VIRAGEN INC, PRE 14A, 1997-01-22

VIRAGEN INC
PRE 14A, 1997-01-22
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the registrant [X]
Filed by party other than the registrant [ ]

Check the appropriate box:

[X] Preliminary proxy statement [Information Statement]
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule s 14a-11(c)
or s 240.14a-12

VIRAGEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11 (1) Title of each class of securities to which transaction
applies:

(2) Aggregate number of securities to which transactions applies:

NOT APPLICABLE
- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

NOT APPLICABLE
- --------------------------------------------------------------------------------

*6(4)Proposed maximum aggregate value of transaction:

NOT APPLICABLE
- --------------------------------------------------------------------------------

<PAGE> 2

(5) Total fee paid:

NOT APPLICABLE
- --------------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materals

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or Schedule and the date of its filing.

(1) Amount previously paid:

- -------------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

- -------------------------------------------------------------------------------

(3) Filing party:

- -------------------------------------------------------------------------------

(4) Date filed:

- -------------------------------------------------------------------------------

<PAGE> 3

VIRAGEN, INC.
2343 WEST 76TH STREET
HIALEAH, FLORIDA 33016

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 28, 1997

TO THE STOCKHOLDERS OF VIRAGEN, INC.

PLEASE TAKE NOTICE that the 1996 Annual Meeting of Stockholders of Viragen,
Inc., a Florida corporation (the "Company"), will be held at Signature Grand,
6900 State Road 84, Davie FL 33317 on Friday, February 28, 1997 at 3:00 P.M.,
Eastern Standard Time, or at any and all adjournments thereof, for the following
purposes:

1. To elect nine directors to the Board of Directors until the
next annual meeting of stockholders of the Company and until
their successors have been elected and qualified;

2. To adopt the Company's 1997 Stock Option Plan, as adopted by
the Board of Directors on January 21, 1997;

3. To amend the Company's Certificate of Incorporation to
increase the authorized capital stock of the Company.

4. To ratify the appointment of independent auditors; and

5. To transact such other business as may properly come before
the meeting or any adjournment thereof.

The Proxy Statement dated February 6, 1997 is attached.

The Board of Directors has fixed the close of business on January 31, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting. The financial statements of the Company for the fiscal
year ended June 30, 1996 are contained in the accompanying Annual Report on Form
10-K/A1. The Annual Report does not form any part of the material for the
solicitation of proxies. Stockholders who do not expect to be present at the
meeting are urged to complete, date, sign and return the enclosed proxy. No
postage is required if the enclosed envelope is used and mailed in the United
States.

BY ORDER OF THE BOARD OF DIRECTORS,

Dennis W. Healey, Secretary

Hialeah, Florida
February 6, 1997

THIS IS AN IMPORTANT MEETING, AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AT THEIR
EARLIEST CONVENIENCE. PROMPTNESS IN RETURNING THE EXECUTED PROXY CARD WILL BE
APPRECIATED. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.

<PAGE> 4

VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Viragen, Inc., a Delaware corporation (the "Company"), of
proxies for use at the 1996 Annual Meeting of Stockholders ("Annual Meeting") to
be held at Signature Grand, 6900 State Road 84, Davie FL 33317 on Friday,
February 28, 1997 at 3:00 P.M., Eastern Standard Time, or at any and all
adjournments thereof. The cost of this solicitation will be borne by the
Company. Directors, officers and employees of the Company may solicit proxies by
telephone, telegraph or personal interview. The Annual Report on Form 10-K/A1 of
the Company for the fiscal year ended June 30, 1996, is being mailed together
with this Proxy Statement and form of Proxy. The date of mailing of this Proxy
Statement and form of Proxy is approximately February 6, 1997.

OUTSTANDING STOCK AND VOTING RIGHTS

In accordance with the By-Laws of the Company, the Board of Directors has fixed
the close of business on January 31, 1997, as the record date for determining
the stockholders entitled to notice of, and to vote at, the Annual Meeting. Only
stockholders of record on that date will be entitled to vote. A stockholder who
submits a proxy on the accompanying form has the power to revoke it by notice of
revocation directed to the proxy holders of the Company at any time before it is
voted. Unless authority is withheld in writing, proxies which are properly
executed will be voted for the proposals thereon. Although a stockholder may
have given a proxy, such stockholder may nevertheless attend the meeting, revoke
the proxy and vote in person. The election of the directors nominated, the
appointment of the Company's auditors, the approval of the amendments to the
Company's Certificate of Incorporation to increase the Company's authorized
common stock from 50,000,000 shares to 75,000,000 shares, and the approval of
the newly established 1997 Stock Option Plan will require the affirmative vote
of a majority of the shares of the Company's Common Stock voting at the Annual
Meeting in person or by proxy.

As of January 31, 1997, the record date for determining the stockholders of the
Company entitled to vote at the Annual Meeting, approximately ______________
shares of the Common Stock of the Company, $.01 par value ("Common Stock"), were
issued and outstanding. Each share of Common Stock entitles the holder to one
vote on all matters brought before the Annual Meeting. The quorum necessary to
conduct business at the Annual Meeting consists of a majority of the outstanding
shares of Common Stock as of the record date. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum and
have the effect of a negative vote on the ratification of the appointment of the
Company's independent auditors, on the approval of the amendments to the
Company's Certificate of Incorporation to increase the Company's authorized
common stock, and on the adoption of the 1997 Stock Option Plan.

<PAGE> 5

Abstentions and broker non-votes have no effect for the election of directors.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
Company's Common Stock beneficially owned at January 15, 1997 (i) by each person
who is known by the Company to own beneficially or exercise voting or
dispositive control over 5% or more the Company's Common Stock on the record
date based upon certain reports regarding ownership filed with the Securities
and Exchange Commission (the "SEC") in accordance with Sections 13(d) or 13(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) by
each of the Company's directors, and (iii) by all officers and directors as a
group. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
Except as otherwise indicated the business address for the persons set forth
below is 2343 West 76th Street, Hialeah, Florida 33016. At January 15, 1997
there were 38,639,591 shares of Common Stock of the Company outstanding.

<TABLE>
<CAPTION>
Amount
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership(1) Class(2)
- ------------------- ------------ --------
<S> <C> <C>
Gerald Smith 2,000,000 5.2%
Robert H. Zeiger 1,000,000 2.6%
Dennis W. Healey 675,000 1.7%
Charles F. Fistel 876,255 2.3%
Peter D. Fischbein 400,000 1.0%
Sidney Dworkin, Ph.D. 325,244 0.8%
Jay M. Haft 197,744 0.5%
William B. Saeger 1,883,855 4.9%
Fred D. Hirt 25,000 0.1%
Officers & Directors
(as a Group 9 persons) 7,733,098 20.1%
</TABLE>

(1) Based upon information furnished to the Company by the principal
security holders or obtained from the stock transfer books of the
Company. Other than indicated in the notes, the Company has been
informed that such persons have sole voting and dispositive power with
respect to their shares.

(2) Based on 38,639,591 shares of Common Stock outstanding as of January
15, 1997. Exclusive of 11,289 shares of Common Stock reserved for
issuance pursuant to conversion of 2,650 outstanding shares of
Preferred Stock each convertible into 4.26 shares of Common Stock; and
(ii) 13,486,703 shares of Common Stock reserved for issuance
pursuant to the conversion of convertible preferred stock and the
exercise of options and warrants of the Company.

<PAGE> 6

(3) Mr. Smith is Chairman of the Board of Directors and President of the
Company. Includes (i) 350,000 shares owned directly by Mr. Smith; (ii)
50,000 options exercisable at $1.00 per share granted to all Directors
in August 1994; and (iii) 1,600,000 options exercisable at $.50 per
share pursuant to the provisions of the Company's 1995 Amended Stock
Option Plan (the "1995 Plan").

(4) Mr Zeiger is Chief Executive Officer, Chief Operating Officer and a
Director of the Company. Includes 1,000,000 options exercisable at
$.96 per share pursuant to Mr. Zeiger's employment agreement with the
Company.

(5) Mr. Healey is Executive Vice President, Treasurer, Chief Financial
Officer, Secretary and a Director of the Company. Includes (i) 125,000
shares held in Mr. Healey's name; (ii) 50,000 options exercisable at
$1.00 per share granted to all Directors in August 1994; and (iii)
500,000 options exercisable at $.50 per share granted pursuant to the
provisions of the 1995 Plan.

(6) Mr. Fistel is an Executive Vice President and was elected a Director of
the Company in June 1996. Includes (i) 215,455 owned directly by Mr.
Fistel; (ii) 300,000 options exercisable at $.30 per share; (iii)
110,000 options exercisable at $.50 per share pursuant to the 1995
Plan; and (iv) 250,000 options exercisable at $3.73 per share granted
pursuant to Mr. Fistel's 1996 Employment Agreement.

(7) Mr. Fischbein is a Director of the Company. Includes (i) 125,000 shares
held in Mr. Fischbein's name; (ii) 50,000 options exercisable at $1.00
per share granted to all Directors in August 1994; and (iii) 225,000
options exercisable at $.50 per share granted pursuant to the
provisions of the 1995 Plan.

(8) Mr. Dworkin is a Director of the Company. Includes (i) 175,244 shares
owned directly by Mr. Dworkin and his wife; (ii) 50,000 options
exercisable at $1.00 per share granted to all Directors in August 1994;
and (iii) 100,000 options exercisable at $.50 per share granted
pursuant to the provisions of the 1995 Plan.

(9) Mr. Haft is a Director of the Company. Includes (i) 47,744 shares owned
directly by Mr. Haft; (ii) 50,000 options exercisable at $1.00 per
share granted to all Directors in August 1994; and (iii) 100,000
options exercisable at $.50 per share granted pursuant to the
provisions of the 1995 Plan.

