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As Filed with the Securities and Exchange Commission on April 6, 1999.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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VIRAGEN, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2101668
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
865 S.W. 78th Avenue
Suite 100
Plantation, FL 33324
Telephone (954) 233-8746
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Copies to:
James Schneider, Esq.
Gerald Smith Robert J. Burnett, Esq.
Chairman of the Board Atlas, Pearlman, Trop & Borkson, P.A.
Viragen, Inc. Suite 1900
865 S.W. 78th Avenue, Suite 100 200 East Las Olas Boulevard
Plantation, Florida 33324 Fort Lauderdale, Florida 33301
(954) 233-8746 (954) 763-1200
------------------------------------------------------------------
Name, address, including zip code, and telephone number, including
area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Shares to be to be Price Per Offering Registration
Registered Registered Share(1) Price(1) Fee
- ------------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share issuable upon
the conversion of 8%
Redeemable Convertible
Promissory Notes 9,912,622(2) $0.52 $ 5,155,000 $ 1,562
Common Stock issuable upon
exercise of Common Stock
Purchase Warrants 932,039(3) $0.52 $ 485,000 $ 147
Common Stock issuable upon
exercise of Common Stock
Purchase Warrants 155,339(4) $0.52 $ 81,000 $ 25
Total 11,000,000 $ 5,721,000 $ 1,734
========== =========== =======
</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 of
1933, as amended (the "Securities Act"), based on the average of the high and
low sale price for the Common Stock, $.01 par value per share (the "Common
Stock"), as reported on the Nasdaq National Market System at March 31, 1999.
(2) Includes up to an aggregate of 9,912,622 shares of our Common Stock
(including the Additional Shares) issuable upon the conversion of our 8%
Redeemable Convertible Notes convertible at the lesser of the average closing
bid price of our Common Stock for the period of five consecutive trading days
preceding March 17, 1999 (the "Closing Market Price") and the lowest closing bid
price of our Common Stock during the 10 consecutive trading days immediately
preceding the conversion date (the "Notes").
(3) Includes up to an aggregate of 932,039 shares of our Common Stock
issuable upon the exercise of warrants exercisable at the lower of 120% of the
Closing Market Price or the lowest closing bid price of our Common Stock during
the 10 consecutive trading days immediately preceding the conversion date (the
"Warrants").
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(4) Includes an aggregate of up to 155,339 shares of our Common Stock
issuable upon the exercise of warrants exercisable at 120% of Closing Market
Price (the "Additional Warrants").
Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered such additional number of shares as may be issuable as a result
of the anti-dilution provisions of the Notes, Warrants and the Additional
Warrants but not as a result of pure adjustments attributable to changes in
Market price.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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SUBJECT TO COMPLETION
____________, 1999
Selling Security Holder Offering Prospectus
VIRAGEN, INC.
11,000,000 Shares of Common Stock
offered at market price
Viragen, Inc. is registering up to
11,000,000 shares of Common Stock
issuable upon the conversion of
promissory notes and warrants to the
selling security holders.
Viragen, Inc. is researching and
developing products which help the human
immune system resist viral infections.
NASDAQ National Market Symbol: VRGN
Recent Price: $0.52 at March 31, 1999
The selling security holders may sell
the following securities:
9,912,622 shares from the conversion of
promissory notes; and
1,087,378 shares from warrant exercises;
- ----------
---------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------------
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on public reference rooms. Our SEC filings are also available to the public from
our web site at www.viragen.com or at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling security holder sells all the shares.
This prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-_____).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-- Annual Report on Form 10-K/A for the year ended June 30, 1998
(Commission File No. 0-10252)
-- Quarterly Report on Form 10-Q for the quarter ended September 30,
1998 (Commission File No. 0-10252)
-- Quarterly Report on Form 10-Q for the quarter ended December 31,
1998 (Commission File No. 0-10252)
-- Future Filings
You may request a copy of these filings and their exhibits, at no cost,
by writing or telephoning us at the following address:
Corporate Secretary
Viragen, Inc.
865 S.W. 78th Avenue, Suite 100
Plantation, FL 33324
Telephone No.: (954) 233-8746
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with
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different information. The selling security holders will not make any offer of
these shares in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.
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TABLE OF CONTENTS
Where You Can Find More Information................................... 2
Incorporation of Certain Information by Reference..................... 2
High Risk Factors..................................................... 5
The Company........................................................... 10
Selling Security Holders.............................................. 11
Plan of Distribution.................................................. 16
Description of Securities............................................. 17
Legal Matters......................................................... 20
Experts............................................................... 20
Indemnification....................................................... 21
We will not receive any proceeds from the sale of Common Stock from the
accounts of the selling security holders. We may however receive proceeds from
the exercise of the Warrants and the Additional Warrants.
We informed the selling security holders that the anti-manipulative
rules under the Exchange Act of 1934, including Regulation M, may apply to their
sales in the market. We have furnished the selling security holders with a copy
of these rules. We have also informed the selling security holders that they
must deliver a copy of this Prospectus with any sale of their shares.
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HIGH RISK FACTORS
An investment in our Common Stock is very risky. You should be aware
you could lose the entire amount of your investment. Prior to making an
investment decision, you should carefully read this entire prospectus and
consider the following risk factors:
HISTORY OF LOSSES DUE TO LACK OF SALES AND REGULATORY APPROVAL
Since the organization of Viragen Inc. (the "Company" or "Viragen"), we
have incurred operating losses. The net loss for our fiscal year ended June 30,
1998 was $7,856,136. As of December 31, 1998, our net loss for the six month
period then ended was $5,758,422. At December 31, 1998, we had a total deficit
since organization of $44,657,636.
We presently produce a single product known as natural human leukocyte
derived alpha interferon. However, because the Food and Drug Administration (for
United States distribution) and the European Union (for European distribution)
have not yet approved our natural interferon product, we cannot sell this
product and, therefore, have no current source of income from operations.
We will not be able to reduce such losses or operate profitably until
we obtain the necessary approvals to sell natural interferon. While we currently
have a 10% interest in a separate product for the treatment of rheumatoid
arthritis, sales of natural interferon is expected to be our primary source of
income. Investors must understand that natural interferon may never receive the
necessary approvals from regulatory authorities. In addition, even if approval
is received, we may not be able to recover sufficient profit from the sale of
natural interferon. If we do not obtain the required approvals nor profit from
the sale of natural interferon or other products, Viragen most likely will be
forced to terminate its operations. In that case, those who have invested in our
Company will likely lose their entire investment.
POSSIBLE NASDAQ DELISTING
On December 16, 1998 we received notice from the Nasdaq Stock Market
that our Common Stock was in jeopardy of being delisted from the Nasdaq National
Market because our Common Stock failed to maintain a closing bid price of $1.00
per share. We expect to solicit proxies from our stockholders to effect up to a
4 to 1 revenue stock split of our common stock which should assist in
increasing the closing bid price of our common stock above $1.00. However, we
cannot be sure if our stockholders will approve the reverse stock split or, if
the stock split is approved, it will increase the closing bid price of our
common stock above $1.00 for a sufficient period of time. If our common stock
is delisted from the NASDAQ National Market, it may be more difficult to
liquidate your investment in us.
ADDITIONAL FUNDING NEEDED
As explained above, we have no source of income and may not have
sufficient sources of income for a significant period of time, if ever. Funds
will be needed to conduct clinical trials so we can receive regulatory
approvals. We must obtain additional funding from outside sources to conduct
these trials. In the event we are unable to locate
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funding or obtain funding on reasonable terms, we will most likely be required
to terminate operations. In that case, any investment in our Company would be
lost.
DIFFICULTY TESTING PRODUCT
Our ability to receive the approval of either the Food and Drug
Administration ("FDA") or the European Union ("EU") is, in part, dependent on
our ability to test natural interferon on human patients. In the past, we had
certain problems with our testing programs in Florida. We cannot assure you that
our current production technology or new facilities in Florida or Scotland will
meet FDA or EU standards.
COMPETITION
Competition in the immunological and pharmaceutical products industry
is intense. Our competitors, which include major pharmaceutical companies, have
more experience in research, development and clinical testing of pharmaceutical
and biomedical products. They also have greater financial, marketing and human
resources than our Company. Some of our competitors already have approvals for
and are already marketing synthetic products similar to our product. Competition
is only expected to increase in the future. If we are unable to compete with
larger, more experienced competitors, we may be forced to terminate operations.
RISK OF TECHNOLOGICAL OBSOLESCENCE
The research and development of natural interferon and other related
products involves rapid technological change. This change can severely affect
the production methods, costs, marketing and acceptance of biomedical products.
We cannot guarantee that we will have the resources to keep pace with
technological changes or that products developed by our competitors will not
make it difficult or impossible to market our product.
GOVERNMENT REGULATION MAY AFFECT DEVELOPMENT AND DISTRIBUTION OF
NATURAL INTERFERON
All pharmaceutical manufacturers are subject to various state and
federal rules and regulations. In particular, we must comply with FDA guidelines
known as current Good Manufacturing Practices. EU regulatory authorities also
impose regulations. These rules and regulations are constantly changing and may
restrict our ability to produce and distribute our natural interferon product.
UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT
Our ability to successfully market our products may depend on the
receipt of reimbursements from government health administration authorities,
private health coverage insurers and other organizations. In September 1993,
President Clinton announced a series of legislative and regulatory proposals
aimed at reforming the health care system. Although
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many of the proposals have not yet been put into effect, these proposals
may hurt our ability to raise capital. If these proposals become law, the
pricing of products similar to those we produce or the amount of reimbursement
available from U.S. governmental agencies or third party insurers may affect our
ability to market our product or market our product at a profit.
RISK THAT PATENTS AND PROPRIETARY TECHNOLOGY MAY NOT PROVIDE PROTECTION
We intend to rely, in part, on certain proprietary technology in the
production of natural interferon. However, we cannot assure you that such
proprietary technology will enable us to either manufacture natural interferon
more efficiently or enable us to compete effectively with our competitors. In
addition, we may be damaged if we are accused of misappropriating a competitor's
proprietary technology even if these claims are untrue. We cannot assure you
that our future patent applications will be approved, and if granted, that these
patents will provide necessary protection to us.
RISKS OF TECHNOLOGY TRANSFERS
One of our proposed marketing strategies is to sell the right to use
our technology and product manufacturing techniques to third parties, who will
in turn use them to produce natural human leukocyte alpha interferon outside the
United States. We cannot guarantee that we will be able to successfully market
the product or receive revenue from such third parties.
PRODUCT LIABILITY AND LIMITATIONS OF PRODUCT LIABILITY INSURANCE
We may be subject to claims for personal injuries or other damages
resulting from the use of natural interferon. In order to protect our Company
against such claims, we maintain product liability insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in total. We cannot be sure that this
insurance will be adequate to cover any liabilities that may result from the use
of natural interferon or that we will be able to afford such insurance in the
future.
RELIANCE ON FOREIGN THIRD PARTY MANUFACTURER MAY DISRUPT OPERATIONS
Viragen (Scotland) Ltd. ("VSL"), a wholly-owned subsidiary of Viragen
(Europe) Ltd., our majority-owned subsidiary, has entered into a manufacturing
agreement with the Common Services Agency of Scotland. Our decision to use an
offshore manufacturer could expose VSL to certain risks involved with
fluctuations in exchange rates of foreign currencies. In addition, relying on
foreign manufacturers exposes us to all the risks of dealing with a foreign
manufacturing source. These include governmental regulations, tariffs, import
and export restrictions, transportation, taxes and local health and safety
regulations. Any such foreign manufacturing arrangements limit our control and
may lead to the disruption of our operations.
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RISK OF DEPENDENCE ON KEY PERSONNEL
Our day-to-day operations are managed by Mr. Gerald Smith, our Chairman
of the Board and President, Dr. Jay Sawardeker, our Executive Vice President and
Chief Operating Officer, Mr. Dennis W. Healey, our Executive Vice President,
Treasurer and Chief Financial Officer. We have employment agreements with
Messrs. Smith, Sawardeker and Healey which restrict competitive activities by
them during the term of their agreements and for a two-year period thereafter.
However, the loss of their services would have a negative effect on our ability
to conduct business. Our future success will greatly depend on our ability to
attract and retain additional skilled personnel in various phases of our
operations.
PENNY STOCK RULES
Our Common Stock currently trades on the NASDAQ National Market System
and as such is exempt from the "Penny Stock Rules." If our Common Stock is
delisted from the NASDAQ National Market System and continues to trade at less
than $5.00 per share, our Common Stock will most likely be subject to the Penny
Stock Rules promulgated under the Securities Exchange Act of 1934. Penny stocks
generally are equity securities with a price of less than $5.00 which do not
trade on certain national securities exchanges or are quoted on the NASDAQ
National Market System. The Penny Stock Rules require broker-dealers, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation.
In addition, the Penny Stock Rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker and/or dealer
must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of purchases in our Common Stock and trading activity in the secondary
market for the Company's Common Stock. If our Common Stock becomes subject to
the Penny Stock Rules, it will be more difficult for you to sell the Common
Stock which may reduce the value of your investment.
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POSSIBLE ISSUANCE OF ADDITIONAL SHARES AND PAYMENT OF PENALTY FEES
As described in the Selling Security Holders section of this
Prospectus, we may be obligated to pay the Selling Security Holders certain
penalty fees and/or issue additional shares of our Common Stock if certain
events occur. If we are required to pay such penalty fees, our ability to
finance our current and future operations could be negatively affected. If we
are required to issue additional shares of our Common Stock, your ownership
interest in us may be significantly diluted.
IMPACT OF THE YEAR 2000 ON COMPUTER SYSTEMS
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the year 2000. Some older
computer systems store dates with only a two-digit year with an assumed prefix
of "19". Consequently, this limits those systems to dates between 1900 and 1999.
If not corrected, many computer systems and applications could fail or create
erroneous results by or at the year 2000 (the "Year 2000").
Because we will rely heavily on computers to conduct our business we
are subject to all the risks associated with the Year 2000. We have assessed the
scope of our risks related to problems these computer systems may have related
to the Year 2000 and we believe such risks are not significant. In addition, we
are in the process of questioning our vendors and business partners about their
progress in identifying and addressing problems related to the Year 2000.
However, no assurance can be given that all of these third party systems or our
computer systems will be Year 2000 compliant.
DILUTIVE EFFECTS OF TRANSACTION WITH SELLING SECURITY HOLDERS
Based on the current market price of our Common Stock we may issue
approximately 6,000,000 shares of our Common Stock (or 9.2% of the issued and
outstanding Common Stock as of March 31, 1999) to the Selling Security Holders.
Because the price the Selling Security Holders must pay for those shares is
based on the market price of our Common Stock on various dates and the large
percentage of shares of our Common Stock we may sell to the Selling Security
Holders, you may experience substantial dilution of your investment in us.
NO DIVIDENDS ANTICIPATED TO BE PAID
We have never paid cash dividends on our Common Stock and do not expect
to pay cash dividends on our Common Stock any time in the near future. The
future payment of dividends directly depends upon our future earnings, capital
requirements, financial requirements and other factors to be determined by our
Board of Directors. For the foreseeable future, we anticipate that any earnings
from operations will be used to finance our growth and will not be paid to our
common stockholders in the form of dividends.
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POSSIBLE RESALES OF SECURITIES BY CURRENT STOCKHOLDERS AND DEPRESSIVE EFFECT ON
MARKET
As of December 31, 1998, we had 5,772,365 shares of Common Stock
outstanding which were "restricted securities" as that term is defined by Rule
144 under the Securities Act of 1933 (the "Securities Act"). The shares of
Common Stock outstanding do not include shares of common stock that may be
issued on conversion of various options and warrants. Under Rule 144, a person
who holds restricted securities for a period of one year may sell a limited
number of shares to the public in ordinary brokerage transactions. Sales under
Rule 144 and sales of Common Stock covered by registration statements filed by
us may reduce the market price of our Common Stock and increase the number of
our publicly held securities.
USE OF PREFERRED STOCK TO RESIST TAKEOVERS; POTENTIAL ADDITIONAL DILUTION
Our Certificate of Incorporation authorizes 1,000,000 shares of
preferred stock, of which at March 31, 1999, 2,650 shares of Series A Preferred
Stock and 11 shares of Series I Preferred Stock were issued and outstanding. Our
Certificate of Incorporation gives our Board of Directors the authority to issue
preferred stock without approval of our stockholders. We may issue additional
shares of preferred stock to raise money to finance our operations. We may
authorize issuance of the preferred stock in one or more series. In addition, we
may set the dividend and liquidation preferences, voting rights, conversion
privileges, redemption terms and other privileges and rights of the shares of
each authorized series. While we include preferred stock in our capitalization
to improve our financial flexibility, we could possibly use such preferred stock
to preserve control by present management in the event we become subject to a
potential hostile takeover. In addition, the issuance of large blocks of
preferred stock could possibly have a dilutive effect to our existing
stockholders.
THE COMPANY
Viragen, Inc. was organized in 1980 and is in the business of
researching and developing products which help the human immune system resist
viral infections. Our primary product is a natural interferon product named
OmniferonTM which is produced from human white blood cells. Natural interferon
stimulates and controls the human immune system. In addition, interferon may
stem the growth of various viruses including those involved with diseases such
as hepatitis, multiple sclerosis, cancer and HIV/AIDS.
Our product has not been approved by the U.S. Food and Drug
Administration or the European Union regulatory authorities. Viragen will seek
FDA and EU approval for various uses of its Omniferon product in the future.
This approval requires several years of clinical trials and substantial
additional funds. Until 1993, we did not operate actively because of limited
funds. As a result of funds previously raised by us as well as funds from the
current transaction, we are concentrating our efforts in obtaining approval for
our Omniferon product initially in the EU and eventually from the FDA.
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Our affiliate, Viragen (Scotland) Ltd., entered into a license and
manufacturing agreement with the Common Services Agency of Scotland, and the
Scottish National Blood Transfusion Service (the "Scottish Service"). As a
result of this agreement, the Scottish Service will help in the manufacture of
Viragen (Scotland)'s product for exclusive distribution in the EU and on a
non-exclusive basis worldwide. The Scottish Service will receive royalties and
special access to our Omniferon product. We have also recently entered into
agreements with the American Red Cross, America's Blood Centers and the German
Red Cross for supplies of white blood cells. These sources of white blood cells
enable us to conduct EU and FDA trials and, subject to regulatory approvals,
will also be used for commercial manufacturing in the future.
Our executive offices are at 865 S.W. 78th Avenue, Suite 100,
Plantation, FL 33324. Our telephone number is (954) 233-8746; our facsimile
number is (954) 233-1414.
---------------
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS PROSPECTUS ARE FORWARD LOOKING AND INVOLVE A NUMBER OF RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DESCRIBED FOR A VARIETY OF FACTORS. SUCH FACTORS COULD INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" IN THE COMPANY'S FORM
10-K/A ANNUAL REPORT FILED FOR THE FISCAL YEAR ENDED JUNE 30, 1998, AS WELL AS
THOSE DISCUSSED ELSEWHERE IN OTHER PUBLIC FILINGS MADE BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION. FORWARD LOOKING STATEMENTS INCLUDE THE
COMPANY'S STATEMENTS REGARDING LIQUIDITY, ANTICIPATED CASH NEEDS AND
AVAILABILITY, AND ANTICIPATED EXPENSE LEVELS IN "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" INCLUDING EXPECTED
PRODUCT CLINICAL TRIAL INTRODUCTIONS, EXPECTED RESEARCH AND DEVELOPMENT
EXPENDITURES, AND RELATED ANTICIPATED COSTS. ALL FORWARD LOOKING STATEMENTS
INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON
THE DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD LOOKING STATEMENTS. IT IS IMPORTANT TO NOTE THAT THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD LOOKING STATEMENTS.
