<PAGE> 1
As filed with the Securities and Exchange Commission on April 17, 1998
File No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VIRAGEN, INC.
(Exact name of issuer as specified in its charter)
Delaware 59-2101668
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
865 S.W. 78th Avenue, Suite 100
Plantation, Florida 33324
(Address of principal executive offices) (Zip Code)
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VIRAGEN, INC. AMENDED 1997 STOCK OPTION PLAN
(Full title of the plan)
Gerald Smith
865 S.W. 78th Avenue, Suite 100
Plantation, Florida 33324
(954) 233-8746
(Name and address of agent for service)
Copy to:
Jim Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
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<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Securities Amount to be Price per Offering Registration
to be Registered Registered(1) Share(1) Price(1) Fee (1)
============================================================================================
<S> <C> <C> <C> <C>
Common Stock
($.01 par value) 4,000,000 shares $2.19 $8,760,000 $2,655
============================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities
Act based upon the average of the high and low bid price for the Common
Stock, $.01 per share (the "Common Stock") as reported by NASDAQ
National Market System on April 14, 1998.
2
<PAGE> 3
VIRAGEN, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
Form S-8 Item Number
and Caption Caption in Prospectus
--------------------- ---------------------
<S> <C> <C>
1. Forepart of Registration State- Facing Page of Registration
ment and Outside Front Cover Statement and Cover Page of
Page of Prospectus Prospectus
2. Inside Front and Outside Back Inside Cover Page of Pros pectus
Cover Pages of Prospectus and Outside Cover Page of
Prospectus
3. Summary Information, Risk Fac- Not Applicable
tors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page of Prospectus and Sales by
Selling Security Holders
9. Description of Securities to be Description of Securities;
Registered Viragen, Inc. Amended 1997 Stock Option Plan
10. Interests of Named Experts and Legal Matters
Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Infor- Incorporation of Certain
mation by Reference Documents by Reference
13. Disclosure of Commission Posi- Indemnification
tion on Indemnification for
Securities Act Liabilities
</TABLE>
3
<PAGE> 4
PROSPECTUS
VIRAGEN, INC.
4,000,000 SHARES OF COMMON STOCK
($.01 PAR VALUE)
Issued Pursuant to the
Viragen, Inc. Amended 1997 Stock Option Plan
This Prospectus is part of a Registration Statement which registers an
aggregate of 4,000,000 shares of Common Stock, $.01 par value (such shares being
collectively referred to as the "Shares") of Viragen, Inc. (the "Company" or
"Viragen") which may be issued, as set forth herein, to officers, directors, key
employees and consultants of the Company pursuant to the exercise of
non-qualified or incentive stock options to purchase up to 4,000,000 shares of
Common Stock under and in accordance with the Viragen, Inc. Amended 1997 Stock
Option Plan (the "Plan") (the Plan covers the issuance of up to 4,000,000 shares
of Common Stock), and separate stock option agreements with employees, officers,
directors and consultants (the "Option Agreements") (such options being
collectively referred to as "Options"). All of the Options or Shares have been
or will be granted or issued to such officers, directors, key employees and
consultants pursuant to individual written option agreements. Such selling
stockholders may sometimes hereafter be collectively referred to as the "Selling
Security Holders." The Company has been advised by the Selling Security Holders
that they may sell all or a portion of the Shares from time to time in the
over-the-counter market, in negotiated transactions, directly or through brokers
or otherwise, and that such shares will be sold at market prices prevailing at
the time of such sales or at negotiated prices, and the Company will not receive
any proceeds from such sales except upon exercise of the Options.
No person has been authorized by the Company to give any information or
to make any representation other than as contained in this Prospectus, and if
given or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither the delivery of this Prospectus
nor any distribution of the Shares issuable upon exercise of the Options or
under the terms of the Agreements shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
This Prospectus does not constitute an offer to sell securities in any
state to any person to whom it is unlawful to make such offer in such state.
The date of this Prospectus is April 17 , 1998.
4
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a website on the internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. The Company's Common
Stock is traded on the NASDAQ National Market System ("NASDAQ:NM") under the
symbol "VRGN."
The Company has filed with the Commission a Registration Statement on
Form S-8 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), with respect to an aggregate of 4,000,000 shares of the
Company's Common Stock, issued or to be issued to officers, directors, key
employees or consultants to the Company under the Plan, the Option Agreements or
the Agreements, as the case may be. This Prospectus, which is Part I of the
Registration Statement, omits certain information contained in the Registration
Statement. For further information with respect to the Company and the shares of
the Common Stock offered by this Prospectus, reference is made to the
Registration Statement, including the exhibits thereto. Statements in this
Prospectus as to any document are not necessarily complete, and where any such
document is an exhibit to the Registration Statement or is incorporated by
reference herein, each such statement is qualified in all respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full statement of the provisions thereof. A copy of the Registration
Statement, with exhibits, may be obtained from the Commission's office in
Washington, D.C. (at the above address) upon payment of the fees prescribed by
the rules and regulations of the Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference and made a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended June 30,
1997 filed October 2, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed November 14, 1997.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997, filed February 13, 1998.
