of the shares of Common Stock underlying
this Warrant Certificate, as provided in Section 5 hereof, all such certificates
shall bear a restrictive legend to the effect that the Shares represented by
such certificate have not been registered under the Securities Act of 1933, as
amended, and the Shares may not be sold or transferred in the absence of such
registration or an exemption therefrom, such legend to be substantially in the
form of the bold face language appearing on Page 1 of this Warrant Certificate.
8. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, each transferee hereof and any Holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation of the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Act"). Furthermore, it shall be a condition to the
<PAGE>
Common Stock Purchase Warrant Certificate
Page 5
transfer of the Warrants that any transferee thereof deliver to the Company his
or its written agreement to accept and be bound by all of the terms and
conditions contained in this Warrant Certificate.
9. Notices. Except as otherwise specified herein to the contrary,
all notices, requests, demands and other communications required or desired to
be given hereunder shall only be effective if given in writing by certified or
registered mail, return receipt requested, postage prepaid, or by U. S. express
mail service or private overnight mail service (e.g. Federal Express). Any such
notice shall be deemed to have been given (a) on the business day immediately
subsequent to mailing, if sent by U. S. express mail service or private
overnight mail service, or (b) three (3) business days following the mailing
thereof, if mailed by certified or registered mail, postage prepaid, return
receipt requested, and all such notices shall be sent to the following addresses
(or to such other address or addresses as a party may have advised the other in
the manner provided in this Section 9):
If to the Company: VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016
If to the Holder: P.R.I.F., L.P.
175 Bloor Street East
South Tower, 6th Floor
Toronto, Ontario
M4W 3R8, Canada
With copy to: Refco Capital Markets, Ltd.
Attn: Santo Maggio
Suite No. 542 48 Par-La-Ville Road
Hamilton HM 11
Bermuda
Telephone: (441) 295-6960
Facsimile: (441) 295-8684
10. Governing Law. This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by the laws of the State
of New York without giving effect to the conflicts of laws provisions.
11. Successors and Assigns. This Warrant Certificate shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
Common Stock Purchase Warrant Certificate
Page 6
12. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not be a part of this
Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or by facsimile, by one of its officers thereunto duly
authorized.
VIRAGEN, INC.
Date:_________________ By:_________________________________
Dennis Healey
Executive Vice President and CFO
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise _______ of
the Warrants represented by this Common Stock Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants
and requests that certificates for securities be issued in the name of:
-------------------------------------------------
(Please type or print name and address)
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
(Social security or tax identification number)
and delivered to _________________________________________________________
__________________________________________________________________________
(Please type or print name and address)
and, if such number of Warrants shall not be all the Warrants evidenced by this
Common Stock Warrant Certificate, that a new Common Stock Warrant Certificate
for the balance of such Warrants be registered in the name of, and delivered to,
the Holder at the address stated below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ by check or money order payable in United States currency to the
order of Viragen, Inc.
[HOLDER]
Dated:___________________ By:_________________________________
Name:
Title:
____________________________________
(Address)
____________________________________
____________________________________
<PAGE>
(Social security or tax identification
number)