SELLING SECURITY HOLDERS
SECURITIES PURCHASE AGREEMENT
On March 17, 1999, we entered into a purchase agreement (the
"Agreement") with The Isosceles Fund ("Isosceles") and Cefeo Investments Limited
("Cefeo"). The Agreement:
o describes the terms pursuant to which we issued Isosceles and Cefeo
8% Redeemable Promissory Notes (the "Notes") in the principal amount of
$2,000,000 and warrants to purchase shares of our common stock (the "Warrants");
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o limits our ability under certain circumstances to issue shares of our
common stock or securities convertible or exercisable into our common stock
without the consent of Isosceles and Cefeo for up to 195 days from the date of
the Agreement;
o require us to indemnify Isosceles, Cefeo and their respective
officers, directors and affiliates from and damages they may incur if we breach
the Agreement; and
o give Isosceles a right of first refusal to participate in certain
equity financings we undertake for a period of 360 days following the date of
the Agreement.
THE NOTES
The aggregate principal amount of the Notes we issued to Isosceles and
Cefeo pursuant to the Agreement was $2,000,000. The principal amount of the
Notes accrues interest at a rate of 8% annually.
OPTIONAL PRE-PAYMENT. At our option, we may pre-pay (the "Pre-Payment")
the Notes at 120% of their outstanding principal balance plus the accrued
interest until either 90 or 105 days after the date of the Agreement depending
on certain circumstances (the "Registration Period").
MANDATORY REDEMPTION. If we do not obtain the approval of our
stockholders to complete up to a 1 to 4 reverse stock split of our outstanding
common stock by May 30, 1999, the Note holders may require us to redeem an
amount of the Notes or any shares of our common stock issued to the Note holders
upon conversion of the Notes (the "Conversion Shares") necessary to permit:
o conversion of the remaining Note(s);
o re-sale of the Conversion Shares;
o issuance of the Additional Shares (as defined below); and
o exercise of the Warrants;
without violating NASDAQ rules. Any redemption we would be required to make
would be at a cash price equal to the greater of 125% of the face amount of the
Notes or the Conversion Shares (valued at the applicable Conversion Price for
such shares) being redeemed plus certain fees.
CONVERSION. If we do not pre-pay or redeem the Notes, then on the
trading day following the sooner of the end of the Registration Period or the
date a registration statement registering the Conversion Shares becomes
effective (the "Pre-Payment Deadline") and the 30th day after the PrePayment
Deadline (the "Conversion Dates"), one-half of the principal balance and accrued
interest on the Notes will automatically convert into shares of our Common
Stock. Subject to certain adjustments, the conversion price (the "Conversion
Price") will be the lesser of a) the average of the closing bid prices of our
Common Stock during the five consecutive trading days preceding the Initial
Purchase Date (the "Closing Market Price") ($0.644) and b) the lowest closing
bid price of our common stock during the ten consecutive trading days
immediately preceding the applicable Conversion Date (the "Future Price"). The
number of Conversion Shares that will be issued to each Note holder will
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be determined by dividing the principal balance and accrued interest on the
Notes by the respective Conversion Price.
In addition to the Conversion Shares, the Note holders are entitled to
receive additional shares (the "Additional Shares") of our common stock on the
trading days following 30 days and 60 days after the Pre-Payment Deadline (each
a "Re-Set Date"). The number of Additional Shares the Note holders are entitled
to receive will be calculated by subtracting 1 from the quotient obtained by
dividing the Closing Market Price by the Future Price multiplied by 1.2 on the
first Re-Set Date and 1.22 on the second Re-Set Date (the "Applicable Rates")
multiplied by the number of Conversion Shares.
If we do not deliver the Conversion Shares and the Additional Shares
to the Note holders within four business days after we receive proper notice
from the Note holders (a "Delivery Default"), we must pay each Note holder $500
in cash for each of the first two days beyond such date, and $2,500 in cash for
each day thereafter we do not deliver the Conversion Shares or the Additional
Shares (the "Late Fee"). The Late Fee may, at the Note holders' option, be added
to the principal amount of the Note.
If a Delivery Default occurs because we do not have enough authorized
but unissued shares of our common stock to deliver to the Note holders, we must
issue the Note holders all of the shares of Common Stock which are then
available. All of the Conversion Shares which the Note holders are entitled to
receive which we are unable to deliver (the "Excess Amount") as a result of a
Delivery Default must be delivered to the Note holders on the first date which
they become available. On the date the shares become available, the Conversion
Price for the Excess Shares will be adjusted to the lower of (i) the Conversion
Price on the Delivery Default date and (ii) the Conversion
Price on the Conversion Date thereafter elected by the Holder in respect
thereof. The number of Additional Shares shall be adjusted to reflect the
Applicable Rate up to the date of actual delivery.
If a Delivery Default occurs, we must also make certain payments to the
Note holders based on the number of days the Delivery Default exists ("Delivery
Default Payments"). The accrued Delivery Default Payments for each calendar
month shall be paid in cash or shall be convertible into Common Stock (at such
time as there are sufficient authorized shares of Common Stock) at the market
price, at the Note holder's option. In the event the Note holder elects to take
such payment in Common Stock, the holder may convert such payment amount into
Common Stock at the Conversion Price in effect at the time of conversion.
RESTRICTION. As long as the Notes are outstanding, we may not pay any
dividend, redeem any of our outstanding securities, assume any liability for
borrowed money, lend money or guarantee any obligations, incur any obligations
senior to the Notes, sell or lease assets (except in the ordinary course of
business) without the prior written consent of the Note holders.
DEFAULT. If we default on our obligations under the Agreement or the
Note, the Note holders may require us to immediately pay no less than, and
possibly more than, 130% of the principal balance, the accrued interest and any
other sums due the Note holders under the Notes (the "Default Amount"). If we
fail to pay the Default Amount within five business days of written notice that
such amount is due and payable, we may be required to immediately issue, in lieu
of a Default Amount, a
13
<PAGE> 17
number of shares of our Common Stock equal to the Default Amount divided by the
Conversion Price then in effect.
THE WARRANTS
The Warrants entitle Isosceles and Cefeo to purchase an aggregate of
932,039 shares of our common stock subject to adjustment (the "Warrant Shares").
The Warrants are exercisable until March 17, 2004. Subject to certain
adjustments, the Warrants are exercisable at a price per share equal to 120% of
the Closing Market Price (the "Exercise Price"). If, however, the Future Price,
as defined above, is lower than the Exercise Price on the first Conversion Date,
then the Exercise Price will be the Future Price (the "Adjusted Exercise
Price"). If the Future Price on the second Conversion Date is lower than the
Exercise Price and the Adjusted Exercise Price, then the Exercise Price shall be
such Future Price. The Warrants also contain a cashless exercise provision.
With certain limited exceptions, we must reduce the exercise price of
the Warrants if we sell shares of our common stock, grant options (or adjust the
exercise price of options) or issue other securities convertible into our common
stock at prices less than the Closing Market Price. We may be required to pay
the Warrant holders a fee equal to the Late Fee if we do not deliver the Warrant
Shares within the time period specified in the Warrant.
REGISTRATION RIGHTS AGREEMENTS
We are required to file a Registration Statement registering the shares
of our Common Stock issuable upon the exercise of the Notes, Warrants and
Additional Warrants. If we fail to maintain the effectiveness of the
Registration Statement for certain periods of time, or if our Common Stock is
delisted from Nasdaq, we may be required to redeem the Notes, Warrants, Common
Shares and Warrant Shares. In addition to the amounts we would be required to
pay in redemption of the Notes, Warrants, Common Shares and Warrant Shares we
would also be required to pay certain penalty fees.
If at any time after 180 days following the Initial Purchase Date, the
Registration Statement is not yet effective or the Registration Statement ceases
to be effective for 30 consecutive business days or a total of 60 business days
during any 12 month period, the Selling Security holders will have the right to
require us to redeem all Notes and Warrants and shares of Common Stock received
upon conversion or exercise for a cash price which may be greater than the
market price of our common stock.
We agreed to indemnify Isosceles and Cefeo and their partners,
affiliates, officers, directors, employees and duly authorized agents, or any
seller of the shares of Common Stock usable in connection with the Note and
Warrants from any damages, costs and expenses incurred, including, reasonable
attorneys' fees, as a result of any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or prospectus
relating to the registrable securities or any preliminary prospectus registering
the shares of our Common Stock issuable pursuant to the Note or Warrant.
ADDITIONAL WARRANTS
In connection with the consummation of the Purchase Agreement, we
issued warrants to purchase an aggregate of up to 155,339 shares of our Common
Stock (the "Additional Warrants") to Ballsbridge Finance Limited, Elliot Layne &
Associates, Inc. and Ven-Gua Capital Markets Ltd. (the "Additional
Warrantholders"). All of the Additional Warrants are exercisable for a period of
five years from the date of issuance at such time as we pre-pay the Notes. If we
do not pre-pay the Notes, then only half of the Additional Warrants are
exercisable.
14
<PAGE> 18
The following table sets forth as of March 17, 1999 (1) the name of the
selling security holder, (2) the amount of Common Stock held directly or
indirectly or underlying the Warrants and the Placement Agent Warrants to be
offered by the selling security holders and (3) the amount to be owned by the
selling security holders following the sale of such shares. As of March 17,
1999, there were outstanding 64,995,402 shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Percentage
of Shares Shares to be
Name of Selling Number of Owned Prior Owned After
Security Holders Shares Owned to Offering Offering
- ---------------- ------------ ----------- ------------
<S> <C> <C> <C>
The Isosceles Fund(1) 8,133,496 12.5% 0
Cefeo Investments Limited(2) 2,711,165 4.2% 0
Ballsbridge Finance, Limited(3) 38,835 * 0
Elliott Layne & Associates, Inc.(3) 58,252 * 0
Ven-Gua Capital Markets Ltd.(3) 58,252 * 0
</TABLE>
* Denotes less than 1%
- ---------------------
(1) Assumes that (i) 7,434,467 shares will be acquired upon
conversion of Notes and (ii)699,029 shares will be acquired
upon the conversion of the Warrants.
(2) Assumes that (i) 2,478,155 shares will be acquired upon
conversion of Notes and (ii) 233,010 shares will be acquired
upon the conversion of the Warrants.
15
<PAGE> 19
(3) Issuable upon exercise of the Additional Warrants exercisable at 120%
of the Closing Market Price until March 17, 2004.
The Company has agreed to pay for all costs and expenses in the
issuance, offer, sale and delivery of the Shares. These include, all expenses
and fees of preparing, filing and printing the Registration Statement and
mailing of these items. The Company will not pay selling commissions and
expenses for any sales by the selling security holders. The Company will
indemnify the selling security holders against civil liabilities including
liabilities under the Securities Act of 1933.
PLAN OF DISTRIBUTION
These Shares may be sold by the selling security holders, or by other
successors in interest. The sales may be made on one or more exchanges or in the
over-the-counter market (including the Nasdaq National Market of The Nasdaq
Stock Market), or at prices related to the then current market price, or in
negotiated transactions.
The Shares may be sold by one or more of the following methods,
including, without limitation:
(1) a block trade in which the broker-dealer so engaged will attempt to
sell the Shares as agent, but may position and resell a portion of the block as
principal;
(2) purchases by a broker or dealer as principal and resale by such
broker or dealer;
(3) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
(4) face-to-face or other direct transactions between the selling
security holders and purchasers without a broker-dealer or other intermediary.
In addition, the selling security holders may, subject to the
restrictions described below and previously under "Selling Security Holders",
sell short the Common Stock of the Company. In these instances, this Prospectus
may be delivered in connection with such short sale and the Shares offered may
be used to cover such short sale. The Selling Security Holders may be considered
underwriters within the meaning of the Act in connection with the sale of the
shares offered hereby. In making sales, broker-dealers or agents engaged by the
selling security holders may arrange for other broker-dealers or agents to
participate. Such broker-dealers may receive commissions or discounts from the
selling security holders in amounts to be negotiated immediately prior to the
sale. These broker-dealers and agents and any other participating broker-dealers
or agents, as well as the selling security holders and the placement agent, may
be considered to be "underwriters" within the meaning of the
16
<PAGE> 20
Act. In addition, any securities covered by this Prospectus that qualify for
sale under Rule 144 may be sold under Rule 144 rather than by this Prospectus.
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 64,995,402 shares were
outstanding as of March 17, 1999. The Company is also authorized to issue up to
1,000,000 shares of preferred stock, par value $1.00 per share, of which 2,650
shares of Series A Preferred Stock and 11 shares of Series I Preferred Stock
were outstanding as of March 31, 1999.
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 proportionate
basis, such dividends as may be declared by the Board of Directors. 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 proportionately on a per share basis among the
holders of the Common Stock.
Each share of Common Stock has 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 can elect all of the Directors.
In that event, the holders of the remaining shares will not be able to elect any
Directors. The By-Laws of the Company provide that a majority of the issued and
outstanding shares of Common Stock are a quorum 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
17
<PAGE> 21
Company's Board of Directors without any action of the stockholders. However,
any issuance of 20% of Viragen's Common Stock will require stockholder approval
under Nasdaq Rule 4460(I)(1)(d)(ii). These resolutions may authorize issuances
of such preferred stock in one or more series. In addition, they 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 preferred stock in its capitalization to
improve its financial flexibility, preferred stock could possibly be used by the
Company 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 also have a dilutive effect to existing holders of Common
Stock of the Company.
SERIES A PREFERRED STOCK
Viragen established the Series A Preferred Stock 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 is 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 for the
Series A Preferred Stock.
Owners of the Series A Preferred Stock will be entitled to receive
$10.00 per share (plus accrued and unpaid dividends) upon liquidation,
dissolution or winding up of the Company. This is 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.
Series H and Series I Preferred Stock
The Series H Preferred Stock and the Series I Preferred Stock
(sometimes collectively referred to in this section as the "Preferred Stock")
have no dividends, although an 8% accretion factor has been included for
purposes of determining the liquidation and conversion amounts. The Preferred
Stock carries no voting rights. The stated value of the Preferred Stock is
$10,000 per share.
18
<PAGE> 22
The Preferred Stock, including the 8% accretion factor, is convertible
into shares of Common Stock of the Company at the lower of:
(1) the Fixed Conversion Price of $1.59; or
(2) the Variable Conversion Price which will equal 82% of the Market
Price on the date of conversion (the "Conversion Price").
The amount of the shares a holder of the Preferred Shares may convert
into is limited to a maximum of 15% of the aggregate principal amount of the
Series H Preferred Stock or the Series I Preferred Stock issued to a holder for
each monthly period. This is subject to a maximum of 25% per monthly period if
the holder has not elected to convert the permitted 15% amount for the series
during any previous monthly conversion period. In addition, this conversion
quota will not be applicable in the event the Company completes a private
offering of its debt or equity securities.
At the option of the Company, any shares of Preferred Stock which are
outstanding on August 19, 2000 will either be (1) automatically converted at the
Conversion Rate in effect at that time or (2) automatically redeemed at the
Stated Value plus any liquidated damages and any other cash payments then due
from the Company ("Total Value").
The Company also has the right to redeem ("Right to Redeem") all or any
part of the 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 Preferred Stock. On the other hand, 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 Preferred Stock.
In addition, at any time commencing February 20, 1999, the Company has
the Right to Redeem the Preferred Stock. However, the Company is only entitled
to redeem 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
Preferred Stock through August 19, 1999,and is equal to 115% of the Total Value
of the Preferred Stock through August 19, 2000.
A holder may not convert Preferred Stock if, as a result of conversion,
the shares of Common Stock beneficially owned by the holder would exceed 4.9% of
the outstanding shares of the Company. However, the converting holder or holders
may waive the 4.9% Restriction by providing notice to the Company of the intent
to waive this restriction. In no event may holders convert Preferred Stock if
the total number of shares issuable upon conversion would exceed the maximum
number of shares of Common Stock that the Company could, without stockholder
approval, issue under Nasdaq Rule 4460(i)(l)(d)(ii).
The Company had agreed that through February 19, 1999, it would not,
without the prior written consent of each holder, issue or sell, any equity or
debt securities of the Company (not including securities sold in underwritten
public offerings or mergers,
19
<PAGE> 23
acquisitions or similar transactions) or any of its subsidiaries. An exception
is if the Company has first delivered to each holder a written notice describing
such future offering and providing each holder and its affiliates an option to
purchase up to the full amount of the securities being offered in the future
offering on the same terms as in the future offering. However, if any holder
chooses not to participate in any future offering, then any debt or equity
security issued in that offering will be ineligible for resale and/or
conversion, until November 19, 1999.
OVER-THE-COUNTER MARKET
The Company's Common Stock is traded in the Nasdaq National Market
under the symbol "VRGN." If for any reason the Common Stock does not remain
accepted for inclusion on Nasdaq, then the Company's Common Stock would 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 on
Nasdaq, 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. It
also may affect the ability of purchasers in this offering to sell their shares
in the secondary market.
TRANSFER AGENT
The Transfer Agent for the shares of Common Stock is Chase Mellon
Shareholders Services, Overpeck Centre, 85 Challenger Road, Ridgefield Park, New
Jersey 07660-2108.
LEGAL MATTERS
Certain legal matters in connection with the Shares being offered
hereby will be passed upon by Atlas, Pearlman, Trop & Borkson, P.A., 200 East
Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301. Members of that
firm or members of their family own a total 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/A) for the year ended June 30, 1998,
as amended, have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon
20
<PAGE> 24
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware allows a
corporation to indemnify any person who was or is threatened to be made a party
to any threatened, pending or completed suit or proceeding. This applies whether
the matter is civil, criminal, administrative or investigative because he or she
is or was a director, officer, employee or agent of the corporation.
A corporation may indemnify against expenses (including attorney's
fees) and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of such suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which such action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Section 145 of the General Corporation Law of Delaware further provides
that if a director, officer, employee or agent of the corporation has been
successful in the defense of any suit, claim or proceeding described above, he
or she will be indemnified for expenses (including attorneys' fees) actually and
reasonably incurred by him or her.
Insofar as indemnification for liabilities arising under the Act is
permitted as to directors, officers and controlling persons of the Company, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company in the successful defense of any action, suit or proceeding) is
asserted, 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. The Company will be governed by the final adjudication of such issue.
21
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses, all of which are
being paid by the Company, in connection with this offering.
Registration fee...................................... $ 1,734
Legal fees and expenses............................... 10,000*
Accounting fees and expenses.......................... 10,000*
Printing expenses..................................... 3,000*
Miscellaneous......................................... 2,266*
-------
Total ................................................ $27,000*
=======
- ---------------------
*Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware allows a
corporation to indemnify any person who was or is, or is threatened to be made a
party to any threatened, pending or completed suit or proceeding. This applies
whether the matter is civil, criminal, administrative or investigative because
he or she is or was a director, officer, employee or agent of the corporation.
A corporation may indemnify against expenses (including attorney's
fees) and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of such suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which such action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Section 145 of the General Corporation Law of Delaware further provides
that if a director, officer, employee or agent of the corporation has been
successful in the defense of any suit, claim or proceeding described above, he
or she will be indemnified for expenses (including attorneys' fees) actually and
reasonably incurred by him or her.
II-1
<PAGE> 26
Insofar as indemnification for liabilities arising under the Act is
permitted as to directors, officers and controlling persons of the Company, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company in the successful defense of any action, suit or proceeding) is
asserted, 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. The Company will be governed by the final adjudication of such issue.
Item 16. Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession (incorporated by reference to the Company's
registration statement on Form S-3 dated April 15, 1997, as
amended, File No. 333-25187, Part II, Item 16, (2)("April 1997
Form S-3)).