(10) Mr. Saeger is a Director of the Company. Includes (i) 89,500 shares
owned directly by Mr. Saeger; (ii) 1,644,355 shares held by
Fundamental Management Corp. and Hedge Fund Management. Mr. Saeger
holds a controlling position as Fund Manager of the Fundamental Fund
Group, holder of these shares and is considered a beneficial owner;
(iii) 50,000 options exercisable at $1.00 per share granted to all
Directors in August 1994; and (iii) 100,000 options exercisable at
$.50 per share granted pursuant to the provisions of the 1995 Plan.

(11) Mr. Hirt is a Director of the Company. Includes 25,000 options
exercisable at $3.96 per share granted in June, 1996 pursuant to the
provisions of the 1995 Plan.

Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten (10%) stockholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished

3
<PAGE> 7

to the Company and written representation that no other reports were required,
during the fiscal year ended June 30, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
(10%) beneficial owners were completed except that Mr. Robert Zeiger, the
Company's Chief Executive Officer, Chief Operating Officer and a Director of the
Company, did not file one report, covering one transaction, in a timely manner.

ELECTION OF DIRECTORS

The Board of Directors is responsible for the overall affairs of the Company.
The names of the nominees, their principal occupations and the year in which
they became Directors, are set forth below. Each Director is elected for a
period of one year at the Company's annual meeting of stockholders. Executive
officers are elected annually and, except to the extent governed by employment
contracts, serve at the discretion of the Board of Directors.

NOMINEES FOR ELECTION

<TABLE>
<CAPTION>
Served as
Position with Officer and/or
Name Age the Company Director Since
- ---- --- ----------- --------------
<S> <C> <C> <C>
Gerald Smith 66 Chairman of the Board and 1994
President 1993
Robert H. Zeiger 52 Chief Executive Officer 1995
and Director
Dennis W. Healey 48 Executive Vice President, 1993
Treasurer, Chief Financial 1980
Officer, Secretary and 1994
Director 1984
Charles F. Fistel 35 Executive Vice President and 1994
Director 1996
Peter D. Fischbein 56 Director 1981
Sidney Dworkin, Ph.D. 74 Director 1994
Jay M. Haft 60 Director 1994
William B. Saeger 44 Director 1994
Fred D. Hirt 53 Director 1996
</TABLE>

GERALD SMITH, in accordance with the February 1993 Stock Agreement, became a
Director on February 5, 1993, the date of the Initial Purchase by Cytoferon
Corp. ("Cytoferon"). On May 12, 1993, Mr. Smith became President of the
Company. In June 1994, Mr. Healey relinquished his position as Chairman of the
Board of Directors in favor of Mr. Smith. Since 1982, he was a principal
stockholder, President, Chief Executive Officer and director of Business
Development Corp ("BDC"), which has served as a managing entity and consultant
to several high technology ventures including Compupix Technology Joint
Venture. From August 1991 to December 1991, Mr. Smith was the Chief Executive
Officer of Electronic Imagery, Inc., a company engaged in the development of
imaging software. Mr. Smith is also the President, Chief Executive Officer

4
<PAGE> 8

and a director of Cinescopic Corporation and International Database Service,
Inc., computer-oriented companies which developed database technology using the
personal computer for audio, video, animation and real time communication. Mr.
Smith has discontinued BDC's operations in order to devote all of his time to
the Company. See Transactions with Management. Mr. Smith is also Chairman of the
Board and President of Viragen Europe, Ltd. ("VEL"), a majority owned publicly
traded subsidiary of the Company (NASDAQ; VERP) of which the Company holds
approximately 72% of the outstanding common stock of VEL and Viragen U.S.A.,
Inc. ("VUSA"), a subsidiary of the Company.

ROBERT H. ZEIGER was appointed Chief Executive Officer and Chief Operating
Officer and was elected as a Director in May 1995. Mr. Zeiger is a
pharmaceutical executive. From 1985 to 1994, Mr. Zeiger was employed by GLAXO,
Inc., Research Triangle Park, North Carolina, serving as Vice President and
General Manager of their Dermatological Division from 1985 to 1988, Vice
President and General Manager of Alan & Hansburgs from 1988 to 1991, and Vice
President and General Manager of Glaxo Pharmaceuticals from 1991 to 1994. Mr.
Zeiger also served as Vice President, Marketing and Sales with Stiefel
Laboratories, Inc., Coral Gables, Florida, from 1979 to 1985, as National Sales
Manager to Knoll Pharmaceutical Company, Whipping, New Jersey from 1971 to 1979.
Mr. Zeiger is also Chief Executive Officer and a Director of VEL.

DENNIS W. HEALEY is a Certified Public Accountant and was appointed Chairman of
the Board and Chief Executive Officer on April 13, 1993. In June 1994, Mr.
Healey relinquished his position as Chairman of the Board to Mr. Smith and in
July 1994, relinquished the position of Chief Executive Officer upon the
employment of Mr. Fistel. Upon Gerald Smith becoming President on May 12,
1993, Mr. Healey became Executive Vice President and has served as Chief
Financial Officer and Treasurer of the Company since 1980. Mr. Healey was
appointed Secretary in 1994. Until his resignation in July 1996, Mr. Healey
served as Senior Vice President, Principal Financial Officer and Treasurer of
Medicore, Inc. ("Medicore") and Executive Vice President of its Techdyne
affiliate ("Techdyne"). He also served as Treasurer of most of Medicore's
subsidiaries and as a Vice President of Dialysis Corporation of America
("DCA"), a subsidiary of Medicore and Secretary, Treasurer and director of
other DCA subsidiaries. Mr. Healey is also Executive Vice President,
Treasurer, Secretary and a Director of VEL and VUSA.

CHARLES F. FISTEL was appointed Chief Executive Officer of the Company upon his
employment in July 1994, which position he relinquished to Mr. Robert H. Zeiger
in May 1995, becoming an Executive Vice President of the Company. Mr. Fistel
was elected a Director of the Company in June 1996. Mr. Fistel, prior to
joining the Company, served for two years as an independent financial advisor
to publicly-traded and privately-held emerging growth companies. Prior
thereto, between 1986 and 1992, he served as Executive Vice President, Chief
Financial Officer and a director of Tiger Direct, Inc. (formerly BLOC
Development Corporation), a Miami, Florida-based publicly-traded computer
technology development, marketing and distribution company. From 1981 to 1986,
Mr. Fistel, who is also a Certified Public Accountant, actively practiced
public accounting. Mr. Fistel is also Executive Vice President and a Director
of VUSA.

5
<PAGE> 9

PETER D. FISCHBEIN is an attorney who has been practicing law for approximately
30 years. Mr. Fischbein served as the Company's Secretary between May and
December 1994. His former firm on occasion represented the Company, Medicore
and the Viragen Research Associates Limited Partnership ("Limited Partnership")
which has certain contracts with the Company. Mr. Fischbein is also a director
of Medicore (since 1984) and Techdyne (since 1985). Mr. Fischbein has been a
general partner of several limited partnerships engaged in oil exploration and
real estate development.

SIDNEY DWORKIN, PH.D., elected a Director in August 1994, was a founder, former
President, Chief Executive Officer and Chairman of Revco, Inc. Between 1987 and
the present, Dr. Dworkin has also served as Chief Executive Officer of Stonegate
Trading, Inc., an importer and exporter of various health, beauty aids,
groceries and sundries. Between 1988 and the present, Dr. Dworkin has served as
Chairman of the Board of Advanced Modular Systems, which is engaged in the sale
of modular buildings. Between June 1993 and the present, Dr. Dworkin has also
served as Chairman of Global International, Inc., which is involved in the sale
and leasing of modular buildings to hospitals and radiology groups. Between 1993
and the present, Dr. Dworkin has also served as Chairman of the Board of Comtrex
Systems, which is engaged in the development and sale of programmable cash
registers. Dr. Dworkin also serves on the Board of Directors of CCA Industries,
Inc., Interactive Technologies, Inc. and Northern Technologies International
Corporation, all of which are publicly-traded companies.

JAY M. HAFT, elected a Director in August 1994, is an attorney and of counsel to
Parker Duryee Rosoff & Haft, New York, NY and has been a practicing lawyer since
1959. Mr. Haft has specialized in the representation of emerging growth
companies, and has participated in fund raising for a number of leading edge
medical technology companies and is Managing General Partner of Venture Capital
Associates, Ltd. and GenAm "1" Venture Fund, a domestic and international
venture capital fund, respectively.

WILLIAM B. SAEGER, elected a Director in August 1994, is a Certified Public
Accountant with experience in corporate strategic planning, financial and tax
planning, acquisitions, corporate capitalizations, analysis and management of
financial assets. Mr. Saeger has served as a portfolio manager and analyst for a
number of funds and is currently Vice President of Fundamental Management and
serves as a director of Telemac Cellular Corp. Mr. Saeger has also written for
financial publications on federal taxation and investment portfolio management.

FRED D. HIRT, elected a Director in June 1996, is a health care executive and
serves as the President and Chief Executive Officer of Mount Sinai Medical
Center in Miami Beach, Florida. Mr. Hirt is active in numerous community
healthcare and charitable organizations and serves on many of their Board of
Directors.

There is no family relationship between any of the officers and directors.

The term of office for the Company's Directors is one year and they serve until
the next annual meeting of stockholders.

<PAGE> 10

On August 15, 1994, the Company expanded its Board of Directors to include an
Executive Committee, which consists of Messrs. Smith, Zeiger, Healey and Fistel.
The Executive Committee is empowered to act for the full Board in intervals
between Board of Director meetings, with the exception of certain matters which
by law may not be delegated. The Executive Committee meets, as necessary, and
all actions by the Company are to be reported at the next Board of Directors
meeting. The Executive Committee met twenty four times during fiscal 1996 with
all members attended the meetings.