4. The Company's Current Report on Form 8-K dated July 1, 1997 and
filed September 24, 1997.
5
<PAGE> 6
All reports and documents filed by the Company pursuant to Section 13,
14 or 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written request of any such person, a copy of any or all of
the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, Viragen,
Inc., 865 S.W. 78th Avenue, Suite 100, Plantation, Florida 33324, Telephone
(954) 233-8746.
6
<PAGE> 7
THE COMPANY
Viragen, Inc. was organized in December 1980 to engage in research,
development and manufacture of certain immunological products for commercial
application, particularly human leukocyte derived alpha interferon, for
antiviral and therapeutic applications and as anticancer agents. Viragen's
primary product (the "Product") is a natural human leukocyte derived alpha
interferon ("Natural Interferon"). Natural Interferon is a protein substance
that inhibits malignant cell growth without materially interfering with normal
cells. Natural Interferon stimulates and modulates the human immune system and,
in addition, impedes the growth and propagation of various viruses. The Product
is a natural product produced from human white blood cells. Alpha Leukoferon(TM)
(now discontinued) and Omniferon(TM) are the trade names for Viragen's Product
in injectable form. The Company's Product has not been approved by the United
States Food and Drug Administration ("FDA") or the European Union ("EU")
regulatory authority, and there can be no assurances that approval of the
Product will be obtained at any time in the future.
The Company intends to seek to obtain FDA and EU approvals for various
uses of its Omniferon product in the future. Such approval is expected to
require several years of clinical trials and substantial additional funding. To
date, Viragen has not distributed the Product other than for research and
pursuant to its investigatory license from the Florida Department of Health and
Rehabilitative Services, and until May 1993, Viragen had not actively operated
due to insufficient funds. Viragen expects to concentrate its efforts in
preparing, filing and processing its applications and obtaining approvals for
its Product from the FDA and the EU. The Company has assembled an advisory
committee consisting of scientists, medical researchers and clinicians to assist
the Company in its applications to the FDA and the EU.
The Company's majority owned subsidiary, Viragen (Europe) Ltd., acting
through its wholly-owned subsidiary Viragen (Scotland) Ltd. ("VSL"), entered
into a License and Manufacturing Agreement with The Common Services Agency of
Scotland (the "Agency") an agent acting on behalf of the Scottish National Blood
Transfusion Service ("SNBTS"). Pursuant to such Licensing and Manufacturing
Agreement, SNBTS on behalf of VSL, will assist in the manufacture of VSL's
Omniferon product for exclusive distribution within the EU and non-exclusively
worldwide in return for certain royalties and preferential access to the Product
for Agency patients at preferential prices. The Agency has committed to assist
in the manufacture of Omniferon in sufficient scale to accommodate the EU
Clinical Trials and, subsequently, for limited commercial sales in amounts to be
agreed upon by the parties. The Agency will also work with the Company in
conducting studies relevant to Omniferon and cooperate with the Company to
enable it to comply with the laws and regulations of the EU in connection with
production, clinical trials and distribution of Omniferon.
Viragen's executive offices are located at 865 S.W. 78th Avenue, Suite
100, Plantation, Florida 33324 (Telephone No. (954) 233-8746; Facsimile No.
(954) 233-1416).
VIRAGEN, INC. AMENDED 1997 STOCK OPTION PLAN
INTRODUCTION
The following descriptions summarize certain provisions of the Plan and
the form of agreements to be entered into by recipients of options thereunder.
Such summaries do not purport to be complete and are qualified by reference to
the full text of the Plan and form of agreement. A copy of the Plan is
7
<PAGE> 8
on file as an exhibit to the Registration Statement of which this Prospectus is
a part. Each person receiving an option under the Plan should read the Plan and
related option agreement in its entirety.
The Company's 1997 Stock Option Plan was adopted by the Board of
Directors on January 27, 1997, effective as of that date. Under the Plan, the
Company had reserved an aggregate of 3,000,000 shares of Common Stock for
issuance pursuant to options granted under the Plan ("Plan Options"). The Plan
was ratified by the Company's stockholders at the Annual Meeting of Stockholders
held on February 28, 1997. On April 3, 1998 the Board of Directors approved an
Amendment to the Plan to increase the number of shares of Common Stock reserved
under the Plan to 4,000,000 shares of Common Stock for issuance pursuant to Plan
Options. The increase in the number of shares of Common Stock to be issued
pursuant to Plan Options will be submitted for ratification by the stockholders
of the Company at the Annual Meeting of Stockholders to be held on June 19,
1998.