(2)(i) Plan of Merger between Florida Immunological Institute, Inc.
and Vira- Tech, Inc., dated September 30, 1986 (incorporated
by reference to the Company's registration statement on Form
S-2, dated October 24, 1986, as amended File No. 33-9714
("1986 Form S-2"), Part II, Item 16, 2.1)
(2)(ii) Articles of Merger of Florida Immunological Institute into
Vira-Tech, Inc., dated September 30, 1986 (incorporated by
reference to 1986 Form S-2, Part II, Item 16, 2.2)
(3)(i) Articles of Incorporation and By-Laws (incorporated by
reference to the Company's registration statement on Form S-1,
dated June 8, 1981, as amended, File No. 2-72691, "Form S-1",
Part II, Item 30(b) 3.1 and 3.2)
(3)(ii) Amended Certificate of Incorporation (incorporated by
reference to 1986 Form S-2, Part II, Item 16, 4.2)
(4) Instruments defining the rights of security holders, including
indentures (incorporated by reference to April 1997 Form S-3,
Item 16, (4))
(4)(i) Certificate of Designation for Series A Preferred Stock, as
amended (incorporated by reference to 1986 Form S-2, Part II,
Item 16, 4.4)
(4)(ii) Specimen Certificate for Unit (Series A Preferred Stock and
Class A Warrant) (incorporated by reference to 1986 Form S-2,
Part II, Item 16, 4.5)
II-2
<PAGE> 27
EXHIBIT DESCRIPTION
- ------- -----------
(4)(iii) Omitted
(4)(iv) Omitted
(4)(v) Omitted
(4)(vi) Omitted
(4)(vii) Omitted
(4)(viii) Form of three year 8.5% Convertible Subordinated Debenture
(incorporated by reference to the Company's Current Report on
Form 8- K dated November 17, 1993)
(4)(ix) Form of Stock Option Agreement dated November 19, 1993, issued
to Messrs. Dennis W. Healey and Peter D. Fischbein
(incorporated by reference to the Company's Current Report on
Form 8-K dated November 17, 1993)
(4)(x) 1995 Stock Option Plan
(4)(xi) Certificate of Designation for Series B Preferred Stock,
(incorporated by reference to the Company's Current Report on
Form 8-K dated June 7, 1996)
(4)(xii) Omitted
(4)(xiii) Certificate of Designations Preferences and Rights for Series
C Preferred Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated February 14, 1997)
(4)(xiv) Certificate of Designations Preferences and Rights for Series
D Preferred Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated February 14, 1997)
(4)(xv) Certificate of Designations, Preferences and Rights for Series
E Preferred Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated March 6, 1997)
II-3
<PAGE> 28
EXHIBIT DESCRIPTION
- ------- -----------
(4)(xvi) Certificate of Designations, Preferences and Rights for Series
F Preferred Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated September 22, 1997)
(4)(xvii) Certificate of Designations, Preferences and Rights for Series
G 10% Cumulative Convertible Preferred Stock (incorporated by
reference to the Company's Current Report on Form 8-K dated
September 22, 1997)
(4)(xvii) Certificate of Designations, Preferences and Rights for Series
H Preferred Stock (incorporated by reference to the Company's
Registration Statement on Form S-3 (File No. 333-65199))
(4)(xviii) Certificate of Designations, Preferences and Rights of Series
I Preferred Stock (incorporated by reference to the Company's
Registration Statement on Form S-3 (File No. 333-65199))
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the
validity of the securities being registered (previously filed)
(10) Material contracts
(10)(i) Research Agreement between the Registrant and Viragen Research
Associates Limited Partnership dated December 29, 1983
(incorporated by reference to Medicore S-1, File No. 2-89390,
dated February 10, 1984 ("Medicore S-1"), Part II, Item
16(a)(10)(xxxiii))
(10)(ii) License Agreement between the Registrant and Viragen Research
Associates Limited Partnership dated December 29, 1983
(incorporated by reference to Medicore S-1, Part II, Item 16
(a)(10)(xxxiv))
(10)(iii) Omitted
(10)(iv) Royalty Agreement between the Company and Medicore, Inc. dated
November 7, 1986 (incorporated by reference to the November
1986 Form 8-K, Item 7(c)(i))
(10)(v) Amendment to Royalty Agreement between the Company and
Medicore, Inc. dated November 21, 1989 (incorporated by
reference to the Company's Current Report on Form 8-K dated
December 6, 1989, Item 7 (c)(i))
II-4
<PAGE> 29
EXHIBIT DESCRIPTION
- ------- -----------
(10)(vi) Promissory Note from the Company to Medicore, Inc. dated
August 6, 1991 (incorporated by reference to the Company's
1991 Form 10-K, Part IV, Item 10(a)(10)(xx))
(10)(vii) Loan Agreement between the Company and Medicore, Inc. dated
January 31, 1991 (incorporated by reference to the Company's
Current Report on Form 8-K dated February 26, 1991, Item
7(c)(ii))
(10)(viii) Amendment to Loan Agreement between the Company and Medicore,
Inc. dated August 6, 1991 (incorporated by reference to the
Company's 1991 Form 10-K, Part IV, Item 14(a)(10)(xxi))
(10)(ix) Florida Real Estate Mortgage and Security Agreement from the
Company to Medicore, Inc. dated August 6, 1991 (incorporated
by reference to the Company's 1991 Form 10-K, Part IV, Item
14(a)(10)(xxii))
(10)(x) Omitted
(10)(xi) Omitted
(10)(xii) Promissory Note to Equitable Bank dated August 2, 1991
(incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the second quarter ended June 30, 1991
("June, 1991 Form 10-Q"), Part II, Item 6(a)(28)(i))
(10)(xiii) Mortgage and Security Agreement issued to the Equitable Bank
dated August 2, 1991 (incorporated by reference to the
Company's June, 1991 Form 10-Q, Part II, Item 6(a)(28)(ii))
(10)(xiv) Acquisition Agreement between the Company and Medicore, Inc.
dated August 2, 1991 (incorporated by reference to the
Company's 1991 Form 10-K, Part IV, Item 14(a)(10)(xxiii))
(10)(xv) Lease between the Company and Medicore, Inc. dated December 8,
1992 (incorporated by reference to the Company's Current
Report on Form 8-K, dated January 21, 1993 ("January 1993 Form
8-K"), Item 7(c)(10)(i))
II-5
<PAGE> 30
EXHIBIT DESCRIPTION
- ------- -----------
(10)(xvi) Addendum to Lease between the Company and Medicore, Inc. dated
January 15, 1993 (incorporated by reference to the Company's
January 1993 Form 8-K, Item 7(c)(10)(ii))
(10)(xvii) Agreement for Sale of Stock between the Company and Cytoferon
Corp. dated February 5, 1993 (incorporated by reference to the
Company's Current Report on Form 8-K, dated February 11, 1993,
Item 7(c)(28))
(10)(xviii) Addendum to Agreement for Sale of Stock between the Company
and Cytoferon Corp. dated May 4, 1993 (incorporated by
reference to the Company's Current Report on Form 8-K dated
May 5, 1993, Item 7(c)(28)(i))
(10)(xix) Amendment No. 2 to the Royalty Agreement between the Company
and Medicore, Inc. dated May 11, 1993 (incorporated by
reference to the Company's June 30, 1993 Form 10-K, Part IV,
Item 14(a)(10)(xix))
(10)(xx) Note and Mortgage Modification Agreement between the Company
and Medicore, Inc. dated August 18, 1993 (incorporated by
reference to the Company's June 30, 1993 Form 10-K, Part IV,
Item 14(a)(10)(xx))
(10)(xxi) Amendment No. 2 to the Loan Agreement between the Company and
Medicore, Inc. dated August 18, 1993 (incorporated by
reference to the Company's June 30, 1993 Form 10-K, Part IV,
Item 14(a)(10)(xxi))
(10)(xxii) Amendment to Acquisition Agreement between the Company and
Medicore, Inc. dated August 18, 1993 (incorporated by
reference to the Company's June 30, 1993 Form 10-K, Part IV,
Item 14(a)(10)(xxii))
(10)(xxiii) Marketing and Management Services Agreement between the
Company and Cytoferon Corp. dated August 18, 1993
(incorporated by reference to the Company's June 30, 1993 Form
10-K, Part IV, Item 14(a)(10)(xxiii))
(10)(xxiv) Agreement for Sale of Stock between Cytoferon and the Company
dated November 19, 1993 (incorporated by reference to the
Company's current report on Form 8-K, dated November 12, 1993)
(10)(xxv) Employment Agreement between Gerald Smith and the Company
dated November 19, 1993 (incorporated by reference to the
II-6
<PAGE> 31
EXHIBIT DESCRIPTION
- ------- -----------
Company's current report on Form 8-K, dated November 12, 1993)
as amended by Modified Employment Agreement dated December 15,
1994
(10)(xxvi) Common Stock Purchase Warrant Agreement between Northlea
Partners Ltd. and the Company dated January 6, 1994
(incorporated by reference to the Company's Current Report on
Form 8- K, dated November 17, 1993)
(10)(xxvii) Management Consulting Agreement between the Company, Medvest,
Inc. and Dr. John Abeles dated January 6, 1994 (incorporated
by reference to the Company's Current Report on Form 8-K,
dated November 17, 1993)
(10)(xxviii) Employment Agreement between Dennis W. Healey and the Company
dated April 8, 1994 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1994) as amended by Modified Employment Agreement dated
December 15, 1994
(10)(xxix) Promissory Note between the Company and Gerald Smith dated
April 18, 1994 (incorporated by reference to the Company's
June 30, 1994 Form 10-K, Part IV, Item 14(a)(10)(xxviii))
(10)(xxx) Employment Agreement between Charles F. Fistel and the Company
dated July 1, 1994 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994)
as amended by Modified Employment Agreement dated December 15,
1994
(10)(xxxi) Placement Agent Agreement and Common Stock Purchase Warrant
issued to Laidlaw Equities, Inc. and designees (incorporated
by reference to the April 1997 Form S-3, Part II, Item 16,
10(xxxi)).
(10)(xxxii) Amendment No. 1 to Agreement for Sale of Stock with Cytoferon
(10)(xxxiii) Modified Sale of Stock and Stock Option Agreement with Peter
D. Fischbein(1) (incorporated by reference to the Company's
1995 Form SB-2, Part II, Item 27(10)(xxxiii))
(10)(xxxiv) Agreement with Moty Hermon (incorporated by reference to the
Company's 1995 Form SB-2, Part II, Item 27(10)(xxxiv))
II-7
<PAGE> 32
EXHIBIT DESCRIPTION
- ------- -----------
(10)(xxxv) Agreement with University of Nebraska Medical Center
(incorporated by reference to the Company's 1995 Form SB-2,
Part II, Item 27(10)(xxxv))
(10)(xxxvi) License and Manufacturing Agreement with Common Services
Agency (incorporated by reference to the Company's 1995 Form
SB-2, Part II, Item 27(10)(xxxiv))
(10)(xxxvii) Agreed Motion for Consent Final Order and Settlement Agreement
dated August 29, 1995 (incorporated by reference to the
Company's June 30, 1995 Form 10-KSB)
(10)(xxxviii) Agreement and Plan of Reorganization dated November 8, 1995
and Amendment thereto (incorporated by reference to the
Company's Post-Effective Amendment No. 1 to Registration
Statement on Form SB-2)
(10)(xxxix) Private Securities Subscription Agreement dated June 7, 1996,
and Registration Rights Agreement (incorporated by reference
to the Company's Current Report on Form 8-K dated June 7,
1996)
(10)(xl) Employment Agreement between Charles F. Fistel and the Company
dated July 1, 1996 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996)
(10)(xli) Stock Option Agreement between the Company and Fred D. Hirt
dated August 2, 1996 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996)
(10)(xlii) Form of Private Securities Subscription Agreement dated
November 27, 1996 and related Registration Rights Agreement
and Common Stock Purchase Warrant (incorporated by reference
to the Company's Current Report on Form 8-K dated February 14,
1997)
(10)(xliii) Private Securities Subscription Agreement dated February 3,
1997 and related Regulation Rights Agreement, Common Stock
Purchase Warrant and related agreements (incorporated by
reference to the Company's Current Report on Form 8-K dated
February 14, 1997)
II-8
<PAGE> 33
EXHIBIT DESCRIPTION
- ------- -----------
(10)(xliv) Securities Purchase Agreement dated as of December 31, 1996
and related Registration Rights Agreement (incorporated by
reference to the Company's Current Report on Form 8-K dated
March 6, 1997)
(10)(xlv) Employment Agreement between Gerald Smith and the Company
dated March 1, 1997 (incorporated by reference to the
Company's Annual Report on Form 10-K, dated June 30, 1997)
(10)(xlvi) Employment Agreement between Dennis W. Healey and the Company
dated March 1, 1997 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1997)
(10)(xlvii) Employment Agreement between Robert C. Reeh and the Company
dated May 19, 1997 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended June 30, 1997)
(10)(xlviii) 11 month 10% Promissory Note dated July 1, 1997 (incorporated
by reference to the Company's Current Report on Form 8-K dated
August 28, 1997)
(10)(xlix) Employment Agreement between Robert H. Zeiger and the Company
dated August 1, 1997 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1997)
(10)(l) Omitted
(10)(li) Omitted
(10)(lii) Stock Exchange Agreement (Series F Convertible Preferred Stock
Exchange Agreement) (incorporated by reference to the
Company's Current Report on Form 8-K dated September 22, 1997,
Item 7(c)4)
(10)(liii) Stock Exchange Agreement (Series G Convertible Preferred Stock
Exchange Agreement) (incorporated by reference to the
Company's Current Report on Form 8-K dated September 22, 1997,
Item 7(c)5)
(10)(liv) 10% Promissory Note to Clearwater Fund IV, LTD. (incorporated
by reference to the Company's Current Report on Form 8-K dated
September 22, 1997, Item 7(c)1)
II-9
<PAGE> 34
EXHIBIT DESCRIPTION
- ------- -----------
(10)(lv) Cooperation and Supply Agreement between the Company and the
German Red Cross dated May 19, 1998 (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1998)
(10)(lvi) Series H Convertible Preferred Stock, Form of Subscription
Agreement dated February 17, 1998 and related Registration
Rights Agreement and Common Stock Purchase Warrants
(incorporated by reference to the Company's Registration
Statement on Form S-3 dated April 17, 1998)
(10)(lvii) Series I Convertible Preferred Stock, Form of Subscription
Agreement dated April 2, 1998 and related Registration Rights
Agreement and Common Stock Purchase Warrants (incorporated by
reference to the Company's Registration Statement on Form S-3
dated April 17, 1998)
(10)(lviii) Cooperation and Supply Agreement between the Company, Viragen
Deutschland GmbH and German Red Cross dated March 19, 1998
(Certain portions of this exhibit have been redacted pursuant
to a Confidentiality request submitted to the Securities and
Exchange Commission (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June
30, 1998)
(10)(lix) Buffycoat Supply Agreement between American's Blood Centers
and the Company dated July 15, 1998 (Certain portions of this
exhibit have been redacted pursuant to a Confidentiality
Request submitted to the Securities and Exchange Commission)
(incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended June 30, 1998)
(10)(lx) Agreement between the Company the American Red Cross dated
August 18, 1998 (incorporated by reference o the Company's
Annual Report on Form 10-K for the year ended June 30, 1998)
(10)(lxi) Placement Agreement, Placement Agent Warrant and Investor
Warrant dated September 22, 1998 (incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1998)
10(lxii) Purchase Agreement between the Registrant, the Isosceles Fund
and Cefeo Investments Limited dated march 17, 1999.**
10(lxiii) 8% Redeemable Convertible Promissory Note to the Isosceles
Fund dated March 17, 1999.*
II-10
<PAGE> 35
EXHIBIT DESCRIPTION
- ------- -----------
10(lxiv) 8% Redeemable Convertible Promissory Note to Cefeo Investments
Limited dated March 17, 1999.*
10(lxv) Common Stock Purchase Warrant issued to the Isosceles Fund
dated March 17, 1999.*
10(lxvi) Common Stock Purchase Warrant issued to Cefeo Investments
Limited dated March 17, 1999.*
10(lxvii) Common Stock Purchase Warrant issued to Ven-Gua Capital
Markets Ltd. dated March 17, 1999.*
10(lxviii) Common Stock Purchase Warrant issued to Elliott, Lane &
Associates, Inc. dated March 17, 1999.*
10(lxix) Common Stock Purchase Warrant issued to Ballsbridge Finance
Ltd dated March 17, 1999.*
10(lxx) Registration Rights Agreement between the Registrant, The
Isosceles Fund and Cefeo Investments Limited dated March 17,
1999.*
10(lxxi) Registration Rights Agreement between the Registrant,
Ballsbridge Finance Limited, Elliot, Lane & Associates, Inc.
and Ven-Gua Capital Markets, Ltd. dated March 17, 1999.*
(11) Computation of Per Share Earnings (incorporated by reference
to the Company's Quarterly Report on Form 10-Q dated February
10, 1998, Part II, Item 6 (11))
(21) Subsidiaries of the Registrant (incorporated by reference to
the Company's June 30, 1996 Form 10-KA/1)
(23)(i) Consent of Ernst & Young LLP*
(23)(ii) Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as
part of Exhibit (5))
- -----------------------
* Filed herewith.
** To be filed by amendment.
Item 17. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(i) to file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution;
II-11
<PAGE> 36
(ii) that, for determining any liability under the Securities
Act, treat each such post-effective amendment as a new Registration Statement of
the securities offered at that time shall be deemed to be the initial bona fide
offering thereof;
(iii) to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering; and
(iv) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-12
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to its 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 6th day of April, 1999.
VIRAGEN, INC.
By: /s/ Gerald Smith
-----------------------------
Gerald Smith
Chairman of the Board of Directors
and President
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Gerald Smith Chairman of the April 6, 1999
- ---------------------------------- Board of Directors,
Gerald Smith President and Principal
Executive Officer
/s/ Dennis W. Healey Executive Vice President April 6, 1999
- ---------------------------------- Treasurer, Principal
Dennis W. Healey Financial Officer,
Director and Secretary
/s/ Jose I. Ortega Controller and Principal
- ---------------------------------- Accounting Officer April 6, 1999
Jose I. Ortega
/s/ Sidney Dworkin Director April 6, 1999
- ----------------------------------
Sidney Dworkin
</TABLE>
II-13
<PAGE> 38
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Peter D. Fischbein Director April 6, 1999
- -----------------------------------
Peter D. Fischbein
/s/ Carl N. Singer Director April 6, 1999
- ----------------------------------
Carl N. Singer
/s/ Charles J. Simons Director April 6, 1999
- ----------------------------------
Charles J. Simons
Director April 6, 1999
- ----------------------------------
Robert H. Zeiger
/s/ Robert Salisbury Director April 6, 1999
- ----------------------------------
Robert Salisbury
</TABLE>
II-14
<PAGE> 1
EXHIBIT 10(lxiii)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY
STATE; AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN EXEMPTION FROM, THE REQUIREMENTS
OF SUCH ACT OR SUCH LAWS.
--------------------
VIRAGEN INC.
8% REDEEMABLE CONVERTIBLE NOTE
March 17, 1999 $1,500,000
Viragen Inc., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to the Holder (or
Holders) (as defined below) the outstanding principal balance of $1,500,000 plus
the amount of 8% interest per annum on such amount (as adjusted pursuant to
Section 3.3(d) hereof) accruing from the date of the original issuance of this
note (the "Purchase Date") payable in such coin or currency of the United States
of America as at the time of payment shall be legal tender for public and
private debts, upon the earlier of Conversion or Pre-Payment (as defined below),
or, subject to the conditions contained herein, in Common Stock (as defined
below) in the manner described below.
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The terms defined in this Article whenever
used in this Note shall have the respective meanings hereinafter specified.
"ACCRUED BALANCE" shall mean the outstanding principal balance of
Note(s) plus accrued interest.
"BUSINESS DAY" shall mean a day other than Saturday, Sunday or any day
on which banks located in the state of New York are authorized or obligated by
law or executive order to be closed.