The Company does not have a standing Nominating Committee. While the Company
does have a standing Audit and Compensation Committee, currently the Company's
Board of Directors act as a whole to (i) oversee the Company's audit activities
to protect against unsound and improper practices and to furnish adequate
protection to all assets and records of the Company; and (ii) determine officer
compensation programs include salaries and other forms of compensation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

The Company's Board of Directors meet as a whole to make decisions
concerning the compensation of its executive officers and directors. Currently,
there are nine members of the Company's Board of Director, five of whom are
outside directors and four who are inside Directors. The four inside Directors
include Gerald Smith, the Company's Chairman of the Board and President, Robert
H. Zeiger, the Company's Chief Executive Officer, Dennis W. Healey, an Executive
Vice President, Treasurer, Chief Financial Officer, and Secretary of the
Company, and Charles F. Fistel, an Executive Vice President of the Company. Each
of these individuals also serves in similar capacities for one or more of the
Company's subsidiaries. Each of the individuals abstain from any discussions or
votes concerning their respective salaries and other forms of compensation
received by each of them from the Company. Discussions concerning the
compensation received by each of these persons, along with a related
transactions are set forth elsewhere in this Notice and Annual Meeting and Proxy
Statement.

EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under the rules
established by the Securities and Exchange Commission, the Company is required
to provide certain data and information in regard to the compensation and
benefits provided to the Company's Chief Executive Officer (CEO) and other
executive officers. The disclosure requirements for the CEO and executive
officers include the use of tables and a report explaining the rationale and
considerations that led to the fundamental compensation decision affecting those
individuals.

COMPENSATION REPORT. The Compensation Committee and/or the Board of Directors
are responsible for establishing compensation levels and benefits for the
executive officers of the Company. The Compensation Committee and/or Board of
Directors are also responsible for reviewing recommendations made by management
regarding compensation, including stock options, and benefits for other
employees.

EXECUTIVE COMPENSATION POLICY. For the last fiscal year, the goals established
by the Compensation Committee and The Board for executive compensation are as
follows:

o to provide a compensation package which would attract and retain
scientific experienced pharmaceutical and administrative personnel;

o to maintain reasonable yet competitive based salaries while
conserving the liquid assets of the Company;

o provide an environment where innovation, dedication and success
are rewarded; and

o provide participation in stock appreciation as part of an incentive
based compensation package.

The performance of executive officers is evaluated routinely by the Board of
Directors as a whole. The Board of Directors considers each employee's total
compensation package, including base salary, stock options and other benefits
as provided in their respective employment agreements.

CHIEF EXECUTIVE OFFICER. The Chief Executive Officer entered into a two-year
employment agreement in May 1995, the terms of which provided for the bulk of
his compensation to be derived from appreciation in the Company stock and
market value. His compensation consists of a base annual salary of $120,000 and
1,000,000 stock options at the then current market value of $.96 per share,
vesting over the term of his employment agreement. The Compensation Committee
and the Board of Directors felt that this structure, heavily weighted towards
performance compensation, would provide the motivational structure necessary
for the competitive environment in which the Company operates.

OTHER EXECUTIVE OFFICERS. As with the compensation of the CEO, the Compensation
Committee and the Board of Directors evaluate and establish the compensation
packages for other executive officers of the Company. These executives are
evaluated routinely based on the effectiveness of their efforts in their
respective areas of responsibility as well as their contribution to achieving
the overall goals of the Company. The Compensation Committee and Board of
Directors have structured compensation packages so that the base salaries are
conservative by pharmaceutical industry standards. The emphasis is on
compensation through the issuance of stock options. As a consequence, the
executive officers may maximize their total compensation through the attainment
of corporate goals as reflected in appreciated stock values.

<PAGE> 11

OTHER EXECUTIVE OFFICERS

Submitted by the Outside Directors of the Company:

Peter D. Fischbein
Sidney Dworkin, Ph.D.
Jay M. Haft
William B. Saeger
Fred D. Hirt

SUMMARY COMPENSATION

The following table sets forth information concerning the compensation and
employment agreements of the Chief Executive Officers of the Company and two
other most highly compensated executive officers as of June 30, 1996.

<TABLE>
<CAPTION>
Restricted All Other
Name and Other Annual Stock Options/ LTIP Other
Principal Position Year Salary Bonus Compensation Awards SARS(#) Payouts Compensation
------------------ ---- ------ ----- ------------ ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Smith, Chairman 1996 $154,615 $7,500 $14,000 -0- 1,600,000 -0- -0-
and President(1) 1995 70,000 -0- $ 9,317 -0- 50,000(5) -0- -0-
1994 -0- $7,500 -0- -0- -0- -0- -0-

Robert H. Zeiger, CEO 1996 $ 66,653 -0- $ 5,000 -0- 100,000 -0- -0-
and Director(2) 1995 11,538 -0- -0- -0- 1,000,000 -0- -0-

Dennis W. Healey, Exec 1996 $ 78,653 $1,250 $ 8,500 -0- 500,000 -0- -0-
V.P., Treasurer, CFO 1995 $ 75,000 -0- 10,167 -0- 50,000(5) -0- -0-
and Director (3) 1994 $ 7,200 1,250 -0- -0- -0- -0- -0-

Charles F. Fistel, Exec 1996 $110,000 -0- $ 6,000 -0- 110,000 -0- -0-
V.P. and Director (4) 1995 $106,615 -0- $19,208 -0- -0- -0- -0-
</TABLE>

- --------------

(1) Mr. Smith is Chairman of the Board, Chief Executive Officer and
President of Cytoferon, a former affiliate of the Company. Cytoferon
previously had a consulting and marketing agreement with the Company
pursuant to which Cytoferon was entitled to receive consulting fees,
commissions, fees for certain foreign transactions and foreign
royalties.

In November 1993, as modified on December 15, 1994, Mr. Smith entered
into a two-year employment agreement expiring November 18, 1995, with
the Company at no salary. The agreement provided for the sale of
750,000 shares of common stock at $.30 per share payable through the
issuance of a promissory note with the shares being issued into escrow
pending cash payments reflecting the shares to be released from escrow
in increments of no less than $3,000. These shares were purchased
through the issuance of a note in the principal amount of $217,500 in
April 1994 with Mr. Smith receiving a bonus equal to the par value
($7,500) of shares purchased. On May 15, 1995, the Company forgave Mr.
Smith's note in lieu of bonus for the 1995 fiscal year, following
unanimous approval of the independent members of the Board of

<PAGE> 12

Directors. The agreement also provided for the issuance of 750,000
options to purchase common stock subject to meeting certain production
related or capital raising criteria. The criteria were successfully met
with the closing of the Company's $3.5 million Private Placement in
August 1994 and, accordingly, these options became exercisable.

Mr. Smith had an employment agreement with Cytoferon effective June 2,
1992, for a term ending June 30, 1995. He was provided with an annual
salary of $120,000 the first year, $130,000 the second year and
$140,000 the third year. The salary for the period prior to May 12,
1993, the completion of the Stock Agreement, was accrued and was
payable from available cash. Mr. Smith was entitled to participate in
any Cytoferon benefit plans of which there were none. The Cytoferon
employment agreement further provided Mr. Smith with certain severance
arrangements if there was a change in control of Cytoferon or the
Company. In August 1994, the Board of Directors of the Company voted to
terminate the Management and Marketing Services Agreement with
Cytoferon, terminating all fees payable thereunder, concurrent with the
issuance of the 1,750,000 contingently issuable shares subject to
receipt of a fairness opinion which was subsequently received. In
connection with this transaction, the Company agreed to assume the
obligations of Mr. Smith's employment agreement with Cytoferon through
November 18, 1995. The Company entered into a two-year employment
agreement with Mr. Smith, effective October 6, 1995, under terms
similar to his previous employment agreement, modified to increase his
salary by $20,000 and $10,000 for the first and second years,
respectively. In January 1996 Mr. Smith exercised options to purchase
750,000 shares of common stock through the issuance of a note in the
principal amount of $217,500 with the shares being issued into escrow
pending cash payments with the shares to be released from escrow in
increments of no less than $3,000. Mr. Smith received a bonus equal to
the par value ($7,500) of the shares purchased. On June 6, 1996, the
Company forgave Mr. Smith's note in lieu of bonus for the 1996 fiscal
year, following unanimous approval of the independent members of the
Board of Directors. See Item 13, Certain Relationships and Related
Transactions.

(2) On May 9, 1995, the Company entered into a two-year employment
agreement expiring May 1, 1997, with Robert H. Zeiger to serve as Chief
Executive Officer and Chief Operating Officer of the Company at an
annual salary of $120,000. The agreement provides for health, life and
similar employee benefits generally made available to other employees
of the Company, use of an automobile and related maintenance expenses
and reimbursement for expenses incurred in fulfilling his normal
responsibilities to the Company. The agreement provides for the
issuance of options to purchase the aggregate of 1,000,000 shares of
Common Stock of the Company at an exercise price of $.96 per share,
exercisable with respect to 500,000 shares commencing May 8, 1996
through May 8, 2000 and exercisable for the remaining 500,000 shares
commencing May 8, 1997 through May 8, 2001. The right to exercise such
options may be accelerated upon the occurrence of certain material
corporate transactions. The options are terminable prior to the lapse
of their respective terms only if Mr. Zeiger's employment should be
terminated for cause, and, in that event, the options must be exercised
to the extent that they have vested within 90 days of such termination.