The purpose of the Plan is to encourage stock ownership by officers,
directors, key employees and consultants of the Company, and to give such
persons a greater personal interest in the success of the Company's business and
an added incentive to continue to advance and contribute to the Company. The
Audit and Finance Committee of the Board of Directors (the "Committee") of the
Company which currently oversees compensation matters, will administer 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. As discussed hereafter, 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 outstanding Common Stock of the
Company must not be less than 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 Directors or the Committee,
provided that no Plan Option may be exercisable more than ten (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 Common Stock, no more than five
(5) years after the date of the grant.
ELIGIBILITY
Officers, directors, key employees and consultants of the Company and
its subsidiaries are eligible to receive Non-Qualified Options under the
Viragen, Inc. Amended 1997 Stock Option Plan. Only officers and employees of the
Company who are employed by the Company or by any subsidiary thereof are
eligible to receive Incentive Options.
8
<PAGE> 9
ADMINISTRATION
The Plan will be administered by the Company's Audit and Finance
Committee of the Board of Directors. The Committee determines from time to time
those officers, directors, key employees and consultants of the Company or any
of its subsidiaries to whom Plan Options are to be granted, the terms and
provisions of the respective option agreements, the time or times at which such
Plan Options shall be granted, the type of Plan Options to be granted, the dates
such Plan Options become exercisable, the number of shares subject to each Plan
Option, the purchase price of such shares and the form of payment of such
purchase price. All other questions relating to the administration of the Plan,
and the interpretation of the provisions thereof and of the related option
agreements, are resolved by the Committee.
SHARES SUBJECT TO AWARDS
The Company has reserved 4,000,000 of its authorized but unissued
shares of Common Stock or shares maintained in the treasury of the Company for
issuance under the Plan, and a maximum of 4,000,000 shares may be issued
thereunder unless the Plan is subsequently amended. In connection with the
adoption and approval of the Plan, the Company's Board of Directors resolved
that the aggregate number of total shares of the Company's Common Stock issuable
under the Plan may not exceed 4,000,000 shares (subject to adjustment in the
event of certain changes in the Company's capitalization) without further action
by the Company's Board of Directors and stockholders, as required. Except for
such limitation on the aggregate number of shares issuable under the Plan, there
is no maximum or minimum number of shares of Common Stock as to which a Plan
Option may be granted to any person. Shares used for Plan Options may be
authorized and unissued shares or shares reacquired by the Company, including
shares purchased in the open market. Shares covered by Plan Options which
terminate unexercised will again become available for additional Plan Options,
without decreasing the maximum number of shares issuable under the Plan,
although such shares may also be used by the Company for other purposes.
The Plan provides that, if the Company's outstanding shares are
increased, decreased, exchanged or otherwise adjusted due to a share dividend,
forward or reverse share split, recapitalization, reorganization, merger,
consolidation, combination or exchange of shares, an appropriate and
proportionate adjustment shall be made in the number or kind of shares subject
to the Plan or subject to unexercised Plan Options and in the purchase price per
share under such Plan Options. Any adjustment, however, does not change the
total purchase price payable for the shares subject to outstanding Plan Options.
In the event of the proposed dissolution or liquidation of the Company, a
proposed sale of all or substantially all of the assets of the Company, a merger
or tender offer for the Company'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 proceeding such termination, to exercise
his Option as to all or any part of the Shares, including shares of stock as to
which such Option would not otherwise be exercisable.
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<PAGE> 10
TERMS OF EXERCISE
The Plan provides that the Plan Options granted thereunder shall be
exercisable from time to time in whole or in part, unless otherwise specified in
the agreement representing the Plan Options or by the Committee or by the Board
of Directors. Each Plan Option may be exercised in whole or in part at any time
during the period from the date of the grant until the end of the period covered
by the Plan Option period.
The Plan provides that, with respect to Incentive Stock Options, the
aggregate fair market value (determined as of the time the option is granted) of
the shares of Common Stock, with respect to which Incentive Stock Options are
first exercisable by any option holder during any calendar year (including all
incentive stock option plans of the Company, any parent or any subsidiaries
which are qualified under Section 422 of the Internal Revenue Code of 1986)
shall not exceed $100,000.
EXERCISE PRICE
The purchase price for shares subject to Incentive Stock Options must
be at least 100% of the fair market value of the Company's Common Stock on the
date the option is granted, except that the purchase price must be at least 110%
of the fair market value in the case of an Incentive Stock Option granted to a
person who is a "10% stockholder." A "10% stockholder" is a person who owns
(within the meaning of Section 422(b)(6) of the Internal Revenue Code of 1986)
at the time the Incentive Stock Option is granted, shares possessing more than
10% of the total combined voting power of all classes of the outstanding shares
of the Company, any parent or any subsidiaries. The Plan provides that fair
market value shall be determined by the Board or the Committee in accordance
with procedures which it may from time to time establish. If the purchase price
is paid with consideration other than cash, the Board or the Committee shall
determine the fair value of such consideration to the Company in monetary terms.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee but not less than 55% of the fair market
value (but in no event less than the par value) of one share of the Company's
Common Stock on the date the Option is granted.