"CLOSING MARKET PRICE" shall have the meaning set forth in Section 3.1.
"COMMON STOCK" shall mean the Company's Common Stock, $.01 par value
per share.
"CONVERSION DATE" shall have the meaning set forth in Section 3.1.
"CONVERSION PRICE" shall have the meaning set forth in Section 3. 1.
"CONVERTIBLE SECURITIES" shall mean securities or obligations that are
exercisable for, convertible into or exchangeable for Common Stock. The term
includes convertible notes, warrants or other rights to subscribe for or
purchase Common Stock or to subscribe for or purchase other securities that are
convertible into or exchanged for Common Stock.
"EFFECTIVE DATE" shall have the meaning set forth in the Purchase
Agreement.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 6.1.
"HOLDER" shall mean The Isosceles Fund Limited or subsequent holders of
Notes.
"INTEREST RATE" shall mean the rate of 8% per annum.
"ISSUED SHARES" shall have the meaning set forth in Section 3.1.
1
<PAGE> 2
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, assets, operations (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
"NOTE" shall mean this Convertible Note or such other Convertible Note
or Notes exchanged therefor as provided in Section 2.1.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a Company, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
"PRE-PAYMENT" shall have the meaning set forth in Section 2.4.
"PRINCIPAL AMOUNT" means $1,500,000 or such other amount as shall be
outstanding after conversion or prepayment, which amount shall be divisible by
$25,000.
"PROXY" shall have the meaning set out in the Purchase Agreement.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
March 17, 1999, between the Company and the Holder, as it may be amended from
time to time.
"REGISTRATION PERIOD" shall have the meaning set forth in the Purchase
Agreement.
"RE-SET SHARES" shall have the meaning set forth in Section 3.2.
"SEC" means the United States Securities and Exchange Commission.
"SUBSIDIARY" means any Person that the Company now or hereafter shall
at the time own, directly or indirectly through another Person, at least a
majority of the outstanding capital stock (or other beneficial interest) or a
majority of the Voting Power of such Person; and the term "Subsidiaries" shall
mean all of such Persons collectively.
"TRADING DAY" means a day on which NASDAQ trading occurs.
"VOTING POWER" shall mean voting securities or other voting interests
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors or persons performing
substantially equivalent tasks and responsibilities.
ARTICLE 2
EXCHANGES AND TRANSFER; REDEMPTION
SECTION 2.1. TRANSFER OF NOTES. Transfer or split-up of the Notes in
accordance with the provisions of Article IV hereof shall be effected by the
Company upon request by the Holder.
SECTION 2.2. LOSS, THEFT, DESTRUCTION OF NOTE. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Note, the
Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tenor and unpaid principal amount dated as of
the date hereof. This Note shall be held and owned upon the express condition
that the provisions of this Section 2.2 are exclusive with respect to the
replacement of a mutilated, destroyed, lost or stolen Note and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without their surrender.
SECTION 2.3. WHO DEEMED ABSOLUTE OWNER. The Company may deem the person
in whose name this Note shall be registered upon the registry books of the
Company to be, and may treat it as, the
2
<PAGE> 3
absolute owner of this Note (whether or not this Note shall be overdue) for the
purpose of receiving payment of or on account of the principal of this Note, for
the conversion of this Note and for all other purposes, and the Company shall
not be affected by any notice to the contrary. All such payments and such
conversion shall be valid and effectual to satisfy and discharge the liability
upon this Note to the extent of the sum or sums so paid or the conversion so
made.
SECTION 2.4. OPTIONAL REDEMPTION BY THE COMPANY.
(a) At any time during the applicable Registration Period, the
Company may redeem or pre-pay the Note(s), with seven Trading Days written
notice to the holder regardless of the price of the Company's common stock. The
pre-payment amount shall be equal to 120% times the Accrued Balance up to the
date (the "Pre-Payment Date") the consideration for the pre-payment from the
Company has value in the account of the Holder ("Pre-Payment").
SECTION 2.5. REDEMPTION UPON FAILURE TO OBTAIN PROXY. In the event the
Company fails to obtain approval of the Proxy within 75 calendar days of the
sooner of (1) the date of filing with the SEC or (2) March 16, 1999, then the
Holder, at its sole discretion, shall have the right to require the Company
within 30 days of a written notice from the Holder to the Company (the
"Notice"), to redeem an amount of the Notes or the Issued Shares, as applicable,
necessary in the Holder's reasonable judgement to permit: (A) conversion of the
remaining Note(s); (B) re-sale of the Issued Shares; (C) issuance of Re-Set
Shares; and (D) exercise of the Warrants without violating the NASD limitation
of amounts of securities offered, at a cash price equal to (a) the greater of
125% of the face amount of the Notes or the Initial Shares (valued at the
applicable Conversion Price for such shares) being redeemed, and (b) the amount
of all other penalties outstanding up to the date of the Notice.
SECTION 2.6. SURRENDER OF NOTES: NOTATION THEREON. The Company may, as
a condition of payment of the principal and interest on this Note, require the
Holder to present this Note for notation of such payment and, if this Note be
paid in full, require the surrender hereof.
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1. CONVERSION; CONVERSION PRICE. In the event that
Pre-Payment does not occur by the sooner of the end of the applicable
Registration Period or the Effective Date (the "Pre-Payment Deadline"), then on
the trading day following: a) the Pre-Payment Deadline and b) the 30th day after
the Pre-Payment Deadline, one-half of the Accrued Balance will automatically
convert into the Company's Common Stock (each of these dates being a "Conversion
Date"). The conversion price (the "Conversion Price") shall be the lesser of a)
the average of the closing bid prices of the Company's common stock during the
five consecutive Trading Day period preceding the Initial Purchase Date (the
"Closing Market Price") and b) the lowest closing bid price of the Company's
common stock during the ten consecutive Trading Day period immediately preceding
the applicable Conversion Date. On the date specified in Section 3.3, the Holder
will receive from the Company the number of shares of the Company's common stock
(the "Issued Shares") determined by dividing the respective Accrued Balance by
the respective Conversion Price.
SECTION 3.2. ALLOCATION OF RE-SET SHARES. On the Trading Day following
30 days and 60 days after the Pre-Payment Deadline (each a "Re-Set Date"), based
on the number of Issued Shares, the Holder shall additionally be entitled to
receive a number of Re-Set Shares according to the Formula (as defined below)
based on a percentage rate of return (the "Applicable Rate") as follows:
30 day Re-Set Date 1.20 (120%)
60 day Re-Set Date 1.22 (122%)
3
<PAGE> 4
On the date specified in Section 3.3 the Company shall issue and deliver to the
Holder a number of Re-Set Shares equal to the following formula (the "Formula")
based on the respective Closing Market Price and number of Issued Shares
applicable on each Re-Set Date:
((Applicable Rate x Closing Market Price/Future Price) -1) x (# of
Issued Shares)
If the result of such calculation is a negative number, the number of Re-Set
Shares applicable to such re-set will be deemed to be zero. For purposes hereof,
the "Future Price" in effect as of any Re-Set Date shall equal the lowest
closing bid price of the Issuer's common stock during the ten consecutive
trading day period immediately preceding the applicable Re-Set Date.
SECTION 3.3. DELIVERY OF ISSUED SHARES UPON CONVERSION AND RE-SET.
(a) As soon as practicable after each Conversion Date and
Re-Set Date (but in any event within three Business Days after the Holder has
presented to the Company the Note certificates (or affidavits of loss)
evidencing the portion of Principal Amount of the Note converted into Common
Stock in accordance herewith in the case of conversions) the Company shall mark
the Note certificates to reflect the Principal Amount converted and shall
deliver to the converting Holder:
(i) a certificate or certificates representing, in the
aggregate, the number of shares of Common Stock issued upon such
conversion or Re-Set, (in the same name or names as the certificates
representing the converted Notes in the case of conversions) and in
such denomination or denominations as the holder shall specify and a
check for cash with respect to any fractional interest in a share of
Common Stock; and
(ii) a certificate representing any Notes that were
represented by the certificate or certificates delivered to the Company
in connection with such conversion but that were not converted.
(b) The issuance of certificates for Common Stock upon
conversion of the Note (or portion of Principal Amount thereof) or Re-Set shall
be made without charge to the Holder for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and the
related issuance of Common Stock. Upon conversion of the Note (or portion of
Principal Amount thereof) or Re-Set, the Company shall take all such actions as
are necessary in order to insure that the Common Stock so issued upon such
conversion or Re-Set shall be validly issued, fully paid and nonassessable.
(c) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion or Re-Set, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the Holder the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion or Re-Set to the Holder by
crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system.
(d) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the any portion of the Issued Shares issuable upon
conversion of Notes or Re-Set is more than one business day after the date set
forth in (a) above (a "Delivery Default"), the Company shall pay to the Holder
$500 per day in cash for each of the first two days beyond such date, and $2,500
per day in cash for each day thereafter that the Company fails to deliver such
Issued Shares. Such cash amount shall be paid to Holder by the fifth day of the
month following the month in which it has accrued or, at the option of the
Holder (by written notice to the Company by the first day of the month following
the month in which it has accrued), shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in accordance with the
terms of
4
<PAGE> 5
this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note.
(e) The Company shall not close its books against the transfer
of Common Stock issued or issuable upon conversion of the Note in any manner
that interferes with the timely conversion of the Note. The Company shall assist
and cooperate with the Holder if it is required to make any governmental filings
or obtain any governmental approval prior to or in connection with any
conversion of the Note hereunder (including, without limitation, making any
filings required to be made by the Company).
SECTION 3.4. The Company shall at all times reserve and keep available
out of its authorized but unissued Common Stock, solely for the purpose of
issuance upon the conversion of the Note or Re-Set, such number of Common Stock
as are issuable upon the conversion of the Note or Re-Set. All Common Stock that
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Company shall take
all such actions as may be necessary to assure that all such Common Stock may be
so issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which Common Stock may
be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance).
SECTION 3.5. ADJUSTMENT OF CONVERSION PRICE AND RE-SET NUMBER ON
DELIVERY DEFAULT. Upon a Delivery Default due to an insufficient number of
authorized but unissued shares, the Company shall issue to the Holder all of the
shares of Common Stock which are then available. The portion of this Note which
the Holder to be converted and which exceeds the amount which is then
convertible into available shares of Common Stock (the "Excess Amount") shall,
notwithstanding anything to the contrary contained herein, not be convertible
into Common Stock in accordance with the terms hereof and no Re-Set Shares shall
be delivered until the date additional shares of Common Stock are authorized by
the Company. At such time the Conversion Price in respect thereof shall be the
lower of (i) the Conversion Price on the Delivery Default Date (as defined
below) and (ii) the Conversion Price on the Conversion Date thereafter elected
by the Holder in respect thereof. The number of Re-Set Shares shall be adjusted
to reflect the Applicable Rate up to the date of actual delivery. The Company
shall additionally pay to the Holder payments ("Delivery Default Payments") for
a Delivery Default in the amount of (N/365) x .24 x the Excess Amount on the
Conversion Date or Re-Set Date in respect of the Delivery Default (the "Delivery
Default Date"), where N = the number of days from the Delivery Default Date to
the date (the "Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of the full outstanding
principal balance of this Note or the issuance of Re-Set Shares, as applicable.
The Company shall use its best efforts to authorize a sufficient number of
shares of Common Stock as soon as practicable following the earlier of (i) such
time that the Holder notifies the Company or that the Company otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof or issuance of Re-Set Shares and (ii) a
Delivery Default. The Company shall send notice to the Holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of Holder's accrued Delivery Default Payments. The accrued Delivery
Default Payments for each calendar month shall be paid in cash or shall be
convertible into Common Stock (at such time as there are sufficient authorized
shares of Common Stock) at the Market Price (as defined below), at the Holder's
option, as follows:
(a) In the event Holder elects to take such payment in cash,
cash payment shall be made to Holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common
Stock, the Holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of conversion) at any time after the
fifth day of the month following the month in which it has accrued (at such time
as there are sufficient authorized shares of Common Stock) in accordance with
the terms of this Article III.
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The Holder's election shall be made in writing to the Company
at any time prior to 9:00 p.m., New York City Time, on the third day of the
month following the month in which Conversion Default payments have accrued. If
no election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Delivery Default Payments) due to the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
SECTION 3.6. ADJUSTMENT OF CONVERSION PRICE ON MERGER. In the event the
Company (i) makes a public announcement that it intends to consolidate or merge
with any other corporation (other than a merger in which the Company is the
surviving or continuing corporation and its capital stock is unchanged) or sell
or transfer all or substantially all of the assets of the Company or (ii) any
person, group or entity (including the Company) publicly announces a tender
offer to purchase 50% or more of the Company's Common Stock (or any other
takeover scheme) (the date of the announcement referred to in clause (i) or (ii)
is hereinafter referred to as the "Announcement Date"), then the Conversion
Price shall, effective upon the Announcement Date and continuing through the
Adjusted Conversion Price Termination Date (as defined below), be equal to the
lower of (x) the Conversion Price which would have been applicable for a
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in this
Section. For purposes hereof, "Adjusted Conversion Price Termination Date" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section has been
made, the date upon which the Company (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this Section to become operative.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1. STATUS OF NOTE. Subject to Section 4.2 below, this Note is
a direct, general and unconditional obligation of the Company ranking, and
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights and to general principals of equity.
The Company agrees that it will not, without the prior written consent of the
Holder, take any action, nor fail to take any action which would in any manner
adversely affect the rights of the Holder pursuant to the Note or subject the
Holder to any liability.
SECTION 4.2. RESTRICTIONS ON TRANSFER. This Note, and any Issued Shares
issued according to the terms hereof, have not been and will not be registered
under the U.S. Securities Act. This Note and any Common Stock issued upon
conversion thereof may not be offered or sold, directly or indirectly, except in
accordance with Section 2.1 hereof, and pursuant to registration under the Act,
an available exemption therefrom, or pursuant to Regulation S.
ARTICLE 5
COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
SECTION 5.1. PAYMENT OF NOTE. The Company will punctually, according to
the terms hereof, (a) pay or cause to be paid the principal of and interest and
penalties on this Note and (b) issue Issued Shares upon conversion or Re-Set.
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SECTION 5.2. NOTICE OF DEFAULT. If any one or more events occur which
constitute or which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default or if the Holder shall demand payment or
take any other action permitted upon the occurrence of any such Event of
Default, the Company will forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or other event or of such demand or
action, as the case may be.
SECTION 5.3. SUFFICIENT NUMBER OF AUTHORIZED COMMON STOCK. So long as
this Note shall be outstanding, the Company shall at all times have authorized
and reserved for issuance, free from preemptive rights, a sufficient number of
Common Stock to yield a number of Issued Shares sufficient to satisfy the
conversion rights of the holder pursuant to the terms and conditions hereof. In
the event that insufficient Common Stock shall be available, then the Company
shall issue such number as are available and pay the penalties set forth in
Section 3.3(d) hereof.
SECTION 5.4. INSURANCE. The Company will carry and maintain in full
force and effect at all times with insurers the Company reasonably believes to
be financially sound and reputable such insurance in such amounts as is
customary in the respective industries of the Company and such subsidiaries.
SECTION 5.5. PAYMENT OF OBLIGATIONS. The Company will pay and discharge
at or before maturity, all its respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same;
SECTION 5.6. COMPLIANCE WITH LAWS. The Company will comply in all
material respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.7. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
will keep proper books of record and account in which full, true and correct
entries shall be made of all dealings and transactions in relation to its
business and activities and will permit representatives of the Holder at the
Holder's expense to visit and inspect any of its respective properties, to
examine and make abstracts from any of its respective books and records and to
discuss its respective affairs, finances and accounts with its respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
SECTION 5.8. COMPLIANCE WITH PURCHASE AGREEMENT. The Company shall
comply with the agreements and covenants set forth in the Purchase Agreement.
SECTION 5.9. DISTRIBUTIONS ON CAPITAL STOCK. So long as the Company
shall have any obligation under this Note, the Company shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock.
SECTION 5.10. RESTRICTION ON STOCK REPURCHASES. So long as the Company
shall have any obligation under this Note, the Company shall not without the
Holder's written consent redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Company or any warrants, rights or options to purchase or acquire any such
shares.
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SECTION 5.11. BORROWINGS. So long as Company shall have any obligation
under this Note, the Company shall not without the Holder's written consent
create, incur, assume or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof and of which
the Company has informed the Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors incurred in the ordinary course of business, (c)
borrowings, the proceeds of which shall be used to repay this Note and (d)
leases entered into in the ordinary course of business.
SECTION 5.12. SALE OF ASSETS. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent, sell, lease or otherwise dispose of any of its assets outside the
ordinary course of business, except as set forth in Section 4.2(f) of the
Purchase Agreement. Any consent of the Holder to the disposition of any assets
may be conditioned on a specified use of the proceeds of disposition.
SECTION 5.13. ADVANCES AND LOANS. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent lend money, give credit or make advances to, or otherwise make an
investment in, any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries and affiliates
of the Company, except loans, credits or advances (a) in existence or committed
on the date hereof and which the Company has informed the Holder in writing
prior to the date hereof, and (b) made in the ordinary course of business.
SECTION 5.14. CONTINGENT LIABILITIES. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent assume, guarantee, endorse, continently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership, joint
venture or corporation, except by the endorsement of negotiable instruments for
deposit or collection and except assumptions, guarantees, endorsements and
contingencies (a) in existence or committed on the date hereof and which the
Company has informed the Holder in writing prior to the date hereof, and (b)
similar transactions in the ordinary course of business.
SECTION 5.15. SENIORITY OF NOTE. So long as Company shall have any
obligation under this Note, the Company shall not incur any obligation with
respect to indebtedness which is senior in right of payment to this Note
(including, without limitation, making any obligation outstanding as of the
Issue Date senior in right of payment to this Note); PROVIDED, HOWEVER that the
Company may subordinate its obligations under this Note upon execution of a
Security Agreement acceptable to the Holder, in which case this section shall
not apply to obligations with respect to indebtedness incurred in connection
with a Permitted Lien (as defined in such Security Agreement).
ARTICLE 6
REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. "Event of Default" wherever used herein
means any one of the following events:
(a) a Delivery Default (as defined in Section 3.3(d) hereof);
(b) default in the due and punctual payment of the principal
of on, or any other amount owing in respect of, this Note when and as the same
shall become due and payable, and continuance of such default for a period of 30
calendar days;
(c) substantial failure in the performance or observance of
Section 5.3 of this Note and the continuance of such default for a period of 30
calendar days;
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(d) default in the performance or observance of any covenant
or agreement of the Company in this Note (other than a covenant or agreement a
default in the performance of which is specifically provided for elsewhere in
this Section), and the continuance of such default for a period of 30 calendar
days after there has been given to the Company by a Holder a written notice
specifying such default and requiring it to be remedied;
(e) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
Bankruptcy Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, Trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 30 calendar days, except
in case that such event does not result in a Material Adverse Effect;
(f) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, Trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such action,
except in case that such event does not result in a Material Adverse Effect;
(g) the Company shall fail to issue and deliver the Issued
Shares in accordance with Article III;
(h) any principal of other indebtedness of the Company or any
Subsidiary, exceeding $500,000 is not repaid on its original maturity date or
becomes due and payable by reason of default before its original maturity date;
(i) the Company or any Subsidiary is unable to pay its debts
as they fall due, stops, suspends, or threatens in writing to stop or suspend
payment of all or any material part of its debts (other than debts contested in
good faith by appropriate proceedings), begins negotiations or takes any
proceeding or other step with a view to readjustment, rescheduling or deferral
of all of its indebtedness (or any material part thereof) that it will or might
otherwise be unable to pay when due or seeks the appointment of a statutory
manager or proposes in writing or makes a general assignment or an arrangement
or composition with or for the benefit of its creditors or any group or class
thereof or files a petition for suspension of payments or other relief of
debtors of for bankruptcy or is declared bankrupt or a moratorium or statutory
management is agreed or declared in respect of or affecting all or any material
part of the indebtedness of the Company or any of its wholly owned subsidiaries,
or (ii) the Company ceases or threatens in writing to cease to carry on all or
any material part of the business carried on by the Company and its Subsidiaries
taken as a whole and as a result of such cessation or threat of cessation, the
Company will not be able to perform or comply with its payment obligations under
this Note, except in case that any such event does not result in a Material
Adverse Effect;
(j) on or after the date hereof, a final judgment or final
judgments for the payment of money shall have been entered by any court or
courts of competent jurisdiction against the Company and remains undischarged
for a period (during which execution shall be effectively stayed) of 30 days,
provided that the aggregate amount of all such judgments at any time outstanding
(to the extent not paid or to be paid,
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as evidenced by a written communication to that effect from the applicable
insurer, by insurance) exceeds $500,000;
(k) it becomes unlawful for the Company to perform or comply
with its obligations under this Note or the Purchase Agreement.