(3) In April 1994, as modified on December 15, 1994, Mr. Healey entered
into an employment agreement expiring November 18, 1995, with the
Company at an annual salary of $75,000. The agreement provides for
health, life and similar employee benefits generally made available to
other employees of the Company, an automobile and related expenses. The
agreement further provided for the sale of 125,000 shares of common
stock at $.30 per share payable through the issuance of a promissory
note with the shares being issued into escrow pending cash payments
reflecting the shares to be released from escrow in increments of no
less than $3,000 shares. These shares were purchased in June 1994
through the issuance of a note in the principal amount of $36,250, with
Mr. Healey receiving a bonus equal to the par value ($1,250) of the
shares purchased. On May 15, 1995, the Company forgave Mr. Healey's
note in lieu of bonus for the 1995 fiscal year, following unanimous
approval of the independent members of the Board of Directors. The
agreement also provided for the issuance of 125,000 options to purchase
common shares at $.30 per share subject to the Company reaching certain
production levels or raising certain minimums in capital during the
employment contract period, consistent with similar provisions
contained in Mr. Smith's November 1993

9
<PAGE> 13

employment agreement. These criteria were met in August 1994
and, accordingly, these options became exercisable. The Company entered
into a two-year employment agreement with Mr. Healey, effective October
6, 1995, under terms similar to his previous employment agreement,
modified to increase his salary by $5,000 and $5,000 for the first and
second years, respectively. In July 1996, Mr. Healey resigned all
positions he held with Medicore and its subsidiaries and entered into
an employment agreement with Viragen (Europe) Ltd. This agreement
provides for a salary of $85,000 per year and expires in October 1997
concurrent with the expiration of his employment agreement with the
Company. In January 1996 Mr. Healey exercised options to purchase
125,000 shares of common stock through the issuance of a note in the
principal amount of $36,250 with the shares being issued into escrow
pending cash payments with the shares to be released from escrow in
increments of no less than $3,000. Mr. Healey received a bonus equal to
the par value ($1,250) of the shares purchased. On June 6, 1996, the
Company forgave Mr. Healey's note in lieu of bonus for the 1996 fiscal
year following unanimous approval of the independent members of the
Board of Directors.

(4) On July 1, 1994, as modified on December 15, 1994, the Company entered
into a two-year employment agreement expiring July 1, 1996, with
Charles Fistel to serve as Chief Executive Officer (which position he
relinquished to Mr. Zeiger in May 1995, assuming the position of
Executive Vice President) at an annual salary of $110,000. The
agreement provides for health, life, and similar employee benefits
generally made available to other employees of the Company, use of an
automobile and related expenses. The agreement provides for the
issuance of options to purchase the aggregate of 300,000 shares of
common stock at an exercise price of $.30 per share, exercisable with
respect to 150,000 shares commencing June 30, 1995, through July 1,
1999, and exercisable for the remaining 150,000 shares commencing June
30, 1996, through July 1, 2000. The right to exercise such options have
accelerated based on the Company having raised certain minimums in
capital. On July 1, 1996, upon the expiration of Mr. Fistel's 1994
employment agreement, Mr. Fistel entered into a two year employment
under terms similar to his previous employment agreement modified to
increase his salary $30,000 and $10,000 in the first and second years,
respectively.

In November 1995, VSL, a wholly-owned subsidiary of VEL issued an
aggregate of 7.144 shares of VSL common stock at $56.00 per share to
individuals serving as officers and directors of VEL and one employee
of the Company. Pursuant to the Agreement and Plan of Reorganization,
these shares were exchangeable into an aggregate of 400,000 shares of
VEL. Of these options 100,000 were granted each to (i) Mr. Gerald
Smith, (ii) Mr. Robert H. Zeiger, and (iii) Mr. Dennis W. Healey, all
serving as officers and directors of VEL and (iv) one employee of the
Company. All options in VSL were exercised and the related shares
exchanged for VEL common stock. The Company recognized $243,000 in
compensation expense as a result of the issuance of these shares.

<PAGE> 14

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to the grant of options
to purchase shares of Common Stock during the fiscal year ended June 30, 1996 to
each person named in the Summary Compensation Table.

<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Shares) Date
- ---- ---------- ----------- ---------- ----
<S> <C> <C> <C> <C>
Gerald Smith 1,600,000 52.2% $.50 10-05-00
Robert H. Zeiger 100,000 3.3% $.50 10-05-00
Dennis W. Healey 500,000 16.3% $.50 10-05-00
Charles F. Fistel 110,000 3.6% $.50 10-05-00
</TABLE>

OPTION EXERCISES AND HOLDINGS

The following table sets forth information with respect to the exercise of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1996 to each person named in the Summary Compensation Table and the unexercised
options held as of the end of the 1996 fiscal year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES

<TABLE>
<CAPTION>
Value Realized Value of Unexercised
Market Price in the Money Options At
Shares at Exercise Number of Unexercised FY-End (Based on FY-End
Acquired Less Price Options at FY-End Price of $5.44/Share
Name on Exercise Exercisable Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Smith 750,000 $348,750 1,650,000 -0- $8,126,000 -0-
Robert H. Zeiger 75,000 $494,470 525,000 500,000 $2,363,000 $2,240,000
Dennis W. Healey 125,000 $58,125 550,000 -0- $2,692,000 -0-
Charles F. Fistel -0- -0- 410,000 -0- -0- -0-
</TABLE>

1995 AMENDED STOCK OPTION PLAN

On May 15, 1995 the Board of Directors adopted, subject to approval by the
stockholders, a stock option plan called the "1995 Amended Stock Option Plan."
On September 22, 1995, the Board of Directors amended the 1995 Stock Option Plan
(collectively the "Plan") to define certain terms and clarify the minimum
exercise price of the Non-Qualified Options, described herein, as not less than
55% of the fair market value. The Plan was submitted to the stockholders
of the Company at the Annual Meeting of Stockholders held on December 15, 1995,
and the Stockholders ratified the Plan at that time.

Under the Plan, the Company has reserved an aggregate of 4,000,000 shares of
Common Stock

11
<PAGE> 15

for issuance pursuant to options granted under the Plan ("Plan Options"). The
full Board of Directors or the Compensation Committee of the Board of Directors
(the "Committee") administers the Plan including, without limitation, the
selection of the persons who will be granted Plan Options under the Plan, the
type of Plan Options to be granted, the number of shares subject to each Plan
Option and the Plan Option price.

Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after the date of the grant.

The exercise price of Non-Qualified Options shall be determined by the Board of
Directors or the Compensation Committee.

The per share purchase price of shares subject to Plan Options granted under the
Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.

Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non-Qualified Options under the Plan. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.

All Plan Options are nonassignable and nontransferable, except by will or by the
laws of descent and distribution, and during the lifetime of the optionee, may
be exercised only by such optionee. If an optionee's employment is terminated
for any reason, other than his death or disability or termination for cause, or
if an optionee is not an employee of the Company but is a member of the
Company's Board of Directors and his service as a director is terminated for any
reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following

<PAGE> 16

the date of the optionee's death. If the optionee is permanently and totally
disabled within the meaning of Section 22(c)(3) of the Internal Revenue Code of
1986, the Plan Option granted to him lapses to the extent unexercised on the
earlier of the expiration date of the option or one year following the date of
such disability.

The Board of Directors or Committee may amend, suspend or terminate the Plan at
any time, except that no amendment shall be made which (i) increases the total
number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on May 15, 2005. Any such termination of the Plan shall not
affect the validity of any Plan Options previously granted thereunder.

As of January 21, 1997, 3,996,500 options has been issued under the 1995 Amended
Stock Option Plan.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Number Performance Estimated Future Payouts Under
of Shares, or Other Non-Stock Price-Based Plans
Units or Period Until
Other Rights Maturation Threshold Target Maximum
Name (#) or Payout ($ or #) ($ or #) ($ or #)
- ---- ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gerald Smith -0- -0- -0- -0- -0-
Robert H. Zeiger -0- -0- -0- -0- -0-
Dennis W. Healey -0- -0- -0- -0- -0-
Charles F. Fistel -0- -0- -0- -0- -0-
</TABLE>

ADDITIONAL STOCK OPTIONS

On October 6, 1995, the Board of Directors awarded options to purchase
2,935,000 shares of Common Stock to the officers, directors and key employees
of the Company exercisable of $0.50 per share at any time on or prior to
October 6, 2000. The options were granted to the following individuals: Gerald
Smith (1,600,000), Robert H. Zeiger (100,000), Dennis W. Healey
(500,000), Charles F. Fistel (110,000), Peter D. Fischbein (225,000), Sidney
Dworkin (100,000), Jay W. Haft (100,000), William B. Saeger (100,000) and to key
employees (100,000). In addition, between October 1995 and June 1996, the
Company awarded options to purchase up to 500,500 shares of Common Stock to
other employees of the Company, which options are exercisable at prices ranging
from $0.50 to $5.90 per share during the five-year term of the options.

In June 1995, the Company issued 33,000 Incentive Stock Options to non-executive
employees

<PAGE> 17

under the Plan. The options granted vest over different periods not exceeding
two years.

In May 1995, the Company issued 1,000,000 Common Stock purchase options to Mr.
Robert H. Zeiger, Chief Executive Officer, Chief Operating Officer and a
director, pursuant to an Employment Agreement. Under the terms of the Agreement,
500,000 options became exercisable in May 1996 and 500,000 options became
exercisable in May 1997. The options carry a five year term and are exercisable
at $.96 per share.

In August 1994, the Company issued five-year options to purchase an aggregate of
350,000 shares exercisable at $1.00 per share which were divided equally among
the seven directors of the Company (one of whom subsequently resigned). In
addition, between May 1994 and March 1995, the Company issued five-year options
to purchase an aggregate of 570,000 shares of Common Stock at exercise prices
ranging from $.62 to $1.00 per share to six key employees.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Gerald Smith, Chairman of the Board of Directors, President and Director of the
Company, is the sole stockholder of Cytoferon, a former active affiliate of the
Company.

Peter D. Fischbein is a Director of the Company, and a director of Medicore and
Techdyne, was a member of a law firm, now dissolved, which firm acted as counsel
to the Company, and Medicore from time to time. Mr. Fischbein's firm also
handled the legal work for the Limited Partnership which has licensing
agreements with the Company. In December 1994, Mr. Fischbein resigned as
Secretary of the Company. In July 1994 Mr. Fischbein, in recognition for several
years of service as a Director of the Company, was provided the right to
purchase 125,000 shares of Common Stock at $.30 per share (market price at that
time was approximately $.53 per share), payable through the issuance of a note
in the principal amount of $36,250, with Mr. Fischbein receiving a bonus equal
to the par value ($1,250) of the shares purchased. On May 15, 1995, the Company
forgave Mr. Fischbein's note in lieu of a bonus for the 1995 fiscal year,
following unanimous approval of the independent members of the Board of
Directors.