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.
MANNER OF EXERCISE
Plan Options are exercisable under the Plan by delivery of written
notice to the Company stating the number of shares with respect to which the
Plan Option is being exercised, together with full payment of the purchase price
therefor. Payment shall be in cash, checks, certified or bank cashier's checks,
promissory notes secured by the Shares issued through exercise of the related
Options, shares of Common Stock or in such other form or combination of forms
which shall be acceptable to the Board of Directors or the Committee, provided
that any loan or guarantee by the Company of the purchase price may only be made
upon resolution of the Board or Committee that such loan or guarantee is
reasonably expected to benefit the Company.
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OPTION PERIOD
All Incentive Stock Options shall expire on or before the tenth (10th)
anniversary of the date the option is granted except as limited above.
Non-Qualified Options shall expire ten (10) years and one (1) day from the date
of grant unless otherwise provided under the terms of the option grant.
TERMINATION
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 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.
MODIFICATION AND TERMINATION OF PLANS
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time. However, no such action may prejudice the rights of any
optionee 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 subject to this Plan (except for adjustments due to changes in
the Company's capitalization), or (b) changing the definition of "Eligible
Person" under this Plan, may be effective unless and until approved by the
Stockholders of the Company in the same manner as approval of this Plan is
required. Any such termination of the Plan shall not affect the validity of any
Plan Options previously granted thereunder. Unless the Plan shall theretofore
have been suspended or terminated by the Board of Directors, the Plan shall
terminate on January 27, 2007.
FEDERAL INCOME TAX EFFECTS
The following discussion applies to the Viragen, Inc. Amended 1997
Stock Option Plan and is based on federal income tax laws and regulations in
effect on December 31, 1997. 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.
The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 and is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
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
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<PAGE> 12
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 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.
If the holder of an Incentive Stock Option pays the exercise price, in
full or in part, with shares of previously acquired Common Stock, the exchange
should not affect the Incentive Stock Option tax treatment of the exercise. No
gain or loss should be recognized on the exchange, and the shares received by
the employee, equal in number to the previously acquired shares exchanged
therefor, will have the same basis and holding period for long-term capital gain
purposes as the previously acquired shares. The employee will not, however, be
able to utilize the old holding period for the purpose of satisfying the
Incentive Stock Option statutory holding period requirements. Shares received in
excess of the number of previously acquired shares will have a basis of zero and
a holding period which commences as of the date the Common Stock is issued to
the employee upon exercise of the Incentive Stock Option. If an exercise is
effected using shares previously acquired through the exercise of an Incentive
Stock Option, the exchange of the previously acquired shares will be considered
a disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
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.
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<PAGE> 13
RESTRICTIONS UNDER SECURITIES LAWS
The sale of the Shares must be made in compliance with federal and
state securities laws. Officers, directors and 10% or greater stockholders of
the Company, as well as certain other persons or parties who may be deemed to be
"affiliates" of the Company under the Federal Securities Laws, should be aware
that resales by affiliates can only be made pursuant to an effective
Registration Statement, Rule 144 or any other applicable exemption. Officers,
directors and 10% and greater stockholders may also be subject to the "short
swing" profit rule of Section 16(b) of the Securities Exchange Act of 1934.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 75,000,000 shares of
Common Stock, par value $.01 per share, of which 52,710,635 shares were
outstanding as of April 14, 1998. The Company is also authorized to issue up to
1,000,000 shares of Preferred Stock, par value $1.00 per share, of which 2,650
shares of Series A Preferred Stock, 500 shares of Series H Preferred Stock and
200 shares of Series I Preferred Stock were outstanding as of April 14, 1998.
COMMON STOCK
Subject to the dividend rights of the holders of Preferred Stock,
holders of shares of Common Stock are entitled to share, on a ratable basis,
such dividends as may be declared by the Board of Directors out of funds,
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, after payment to creditors and holders of Preferred Stock that may be
outstanding, the assets of the Company will be divided pro rata on a per share
basis among the holders of the Common Stock.
Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of a plurality of the shares voting for the election of Directors at
any Special or Annual Meeting of Stockholders can elect all of the Directors if
they choose to do so, and, in such event, the holders of the remaining shares
will not be able to elect any Directors. The By-Laws of the Company require that
only a majority of the issued and outstanding shares of Common Stock of the
Company need be represented to constitute a quorum and to transact business at a
stockholders' meeting. The Common Stock has no preemptive, subscription or
conversion rights and is not redeemable by the Company.