SECTION 6.2. ACCELERATION OF MATURITY. If an Event of Default occurs
and is continuing, then and in every such case any Holder may declare the
principal of and interest and penalties on this Note to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration the principal of and interest and penalties on this Note shall
become immediately due and payable and the Company shall pay to the Holder, in
full satisfaction of its obligations hereunder, an amount equal to the greater
of (i) the Default Percentage (as defined below) times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the
"Mandatory Prepayment Date") plus (z) any amounts owed to the Holder pursuant to
Article III hereof or pursuant to Article III of the Registration Rights
Agreement (the then outstanding principal amount of this Note to the date of
payment plus the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the "Default Sum") or (ii) the "parity value" of the
Default Sum to be prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of such Default Sum in
accordance with Article III (treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the "Conversion Date" for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a
result of a breach in respect of a specific Conversion Date in which case such
Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of
first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the greater of clause (i) and (ii) being the "Default
Amount") and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without limitation, legal
fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. The "Default
Percentage" shall mean 130%.
If the Company fails to pay the Default Amount within five business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Company remains in default (and
so long and to the extent that there are sufficient authorized shares), to
require the Company, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Company equal to the
Default Amount divided by the Conversion Price then in effect.
SECTION 6.3. REMEDIES NOT WAIVED. No course of dealing between the
Company and the Holder or any delay in exercising any rights hereunder shall
operate as a waiver by the Holder.
ARTICLE 7
EFFECT OF CERTAIN EVENTS
SECTION 7.1. CONSOLIDATIONS, MERGERS, ETC. (a) At the option of the
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the company, the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or the consolidation, merger or other business
combination of the Company with or into any other Person or Persons when the
Company is not the survivor shall either: (i) be deemed to be an Event of
Default or (ii) be treated pursuant to Section 7.1(b) hereof.
(b) If, at any time when this Note is issued and outstanding,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result
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of which shares of Common Stock of the Company shall be changed into the same or
a different number of shares of another class or classes of stock or securities
of the Company or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in connection with a
plan of complete liquidation of the Company, then, the Holder of this Note shall
thereafter have the right to receive upon conversion of this Note, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been entitled to receive
in such transaction had this Note been converted in full immediately prior to
such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the exercise
hereof. The Company shall not effect any transaction described in this Section
unless (a) it first gives at least 10 days prior written notice of the record
date of the special meeting of stockholders to approve, or if there is no such
record date, 30 days prior to the consummation of, such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to convert this
Note) and (b) the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligations of this Section. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c) Subject to the provisions of the Purchase Agreement, if the Company
shall declare or make any distribution of its assets (or rights to acquire its
assets) to holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off) (a "Distribution"), the Holder
of this Note shall be entitled, upon any conversion of this Note after the date
of record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the Holder with
respect to the shares of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(d) If, at any time when any Notes are issued and outstanding, the
Company issues any convertible securities or rights to purchase stock, warrants,
securities or other property (the "Purchase Rights") pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be
entitled upon any conversion of this Note after the date of record for
determining shareholders entitled to such Purchase Rights to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note (without regard to
any limitations on conversion contained herein) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(e) Upon the occurrence of each adjustment or readjustment of the
Conversion Price as a result of the events described in this Section 7.1, the
Company, at its expense, shall promptly compute such adjustment or readjustment
and prepare and furnish to the Holder of a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of the Holder, furnish to such Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the amount, if any,
of other securities or property which at the time would be received upon
conversion of the Note.
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SECTION 7.2. STATUS AS STOCKHOLDER. Upon conversion, (i) the to be
shares issued thereby shall be deemed converted into shares of Common Stock and
(ii) the Holder's rights as a Holder of such converted portion of this Note
shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the Company
to comply with the terms of this Note. Notwithstanding the foregoing, if a
Holder has not received certificates for all shares of Common Stock prior to the
tenth business day after the expiration of the date set forth in Section 3.3
hereof, with respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a holder of
Common Stock by so notifying the Company), the Holder shall regain the rights of
a Holder of this Note with respect to such unconverted portions of this Note and
the Company shall, as soon as practicable, return such unconverted Note to the
holder or, if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Delivery Default payments pursuant to Section 3.3(d) and
(ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 3.5) for the Company's failure
to deliver Issued Shares.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. REGISTER. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this Note.
Upon any transfer of this Note in accordance with Articles 2 and 4 hereof, the
Company shall register such transfer on the Note register.
The Company may deem the person in whose name this Note shall be
registered upon the registry books of the Company to be, and may treat it as,
the absolute owner of this Note (whether or not this Note shall be overdue) for
the purpose of receiving payment of principal of this Note, for the conversion
of this Note and for all other purposes, and the Company shall not be affected
by any notice to the contrary. All such payments and such conversions shall be
valid and effective to satisfy and discharge the liability upon this Note to the
extent of the sum or sums so paid or the conversion or conversions so made.
SECTION 8.2. WITHHOLDING. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Note.
SECTION 8.3. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. WITH RESPECT TO
ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS NOTE, THE COMPANY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK AND HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. SUBJECT TO APPLICABLE LAW, THE COMPANY AGREES THAT FINAL
JUDGMENT AGAINST IT IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS NOTE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION
WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED COPY OF
WHICH JUDGMENT SHALL BE CONCLUSIVE EVIDENCE THEREOF AND THE AMOUNT OF ITS
INDEBTEDNESS, OR BY SUCH OTHER MEANS PROVIDED BY LAW.
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SECTION 8.4. HEADINGS. The headings of the Articles and Sections of
this Note are inserted for convenience only and do not constitute a part of this
Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Note.
VIRAGEN INC.
By:
----------------------------------
Name:
Title:
Attest:
By:
----------------------------------
Name:
Title: Secretary
[Corporate Seal]
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EXHIBIT 10(lxiv)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE; AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN
EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
--------------------
VIRAGEN INC.
8% REDEEMABLE CONVERTIBLE NOTE
March 17, 1999 $500,000
Viragen Inc., a Delaware corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to the Holder (or
Holders) (as defined below) the outstanding principal balance of $1,500,000 plus
the amount of 8% interest per annum on such amount (as adjusted pursuant to
Section 3.3(d) hereof) accruing from the date of the original issuance of this
note (the "Purchase Date") payable in such coin or currency of the United States
of America as at the time of payment shall be legal tender for public and
private debts, upon the earlier of Conversion or Pre-Payment (as defined below),
or, subject to the conditions contained herein, in Common Stock (as defined
below) in the manner described below.
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The terms defined in this Article whenever
used in this Note shall have the respective meanings hereinafter specified.
"ACCRUED BALANCE" shall mean the outstanding principal balance of
Note(s) plus accrued interest.
"BUSINESS DAY" shall mean a day other than Saturday, Sunday or any day
on which banks located in the state of New York are authorized or obligated by
law or executive order to be closed.
"CLOSING MARKET PRICE" shall have the meaning set forth in Section 3.1.
"COMMON STOCK" shall mean the Company's Common Stock, $.01 par value
per share.
"CONVERSION DATE" shall have the meaning set forth in Section 3.1.
"CONVERSION PRICE" shall have the meaning set forth in Section 3. 1.
"CONVERTIBLE SECURITIES" shall mean securities or obligations that are
exercisable for, convertible into or exchangeable for Common Stock. The term
includes convertible notes, warrants or other rights to subscribe for or
purchase Common Stock or to subscribe for or purchase other securities that are
convertible into or exchanged for Common Stock.
"EFFECTIVE DATE" shall have the meaning set forth in the Purchase
Agreement.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 6.1.
"HOLDER" shall mean Cefeo Investments Limited or subsequent holders of
Notes.
"INTEREST RATE" shall mean the rate of 8% per annum.
"ISSUED SHARES" shall have the meaning set forth in Section 3.1.
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"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, assets, operations (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
"NOTE" shall mean this Convertible Note or such other Convertible Note
or Notes exchanged therefor as provided in Section 2.1.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a Company, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
"PRE-PAYMENT" shall have the meaning set forth in Section 2.4.
"PRINCIPAL AMOUNT" means $1,500,000 or such other amount as shall be
outstanding after conversion or prepayment, which amount shall be divisible by
$25,000.
"PROXY" shall have the meaning set out in the Purchase Agreement.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
March 17, 1999, between the Company and the Holder, as it may be amended from
time to time.
"REGISTRATION PERIOD" shall have the meaning set forth in the Purchase
Agreement.
"RE-SET SHARES" shall have the meaning set forth in Section 3.2.
"SEC" means the United States Securities and Exchange Commission.
"SUBSIDIARY" means any Person that the Company now or hereafter shall
at the time own, directly or indirectly through another Person, at least a
majority of the outstanding capital stock (or other beneficial interest) or a
majority of the Voting Power of such Person; and the term "Subsidiaries" shall
mean all of such Persons collectively.
"TRADING DAY" means a day on which NASDAQ trading occurs.
"VOTING POWER" shall mean voting securities or other voting interests
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors or persons performing
substantially equivalent tasks and responsibilities.
ARTICLE 2
EXCHANGES AND TRANSFER; REDEMPTION
SECTION 2.1. TRANSFER OF NOTES. Transfer or split-up of the Notes in
accordance with the provisions of Article IV hereof shall be effected by the
Company upon request by the Holder.
SECTION 2.2. LOSS, THEFT, DESTRUCTION OF NOTE. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Note, the
Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tenor and unpaid principal amount dated as of
the date hereof. This Note shall be held and owned upon the express condition
that the provisions of this Section 2.2 are exclusive with respect to the
replacement of a mutilated, destroyed, lost or stolen Note and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without their surrender.
SECTION 2.3. WHO DEEMED ABSOLUTE OWNER. The Company may deem the person
in whose name this Note shall be registered upon the registry books of the
Company to be, and may treat it as, the
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absolute owner of this Note (whether or not this Note shall be overdue) for the
purpose of receiving payment of or on account of the principal of this Note, for
the conversion of this Note and for all other purposes, and the Company shall
not be affected by any notice to the contrary. All such payments and such
conversion shall be valid and effectual to satisfy and discharge the liability
upon this Note to the extent of the sum or sums so paid or the conversion so
made.
SECTION 2.4. OPTIONAL REDEMPTION BY THE COMPANY.
(a) At any time during the applicable Registration Period, the
Company may redeem or pre-pay the Note(s), with seven Trading Days written
notice to the holder regardless of the price of the Company's common stock. The
pre-payment amount shall be equal to 120% times the Accrued Balance up to the
date (the "Pre-Payment Date") the consideration for the pre-payment from the
Company has value in the account of the Holder ("Pre-Payment").
SECTION 2.5. REDEMPTION UPON FAILURE TO OBTAIN PROXY. In the event the
Company fails to obtain approval of the Proxy within 75 calendar days of the
sooner of (1) the date of filing with the SEC or (2) March 16, 1999, then the
Holder, at its sole discretion, shall have the right to require the Company
within 30 days of a written notice from the Holder to the Company (the
"Notice"), to redeem an amount of the Notes or the Issued Shares, as applicable,
necessary in the Holder's reasonable judgement to permit: (A) conversion of the
remaining Note(s); (B) re-sale of the Issued Shares; (C) issuance of Re-Set
Shares; and (D) exercise of the Warrants without violating the NASD limitation
of amounts of securities offered, at a cash price equal to (a) the greater of
125% of the face amount of the Notes or the Initial Shares (valued at the
applicable Conversion Price for such shares) being redeemed, and (b) the amount
of all other penalties outstanding up to the date of the Notice.
SECTION 2.6. SURRENDER OF NOTES: NOTATION THEREON. The Company may, as
a condition of payment of the principal and interest on this Note, require the
Holder to present this Note for notation of such payment and, if this Note be
paid in full, require the surrender hereof.
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1. CONVERSION; CONVERSION PRICE. In the event that
Pre-Payment does not occur by the sooner of the end of the applicable
Registration Period or the Effective Date (the "Pre-Payment Deadline"), then on
the trading day following: a) the Pre-Payment Deadline and b) the 30th day after
the Pre-Payment Deadline, one-half of the Accrued Balance will automatically
convert into the Company's Common Stock (each of these dates being a "Conversion
Date"). The conversion price (the "Conversion Price") shall be the lesser of a)
the average of the closing bid prices of the Company's common stock during the
five consecutive Trading Day period preceding the Initial Purchase Date (the
"Closing Market Price") and b) the lowest closing bid price of the Company's
common stock during the ten consecutive Trading Day period immediately preceding
the applicable Conversion Date. On the date specified in Section 3.3, the Holder
will receive from the Company the number of shares of the Company's common stock
(the "Issued Shares") determined by dividing the respective Accrued Balance by
the respective Conversion Price.
SECTION 3.2. ALLOCATION OF RE-SET SHARES. On the Trading Day following
30 days and 60 days after the Pre-Payment Deadline (each a "Re-Set Date"), based
on the number of Issued Shares, the Holder shall additionally be entitled to
receive a number of Re-Set Shares according to the Formula (as defined below)
based on a percentage rate of return (the "Applicable Rate") as follows:
30 day Re-Set Date 1.20 (120%)
60 day Re-Set Date 1.22 (122%)
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On the date specified in Section 3.3 the Company shall issue and deliver to the
Holder a number of Re-Set Shares equal to the following formula (the "Formula")
based on the respective Closing Market Price and number of Issued Shares
applicable on each Re-Set Date:
((Applicable Rate x Closing Market Price/Future Price) -1) x (# of
Issued Shares)
If the result of such calculation is a negative number, the number of Re-Set
Shares applicable to such re-set will be deemed to be zero. For purposes hereof,
the "Future Price" in effect as of any Re-Set Date shall equal the lowest
closing bid price of the Issuer's common stock during the ten consecutive
trading day period immediately preceding the applicable Re-Set Date.
SECTION 3.3. DELIVERY OF ISSUED SHARES UPON CONVERSION AND RE-SET.
(a) As soon as practicable after each Conversion Date and
Re-Set Date (but in any event within three Business Days after the Holder has
presented to the Company the Note certificates (or affidavits of loss)
evidencing the portion of Principal Amount of the Note converted into Common
Stock in accordance herewith in the case of conversions) the Company shall mark
the Note certificates to reflect the Principal Amount converted and shall
deliver to the converting Holder:
(i) a certificate or certificates representing, in the
aggregate, the number of shares of Common Stock issued upon such
conversion or Re-Set, (in the same name or names as the certificates
representing the converted Notes in the case of conversions) and in
such denomination or denominations as the holder shall specify and a
check for cash with respect to any fractional interest in a share of
Common Stock; and
(ii) a certificate representing any Notes that were
represented by the certificate or certificates delivered to the Company
in connection with such conversion but that were not converted.
(b) The issuance of certificates for Common Stock upon
conversion of the Note (or portion of Principal Amount thereof) or Re-Set shall
be made without charge to the Holder for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and the
related issuance of Common Stock. Upon conversion of the Note (or portion of
Principal Amount thereof) or Re-Set, the Company shall take all such actions as
are necessary in order to insure that the Common Stock so issued upon such
conversion or Re-Set shall be validly issued, fully paid and nonassessable.
(c) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion or Re-Set, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the Holder the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion or Re-Set to the Holder by
crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system.
(d) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the any portion of the Issued Shares issuable upon
conversion of Notes or Re-Set is more than one business day after the date set
forth in (a) above (a "Delivery Default"), the Company shall pay to the Holder
$500 per day in cash for each of the first two days beyond such date, and $2,500
per day in cash for each day thereafter that the Company fails to deliver such
Issued Shares. Such cash amount shall be paid to Holder by the fifth day of the
month following the month in which it has accrued or, at the option of the
Holder (by written notice to the Company by the first day of the month following
the month in which it has accrued), shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in accordance with the
terms of
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<PAGE> 5
this Note and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Note.
(e) The Company shall not close its books against the transfer
of Common Stock issued or issuable upon conversion of the Note in any manner
that interferes with the timely conversion of the Note. The Company shall assist
and cooperate with the Holder if it is required to make any governmental filings
or obtain any governmental approval prior to or in connection with any
conversion of the Note hereunder (including, without limitation, making any
filings required to be made by the Company).
SECTION 3.4. The Company shall at all times reserve and keep available
out of its authorized but unissued Common Stock, solely for the purpose of
issuance upon the conversion of the Note or Re-Set, such number of Common Stock
as are issuable upon the conversion of the Note or Re-Set. All Common Stock that
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Company shall take
all such actions as may be necessary to assure that all such Common Stock may be
so issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which Common Stock may
be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance).
SECTION 3.5. ADJUSTMENT OF CONVERSION PRICE AND RE-SET NUMBER ON
DELIVERY DEFAULT. Upon a Delivery Default due to an insufficient number of
authorized but unissued shares, the Company shall issue to the Holder all of the
shares of Common Stock which are then available. The portion of this Note which
the Holder to be converted and which exceeds the amount which is then
convertible into available shares of Common Stock (the "Excess Amount") shall,
notwithstanding anything to the contrary contained herein, not be convertible
into Common Stock in accordance with the terms hereof and no Re-Set Shares shall
be delivered until the date additional shares of Common Stock are authorized by
the Company. At such time the Conversion Price in respect thereof shall be the
lower of (i) the Conversion Price on the Delivery Default Date (as defined
below) and (ii) the Conversion Price on the Conversion Date thereafter elected
by the Holder in respect thereof. The number of Re-Set Shares shall be adjusted
to reflect the Applicable Rate up to the date of actual delivery. The Company
shall additionally pay to the Holder payments ("Delivery Default Payments") for
a Delivery Default in the amount of (N/365) x .24 x the Excess Amount on the
Conversion Date or Re-Set Date in respect of the Delivery Default (the "Delivery
Default Date"), where N = the number of days from the Delivery Default Date to
the date (the "Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of the full outstanding
principal balance of this Note or the issuance of Re-Set Shares, as applicable.
The Company shall use its best efforts to authorize a sufficient number of
shares of Common Stock as soon as practicable following the earlier of (i) such
time that the Holder notifies the Company or that the Company otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof or issuance of Re-Set Shares and (ii) a
Delivery Default. The Company shall send notice to the Holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of Holder's accrued Delivery Default Payments. The accrued Delivery
Default Payments for each calendar month shall be paid in cash or shall be
convertible into Common Stock (at such time as there are sufficient authorized
shares of Common Stock) at the Market Price (as defined below), at the Holder's
option, as follows:
(a) In the event Holder elects to take such payment in cash,
cash payment shall be made to Holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common
Stock, the Holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of conversion) at any time after the
fifth day of the month following the month in which it has accrued (at such time
as there are sufficient authorized shares of Common Stock) in accordance with
the terms of this Article III.
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The Holder's election shall be made in writing to the Company at any
time prior to 9:00 p.m., New York City Time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Delivery Default Payments) due to the Company's failure
to maintain a sufficient number of authorized shares of Common Stock.