On February 5, 1993, the Stock Agreement with Cytoferon was executed, the
initial $100,000 investment was made by Cytoferon and Gerald Smith, Chief
Executive Officer, director and principal of Cytoferon became a Director of the
Company. Upon Cytoferon's additional investment exceeding $600,000, Thomas K.
Langbein resigned as an officer and director of the Company and in May 1993,
pursuant to which Cytoferon had invested $1,000,000 for 6,000,000 shares of
Common Stock of the Company, Seymour Friend resigned as director. Mr. Friend is
an officer and director of Medicore. In May 1993, Cytoferon moved its offices to
the Company's facilities in Hialeah, Florida. In November 1993, the Company
entered into the Additional Stock Purchase Agreement with Cytoferon and
thereafter, issued 1,333,333 shares of common stock to Cytoferon for an
additional investment of $400,000.

In connection with Cytoferon's investments, the Company entered into a Marketing
and Management Services Agreement ("MMS Agreement") with Cytoferon pursuant to
which agreement Cytoferon became consultant to and exclusive distributor of
products of the Company

14
<PAGE> 18

not approved by the U.S. Food and Drug Administration ("FDA") for national
distribution in exchange for certain fees and commissions. The MMS Agreement
provided for a management consulting fee of $240,000 per year subject to
Cytoferon meeting certain per year and aggregate initial term and renewal term
sales requirements. In addition, the MMS Agreement provided that Cytoferon was
to have been the exclusive worldwide distributor, subject to maintaining certain
sales minimums for all of the Company's non-FDA approved products for three
years, a 4% sales commission on such sales, 50% of all fees received by the
Company from the sale of any foreign franchises, licenses, technology transfer
or joint venture agreements and 20% of any ongoing foreign royalty payments.

Cytoferon had obtained funds for such investments through sale of $2,181,500
principal amount of its Debentures between February 1993 and March 1994 (net of
$849,250 of Debentures which were retired as a result of the settlement of the
Cytoferon Debenture holders' suit against Cytoferon, Viragen and certain other
parties). Each of the series of Debentures issued by Cytoferon carried an
identical interest rate of 8.5%, were convertible into Common Stock of Viragen
at $.30 per share and were secured by Common Stock of Viragen acquired through
Cytoferon's investment in Viragen. The Cytoferon's Debentures were converted
into 7,271,666 shares of Common Stock of Viragen in December 1994, at which time
accrued interest of $133,364 was converted into 444,547 shares of Common Stock
of Viragen also at a conversion ratio of $.30 per share.

The Company's management believed it was in the long-term best interest of the
Company to unify and consolidate management functions and efforts and eliminate
conflicts that could arise by virtue of minimum sales requirements that could be
inconsistent with the Company's plans to introduce new production technologies
and refinement of related protocols. Accordingly, the Company executed the
Subsequent Agreement, subject to receipt of a fairness opinion received in
December 1994, which terminated the MMS Agreement, the Stock Purchase Agreement
and Additional Stock Purchase Agreement and accelerated the issuance of the
1,750,000 shares previously contingently issuable under the Additional Stock
Agreement concurrent with the cancellation of the aforementioned agreements.

Messrs., Sydney Dworkin, Jay M. Haft, and William B. Saeger, Directors of the
Company, Mr. Jerome E. Treisman, a former director, and Charles F. Fistel, an
Executive Vice President of the Company, purchased Cytoferon 8 1/2% Convertible
Debentures in the respective principal amounts of $40,000, $62,500, $150,000,
$22,500 and $50,000 which were convertible into common stock of the Company.
The principal amount of such Debentures together with accrued interests were
converted, effective September 30, 1994, at $.30 per share and accrued interest
into 175,244 shares, 220,744 shares, 533,766 shares, 78,668 and 177,922 shares
of common stock of the Company.

In November 1993, the Company issued $200,000 in 8 1/2%, three-year convertible
debentures. These debentures were converted at $.30 per share in 666,668 shares
of common stock on October 31, 1994. These shares are held by Fundamental
Management Corp. and Hedge Fund Management, which are investment funds managed
by William B. Saeger, a Director of the

<PAGE> 19

Company.

On December 8, 1995, the Company consummated an Agreement and Plan of
Reorganization with Sector Associates, Ltd. (the former name for Viragen
(Europe), Ltd.) pursuant to which VEL acquired 100% of the outstanding capital
stock of Viragen (Scotland) Ltd. and in exchange for which Viragen received
newly issued shares of convertible securities of VEL which represented
approximately 94% of the then issued and outstanding capital stock of VEL. Prior
thereto, on July 12, 1995, Viragen Technology, Inc., a wholly-owned subsidiary
of the Company, entered into a License Agreement with VSL pursuant to which VSL
obtained certain exclusive rights applicable to the EU countries and
non-exclusive rights throughout the world (except within the United States and
its territories) to engage in the research, development and manufacture of
certain proprietary products and technologies relating to the therapeutic
application of human leukocyte interferon. The term of the license ia for 15
years, which is automatically renewed for successive 15-year periods. At the
present time, the Company maintains a 72% capital stock interest in VEL, which
in turn owns all of the capital stock of VSL.

Messrs. Gerald Smith, Robert Zeiger and Dennis W. Healey, who are principal
executive officers with the Company, also serve as the principal executive
officers of VEL. Commencing in July 1996, following his resignation from
Medicore and subsidiaries, Mr. Healey who is serving as VEL's Executive Vice
President, Treasurer and Secretary, began receiving an annual salary of $85,000
per year. In November 1995, VSL issued options to purchase 100,000 shares of
each of its Common Stock to Messrs. Smith, Zeiger and Healey, which following
the consummation of the Sector reorganization agreement were converted into
options to purchase and aggregate of 300,000 shares of Common Stock of VEL
exercisable at $.001 per share. All of such options were exercised at January,
1996.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTORS SET FORTH ABOVE.

PROPOSAL RELATING TO THE 1997 STOCK OPTION PLAN

On January 27, 1997, the Board of Directors adopted, subject to approval by the
stockholders, a stock option plan called the "1997 Stock Option Plan." The
following summary describes features of the Plan. This summary is qualified in
its entirety by reference to the specific provisions of the Plan, the full text
of which is set forth as Appendix A.

The Board of Directors have determined that the Plan will work to increase the
employees', consultants' and non-employee directors' proprietary interest in
the Company and to align more closely their interests with the interests of the
Company's stockholders. The Plan will also maintain the Company's ability to
attract and retain the services of experienced and highly qualified employees
and non-employee directors. The Board of Directors believes that the Plan is in
the Company's best interests and therefore recommends adoption of the Plan on
essentially the terms and conditions as are set forth below.

16
<PAGE> 20

Under the Plan, the Company has reserved an aggregate of 3,000,000 shares of
Common Stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The Compensation Committee of the Board of Directors (the
"Committee") of the Company administers the Plan including, without limitation,
the selection of the persons who will be granted Plan Options under the Plan,
the type of Plan Options to be granted, the number of shares subject to each
Plan Option and the Plan Option price.

The exercise price of Non-Qualified Options shall be determined by the Board of
Directors or the Committee.

Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non- Qualified Options under the Plan. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.

17
<PAGE> 21

unexercised on the earlier of the expiration date or 30 days following the date
of termination. If the optionee dies during the term of his employment, the Plan
Option granted to him shall lapse to the extent unexercised on the earlier of
the expiration date of the Plan Option or the date one year following the date
of the optionee's death. If the optionee is permanently and totally disabled
within the meaning of Section 22(c)(3) of the Internal Revenue Code of 1986, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the option or one year following the date of such
disability.

The Board of Directors or Committee may amend, suspend or terminate the Plan at
any time, except that no amendment shall be made which (i) increases the total
number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on Janaury 26, 2007. Any such termination of the Plan shall
not affect the validity of any Plan Options previously granted thereunder.

The following discussion is based on federal income tax laws and regulations in
effect on March 31, 1995. It does not purport to be a complete description of
the federal income tax consequences of the Plan, nor does it describe the
consequences of state, local or foreign tax laws which may be applicable.
Accordingly, any person receiving a grant under the Plan should consult with his
own tax adviser.

An employee granted an Incentive Stock Option does not recognize taxable income
either at the date of grant or at the date of its timely exercise. However, the
excess of the fair market value of Common Stock received upon exercise of the
Incentive Stock Option over the Option exercise price is an item of tax
preference under Section 57(a)(3) of the Code and may be subject to the
alternative minimum tax imposed by Section 55 of the Code. Upon disposition of
stock acquired on exercise of an Incentive Stock Option, long-term capital gain
or loss is recognized in an amount equal to the difference between the sales
price and the Incentive Stock Option exercise price, provided that the option
holder has not disposed of the stock within two years from the date of grant and
within one year from the date of exercise. If the Incentive Stock Option holder
disposes of the acquired stock (including the transfer of acquired stock in
payment of the exercise price of an Incentive Stock Option) without complying
with both of these holding period requirements ("Disqualifying Disposition"),
the option holder will recognize ordinary income at the time of such
Disqualifying Disposition to the extent of the difference between the exercise
price and the lesser of the fair market value of the stock on the date the
Incentive Stock Option is exercised (the value six months after the date of
exercise may govern in the case of an employee whose sale of stock at a profit
could subject him to suit under Section 16(b) of the Securities Exchange Act of
1934) or the amount realized on such Disqualifying Disposition. Any remaining
gain or loss is treated as a short-term or long-term capital gain or loss,
depending on how long the shares are held. In the event of a Disqualifying
Disposition, the Incentive Stock Option tax preference described above may not
apply (although, where the Disqualifying Disposition occurs subsequent to the
year the Incentive Stock Option is exercised, it may be necessary for the
employee to amend his return to eliminate the tax preference item previously

18
<PAGE> 22

reported). The Company and its subsidiaries are not entitled to a tax deduction
upon either exercise of an Incentive Stock Option or disposition of stock
acquired pursuant to such an exercise, except to the extent that the Option
holder recognized ordinary income in a Disqualifying Disposition.