PREFERRED STOCK
The Company is authorized to issue a total of 1,000,000 shares of
Preferred Stock, par value $1.00 per share. The Preferred Stock may be issued by
resolutions of the Company's Board of Directors from time to time without any
action of the stockholders. Such resolutions may authorize issuances of such
Preferred Stock in one or more series and may fix and determine dividend and
liquidation preferences, voting rights, conversion privileges, redemption terms
and other privileges and rights of the shares of each authorized series. While
the Company includes such Preferred Stock in its capitalization in order to
enhance its financial flexibility, such Preferred Stock could possibly be used
by the Company as a means to preserve control by present management in the event
of a potential hostile takeover of the Company. In addition, the issuance of
large blocks of Preferred Stock could possibly have a dilutive effect with
respect to the existing holders of Common Stock of the Company.
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<PAGE> 14
The Company has authorized 375,000 shares of Series A Preferred Stock
of which 2,650 shares are issued and outstanding, and has authorized 500 Shares
of Series H Preferred Stock and 200 shares of Series I Preferred Stock, all of
which shares are outstanding. The Company had also authorized the issuance of
15,000 shares of Series B Preferred Stock, 5,000 shares of Series C Preferred
Stock, 15,000 shares of Series D Preferred Stock, 5,000 shares of Series E
Preferred Stock, 15,000 shares of Series F Preferred Stock and 4,000 shares of
Series G Preferred Stock, no shares of which are outstanding at April 14, 1998.
The Company is in the process of eliminating the authorizations for such
previously issued preferred series whose shares are no longer outstanding.
Series A Preferred Stock
Series A Preferred Stock was established by the Board of Directors in
January 1984. Each share of Series A Preferred Stock is immediately convertible
into 4.26 shares of Common Stock. Dividends on the Series A Preferred Stock are
cumulative, have priority to the Common Stock and are payable in either cash or
Common Stock, at the option of the Company.
The Series A Preferred Stock has voting rights only if dividends are in
arrears for five annual dividends. Upon such occurrence, the voting would be
limited to the election of two directors. Voting rights terminate upon payment
of the cumulative dividends. The Series A Preferred Stock is redeemable at the
option of the Company at any time after expiration of ten consecutive business
days during which the bid or last sale price for the Common Stock is $6.00 per
share or higher. There is no mandatory redemption or sinking fund obligation
with respect to the Series A Preferred Stock.
Owners of the Series A Preferred Stock, of which there are eight record
holders, will be entitled to receive $10.00 per share (plus accrued and unpaid
dividends) before any distribution or payment is made to holders of the Common
Stock or other stock of the Company junior to the Series A Preferred Stock upon
liquidation, dissolution or winding up of the Company. If in any such event the
assets of the Company distributable among the holders of Series A Preferred
Stock or any stock of the Company ranking on a par with the Series A Preferred
Stock upon liquidation, dissolution or winding up are insufficient to permit
such payment, the holders of the Series A Preferred Stock and of such other
stock will be entitled to ratable distribution of the available assets in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full.
Series H Preferred Stock
The Series H Preferred Stock bears no dividends, although an 8%
accretion factor has been included in the calculation for purposes of
determining the liquidation and conversion amounts. The Series H Preferred Stock
is convertible into the Company's Common Stock beginning August 17, 1998. The
Series H Preferred Stock carries no voting rights. The stated value of the
Series H Preferred Stock is $10,000 per share.
The Series H Preferred Stock, inclusive of the 8% accretion factor, is
convertible commencing August 19, 1998, subject to adjustment, into shares of
Common Stock of the Company at the lower of (i) the "Fixed Conversion Price"
which will equal the lower of (a) $2.15 or (b) the average of the lowest two
closing bid prices of the Company's Common Stock on the NASDAQ National Market
System (or on the principal securities exchange on which the Company's Common
Stock is then traded) during the 20 trading days prior to August 19, 1998, (the
"Market Price") subject to a minimum Fixed Conversion
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<PAGE> 15
Price, equal to a market price of $0.85; or (ii) the "Variable Conversion Price"
which will be equal 82% of the market price on the date of conversion (the
"Conversion Price"). The amount of the shares a holder may convert into is
limited to a maximum of 15% of the aggregate principal amount of the Series H
Preferred Stock issued to such holder for each monthly period, subject to a
maximum of 25% per monthly period if the holder has not elected to convert the
permitted 15% amount during any previous monthly conversion period. In addition,
such conversion quota will not be applicable in the event Viragen completes
certain offerings of its securities.
At the option of the Company, any shares of Series H Preferred Stock
which are outstanding on August 19, 2000 will either be (i) automatically
converted at the Conversion Rate (which is calculated by dividing the sum of the
product of (a) .08; (b) by the quotient of the number of days between the date
the Holder fully paid for the Series H Preferred Stock and the date of
conversion and (c) the stated value plus 10,000, and divided by the Conversion
Price) or (ii) automatically redeemed at the stated value plus any liquidated
damages, conversion failure payments, late registration payments and any other
cash payments then due from the Company and then unpaid ("Total Value").