SECTION 3.6. ADJUSTMENT OF CONVERSION PRICE ON MERGER. In the event the
Company (i) makes a public announcement that it intends to consolidate or merge
with any other corporation (other than a merger in which the Company is the
surviving or continuing corporation and its capital stock is unchanged) or sell
or transfer all or substantially all of the assets of the Company or (ii) any
person, group or entity (including the Company) publicly announces a tender
offer to purchase 50% or more of the Company's Common Stock (or any other
takeover scheme) (the date of the announcement referred to in clause (i) or (ii)
is hereinafter referred to as the "Announcement Date"), then the Conversion
Price shall, effective upon the Announcement Date and continuing through the
Adjusted Conversion Price Termination Date (as defined below), be equal to the
lower of (x) the Conversion Price which would have been applicable for a
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in this
Section. For purposes hereof, "Adjusted Conversion Price Termination Date" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section has been
made, the date upon which the Company (in the case of clause (i) above) or the
person, group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this Section to become operative.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1. STATUS OF NOTE. Subject to Section 4.2 below, this Note is
a direct, general and unconditional obligation of the Company ranking, and
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights and to general principals of equity.
The Company agrees that it will not, without the prior written consent of the
Holder, take any action, nor fail to take any action which would in any manner
adversely affect the rights of the Holder pursuant to the Note or subject the
Holder to any liability.
SECTION 4.2. RESTRICTIONS ON TRANSFER. This Note, and any Issued Shares
issued according to the terms hereof, have not been and will not be registered
under the U.S. Securities Act. This Note and any Common Stock issued upon
conversion thereof may not be offered or sold, directly or indirectly, except in
accordance with Section 2.1 hereof, and pursuant to registration under the Act,
an available exemption therefrom, or pursuant to Regulation S.
ARTICLE 5
COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
SECTION 5.1. PAYMENT OF NOTE. The Company will punctually, according to
the terms hereof, (a) pay or cause to be paid the principal of and interest and
penalties on this Note and (b) issue Issued Shares upon conversion or Re-Set.
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SECTION 5.2. NOTICE OF DEFAULT. If any one or more events occur which
constitute or which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default or if the Holder shall demand payment or
take any other action permitted upon the occurrence of any such Event of
Default, the Company will forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or other event or of such demand or
action, as the case may be.
SECTION 5.3. SUFFICIENT NUMBER OF AUTHORIZED COMMON STOCK. So long as
this Note shall be outstanding, the Company shall at all times have authorized
and reserved for issuance, free from preemptive rights, a sufficient number of
Common Stock to yield a number of Issued Shares sufficient to satisfy the
conversion rights of the holder pursuant to the terms and conditions hereof. In
the event that insufficient Common Stock shall be available, then the Company
shall issue such number as are available and pay the penalties set forth in
Section 3.3(d) hereof.
SECTION 5.4. INSURANCE. The Company will carry and maintain in full
force and effect at all times with insurers the Company reasonably believes to
be financially sound and reputable such insurance in such amounts as is
customary in the respective industries of the Company and such subsidiaries.
SECTION 5.5. PAYMENT OF OBLIGATIONS. The Company will pay and discharge
at or before maturity, all its respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same;
SECTION 5.6. COMPLIANCE WITH LAWS. The Company will comply in all
material respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.7. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
will keep proper books of record and account in which full, true and correct
entries shall be made of all dealings and transactions in relation to its
business and activities and will permit representatives of the Holder at the
Holder's expense to visit and inspect any of its respective properties, to
examine and make abstracts from any of its respective books and records and to
discuss its respective affairs, finances and accounts with its respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
SECTION 5.8. COMPLIANCE WITH PURCHASE AGREEMENT. The Company shall
comply with the agreements and covenants set forth in the Purchase Agreement.
SECTION 5.9. DISTRIBUTIONS ON CAPITAL STOCK. So long as the Company
shall have any obligation under this Note, the Company shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock.
SECTION 5.10. RESTRICTION ON STOCK REPURCHASES. So long as the Company
shall have any obligation under this Note, the Company shall not without the
Holder's written consent redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Company or any warrants, rights or options to purchase or acquire any such
shares.
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SECTION 5.11. BORROWINGS. So long as Company shall have any obligation
under this Note, the Company shall not without the Holder's written consent
create, incur, assume or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof and of which
the Company has informed the Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors incurred in the ordinary course of business, (c)
borrowings, the proceeds of which shall be used to repay this Note and (d)
leases entered into in the ordinary course of business.
SECTION 5.12. SALE OF ASSETS. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent, sell, lease or otherwise dispose of any of its assets outside the
ordinary course of business, except as set forth in Section 4.2(f) of the
Purchase Agreement. Any consent of the Holder to the disposition of any assets
may be conditioned on a specified use of the proceeds of disposition.
SECTION 5.13. ADVANCES AND LOANS. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent lend money, give credit or make advances to, or otherwise make an
investment in, any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries and affiliates
of the Company, except loans, credits or advances (a) in existence or committed
on the date hereof and which the Company has informed the Holder in writing
prior to the date hereof, and (b) made in the ordinary course of business.
SECTION 5.14. CONTINGENT LIABILITIES. So long as Company shall have any
obligation under this Note, the Company shall not without the Holder's written
consent assume, guarantee, endorse, continently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership, joint
venture or corporation, except by the endorsement of negotiable instruments for
deposit or collection and except assumptions, guarantees, endorsements and
contingencies (a) in existence or committed on the date hereof and which the
Company has informed the Holder in writing prior to the date hereof, and (b)
similar transactions in the ordinary course of business.
SECTION 5.15. SENIORITY OF NOTE. So long as Company shall have any
obligation under this Note, the Company shall not incur any obligation with
respect to indebtedness which is senior in right of payment to this Note
(including, without limitation, making any obligation outstanding as of the
Issue Date senior in right of payment to this Note); PROVIDED, HOWEVER that the
Company may subordinate its obligations under this Note upon execution of a
Security Agreement acceptable to the Holder, in which case this section shall
not apply to obligations with respect to indebtedness incurred in connection
with a Permitted Lien (as defined in such Security Agreement).
ARTICLE 6
REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. "Event of Default" wherever used herein
means any one of the following events:
(a) a Delivery Default (as defined in Section 3.3(d) hereof);
(b) default in the due and punctual payment of the principal
of on, or any other amount owing in respect of, this Note when and as the same
shall become due and payable, and continuance of such default for a period of 30
calendar days;
(c) substantial failure in the performance or observance of
Section 5.3 of this Note and the continuance of such default for a period of 30
calendar days;
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(d) default in the performance or observance of any covenant
or agreement of the Company in this Note (other than a covenant or agreement a
default in the performance of which is specifically provided for elsewhere in
this Section), and the continuance of such default for a period of 30 calendar
days after there has been given to the Company by a Holder a written notice
specifying such default and requiring it to be remedied;
(e) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
Bankruptcy Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, Trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 30 calendar days, except
in case that such event does not result in a Material Adverse Effect;
(f) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, Trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such action,
except in case that such event does not result in a Material Adverse Effect;
(g) the Company shall fail to issue and deliver the Issued
Shares in accordance with Article III;
(h) any principal of other indebtedness of the Company or any
Subsidiary, exceeding $500,000 is not repaid on its original maturity date or
becomes due and payable by reason of default before its original maturity date;
(i) the Company or any Subsidiary is unable to pay its debts
as they fall due, stops, suspends, or threatens in writing to stop or suspend
payment of all or any material part of its debts (other than debts contested in
good faith by appropriate proceedings), begins negotiations or takes any
proceeding or other step with a view to readjustment, rescheduling or deferral
of all of its indebtedness (or any material part thereof) that it will or might
otherwise be unable to pay when due or seeks the appointment of a statutory
manager or proposes in writing or makes a general assignment or an arrangement
or composition with or for the benefit of its creditors or any group or class
thereof or files a petition for suspension of payments or other relief of
debtors of for bankruptcy or is declared bankrupt or a moratorium or statutory
management is agreed or declared in respect of or affecting all or any material
part of the indebtedness of the Company or any of its wholly owned subsidiaries,
or (ii) the Company ceases or threatens in writing to cease to carry on all or
any material part of the business carried on by the Company and its Subsidiaries
taken as a whole and as a result of such cessation or threat of cessation, the
Company will not be able to perform or comply with its payment obligations under
this Note, except in case that any such event does not result in a Material
Adverse Effect;
(j) on or after the date hereof, a final judgment or final
judgments for the payment of money shall have been entered by any court or
courts of competent jurisdiction against the Company and remains undischarged
for a period (during which execution shall be effectively stayed) of 30 days,
provided that the aggregate amount of all such judgments at any time outstanding
(to the extent not paid or to be paid,
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as evidenced by a written communication to that effect from the applicable
insurer, by insurance) exceeds $500,000;
(k) it becomes unlawful for the Company to perform or comply
with its obligations under this Note or the Purchase Agreement.
SECTION 6.2. ACCELERATION OF MATURITY. If an Event of Default occurs
and is continuing, then and in every such case any Holder may declare the
principal of and interest and penalties on this Note to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration the principal of and interest and penalties on this Note shall
become immediately due and payable and the Company shall pay to the Holder, in
full satisfaction of its obligations hereunder, an amount equal to the greater
of (i) the Default Percentage (as defined below) times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the
"Mandatory Prepayment Date") plus (z) any amounts owed to the Holder pursuant to
Article III hereof or pursuant to Article III of the Registration Rights
Agreement (the then outstanding principal amount of this Note to the date of
payment plus the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the "Default Sum") or (ii) the "parity value" of the
Default Sum to be prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of such Default Sum in
accordance with Article III (treating the Trading Day immediately preceding the
Mandatory Prepayment Date as the "Conversion Date" for purposes of determining
the lowest applicable Conversion Price, unless the Default Event arises as a
result of a breach in respect of a specific Conversion Date in which case such
Conversion Date shall be the Conversion Date), multiplied by (b) the highest
Closing Price for the Common Stock during the period beginning on the date of
first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the greater of clause (i) and (ii) being the "Default
Amount") and all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without limitation, legal
fees and expenses, of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. The "Default
Percentage" shall mean 130%.
If the Company fails to pay the Default Amount within five business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Company remains in default (and
so long and to the extent that there are sufficient authorized shares), to
require the Company, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Company equal to the
Default Amount divided by the Conversion Price then in effect.
SECTION 6.3. REMEDIES NOT WAIVED. No course of dealing between
the Company and the Holder or any delay in exercising any rights hereunder shall
operate as a waiver by the Holder.
ARTICLE 7
EFFECT OF CERTAIN EVENTS
SECTION 7.1. CONSOLIDATIONS, MERGERS, ETC. (a) At the option of the
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the company, the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or the consolidation, merger or other business
combination of the Company with or into any other Person or Persons when the
Company is not the survivor shall either: (i) be deemed to be an Event of
Default or (ii) be treated pursuant to Section 7.1(b) hereof.
(b) If, at any time when this Note is issued and outstanding,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result
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<PAGE> 11
of which shares of Common Stock of the Company shall be changed into the same or
a different number of shares of another class or classes of stock or securities
of the Company or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in connection with a
plan of complete liquidation of the Company, then, the Holder of this Note shall
thereafter have the right to receive upon conversion of this Note, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been entitled to receive
in such transaction had this Note been converted in full immediately prior to
such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the exercise
hereof. The Company shall not effect any transaction described in this Section
unless (a) it first gives at least 10 days prior written notice of the record
date of the special meeting of stockholders to approve, or if there is no such
record date, 30 days prior to the consummation of, such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to convert this
Note) and (b) the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligations of this Section. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c) Subject to the provisions of the Purchase Agreement, if
the Company shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or distribution
to the Company's shareholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off) (a "Distribution"), the Holder
of this Note shall be entitled, upon any conversion of this Note after the date
of record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the Holder with
respect to the shares of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(d) If, at any time when any Notes are issued and outstanding,
the Company issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the Holder of this Note will
be entitled upon any conversion of this Note after the date of record for
determining shareholders entitled to such Purchase Rights to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note (without regard to
any limitations on conversion contained herein) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
(e) Upon the occurrence of each adjustment or readjustment of
the Conversion Price as a result of the events described in this Section 7.1,
the Company, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder of a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish to such Holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of the Note.
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<PAGE> 12
SECTION 7.2. STATUS AS STOCKHOLDER. Upon conversion, (i) the to be
shares issued thereby shall be deemed converted into shares of Common Stock and
(ii) the Holder's rights as a Holder of such converted portion of this Note
shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure by the Company
to comply with the terms of this Note. Notwithstanding the foregoing, if a
Holder has not received certificates for all shares of Common Stock prior to the
tenth business day after the expiration of the date set forth in Section 3.3
hereof, with respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a holder of
Common Stock by so notifying the Company), the Holder shall regain the rights of
a Holder of this Note with respect to such unconverted portions of this Note and
the Company shall, as soon as practicable, return such unconverted Note to the
holder or, if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Delivery Default payments pursuant to Section 3.3(d) and
(ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 3.5) for the Company's failure
to deliver Issued Shares.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. REGISTER. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this Note.
Upon any transfer of this Note in accordance with Articles 2 and 4 hereof, the
Company shall register such transfer on the Note register.
The Company may deem the person in whose name this Note shall be
registered upon the registry books of the Company to be, and may treat it as,
the absolute owner of this Note (whether or not this Note shall be overdue) for
the purpose of receiving payment of principal of this Note, for the conversion
of this Note and for all other purposes, and the Company shall not be affected
by any notice to the contrary. All such payments and such conversions shall be
valid and effective to satisfy and discharge the liability upon this Note to the
extent of the sum or sums so paid or the conversion or conversions so made.
SECTION 8.2. WITHHOLDING. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Note.
SECTION 8.3. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. WITH RESPECT TO
ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS NOTE, THE COMPANY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY
OF NEW YORK AND HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. SUBJECT TO APPLICABLE LAW, THE COMPANY AGREES THAT FINAL
JUDGMENT AGAINST IT IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS NOTE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION
WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED COPY OF
WHICH JUDGMENT SHALL BE CONCLUSIVE EVIDENCE THEREOF AND THE AMOUNT OF ITS
INDEBTEDNESS, OR BY SUCH OTHER MEANS PROVIDED BY LAW.
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<PAGE> 13
SECTION 8.4. HEADINGS. The headings of the Articles and Sections of
this Note are inserted for convenience only and do not constitute a part of this
Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Note.
VIRAGEN INC.
By:
-----------------------------------
Name:
Title:
Attest:
By:
-----------------------------------
Name:
Title: Secretary
[Corporate Seal]
13
<PAGE> 1
EXHIBIT 10(LXV)
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A PURCHASE AGREEMENT AND A
REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF MARCH 17, 1999, BETWEEN THE
ISOSCELES FUND, CEFEO INVESTMENTS LIMITED AND VIRAGEN, INC. A COPY OF THE
PORTION OF SUCH AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM
VIRAGEN, INC.'S EXECUTIVE OFFICES.
MARCH 17, 1999
Warrant to Purchase up to 699,029 Shares of Common Stock of Viragen,
Inc. (hereinafter, a "Warrant").
Viragen, Inc., a Delaware corporation (the "Company"), hereby agrees
that The Isosceles Fund (the "Subscriber") or any other Warrant Holder is
entitled, on the terms and conditions set forth below, to purchase from the
Company at any time during the Exercise Period up to 699,029 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 6 hereof, at the Exercise Price (hereinafter defined). The resale of the
shares of Common Stock or other securities issuable upon exercise or exchange of
this Warrant is subject to the provisions of the Registration Rights Agreement
(as defined below).
Section 1. DEFINITIONS.
"AGREEMENT" shall mean the Purchase Agreement, dated March 17, 1999
between the Company and the Subscriber and Cefeo Investments Limited.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"DATE OF EXERCISE" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not
<PAGE> 2
sent advance notice by facsimile, the Date of Exercise shall be the date the
original Exercise Form is received by the Company.
"EXERCISE PERIOD" shall mean the period beginning from the Purchase
Date to 5 years from the initial Purchase Date.
"EXERCISE PRICE" as of the date hereof shall mean an exercise price
equal to one hundred twenty percent (120%) of the Closing Market Price subject
to adjustment as set forth in Section 6 hereof PROVIDED THAT, if the Future
Price (as defined in the Notes) is lower than such Exercise Price on the first
Conversion Date, then the Exercise Price shall be such Future Price and PROVIDED
FURTHER, that if the Future Price on the second Conversion Date is lower than
the initial Exercise Price and the re-set Exercise Price, then the Exercise
Price shall be such Future Price.
"PRE-PAYMENT" shall have the meaning defined in the Purchase Agreement.
"PURCHASE DATE" shall mean the Initial Purchase Date as defined in the
Purchase Agreement.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the NASDAQ
Small Cap Market, the American Stock Exchange on the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement, dated March 17, 1999 between the Company and the Subscriber and Cefeo
Investments Limited.
"WARRANT HOLDER" shall mean the Subscriber or any assignee or
transferee of all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Purchase Agreement.
Section 2. EXERCISABILITY. The Warrants are exercisable at any time
during the Exercise Period.
Section 3. EXERCISE; CASHLESS EXERCISE.
(a) METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period, by the Warrant Holder by (i)
surrender of this Warrant, with the form of exercise attached hereto as Exhibit
A duly executed by the Warrant Holder (the "Exercise Notice"), to the Company at
the address set forth in Section 13 hereof, accompanied by payment of the
Exercise Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Aggregate Exercise Price") or (ii) telecopying
an executed and completed Exercise Notice to the Company and delivering to the
Company within 3 business days thereafter the original Exercise Notice, this
Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice
is received by the Company in accordance with clause (i) and each date on which
the Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date."
(b) PAYMENT OF AGGREGATE EXERCISE PRICE. Payment of the
Aggregate Exercise Price shall be made by check or bank draft payable to the
order of the Company or by
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<PAGE> 3
wire transfer to an account designated by the Company. If the amount of the
payment received by the Company is less than the Aggregate Exercise Price, the
Warrant Holder will be notified of the deficiency and shall make payment in that
amount within five business days. In the event the payment exceeds the Aggregate
Exercise Price, the Company will refund the excess to the Warrant Holder within
three business days of receipt.
(c) CASHLESS EXERCISE. As an alternative to payment of the
Aggregate Exercise Price in accordance with paragraph (b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Common Stock on the Principal Market on
the date preceding the Date of Exercise minus the Exercise Price in effect at
such time.
(d) REPLACEMENT WARRANT. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 4. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable shares of Common Stock
("Warrant Shares") to which the Warrant Holder shall be entitled on such
exercise, together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is entitled upon
such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that
any such delivery to a location outside of the United States shall be made
within five Trading Days after the exercise of this Warrant in full or in part.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall receive in cash an amount equal to the
Bid Price of such fractional share within three Trading Days.
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<PAGE> 4
(c) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon exercise of this
Warrant is more than one business day after the date set forth in (a) above the
Company shall pay to the Holder $500 per day in cash, for each of the first two
days beyond such deadline and $2,500 per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Holder by the fifth day of the month following the month in which it has
accrued.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder.
(b) At all times during the Exercise Period, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed or quoted on the Principal Market.