In respect to the holder of Non-Qualified Options, the option holder does not
recognize taxable income on the date of the grant of the Non-Qualified Option,
but recognizes ordinary income generally at the date of exercise in the amount
of the difference between the option exercise price and the fair market value of
the Common Stock on the date of exercise. However, if the holder of
Non-Qualified Options is subject to the restrictions on resale of Common Stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the Common Stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by the Company in
the year that income is recognized.

If the Plan is approved by the stockholders, the Company will have granted
______________ Plan Options.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE 1995 AMENDED STOCK OPTION PLAN

PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY

The Board of Directors has voted to increase the authorized shares of Common
Stock, par value $.01 per share from 50,000,000 to 75,000,000, par value $.01
per share, subject to approval by the Shareholders of the Company. The Board of
Directors determined that such Amendment is advisable and directed that the
proposed Amendment be considered at the Annual Meeting of Shareholders to be
held on February 28, 1997. The full text of the proposed Amendment to the
Certificate of Incorporation is set forth in Appendix B to this Proxy Statement.
The Amendment will not effect the number of shares of Preferred Stock
authorized.

The Board of Directors believe that this increase is desirable for a number of
reasons, including but not limited to facilitating the ability of the Company
to effect growth through future acquisition and future financings, stock splits
or dividends for other corporate purposes. The Company seeks to avoid the delay
and expense incurred in holding special meetings of the Shareholders to approve
amendments to the Articles of Incorporation.

Other than the conversion of convertible preferred stock and the exercise of the
options and warrants to purchase up to 13,486,703 shares of Common Stock, there
are no outstanding obligations of the Company to issue any shares of its Common
Stock as of the date herein.

19
<PAGE> 23

The affirmative vote of the holders of a majority of the outstanding shares of
the Company Common Stock is required for approval of the amendment to the
Articles of Incorporation. If the Amendment is approved by the Shareholders, the
Amendment will become effective upon the filing with the Secretary of State of
the State of Delaware.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.

APPOINTMENT OF THE COMPANY'S AUDITORS

The appointment of Ernst & Young LLP as independent auditors of the Company for
the fiscal year ended June 30, 1997, will be ratified.

Although the Board of Directors of the Company is submitting the appointment of
Ernst & Young LLP for stockholder approval, it reserves the right to change the
selection of Ernst & Young LLP as auditors, at any time during the fiscal year,
if it deems such change to be in the best interest of the Company, even after
stockholder approval. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS FOR THE COMPANY
FOR THE FISCAL YEAR ENDING JUNE 30, 1997.

INTEREST OF CERTAIN PERSONS IN
OPPOSITION TO MATTERS TO BE ACTED UPON

The Company is not aware of any substantial interest, direct or indirect, by
securities holdings or otherwise of any officer, director, or associate of the
foregoing persons in any matter to be acted on, as described herein, other than
elections to offices.

OTHER MATTERS

Management is not aware of any other business which may come before the meeting.
However, if additional matters properly come before the meeting, proxies will be
voted at the discretion of the proxy holders.

<PAGE> 24

STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT THE
COMPANY'S NEXT ANNUAL MEETING OF STOCKHOLDERS

Stockholder proposals intended to be presented at the 1997 Annual Meeting of
Stockholders of the Company must be received by the Company, at its principal
executive offices not later than 95 days from proposed date of the 1997 meeting,
for inclusion in the Proxy Statement and Proxy relating to the 1997 Annual
Meeting of Stockholders. Any such proposal will be subject to the Company's
Bylaws and 17 C.F.R Section 240.142-8 of the Rules and Regulations under the
Securities Act.

AVAILABILITY OF FORM 10-K/A1 ANNUAL REPORT

A copy of the Company's Annual Report on Form 10-K/A1 for the year ended June
30, 1996, has been included in this Proxy Statement, but exclusive of certain
exhibits filed therewith, including related exhibits as filed with the
Securities and Exchange Commission, is available without charge to stockholders
upon request to Gerald Smith, President, 2343 West 76th Street, Hialeah, Florida
33016.

BY ORDER OF THE BOARD OF DIRECTORS

Dennis W. Healey,
Secretary

Hialeah, Florida
February 6, 1997

<PAGE> 25
Appendix A

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VIRAGEN, INC.

Viragen, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:

The amendment to the Corporation's Certification of Incorporation as
set forth in the following resolution approved by the Corporation's Board of
Directors and stockholders was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware:

RESOLVED, . . . the Board of Directors hereby authorizes an
amendment to its Certificate of Incorporation to increase its
authorized capital from 50,000,000 shares of Common Stock, $.01 par
value, to 75,000,000 shares of Common Stock, $.01 par value, and in
particular, the Board hereby approves an amendment to Article FOURTH of
the Certificate of Incorporation, as amended, to increase the Common
Stock, $.01 par value, and shall read in its entirety as follows:

"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Seventy-six Million
(76,000,000) of which One Million (1,000,000) shares shall be Preferred
Stock, $1.00 par value, and Seventy-five Million (75,000,000) shares
shall be Common Stock, $.01 par value. The Preferred Stock shall be
issued from time to time in one or more series with such distinctive
serial designations and (a) may have such voting powers, full or
limited, or may be without voting power; (b) may be subject to
redemption at such time or times and at such prices; (c) may be
entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock; (d)
may have such rights upon the dissolution of, or upon any distribution
of the assets of the Corporation; (e) may be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, at such price of prices or at such rates of exchange and
with such adjustments; and (f) shall have such other relative,
participating, optional or other special rights, qualifications,
limitations, or restrictions thereof, all as shall hereinafter be
stated and expressed in the resolution or resolutions providing for the

<PAGE> 26

issuance of such Preferred Stock form time to time adopted by the Board
of Directors, pursuant to authority so to do which is hereby expressly
vested in the Board of Directors.

Each share of Common Stock shall entitle the holder thereof to
one vote, in person or by proxy, on all matters on which holders of
shares of Common Stock are entitled to vote.

The number of authorized shares of any class of stock of the
Corporation, including but without limitation, the Preferred Stock and
the Common Stock, may be increased or decreased by the affirmative vote
of the holders of a majority of the stock of the Corporation entitled
to vote."

IN WITNESS WHEREOF, Viragen, Inc. has caused this Certificate of
Amendment to the Certification of Incorporation to be signed by Gerald Smith,
Chairman of the Board and President and attested to by Dennis W. Healey,
Secretary, and the seal of the Corporation has been duly affixed hereto, this
21st day of January, 1997.

VIRAGEN, INC.

(Corporate Seal)

By:
------------------------------
Gerald Smith, Chairman of the Board
and President

ATTEST:

- -------------------------------
Dennis W. Healey, Secretary

2
<PAGE> 27
Appendix B

VIRAGEN, INC.
1997 STOCK OPTION PLAN

1. Grant of Options; Generally. In accordance with the provisions hereinafter
set forth in this stock option plan, the name of which is the VIRAGEN, INC. 1997
STOCK OPTION PLAN (the "Plan"), the Board of Directors (the "Board") or, the
Compensation Committee (the "Stock Option Committee") of Viragen, Inc. (the
"Corporation") is hereby authorized to issue from time to time on the
Corporation's behalf to any one or more Eligible Persons, as hereinafter
defined, options to acquire shares of the Corporation's $.01 par value common
stock (the "Stock").

2. Type of Options. The Board or the Stock Option Committee is authorized to
issue Incentive Stock Options ("ISOs") which meet the requirements of Section
ss.422 of the Internal Revenue Code of 1986, as amended (the "Code"), which
options are hereinafter referred to collectively as ISOs, or singularly as an
ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. The Board or the Stock Option Committee is also authorized to issue "Reload
Options" in accordance with Paragraph 8 herein, which options are hereinafter
referred to collectively as Reload Options, or singularly as a Reload Option.
Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs, NSOs and Reload Options.

3. Amount of Stock. The aggregate number of shares of Stock which may be
purchased pursuant to the exercise of Options shall be 3,000,000 shares. Of this
amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because

<PAGE> 28

of one or more recapitalizations, reorganizations or other corporate events, the
holders of outstanding Stock receive something other than shares of Stock then,
upon exercise of an Option, the Eligible Person will receive what the holder
would have owned if the holder had exercised the Option immediately before the
first such corporate event and not disposed of anything the holder received as a
result of the corporate event.

4. Eligible Persons.

(a) With respect to ISOs, an Eligible Person means any individual who
has been employed by the Corporation or by any subsidiary of the Corporation,
for a continuous period of at least sixty (60) days.

(b) With respect to NSOs, an Eligible Person means (i) any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant of the Corporation or any subsidiary of the Corporation.

5. Grant of Options. The Board or the Stock Option Committee has the right to
issue the Options established by this Plan to Eligible Persons. The Board or the
Stock Option Committee shall follow the procedures prescribed for it elsewhere
in this Plan. A grant of Options shall be set forth in a writing signed on
behalf of the Corporation or by a majority of the members of the Stock Option
Committee. The writing shall identify whether the Option being granted is an ISO
or an NSO and shall set forth the terms which govern the Option. The terms shall
be determined by the Board or the Stock Option Committee, and may include, among
other terms, the number of shares of Stock that may be acquired pursuant to the
exercise of the Options, when the Options may be exercised, the period for which
the Option is granted and including the expiration date, the effect on the
Options if the Eligible Person terminates employment and whether the Eligible
Person may deliver shares of Stock to pay for the shares of Stock to be
purchased by the exercise of the Option. However, no term shall be set forth in
the writing which is inconsistent with any of the terms of this Plan. The terms
of an Option granted to an Eligible Person may differ from the terms of an
Option granted to another Eligible Person, and may differ from the terms of an
earlier Option granted to the same Eligible Person.