The Company also has the right to redeem ("Right to Redeem") all or any
part of the Series H Preferred Stock submitted for conversion, if on the date of
conversion the Conversion Price of the Company's Common Stock is less than the
Fixed Conversion Price. Under the Right to Redeem option, if the closing bid
price of the Common Stock on the date of conversion ("Closing Bid Price") is
less than $1.50, the redemption price paid by the Company to the holder will be
$11,200 per share of Series H Preferred Stock, and if the Closing Bid Price is
greater than $1.50, the redemption price paid by the Company to the holder will
be $11,750 per share of Series H Preferred Stock.
In addition, at any time commencing February 20, 1999, the Company has
the Right to Redeem from time to time any and all the Series H Preferred stock;
provided, however, that the Company is only entitled to redeem Series H
Preferred Stock having an aggregate stated value of at least $1,000,000. The
redemption price is equal to 120% of the Total Value of the Series H Preferred
Stock through August 19, 1999, and is equal to 115% of the Total Value of the
Series H Preferred Stock through August 19, 2000.
Series I Preferred Stock
The Series I Preferred Stock bears no dividends, although an 8%
accretion factor has been included in the calculation for purposes of
determining the liquidation and conversion amounts. The Series I Preferred Stock
is convertible into the Company's Common Stock beginning August 17, 1998. The
Series I Preferred Stock carries no voting rights. The stated value of the
Series I Preferred Stock is $10,000 per share.
The Series I Preferred Stock, inclusive of the 8% accretion factor, is
convertible commencing August 19, 1998, subject to adjustment, into shares of
Common Stock of the Company at the lower of (i) the "Fixed Conversion Price"
which will equal the lower of (a) $2.15 or (b) the average of the lowest two
closing bid prices of the Company's Common Stock on the NASDAQ National Market
System (or on the principal securities exchange on which the Company's Common
Stock is then traded) during the 20 trading days prior to August 19, 1998, (the
"Market Price") subject to a minimum Fixed Conversion Price, equal to a market
price of $0.85; or (ii) the "Variable Conversion Price" which will be equal 82%
of the market price on the date of conversion (the "Conversion Price"). The
amount of the shares a
15
<PAGE> 16
holder may convert into is limited to a maximum of 15% of the aggregate
principal amount of the Series H Preferred Stock issued to such holder for each
monthly period, subject to a maximum of 25% per monthly period if the holder has
not elected to convert the permitted 15% amount during any previous monthly
conversion period. In addition, such conversion quota will not be applicable in
the event Viragen completes certain offerings of its securities.
At the option of the Company, any shares of Series I Preferred Stock
which are outstanding on August 19, 2000 will either be (i) automatically
converted at the Conversion Rate (which is calculated by dividing the sum of the
product of (a) .08; (b) by the quotient of the number of days between the date
the Holder fully paid for the Series I Preferred Stock and the date of
conversion and (c) the stated value plus 10,000, and divided by the Conversion
Price) or (ii) automatically redeemed at the stated value plus any liquidated
damages, conversion failure payments, late registration payments and any other
cash payments then due from the Company and then unpaid ("Total Value").
The Company also has the right to redeem ("Right to Redeem") all or any
part of the Series I Preferred Stock submitted for conversion, if on the date of
conversion the Conversion Price of the Company's Common Stock is less than the
Fixed Conversion Price. Under the Right to Redeem option, if the closing bid
price of the Common Stock on the date of conversion ("Closing Bid Price") is
less than $1.50, the redemption price paid by the Company to the holder will be
$11,200 per share of Series I Preferred Stock, and if the Closing Bid Price is
greater than $1.50, the redemption price paid by the Company to the holder will
be $11,750 per share of Series I Preferred Stock.
In addition, at any time commencing February 20, 1999, the Company has
the Right to Redeem from time to time any and all the Series I Preferred stock;
provided, however, that the Company is only entitled to redeem Series I
Preferred Stock having an aggregate stated value of at least $1,000,000. The
redemption price is equal to 120% of the Total Value of the Series I Preferred
Stock through August 19, 1999, and is equal to 115% of the Total Value of the
Series I Preferred Stock through August 19, 2000.
NASDAQ NATIONAL MARKET
The Company's Common Stock is traded in the Nasdaq National Market
System under the symbol "VRGN." If for any reason the Common Stock does not
remain accepted for inclusion on the NASDAQ System, then in such case the
Company's Common Stock would be expected to continue to be traded in the
over-the-counter markets through the "pink sheets" or the NASD's OTC Bulletin
Board. In the event the Common Stock were not included in the NASDAQ System, the
Company's Common Stock would be covered by a Securities and Exchange Commission
rule that imposes additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently,the rule may affect the ability of broker-dealers to
sell the Company's securities and also may affect the ability of purchasers in
this offering to sell their shares in the secondary market.