(c) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
Section 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise Price shall
be subject to adjustment from time to time upon the happening of certain events
as follows:
(a) RECLASSIFICATION, CONSOLIDATION, MERGER OR MANDATORY SHARE
EXCHANGE. If the Company (i) reclassifies or changes its Outstanding Capital
Shares or (ii) consolidates, merges or effects a mandatory share exchange with
or into another corporation (other than a merger or mandatory share exchange
with another corporation in which the Company is a continuing corporation and
that does not result in any reclassification or change, or as a result of a
subdivision or combination of Outstanding Capital Shares issuable upon exercise
of this Warrant), then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Warrant or issue a new warrant
providing that the Warrant Holder shall have rights not less favorable to the
holder than those then applicable to this Warrant and to receive upon exercise
under such amendment of this Warrant or new warrant, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant hereunder, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, mandatory
share exchange, sale or transfer by the holder of one share of Common Stock
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended warrant shall provide
for adjustments which shall be
4
<PAGE> 5
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 6. The provisions of this subsection (a) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, mandatory share
exchanges and sales and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
subdivide its Common Stock, the number of shares of Common Stock issuable to the
Subscriber hereunder shall be proportionately increased as of the effective date
of such subdivision, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time between the Subscription Date
and the Effective Date shall combine its Common Stock, the number of shares of
Common Stock issuable to the Subscriber hereunder shall be proportionately
decreased as of the effective date of such combination, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
of such record date, whichever is earlier.
(c) STOCK DIVIDENDS. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Exercise Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Capital Shares for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other distribution
by a fraction:
the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend
or distribution, and
the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution. The provisions of this subsection (c) shall not
apply under any of the circumstances for which an adjustment
is provided in subsections (a) or (b).
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6 the number of
Warrant Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
the numerator of which shall be the Exercise Price before any
adjustment pursuant to this Section 6; and
the denominator of which shall be the Exercise Price after
such adjustment.
(e) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time
while this Warrant is unexpired and not exercised in full, makes a distribution
of its assets or evidences of indebtedness to the holders of its Capital Shares
as a full or partial dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (d)) while an exercise is pending, then the
5
<PAGE> 6
Warrant Holder shall be entitled to receive upon such exercise of the Warrant in
addition to the Warrant Shares receivable in connection therewith, and without
payment of any consideration other than the Exercise Price, an amount in cash
equal to the value of such distribution per Capital Share multiplied by the
number of Warrant Shares that, on the record date for such distribution, are
issuable upon such exercise of the Warrant (with no further adjustment being
made following any event which causes a subsequent adjustment in the number of
Warrant Shares issuable), and an appropriate provision therefor shall be made a
part of any such distribution. The value of a distribution that is paid in other
than cash shall be determined in good faith by the Board of Directors of the
Company.
(f) ANTIDILUTION PROVISIONS.
(i) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in (b) and (e) above, if
and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with paragraph (f)(ii) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Closing market price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
paragraph (f)(ii) hereof, received by the Company upon such Dilutive Issuance
divided by the Closing market price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance. "Common
Stock Deemed Outstanding" shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury
of the Company), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of Options (as defined below), as of the date of such
issuance or grant of such Options, if any, and (y) the maximum total number of
shares of Common Stock issuable upon conversion or exchange of Convertible
Securities (as defined below), as of the date of issuance of such Convertible
Securities, if any.
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph f(i) hereof, the
following will be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Closing market price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance
or grant
6
<PAGE> 7
of such Options, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For purposes of the
preceding sentence, the "price per share for which Common Stock is
issuable upon the exercise of such Options" is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus
the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common
Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such
Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for such Common Stock
issuable upon such conversion or exchange is less than the Closing
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
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<PAGE> 8
(D) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have been
in effect at the time of such expiration or termination had such Option
or Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(E) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor, before
deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Closing market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good
faith by the Board of Directors of the Company.
(F) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon the
grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the
members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions will be applicable to the making of
adjustments in any Exercise Price hereinabove provided in this Section 6:
1. OTHER ACTION AFFECTING CAPITAL SHARES. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an
8
<PAGE> 9
action described in any of the foregoing subsections (a) through (f) hereof,
inclusive, which in the opinion of the Company's Board of Directors would have a
materially adverse effect upon the rights of the Warrant Holder at the time of
exercise of the Warrant, the Exercise Price shall be adjusted in such manner and
at such time as the Board or Directors on the advice of the Company's
independent public accountants may in good faith determine to be equitable in
the circumstances.
2. NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time
while the Warrant is unexpired and outstanding, take any action which pursuant
to subsections (a) through (f) of this Section 6 may result in an adjustment of
the Exercise Price, the Company shall give to the Warrant Holder at its last
address known to the Company written notice of such action 10 days in advance of
its effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the Holder of the Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
Section 7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or of any reorganization,
consolidation or merger or dissolution or liquidation, the Company shall mail to
each Warrant Holder, a notice specifying the date on which any such record is to
be taken for
9
<PAGE> 10
the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right and, in the case of any
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case my be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto.
Section 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Notes, the
Registration Rights Agreement, the Escrow Agreement and the Agreement contain
the entire understanding of the parties with respect to the matters covered
hereby and thereby. No provision of this Warrant may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 12. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been issued in
a transaction exempt from the registration requirements of the Securities Act in
reliance upon the provisions of Section 4(2) of the Securities Act. This Warrant
and the Warrant Shares issuable upon exercise of this Warrant may not be resold
except pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act and applicable state laws.
(b) LEGEND. Any replacement Warrants issued pursuant to Section 3
hereof and any Warrant Shares issued upon exercise hereof, shall bear the legend
set forth on the face hereof, unless removed in accordance with applicable law.
(c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 12(b) has been or shall be placed on the share
certificates representing the Warrant Shares and no instructions or stop
transfer orders, or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Section 12.
(d) ASSIGNMENT. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or
in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto
10
<PAGE> 11
as Exhibit B, indicating the person or persons to whom the Warrant shall be
assigned and the respective number of warrants to be assigned to each assignee.
The Company shall effect the assignment at no cost to the Warrant Holder within
10 days, and shall deliver to the assignee(s) designated by the Warrant Holder a
Warrant or Warrants of like tenor and terms for the appropriate number of
shares.
(e) SUBSCRIBER'S COMPLIANCE. Nothing in this Section 12 shall affect in
any way the Subscriber's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
Section 13. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
New River Center, Suite 1900
200 East Las Olas Blvd.
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
11
<PAGE> 12
If to the Subscriber:
The Isosceles Fund Limited
c/o Citco Fund Services Lted.
Bahamas Financial Centre, 3rd Floor
Shirley & Charlotte Streets
P.O. Box CB 13136
Nassau, Bahamas
Attention: Ruth Beneby
Telephone: (242) 356-5928
Facsimile: (242) 356-0221
with copies to (which communication shall not constitute notice):
Sara Hanks, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Telephone: (212) 878-8014
Facsimile: (212) 878-8375
Mohammed Manzur
c/o Manzur Associates Ltd.
Witan Court, 270 Witan Gate West
Milton Keynes, MK9 1EJ
United Kingdom
Telephone: 011-44-1908-231-007
Facsimile: 011-44-1908-231-006
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 13 by giving at least 10 days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 14. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision. This Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all of the Company's assets.
12
<PAGE> 13
IN WITNESS WHEREOF, this Warrant was duly executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
VIRAGEN, INC.
By:
------------------------------
Name:
Title:
Attested:
By:
------------------------------
Name:
Title: Secretary
13
<PAGE> 14
EXHIBIT A TO THE WARRANT
EXERCISE FORM
VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Viragen, Inc., a Delaware
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full in the
form of (check the appropriate box) (i) cash or certified check in the amount of
$________; (ii) wire transfer to the Company's account at __________________,
_________, _________ (Account No.:_________); or (iii) ______ Warrant Shares,
which represent the amount of Warrant Shares as provided in the attached Warrant
to be canceled in connection with such exercise, all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:
---------------------------------------
- ---------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
- ---------------------------------------------
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
14
<PAGE> 15
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of Viragen, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
- --------------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE> 1
EXHIBIT 10(lxvi)
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A PURCHASE AGREEMENT AND A
REGISTRATION RIGHTS AGREEMENT, EACH DATED AS OF MARCH 17, 1999, BETWEEN THE
ISOSCELES FUND, CEFEO INVESTMENTS LIMITED AND VIRAGEN, INC. A COPY OF THE
PORTION OF SUCH AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM
VIRAGEN, INC.'S EXECUTIVE OFFICES.
MARCH 17, 1999
Warrant to Purchase up to 233,010 Shares of Common Stock of Viragen,
Inc. (hereinafter, a "Warrant").
Viragen, Inc., a Delaware corporation (the "Company"), hereby agrees
that Cefeo Investments Limited (the "Subscriber") or any other Warrant Holder is
entitled, on the terms and conditions set forth below, to purchase from the
Company at any time during the Exercise Period up to 233,010 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 6 hereof, at the Exercise Price (hereinafter defined). The resale of the
shares of Common Stock or other securities issuable upon exercise or exchange of
this Warrant is subject to the provisions of the Registration Rights Agreement
(as defined below).
Section 1. DEFINITIONS.
"AGREEMENT" shall mean the Purchase Agreement, dated March 17, 1999
between the Company and the Subscriber and The Isosceles Fund Limited.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"DATE OF EXERCISE" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not
<PAGE> 2
sent advance notice by facsimile, the Date of Exercise shall be the date the
original Exercise Form is received by the Company.
"EXERCISE PERIOD" shall mean the period beginning from the Purchase
Date to 5 years from the initial Purchase Date.
"EXERCISE PRICE" as of the date hereof shall mean an exercise price
equal to one hundred twenty percent (120%) of the Closing Market Price subject
to adjustment as set forth in Section 6 hereof PROVIDED THAT, if the Future
Price (as defined in the Notes) is lower than such Exercise Price on the first
Conversion Date, then the Exercise Price shall be such Future Price and PROVIDED
FURTHER, that if the Future Price on the second Conversion Date is lower than
the initial Exercise Price and the re-set Exercise Price, then the Exercise
Price shall be such Future Price.
"PRE-PAYMENT" shall have the meaning defined in the Purchase Agreement.
"PURCHASE DATE" shall mean the Initial Purchase Date as defined in the
Purchase Agreement.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the NASDAQ
Small Cap Market, the American Stock Exchange on the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement, dated March 17, 1999 between the Company and the Subscriber and The
Isosceles Fund Limited.
"WARRANT HOLDER" shall mean the Subscriber or any assignee or
transferee of all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Purchase Agreement.
Section 2. EXERCISABILITY. The Warrants are exercisable at any time
during the Exercise Period.
Section 3. EXERCISE; CASHLESS EXERCISE.
(a) METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period, by the Warrant Holder by (i)
surrender of this Warrant, with the form of exercise attached hereto as Exhibit
A duly executed by the Warrant Holder (the "Exercise Notice"), to the Company at
the address set forth in Section 13 hereof, accompanied by payment of the
Exercise Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Aggregate Exercise Price") or (ii) telecopying
an executed and completed Exercise Notice to the Company and delivering to the
Company within 3 business days thereafter the original Exercise Notice, this
Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice
is received by the Company in accordance with clause (i) and each date on which
the Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date."
(b) PAYMENT OF AGGREGATE EXERCISE PRICE. Payment of the
Aggregate Exercise Price shall be made by check or bank draft payable to the
order of the Company or by
2
<PAGE> 3
wire transfer to an account designated by the Company. If the amount of the
payment received by the Company is less than the Aggregate Exercise Price, the
Warrant Holder will be notified of the deficiency and shall make payment in that
amount within five business days. In the event the payment exceeds the Aggregate
Exercise Price, the Company will refund the excess to the Warrant Holder within
three business days of receipt.
(c) CASHLESS EXERCISE. As an alternative to payment of the
Aggregate Exercise Price in accordance with paragraph (b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Common Stock on the Principal Market on
the date preceding the Date of Exercise minus the Exercise Price in effect at
such time.
(d) REPLACEMENT WARRANT. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 4. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable shares of Common Stock
("Warrant Shares") to which the Warrant Holder shall be entitled on such
exercise, together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is entitled upon
such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that
any such delivery to a location outside of the United States shall be made
within five Trading Days after the exercise of this Warrant in full or in part.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall receive in cash an amount equal to the
Bid Price of such fractional share within three Trading Days.
3
<PAGE> 4
(c) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon exercise of this
Warrant is more than one business day after the date set forth in (a) above the
Company shall pay to the Holder $500 per day in cash, for each of the first two
days beyond such deadline and $2,500 per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Holder by the fifth day of the month following the month in which it has
accrued.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder.
(b) At all times during the Exercise Period, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed or quoted on the Principal Market.
(c) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
Section 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise Price shall
be subject to adjustment from time to time upon the happening of certain events
as follows:
(a) RECLASSIFICATION, CONSOLIDATION, MERGER OR MANDATORY SHARE
EXCHANGE. If the Company (i) reclassifies or changes its Outstanding Capital
Shares or (ii) consolidates, merges or effects a mandatory share exchange with
or into another corporation (other than a merger or mandatory share exchange
with another corporation in which the Company is a continuing corporation and
that does not result in any reclassification or change, or as a result of a
subdivision or combination of Outstanding Capital Shares issuable upon exercise
of this Warrant), then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Warrant or issue a new warrant
providing that the Warrant Holder shall have rights not less favorable to the
holder than those then applicable to this Warrant and to receive upon exercise
under such amendment of this Warrant or new warrant, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant hereunder, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, mandatory
share exchange, sale or transfer by the holder of one share of Common Stock
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended warrant shall provide
for adjustments which shall be
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<PAGE> 5
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 6. The provisions of this subsection (a) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, mandatory share
exchanges and sales and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
subdivide its Common Stock, the number of shares of Common Stock issuable to the
Subscriber hereunder shall be proportionately increased as of the effective date
of such subdivision, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time between the Subscription Date
and the Effective Date shall combine its Common Stock, the number of shares of
Common Stock issuable to the Subscriber hereunder shall be proportionately
decreased as of the effective date of such combination, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
of such record date, whichever is earlier.
(c) STOCK DIVIDENDS. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Exercise Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Capital Shares for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other distribution
by a fraction:
the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend
or distribution, and
the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution. The provisions of this subsection (c) shall not
apply under any of the circumstances for which an adjustment
is provided in subsections (a) or (b).
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6 the number of
Warrant Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
the numerator of which shall be the Exercise Price before any
adjustment pursuant to this Section 6; and
the denominator of which shall be the Exercise Price after
such adjustment.
(e) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time
while this Warrant is unexpired and not exercised in full, makes a distribution
of its assets or evidences of indebtedness to the holders of its Capital Shares
as a full or partial dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (d)) while an exercise is pending, then the
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<PAGE> 6
Warrant Holder shall be entitled to receive upon such exercise of the Warrant in
addition to the Warrant Shares receivable in connection therewith, and without
payment of any consideration other than the Exercise Price, an amount in cash
equal to the value of such distribution per Capital Share multiplied by the
number of Warrant Shares that, on the record date for such distribution, are
issuable upon such exercise of the Warrant (with no further adjustment being
made following any event which causes a subsequent adjustment in the number of
Warrant Shares issuable), and an appropriate provision therefor shall be made a
part of any such distribution. The value of a distribution that is paid in other
than cash shall be determined in good faith by the Board of Directors of the
Company.
(f) ANTIDILUTION PROVISIONS.
(i) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in (b) and (e) above, if
and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with paragraph (f)(ii) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Closing market price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
paragraph (f)(ii) hereof, received by the Company upon such Dilutive Issuance
divided by the Closing market price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance. "Common
Stock Deemed Outstanding" shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury
of the Company), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of Options (as defined below), as of the date of such
issuance or grant of such Options, if any, and (y) the maximum total number of
shares of Common Stock issuable upon conversion or exchange of Convertible
Securities (as defined below), as of the date of issuance of such Convertible
Securities, if any.
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph f(i) hereof, the
following will be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Closing market price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance
or grant
6
<PAGE> 7
of such Options, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For purposes of the
preceding sentence, the "price per share for which Common Stock is
issuable upon the exercise of such Options" is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus
the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common
Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such
Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for such Common Stock
issuable upon such conversion or exchange is less than the Closing
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
7
<PAGE> 8
(D) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have been
in effect at the time of such expiration or termination had such Option
or Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(E) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor, before
deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Closing market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good
faith by the Board of Directors of the Company.
(F) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon the
grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the
members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions will be applicable to the making of
adjustments in any Exercise Price hereinabove provided in this Section 6:
1. OTHER ACTION AFFECTING CAPITAL SHARES. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an
8
<PAGE> 9
action described in any of the foregoing subsections (a) through (f) hereof,
inclusive, which in the opinion of the Company's Board of Directors would have a
materially adverse effect upon the rights of the Warrant Holder at the time of
exercise of the Warrant, the Exercise Price shall be adjusted in such manner and
at such time as the Board or Directors on the advice of the Company's
independent public accountants may in good faith determine to be equitable in
the circumstances.
2. NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time
while the Warrant is unexpired and outstanding, take any action which pursuant
to subsections (a) through (f) of this Section 6 may result in an adjustment of
the Exercise Price, the Company shall give to the Warrant Holder at its last
address known to the Company written notice of such action 10 days in advance of
its effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the Holder of the Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
Section 7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or of any reorganization,
consolidation or merger or dissolution or liquidation, the Company shall mail to
each Warrant Holder, a notice specifying the date on which any such record is to
be taken for
9
<PAGE> 10
the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right and, in the case of any
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case my be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto.
Section 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Notes, the
Registration Rights Agreement, the Escrow Agreement and the Agreement contain
the entire understanding of the parties with respect to the matters covered
hereby and thereby. No provision of this Warrant may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 12. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act in reliance upon the provisions of Section 4(2) of the Securities
Act. This Warrant and the Warrant Shares issuable upon exercise of this Warrant
may not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws.
(b) LEGEND. Any replacement Warrants issued pursuant to
Section 3 hereof and any Warrant Shares issued upon exercise hereof, shall bear
the legend set forth on the face hereof, unless removed in accordance with
applicable law.
(c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 12(b) has been or shall be placed on the
share certificates representing the Warrant Shares and no instructions or stop
transfer orders, or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Section 12.
(d) ASSIGNMENT. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or
in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto
10
<PAGE> 11
as Exhibit B, indicating the person or persons to whom the Warrant shall be
assigned and the respective number of warrants to be assigned to each assignee.
The Company shall effect the assignment at no cost to the Warrant Holder within
10 days, and shall deliver to the assignee(s) designated by the Warrant Holder a
Warrant or Warrants of like tenor and terms for the appropriate number of
shares.
(e) SUBSCRIBER'S COMPLIANCE. Nothing in this Section 12 shall
affect in any way the Subscriber's obligations under any agreement to comply
with all applicable securities laws upon resale of the Common Stock.
Section 13. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
New River Center, Suite 1900
200 East Las Olas Blvd.
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
11
<PAGE> 12
If to the Subscriber:
Cefeo Investments Limited
Via Genevra 2
6901 Lugano
Switzerland
Attention: Rolf Marthaler
Telephone: + 41 91 913 4560
Facsimile: + 41 01 913 4502
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 13 by giving at least 10 days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 14. MISCELLANEOUS. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision. This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
12
<PAGE> 13
IN WITNESS WHEREOF, this Warrant was duly executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
VIRAGEN, INC.
By:
-------------------------------
Name:
Title:
Attested:
By:
-------------------------------
Name:
Title: Secretary
13
<PAGE> 14
EXHIBIT A TO THE WARRANT
EXERCISE FORM
VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Viragen, Inc., a Delaware
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full in the
form of (check the appropriate box) (i) cash or certified check in the amount of
$________; (ii) wire transfer to the Company's account at __________________,
_________, _________ (Account No.:_________); or (iii) ______ Warrant Shares,
which represent the amount of Warrant Shares as provided in the attached Warrant
to be canceled in connection with such exercise, all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:
---------------------------------------
- ---------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
- ---------------------------------------------
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
14
<PAGE> 15
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of Viragen, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
- --------------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE> 1
EXHIBIT 10(lxvii)
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF MARCH 17, 1999, AMONG BALLSBRIDGE FINANCE, LTD., ELLIOTT, LANE
& ASSOCIATES, INC. AND VEN-GUA CAPITAL MARKETS LTD. AND VIRAGEN, INC. (THE
"REGISTRATION RIGHTS AGREEMENT"). A COPY OF THE PORTION OF SUCH AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM VIRAGEN, INC.'S EXECUTIVE
OFFICES.