6. Option Price. The option price per share shall be determined by the Board or
the Stock Option Committee at the time any Option is granted, and shall be not
less than (i) in the case of an ISO, the fair market value, (ii) in the case of
an ISO granted to a ten percent or greater stockholder, 110 percent of the fair
market value, or (iii) in the case of an NSO, not less than 55% of the fair
market value (but in no event less than the par value) of one

<PAGE> 29

share of Stock on the date the Option is granted, as determined by the Board or
the Stock Option Committee. Fair market value as used herein shall be:

7. (a) If shares of Stock shall be traded on an exchange or over-the-counter
market, the mean between the high and low sales prices of Stock on such exchange
or over-the-counter market on which such shares shall be traded on that date, or
if such exchange or over-the-counter market is closed or if no shares shall have
traded on such date, on the last preceding date on which such shares shall have
traded.

(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized appraiser as
selected by the Board or the Stock Option Committee.

8. Purchase of Shares. An Option shall be exercised by the tender to the
Corporation of the full purchase price of the Stock with respect to which the
Option is exercised and written notice of the exercise. The purchase price of
the Stock shall be in United States dollars, payable in cash, check, Promissory
Note secured by the Shares issued through exercise of the related Options, or in
property or Corporation stock, if so permitted by the Board or the Stock Option
Committee in accordance with the discretion granted in Paragraph 5 hereof,
having a value equal to such purchase price. The Corporation shall not be
required to issue or deliver any certificates for shares of Stock purchased upon
the exercise of an Option prior to (i) if requested by the Corporation, the
filing with the Corporation by the Eligible Person of a representation in
writing that it is the Eligible Person's then present intention to acquire the
Stock being purchased for investment and not for resale, and/or (ii) the
completion of any registration or other qualification of such shares under any
government regulatory body, which the Corporation shall determine to be
necessary or advisable.

9. Grant of Reload Options. In granting an Option under this Plan, the Board or
the Stock Option Committee may include a Reload Option provision therein,
subject to the provisions set forth in Paragraphs 20 and 21 herein. A Reload
Option provision provides that if the Eligible Person pays the exercise price of
shares of Stock to be purchased by the exercise of an ISO, NSO or another Reload
Option (the "Original Option") by delivering to the Corporation shares of Stock
already owned by the Eligible Person (the "Tendered Shares"), the Eligible
Person shall receive a Reload Option which shall be a new Option to purchase
shares of Stock equal in number to the tendered shares. The terms of any Reload
Option shall be determined by the Board or the Stock Option Committee consistent
with the provisions of this Plan.

10. Stock Option Committee. The Stock Option Committee may be appointed from
time to time by the Corporation's Board of Directors. The Board may from time to
time remove members from or

<PAGE> 30

add members to the Stock Option Committee. The Stock Option Committee shall be
constituted so as to permit the Plan to comply in all respects with the
provisions set forth in Paragraph 20 herein. The members of the Stock Option
Committee may elect one of its members as its chairman. The Stock Option
Committee shall hold its meetings at such times and places as its chairman shall
determine. A majority of the Stock Option Committee's members present in person
shall constitute a quorum for the transaction of business. All determinations of
the Stock Option Committee will be made by the majority vote of the members
constituting the quorum. The members may participate in a meeting of the Stock
Option Committee by conference telephone or similar communications equipment by
means of which all members participating in the meeting can hear each other.
Participation in a meeting in that manner will constitute presence in person at
the meeting. Any decision or determination reduced to writing and signed by all
members of the Stock Option Committee will be effective as if it had been made
by a majority vote of all members of the Stock Option Committee at a meeting
which is duly called and held.

11. Administration of Plan. In addition to granting Options and to exercising
the authority granted to it elsewhere in this Plan, the Board or the Stock
Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 20 and 21
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.

12. Provisions Applicable to ISOs. The following provisions shall apply to all
ISOs granted by the Board or the Stock Option Committee and are incorporated by
reference into any writing granting an ISO:

(a) An ISO may only be granted within ten (10) years from Janaury 27,
1997, the date that this Plan was originally adopted by the Corporation's Board
of Directors.

(b) An ISO may not be exercised after the expiration of ten
(10) years from the date the ISO is granted.

<PAGE> 31

(d) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.

(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110% of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.

(f) The aggregate fair market value (determined at the time the ISO is
granted) of the Stock with respect to which the ISO is first exercisable by the
Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.

(g) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.

(h) This Plan was adopted by the Corporation on January 27, 1997, by
virtue of its approval by the Corporation's Board of Directors. Approval by the
stockholders of the Corporation is to occur prior to March 1, 1997.

13. Determination of Fair Market Value. In granting ISOs under
this Plan, the Board or the Stock Option Committee shall make a
good faith determination as to the fair market value of the Stock
at the time of granting the ISO.

14. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised
is at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such
exercise it is his or her then present intention to acquire the shares of Stock
for investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be defined to exclude distribution by
will or under the laws of descent and distribution. Prior to issuing any shares
of Stock pursuant to the exercise of an Option, the

<PAGE> 32

Corporation shall take such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government.

15. Exercise in the Event of Death of Termination or Employment.

(a) If an optionee shall die (i) while an employee of the Corporation
or a Subsidiary or (ii) within three months after termination of his employment
with the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.

(b) If an optionee's employment by the Corporation or a Subsidiary
shall terminate because of his disability and such optionee has not died within
the following three months, he may exercise his Options, to the extent that he
shall have been entitled to do so at the date of the termination of his
employment, at any time, or from time to time, but not later than the expiration
date specified in Paragraph 5 hereof or one year after termination of
employment, whichever date is earlier.

(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans if any, or with the consent of the Board or the Stock Option
Committee or involuntarily other than by termination for cause, and such
optionee has not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from to time, but not later than
the expiration date specified in Paragraph 5 hereof or thirty (30) days after
termination of employment, whichever date is earlier. For purposes of this
Paragraph 14, termination for cause shall mean; (i) termination of employment
for cause as defined in the optionee's Employment Agreement or (ii) in the
absense of an Employment Agreement for the optionee, termination of employment
by reason of the optionee's commission of a felony, fraud or willful misconduct
which has resulted, or is likely to result, in substantial and material damage
to the Corporation or a Subsidiary, all as the Board or the Stock Option
Committee in its sole discretion may determine.

<PAGE> 33

(d) If an optionee's employment shall terminate for any reason other
than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment absent
specific provisions in the optionee's Option Agreement.

16. Corporate Events. In the event of the proposed dissolution or liquidation of
the Corporation, a proposed sale of all or substantially all of the assets of
the Corporation, a merger or tender for the Corporation's shares of Common Stock
the Board of Directors may declare that each Option granted under this Plan
shall terminate as of a date to be fixed by the Board of Directors; provided
that not less than thirty (30) days written notice of the date so fixed shall be
given to each Eligible Person holding an Option, and each such Eligible Person
shall have the right, during the period of thirty (30) days preceding such
termination, to exercise his Option as to all or any part of the shares of Stock
covered thereby, including shares of Stock as to which such Option would not
otherwise be exercisable. Nothing set forth herein shall extend the term set for
purchasing the shares of Stock set forth in the Option.

17. No Guarantee of Employment. Nothing in this Plan or in any writing granting
an Option will confer upon any Eligible Person the right to continue in the
employ of the Eligible Person's employer, or will interfere with or restrict in
any way the right of the Eligible Person's employer to discharge such Eligible
Person at any time for any reason whatsoever, with or without cause.

18. Nontransferability. No Option granted under the Plan shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option shall be exercisable only by him.

19. No Rights as Stockholder. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.

20. Amendment and Discontinuance of Plan. The Corporation's Board of Directors
may amend, suspend or discontinue this Plan at any time. However, no such action
may prejudice the rights of any Eligible Person who has prior thereto been
granted Options under this Plan. Further, no amendment to this Plan which has
the effect of (a) increasing the aggregate number of shares of Stock subject to
this Plan (except for adjustments pursuant to Paragraph 3 herein), or (b)
changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan

<PAGE> 34

which require such approval, however, the Board of Directors may modify the
Plan, as necessary, to effectuate the intent of the Plan as a result of any
changes in the tax, accounting or securities laws treatment of Eligible Persons
and the Plan, subject to the provisions set forth in this Paragraph 19, and
Paragraphs 20 and 21.

21. Compliance with Rule 16b-3. This Plan is intended to comply in all respects
with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to participants who are subject to Section 16 of the
Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.

22. Compliance with Code. The aspects of this Plan on ISOs is intended to comply
in every respect with Section 422 of the Code and the regulations promulgated
thereunder. In the event any future statute or regulation shall modify the
existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any Option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes effective shall also be deemed
to incorporate by reference such modification and no notice of such modification
need be given to optionee.

If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.

23. Compliance With Other Laws and Regulations. The Plan, the grant and exercise
of Options thereunder, and the obligation of the Corporation to sell and deliver
Stock under such options, shall be subject to all applicable federal and state
laws, rules, and regulations and to such approvals by any government or
regulatory agency as may be required. The Corporation shall not be required to
issue or deliver any certificates for shares of Stock prior to (a) the listing
of such shares on any stock exchange or over-the-counter market on which the
Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.

24. Disposition of Shares. In the event any share of Stock

<PAGE> 35

acquired by an exercise of an Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution
within two years of the date such Option was granted or within one year after
the transfer of such Stock pursuant to such exercise, the optionee shall give
prompt written notice thereof to the Corporation or the Stock Option Committee.

25. Name. The Plan shall be known as the "Viragen, Inc. 1997 Stock Option
Plan."

26. Notices. Any notice hereunder shall be in writing and sent by certified
mail, return receipt requested or by facsimile transmission (with electronic or
written confirmation of receipt) and when addressed to the Corporation shall be
sent to it at its office, 2343 West 76th Street, Hialeah, Florida 33016, and
when addressed to the Committee shall be sent to it at 2343 West 76th Street,
Hialeah, Florida 33016, subject to the right of either party to designate at any
time hereafter in writing some other address, facsimile number or person to
whose attention such notice shall be sent.