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<PAGE> 17
TRANSFER AGENT
The Transfer Agent for the shares of Common Stock is Chase Mellon
Shareholder Services, Overpeck Centre, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., 200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301.
Members of the firm or members of their family own an aggregate of 37,000 Shares
of Common Stock of the Company.
EXPERTS
The consolidated financial statements of Viragen, Inc. appearing in
Viragen, Inc.'s Annual Report (Form 10-K) for the year ended June 30, 1997, have
been audited by Ernst & Young LLP, Independent Certified Public Accountants, as
set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are, and audited financial statements to be
included in subsequently filed documents will be, incorporated herein in
reliance upon the reports of Ernst & Young LLP pertaining to such financial
statements (to the extent covered by consents filed with the Securities and
Exchange Commission) given upon the authority of such firm as experts in
accounting and auditing.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
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<PAGE> 18
Article VII of the By-Laws of the Company require the Company to
indemnify its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action or suit by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if
he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful, provided, however, that in the
case of an action or suit by or in the right of the corporation, (a)
such person shall be indemnified only to the extent of his expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any
judgments, fines or amounts paid in settlement and (b) no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that, the Court of Chancery
of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
The indemnification provided herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such
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<PAGE> 19
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of the General Corporation Law of the State of Delaware or of these
By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in Article VII of the By-Laws, or elsewhere in the
By-Laws, shall operate to indemnify any director or officer of such
indemnification if for any reason contrary to law, either as a matter of public
policy, or under the provisions of the Federal Securities Act of 1933, the
Securities Exchange Act of 1934, or any other applicable state or federal law.
For the purposes of Article VII, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporations so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE> 20
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The documents listed in (a) through (e) below are incorporated by
reference in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.
(a) The Registrant's latest annual report or transitional report filed
pursuant to Section 13(a) or 15(d) of the Exchange Act, or, in the case of the
Registrant, either (1) the latest prospectus filed pursuant to Rule 424(b) under
the Securities Act of 1933, as amended (the "Act"), that contains audited
financial statements for the Registrant's latest fiscal year for which such
statements have been filed or (2) the Registrant's effective registration
statement on Form 10 or 30F filed under the Exchange Act containing audited
financial statements for the Registrant's latest fiscal year.
(b) The Company's Annual Report on Form 10-K for the year ended June
30, 1997 filed October 2, 1997.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed November 14, 1997.
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997 filed February 13, 1998.
(e) The Company's Current Report on Form 8-K dated July 1, 1997 and
filed September 24, 1997.
(f) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Registrant's
document referred to in (a) above.
(g) The description of the Common Stock of the Company which is
contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
ITEM 4. DESCRIPTION OF SECURITIES
The class of securities to be offered hereby is registered under
Section 12 of the Securities Exchange Act of 1934, as amended. A description of
the Registrant's securities is set forth in the Prospectus incorporated as a
part of this Registration Statement.
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<PAGE> 21
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Article VII of the By-Laws of the Company require the Company to
indemnify its Directors and officers as follows:
"The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such suit, action or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, that in the case of an action or suit by or in the right of
the corporation, (a) such person shall be indemnified only to the extent of his
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement thereof and not for any judgments,
fines or amounts paid in settlement and (b) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware
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<PAGE> 22
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Any indemnification hereunder (unless required by law or ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in this Article. Such determination shall be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
The indemnification provided herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware or of
these By-Laws.
The corporation's indemnity of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
reduced by any amounts such person may collect as indemnification (i) under any
policy of insurance purchased and maintained on his behalf by the corporation or
(ii) from such other corporation, partnership, joint venture, trust or other
enterprise.
Nothing contained in Article VII of the By-Laws, or elsewhere in the
By-Laws, shall operate to indemnify any director or officer of such
indemnification if for any reason contrary to law, either as a matter of public
policy, or under the provisions of the Federal Securities Act of 1933, the
Securities Exchange Act of 1934, or any other applicable state or federal law.
For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporations so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same
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<PAGE> 23
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity."
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Inasmuch as the employees, executives, directors and consultants who
received the Shares of the Company were knowledgeable, sophisticated or had
access to comprehensive information relevant to the Company, such transaction
was undertaken in reliance on the exemption from registration provided by
Section 4(2) of the Act. As a condition precedent to such grant, such security
holders were required to express an investment intent and consent to the
imprinting of a restrictive legend on each stock certificate to be received from
the Registrant.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <C>
4(a) Viragen, Inc. 1997 Stock Option Plan (incorporated by reference to the Company's
Preliminary Proxy Statement dated January 22, 1997)
4(b) Amendment to 1997 Stock Option Plan
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to the issuance of shares of
Common Stock pursuant to the above agreement
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in the opinion filed as
exhibit (5) hereto
(23.2) Consent of independent certified public accountants
</TABLE>
ITEM 9. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offerings or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(b) That, for the purposes of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration
II-4
<PAGE> 24
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Act
may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Plantation and the State of Florida, on the 15th
day of April 1998.
VIRAGEN, INC.
By: /s/Gerald Smith
--------------------------------------
Gerald Smith
Chairman of the Board,
Principal Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Gerald Smith Chairman of the
- ---------------------------- Board of Directors,
Gerald Smith Principal Executive
Officer and President April 15, 1998
/s/Robert H. Zeiger Chief Executive Officer
- ---------------------------- and Director April 16, 1998
Robert H. Zeiger
/s/Dennis W. Healey Executive Vice President
- ---------------------------- Treasurer, Principal
Dennis W. Healey Financial Officer and
Director April 15, 1998
/s/Charles F. Fistel Executive Vice-President
- ---------------------------- and Director April 15, 1998
Charles F. Fistel
/s/Jose I. Ortega Controller and Principal
- ---------------------------- Accounting Officer April 15, 1998
Jose I. Ortega
</TABLE>
II-6
<PAGE> 26
<TABLE>
<S> <C> <C>
/s/Sidney Dworkin Director April 16, 1998
- ----------------------------
Sidney Dworkin
/s/Peter D. Fischbein Director
- ----------------------------
Peter D. Fischbein April 16, 1998
Director
- ----------------------------
Jay M. Haft
Director
- ----------------------------
Fred D. Hirt
Director
- ----------------------------
William B. Saeger
/s/Carl N. Singer Director
- ----------------------------
Carl N. Singer April 16, 1998
</TABLE>
II-7
<PAGE> 27
EXHIBIT INDEX
VIRAGEN, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<C> <C> <C>
4(a) Viragen, Inc.1997 Stock Option Plan (incorporated
by reference to the Company's Preliminary Proxy
Statement dated January 22, 1997)
4(b) Amendment to 1997 Stock Option Plan
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of shares of Common Stock
pursuant to the Amended 1997 Stock Option Plan
(23.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A.
included in the opinion filed as exhibit (5) hereto
(23.2) Consent of independent certified public accountants
</TABLE>
<PAGE> 1
Exhibit 4(b)
AMENDMENT NO. 1 TO
VIRAGEN, INC. 1997 STOCK OPTION PLAN
WHEREAS, the Company has heretofore adopted the Viragen, Inc. 1997
Stock Option Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan by increasing the
aggregate number of shares of Common Stock which may be purchased pursuant to
the exercise of Options under the Plan;
NOW, THEREFORE, the Company agrees to amend the Plan as follows:
1. Paragraph 3 of the Plan entitled "Amount of Stock," is hereby
amended so that the number of Shares of stock which may be purchased pursuant to
the exercise of Options shall be increased from 3,000,000 shares to 4,000,000
shares. Any terms which are not defined herein shall have the same meaning as
defined under the Plan.
2. Except as amended hereby, the terms and conditions of the Plan
shall remain in full force and effect.
Dated as of April 3, 1998
VIRAGEN, INC.
By: /s/ Gerald Smith
-----------------------
Name: Gerald Smith
----------------------
Title: President
<PAGE> 1
EXHIBIT 5
April 17, 1998
[ATLAS PEARLMAN TROP & BORKSON LETTERHEAD]
Viragen, Inc.
865 S.W. 78th Street, Suite 100
Plantation, Florida 33324
RE: REGISTRATION STATEMENT ON FORM S-8; VIRAGEN, INC.
(THE "COMPANY"); 4,000,000 SHARES OF COMMON STOCK
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company and the resale of an aggregate of 4,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock") to be sold pursuant to the above the
Registration Statement and the Company's Amended 1997 Stock Option Plan
("Plan"). The shares of Common Stock to be sold consist of 4,000,000 shares of
Common Stock to be issued under various Common Stock purchase options (the
"Options") pursuant to the Plan.
In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Company's
Certificate of Incorporation, By-Laws, the Plan and various agreements and
written options provided to be provided to officers, directors, key employees
and consultants to the Company, corporate minutes provided to us by the Company
and such other documents and instruments as we deemed necessary. In all such
examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of the Company, we have necessarily assumed the
correctness and completeness of the statements made or included therein by the
Company, and we express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the opinion that
the Common Stock to be issued upon exercise of the Options, when issued in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable.
<PAGE> 2
Viragen, Inc.
April 17, 1998
Page 2
We hereby consent to the use of this opinion in the Registration
Statement on Form S-8 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
JMS/bb
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8) pertaining to the Amended 1997 Stock Option
Plan of Viragen, Inc. and to the incorporation by reference therein of our
report dated September 25, 1997, with respect to the consolidated financial
statements of Viragen, Inc. included in its Annual Report (Form 10-K) for the
year ended June 30, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Miami, Florida
April 13, 1998