27. Headings. The headings preceding the text of Sections and subparagraphs
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Plan nor shall they affect its meaning, construction
or effect.

28. Effective Date. This Plan, the Viragen, Inc. 1997 Stock Option Plan, was
adopted by the Board of Directors of the Corporation on January 27, 1997. The
effective date of the Plan shall be the same date.

Dated as of January 27, 1997.

VIRAGEN, INC.

By:
----------------------------------
Its: President

<PAGE> 36
Appendix C

[NSO GRANT FORM]

VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016

Date:
----------

- -----------

Dear :
-------

The Board of Directors of Viragen, Inc. (the "Corporation") is pleased
to award you an Option pursuant to the provisions of the 1997 Stock Option Plan
(the "Plan"). This letter will describe the Option granted to you. Attached to
this letter is a copy of the Plan. The terms of the Plan also set forth
provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and understand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.

1. Type of Option. You are granted an NSO. Please see in
particular Section 11 of the Plan.

2. Rights and Privileges. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share, the current fair market value of a share of Stock. The
right to purchase the shares of Stock accrues in __________ installments over
the time periods described below:

The right to acquire __________ shares accrues on __________.

3. Time of Exercise. The Option may be exercised at any
time and from time to time beginning when the right to purchase the
shares of Stock accrues and ending when they terminate as provided
in Section 5 of this letter.

<PAGE> 37

contain a check payable to the Corporation in full payment for the Stock or that
number of already owned shares of Stock equal in value to the total Exercise
Price of the Option. We shall make delivery of the shares of Stock subject to
the conditions described in Section 13 of the Plan.

5. Termination of Option. To the extent not exercised, the
Option shall terminate upon the first to occur of the following
dates:

(a) __________, 199_, being __________ years from the

date of grant pursuant to the provisions of Section 2 of this
Agreement; or

(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or

(c) The expiration of 12 months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan, if such employment termination occurs by reason of your death or by
reason of your permanent disability (as defined above).

6. Securities Laws.

The Option and the shares of Stock underlying the Option have
not been registered under the Securities Act of 1933, as amended (the "Act").
The Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.

7. Binding Effect. The rights and obligations described in
this letter shall inure to the benefit of and be binding upon both
of us, and our respective heirs, personal representatives,
successors and assigns.

<PAGE> 38

8. Date of Grant. The Option shall be treated as having
been granted to you on the date of this letter even though you may
sign it at a later date.

Very truly yours,

By:
----------------------------------------
President

AGREED AND ACCEPTED:

- -------------------------

<PAGE> 39
Appendix D

Date:
----------------

VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016

- ----------
- ----------
- ----------

Dear :
------------
The Board of Directors of Viragen, Inc. (the "Corporation") is pleased
to award you an Option pursuant to the provisions of the 1997 Stock Option Plan
(the "Plan"). This letter will describe the Option granted to you. Attached to
this letter is a copy of the Plan. The terms of the Plan also set forth
provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and understand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.

1. Type of Option. You are granted an ISO. Please see in
particular Section 11 of the Plan.

The right to acquire __________ shares accrues on __________.

3. Time of Exercise. The Option may be exercised at any
time and from time to time beginning when the right to purchase the
shares of Stock accrues and ending when they terminate as provided

<PAGE> 40

in Section 5 of this letter.

4. Method of Exercise. The Options shall be exercised by written
notice to the Chairman of the Board of Directors at the Corporation's principal
place of business. The notice shall set forth the number of shares of Stock to
be acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.

5. Termination of Option. To the extent not exercised, the
Option shall terminate upon the first to occur of the following

dates:

(a) _____________, 199___, being __________ years from
the date of grant pursuant to the provisions of Section 2 of this
Agreement; or

(b) The expiration of thirty (30) days following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or

6. Securities Laws.

<PAGE> 41

required.

7. Binding Effect. The rights and obligations described in
this letter shall inure to the benefit of and be binding upon both
of us, and our respective heirs, personal representatives,

successors and assigns.

8. Date of Grant. The Option shall be treated as having
been granted to you on the date of this letter even though you may

sign it at a later date.

Very truly yours,

By:
-------------------------------
President

AGREED AND ACCEPTED:

- -------------------------

<PAGE> 42
Appendix E

[NSO GRANT FORM
WITH RELOAD OPTIONS]

VIRAGEN, INC.
2343 West 76th Street
Hialeah, Florida 33016

Date:
----------
- ------------
- ------------
- ------------

Dear __________:

The Board of Directors of Viragen, Inc. (the "Corporation") is pleased
to award you an Option pursuant to the provisions of the 1993 Stock Option Plan
(the "Plan"). This letter will describe the Option granted to you. Attached to
this letter is a copy of the Plan. The terms of the Plan also set forth
provisions governing the Option granted to you. Therefore, in addition to
reading this letter you should also read the Plan. Your signature on this letter
is an acknowledgement to us that you have read and understand the Plan and that
you agree to abide by its terms. All terms not defined in this letter shall have
the same meaning as in the Plan.

1. Type of Option. You are granted an NSO. Please see in
particular Section 11 of the Plan.

2. Rights and Privileges.

(a) Subject to the conditions hereinafter set forth, we grant
you the right to purchase __________ shares of Stock at $__________ per share,
the current fair market value of a share of Stock. The right to purchase the
shares of Stock accrues in __________ installments over the time periods
described below:

The right to acquire __________ shares accrues on __________.

(b) In addition to the Option granted hereby (the "Underlying
Option"), the Corporation will grant you a reload option (the "Reload Option")
as hereinafter provided. A Reload Option is hereby granted to you if you acquire
shares of Stock pursuant to the exercise of the Underlying Option and pay for
such shares of Stock with shares of Common Stock already owned by you

<PAGE> 43

(the "Tendered Shares"). The Reload Option grants you the right to purchase
shares of Stock equal in number to the number of Tendered Shares. The date on
which the Tendered Shares are tendered to the Corporation in full or partial
payment of the purchase price for the shares of Stock acquired pursuant to the
exercise of the Underlying Option is the Reload Grant Date. The exercise price
of the Reload Option is the fair market value of the Tendered Shares on the
Reload Grant Date. The fair market value of the Tendered Shares shall be the low
bid price per share of the Corporation's Common Stock on the Reload Grant Date.
The Reload Option shall vest equally over a period of __________ (___) years,
commencing on the first anniversary of the Reload Grant Date, and on each
anniversary of the Reload Grant Date thereafter; however, no Reload Option shall
vest in any calendar year if it would allow you to purchase for the first time
in that calendar year shares of Stock with a fair market value in excess of
$100,000, taking into account ISOs previously granted to you. The Reload Option
shall expire on the earlier of (i) __________ (___) years from the Reload Grant
Date, or (ii) in accordance with Paragraph 5(b), or (iii) in accordance with
Paragraph 5(c) as set forth herein. If vesting of the Reload Option is deferred,
then the Reload Option shall vest in the next calendar year, subject, however,
to the deferral of vesting previously provided. Except as provided herein the
Reload Option is subject to all of the other terms and provisions of this
Agreement governing Options.

5. Termination of Option. To the extent not exercised, the
Option shall terminate upon the first to occur of the following
dates:

(a) __________, 199_, being __________ years from the
date of grant pursuant to the provisions of Section 2 of this
Agreement; or

(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by

<PAGE> 44

reason of death or permanent disability. As used herein, "permanent disability"
means your inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months; or

6. Securities Laws.

8. Date of Grant. The Option shall be treated as having
been granted to you on the date of this letter even though you may
sign it at a later date.

Very truly yours,

By:
----------------------------------------
President

AGREED AND ACCEPTED:

- -------------------------

<PAGE> 45
Appendix F

THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS

VIRAGEN, INC.

PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- FEBRUARY 28, 1997

The undersigned, revoking all previous proxies, hereby appoint(s) Gerald Smith
as Proxy, with full power of substitution, to represent and to vote all Common
Stock of Viragen, Inc. owned by the undersigned at the Annual Meeting of
Stockholders to be held in Davie, Florida on Friday, February 28, 1997,
including any original or subsequent adjournment thereof, with respect to the
proposals set forth in the Notice of Annual Meeting and Proxy Statement. No
business other than matters described below is expected to come before the
meting, but should any other matter requiring a vote of stockholders arise, the
person named herein will vote thereon in accordance with his best judgment. All
powers may be exercised by said Proxy. Receipt of the Notice of Annual Meeting
and Proxy Statement is hereby acknowledged.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING.

1. ELECTION OF DIRECTORS. Nominees:

<TABLE>
<S> <C> <C> <C>
Gerald Smith Robert H. Zeiger Dennis W. Healey Charles F. Fistel
Peter D. Fischbein Sidney Dworkin Jay M. Haft William B. Saeger
Fred D. Hirt
</TABLE>

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE PLEASE DRAW A LINE THROUGH THAT NOMINEE'S NAME)

[ ] WITHHOLDING AUTHORITY to vote for all nominees listed
above

2. Proposal to adopt the 1997 Stock Option Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To increase the number of authorized shares from 50 million to
76 million;

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. To ratify the appointment of independent auditors

[ ] FOR [ ] AGAINST [ ] ABSTAIN

<PAGE> 46

The shares represented by this proxy will be voted as directed. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2, PROPOSAL 3, PROPOSAL AND
PROPOSAL 4.

The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to the Annual Meeting. If you
received more than one proxy card, please date, sign and return all cards in the
accompanying envelope.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in the corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

----------------------------------------
Signature

----------------------------------------
Signature If Held Jointly

----------------------------------------
(Please Print Name)

----------------------------------------
Number of Shares Subject to Proxy

Dated: , 1997
------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.