MARCH 17, 1999
Warrant to Purchase up to 58,252 Shares of Common Stock of Viragen,
Inc. (hereinafter, a "Warrant").
Viragen, Inc., a Delaware corporation (the "Company"), hereby agrees
that Ven-Gua Capital Markets Ltd. (the "Subscriber") or any other Warrant Holder
is entitled, on the terms and conditions set forth below, to purchase from the
Company at any time during the Exercise Period up to 58,252 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 6 hereof, at the Exercise Price (hereinafter defined). The resale of the
shares of Common Stock or other securities issuable upon exercise or exchange of
this Warrant is subject to the provisions of the Registration Rights Agreement.
Section 1. DEFINITIONS.
"AGREEMENT" shall mean the Purchase Agreement, dated March 17, 1999
between the Company and The Isosceles Fund Limited and Cefeo Investments
Limited.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"DATE OF EXERCISE" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not
<PAGE> 2
sent advance notice by facsimile, the Date of Exercise shall be the date the
original Exercise Form is received by the Company.
"EXERCISE PERIOD" shall mean the period beginning from the Purchase
Date to 5 years from the initial Purchase Date.
"EXERCISE PRICE" as of the date hereof shall mean an exercise price
equal to one hundred twenty percent (120%) of the Closing Market Price subject
to adjustment as set forth in Section 6 hereof.
"PRE-PAYMENT" shall have the meaning defined in the Purchase Agreement.
"PURCHASE DATE" shall mean the Initial Purchase Date as defined in the
Purchase Agreement.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the NASDAQ
Small Cap Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"WARRANT HOLDER" shall mean the Subscriber or any assignee or
transferee of all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Purchase Agreement.
Section 2. EXERCISABILITY. Half the Warrants are exercisable at any
time during the Exercise Period. The remaining half of the Warrants shall be
exercisable upon Pre-Payment. In the event that Pre-Payment does not occur by
the Pre-Payment Deadline, such half of the Warrants shall be reconveyed by the
Subscriber to the Company.
Section 3. EXERCISE; CASHLESS EXERCISE.
(a) METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period, by the Warrant Holder by (i)
surrender of this Warrant, with the form of exercise attached hereto as Exhibit
A duly executed by the Warrant Holder (the "Exercise Notice"), to the Company at
the address set forth in Section 13 hereof, accompanied by payment of the
Exercise Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Aggregate Exercise Price") or (ii) telecopying
an executed and completed Exercise Notice to the Company and delivering to the
Company within 3 business days thereafter the original Exercise Notice, this
Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice
is received by the Company in accordance with clause (i) and each date on which
the Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date."
(b) PAYMENT OF AGGREGATE EXERCISE PRICE. Payment of the
Aggregate Exercise Price shall be made by check or bank draft payable to the
order of the Company or by wire transfer to an account designated by the
Company. If the amount of the payment received by the Company is less than the
Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency
and shall make payment in that amount within five business days. In the event
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<PAGE> 3
the payment exceeds the Aggregate Exercise Price, the Company will refund the
excess to the Warrant Holder within three business days of receipt.
(c) CASHLESS EXERCISE. As an alternative to payment of the
Aggregate Exercise Price in accordance with paragraph (b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Common Stock on the Principal Market on
the date preceding the Date of Exercise minus the Exercise Price in effect at
such time.
(d) REPLACEMENT WARRANT. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 4. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable shares of Common Stock
("Warrant Shares") to which the Warrant Holder shall be entitled on such
exercise, together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is entitled upon
such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that
any such delivery to a location outside of the United States shall be made
within five Trading Days after the exercise of this Warrant in full or in part.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall receive in cash an amount equal to the
Bid Price of such fractional share within three Trading Days.
(c) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon exercise of this
Warrant is more than one business day after the date set forth in (a) above the
Company shall pay to the Holder $500 per day in cash, for each of the first
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<PAGE> 4
two days beyond such deadline and $2,500 per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Holder by the fifth day of the month following the month in which it has
accrued.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder.
(b) At all times during the Exercise Period, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed or quoted on the Principal Market.
(c) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
Section 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise Price shall
be subject to adjustment from time to time upon the happening of certain events
as follows:
(a) RECLASSIFICATION, CONSOLIDATION, MERGER OR MANDATORY SHARE
EXCHANGE. If the Company (i) reclassifies or changes its Outstanding Capital
Shares or (ii) consolidates, merges or effects a mandatory share exchange with
or into another corporation (other than a merger or mandatory share exchange
with another corporation in which the Company is a continuing corporation and
that does not result in any reclassification or change, or as a result of a
subdivision or combination of Outstanding Capital Shares issuable upon exercise
of this Warrant), then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Warrant or issue a new warrant
providing that the Warrant Holder shall have rights not less favorable to the
holder than those then applicable to this Warrant and to receive upon exercise
under such amendment of this Warrant or new warrant, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant hereunder, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, mandatory
share exchange, sale or transfer by the holder of one share of Common Stock
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The provisions of this subsection
(a) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, mandatory share exchanges and sales and transfers.
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(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
subdivide its Common Stock, the number of shares of Common Stock issuable to the
Subscriber hereunder shall be proportionately increased as of the effective date
of such subdivision, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time between the Subscription Date
and the Effective Date shall combine its Common Stock, the number of shares of
Common Stock issuable to the Subscriber hereunder shall be proportionately
decreased as of the effective date of such combination, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
of such record date, whichever is earlier.
(c) STOCK DIVIDENDS. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Exercise Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Capital Shares for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other distribution
by a fraction:
the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend
or distribution, and
the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution. The provisions of this subsection (c) shall not
apply under any of the circumstances for which an adjustment
is provided in subsections (a) or (b).
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6 the number of
Warrant Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
the numerator of which shall be the Exercise Price before any
adjustment pursuant to this Section 6; and
the denominator of which shall be the Exercise Price after
such adjustment.
(e) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time
while this Warrant is unexpired and not exercised in full, makes a distribution
of its assets or evidences of indebtedness to the holders of its Capital Shares
as a full or partial dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (d)) while an exercise is pending, then the Warrant Holder shall be
entitled to receive upon such exercise of the Warrant in addition to the Warrant
Shares receivable in connection therewith, and without payment of any
consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per
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Capital Share multiplied by the number of Warrant Shares that, on the record
date for such distribution, are issuable upon such exercise of the Warrant (with
no further adjustment being made following any event which causes a subsequent
adjustment in the number of Warrant Shares issuable), and an appropriate
provision therefor shall be made a part of any such distribution. The value of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company.
(f) ANTIDILUTION PROVISIONS.
(i) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in (b) and (e) above, if
and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with paragraph (f)(ii) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Closing market price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
paragraph (f)(ii) hereof, received by the Company upon such Dilutive Issuance
divided by the Closing market price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance. "Common
Stock Deemed Outstanding" shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury
of the Company), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of Options (as defined below), as of the date of such
issuance or grant of such Options, if any, and (y) the maximum total number of
shares of Common Stock issuable upon conversion or exchange of Convertible
Securities (as defined below), as of the date of issuance of such Convertible
Securities, if any.
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph f(i) hereof, the
following will be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Closing market price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance
or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is
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determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or granting
of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all
such Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for such Common Stock
issuable upon such conversion or exchange is less than the Closing
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
(D) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact,
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<PAGE> 8
issued and the rights to exercise such Option or to convert or exchange
such Convertible Securities shall have expired or terminated, the
Exercise Price then in effect will be readjusted to the Exercise Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(E) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor, before
deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Closing market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good
faith by the Board of Directors of the Company.
(F) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon the
grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the
members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions will be applicable to the making of
adjustments in any Exercise Price hereinabove provided in this Section 6:
1. OTHER ACTION AFFECTING CAPITAL SHARES. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors would have a materially adverse effect upon the
rights of the Warrant Holder at the time of exercise of the Warrant, the
Exercise Price shall
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be adjusted in such manner and at such time as the Board or Directors on the
advice of the Company's independent public accountants may in good faith
determine to be equitable in the circumstances.
2. NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time
while the Warrant is unexpired and outstanding, take any action which pursuant
to subsections (a) through (f) of this Section 6 may result in an adjustment of
the Exercise Price, the Company shall give to the Warrant Holder at its last
address known to the Company written notice of such action 10 days in advance of
its effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the Holder of the Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
Section 7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or of any reorganization,
consolidation or merger or dissolution or liquidation, the Company shall mail to
each Warrant Holder, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right and, in the case of any
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not
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then known, a reasonable approximation thereof by the Company) when the same
shall take place. Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case my be. Such notice shall be given at least 30 days prior to the record date
or the date on which the Company's books are closed in respect thereto.
Section 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Notes, the
Registration Rights Agreement, the Escrow Agreement and the Agreement contain
the entire understanding of the parties with respect to the matters covered
hereby and thereby. No provision of this Warrant may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 12. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act in reliance upon the provisions of Section 4(2) of the Securities
Act. This Warrant and the Warrant Shares issuable upon exercise of this Warrant
may not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws.
(b) LEGEND. Any replacement Warrants issued pursuant to
Section 3 hereof and any Warrant Shares issued upon exercise hereof, shall bear
the legend set forth on the face hereof, unless removed in accordance with
applicable law.
(c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 12(b) has been or shall be placed on the
share certificates representing the Warrant Shares and no instructions or stop
transfer orders, or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Section 12.
(d) ASSIGNMENT. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or
in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company shall
effect the assignment at no cost to the Warrant Holder within 10 days, and shall
deliver to the assignee(s)
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designated by the Warrant Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
(e) SUBSCRIBER'S COMPLIANCE. Nothing in this Section 12 shall
affect in any way the Subscriber's obligations under any agreement to comply
with all applicable securities laws upon resale of the Common Stock.
Section 13. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
New River Center, Suite 1900
200 East Las Olas Blvd.
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
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If to the Subscriber:
Ven-Gua Capital Markets Ltd.
The Mill, Mill Lane
Hatton, Warwickshire, CV35 7HN
England
Attention: Edward Fitzpatrick
Telephone: + 44 1926 48461
Facsimile: + 44 1926 4730
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 13 by giving at least 10 days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 14. MISCELLANEOUS. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision. This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
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IN WITNESS WHEREOF, this Warrant was duly executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
VIRAGEN, INC.
By:
---------------------------------
Name:
Title:
Attested:
By:
---------------------------------
Name:
Title: Secretary
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EXHIBIT A TO THE WARRANT
EXERCISE FORM
VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Viragen, Inc., a Delaware
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full in the
form of (check the appropriate box) (i) cash or certified check in the amount of
$________; (ii) wire transfer to the Company's account at __________________,
_________, _________ (Account No.:_________); or (iii) ______ Warrant Shares,
which represent the amount of Warrant Shares as provided in the attached Warrant
to be canceled in connection with such exercise, all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:
---------------------------------------
- ---------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
- ---------------------------------------------
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
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EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of Viragen, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
- -----------------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE> 1
EXHIBIT 10(lxviii)
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF MARCH 17, 1999, AMONG BALLSBRIDGE FINANCE, LTD., ELLIOTT, LANE
& ASSOCIATES, INC. AND VEN-GUA CAPITAL MARKETS LTD. AND VIRAGEN, INC. (THE
"REGISTRATION RIGHTS AGREEMENT"). A COPY OF THE PORTION OF SUCH AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM VIRAGEN, INC.'S EXECUTIVE
OFFICES.
MARCH 17, 1999
Warrant to Purchase up to 58,252 Shares of Common Stock of Viragen,
Inc. (hereinafter, a "Warrant").
Viragen, Inc., a Delaware corporation (the "Company"), hereby agrees
that Elliott, Lane & Associates, Inc. (the "Subscriber") or any other Warrant
Holder is entitled, on the terms and conditions set forth below, to purchase
from the Company at any time during the Exercise Period up to 58,252 fully paid
and nonassessable shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"), as the same may be adjusted from time to time
pursuant to Section 6 hereof, at the Exercise Price (hereinafter defined). The
resale of the shares of Common Stock or other securities issuable upon exercise
or exchange of this Warrant is subject to the provisions of the Registration
Rights Agreement.
Section 1. DEFINITIONS.
"AGREEMENT" shall mean the Purchase Agreement, dated March 17, 1999,
between the Company and The Isosceles Fund Limited and Cefeo Investments
Limited.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"DATE OF EXERCISE" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not sent advance notice by facsimile, the
Date of Exercise shall be the date the original Exercise Form is received by the
Company.
<PAGE> 2
"EXERCISE PERIOD" shall mean the period beginning from the Purchase
Date to 5 years from the initial Purchase Date.
"EXERCISE PRICE" as of the date hereof shall mean an exercise price
equal to one hundred twenty percent (120%) of the Closing Market Price subject
to adjustment as set forth in Section 6 hereof.
"PRE-PAYMENT" shall have the meaning defined in the Purchase Agreement.
"PURCHASE DATE" shall mean the Initial Purchase Date as defined in the
Purchase Agreement.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the NASDAQ
Small Cap Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"WARRANT HOLDER" shall mean the Subscriber or any assignee or
transferee of all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Purchase Agreement.
Section 2. EXERCISABILITY. Half the Warrants are exercisable at any
time during the Exercise Period. The remaining half of the Warrants shall be
exercisable upon Pre-Payment. In the event that Pre-Payment does not occur by
the Pre-Payment Deadline, such half of the Warrants shall be reconveyed by the
Subscriber to the Company.
Section 3. EXERCISE; CASHLESS EXERCISE.
(a) METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period, by the Warrant Holder by (i)
surrender of this Warrant, with the form of exercise attached hereto as Exhibit
A duly executed by the Warrant Holder (the "Exercise Notice"), to the Company at
the address set forth in Section 13 hereof, accompanied by payment of the
Exercise Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Aggregate Exercise Price") or (ii) telecopying
an executed and completed Exercise Notice to the Company and delivering to the
Company within 3 business days thereafter the original Exercise Notice, this
Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice
is received by the Company in accordance with clause (i) and each date on which
the Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date."
(b) PAYMENT OF AGGREGATE EXERCISE PRICE. Payment of the
Aggregate Exercise Price shall be made by check or bank draft payable to the
order of the Company or by wire transfer to an account designated by the
Company. If the amount of the payment received by the Company is less than the
Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency
and shall make payment in that amount within five business days. In the event
the
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<PAGE> 3
payment exceeds the Aggregate Exercise Price, the Company will refund the
excess to the Warrant Holder within three business days of receipt.
(c) CASHLESS EXERCISE. As an alternative to payment of the
Aggregate Exercise Price in accordance with paragraph (b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Common Stock on the Principal Market on
the date preceding the Date of Exercise minus the Exercise Price in effect at
such time.
(d) REPLACEMENT WARRANT. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 4. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable shares of Common Stock
("Warrant Shares") to which the Warrant Holder shall be entitled on such
exercise, together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is entitled upon
such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that
any such delivery to a location outside of the United States shall be made
within five Trading Days after the exercise of this Warrant in full or in part.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall receive in cash an amount equal to the
Bid Price of such fractional share within three Trading Days.
(c) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon exercise of this
Warrant is more than one business day after the date set forth in (a) above the
Company shall pay to the Holder $500 per day in cash, for each of the first
3
<PAGE> 4
two days beyond such deadline and $2,500 per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Holder by the fifth day of the month following the month in which it has
accrued.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder.
(b) At all times during the Exercise Period, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed or quoted on the Principal Market.
(c) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
Section 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise Price shall
be subject to adjustment from time to time upon the happening of certain events
as follows:
(a) RECLASSIFICATION, CONSOLIDATION, MERGER OR MANDATORY SHARE
EXCHANGE. If the Company (i) reclassifies or changes its Outstanding Capital
Shares or (ii) consolidates, merges or effects a mandatory share exchange with
or into another corporation (other than a merger or mandatory share exchange
with another corporation in which the Company is a continuing corporation and
that does not result in any reclassification or change, or as a result of a
subdivision or combination of Outstanding Capital Shares issuable upon exercise
of this Warrant), then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Warrant or issue a new warrant
providing that the Warrant Holder shall have rights not less favorable to the
holder than those then applicable to this Warrant and to receive upon exercise
under such amendment of this Warrant or new warrant, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant hereunder, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, mandatory
share exchange, sale or transfer by the holder of one share of Common Stock
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The provisions of this subsection
(a) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, mandatory share exchanges and sales and transfers.
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<PAGE> 5
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
subdivide its Common Stock, the number of shares of Common Stock issuable to the
Subscriber hereunder shall be proportionately increased as of the effective date
of such subdivision, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time between the Subscription Date
and the Effective Date shall combine its Common Stock, the number of shares of
Common Stock issuable to the Subscriber hereunder shall be proportionately
decreased as of the effective date of such combination, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
of such record date, whichever is earlier.
(c) STOCK DIVIDENDS. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Exercise Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Capital Shares for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other distribution
by a fraction:
the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend
or distribution, and
the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution. The provisions of this subsection (c) shall not
apply under any of the circumstances for which an adjustment
is provided in subsections (a) or (b).
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6 the number of
Warrant Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
the numerator of which shall be the Exercise Price before any
adjustment pursuant to this Section 6; and
the denominator of which shall be the Exercise Price after
such adjustment.
(e) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time
while this Warrant is unexpired and not exercised in full, makes a distribution
of its assets or evidences of indebtedness to the holders of its Capital Shares
as a full or partial dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (d)) while an exercise is pending, then the Warrant Holder shall be
entitled to receive upon such exercise of the Warrant in addition to the Warrant
Shares receivable in connection therewith, and without payment of any
consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per
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<PAGE> 6
Capital Share multiplied by the number of Warrant Shares that, on the record
date for such distribution, are issuable upon such exercise of the Warrant (with
no further adjustment being made following any event which causes a subsequent
adjustment in the number of Warrant Shares issuable), and an appropriate
provision therefor shall be made a part of any such distribution. The value of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company.
(f) ANTIDILUTION PROVISIONS.
(i) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in (b) and (e) above, if
and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with paragraph (f)(ii) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Closing market price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
paragraph (f)(ii) hereof, received by the Company upon such Dilutive Issuance
divided by the Closing market price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance. "Common
Stock Deemed Outstanding" shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury
of the Company), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of Options (as defined below), as of the date of such
issuance or grant of such Options, if any, and (y) the maximum total number of
shares of Common Stock issuable upon conversion or exchange of Convertible
Securities (as defined below), as of the date of issuance of such Convertible
Securities, if any.
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph f(i) hereof, the
following will be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Closing market price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance
or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is
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<PAGE> 7
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or granting
of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all
such Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for such Common Stock
issuable upon such conversion or exchange is less than the Closing
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
(D) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact,
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<PAGE> 8
issued and the rights to exercise such Option or to convert or exchange
such Convertible Securities shall have expired or terminated, the
Exercise Price then in effect will be readjusted to the Exercise Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(E) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor, before
deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Closing market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good
faith by the Board of Directors of the Company.
(F) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon the
grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the
members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions will be applicable to the making of
adjustments in any Exercise Price hereinabove provided in this Section 6:
1. OTHER ACTION AFFECTING CAPITAL SHARES. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors would have a materially adverse effect upon the
rights of the Warrant Holder at the time of exercise of the Warrant, the
Exercise Price shall
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<PAGE> 9
be adjusted in such manner and at such time as the Board or Directors on the
advice of the Company's independent public accountants may in good faith
determine to be equitable in the circumstances.
2. NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time
while the Warrant is unexpired and outstanding, take any action which pursuant
to subsections (a) through (f) of this Section 6 may result in an adjustment of
the Exercise Price, the Company shall give to the Warrant Holder at its last
address known to the Company written notice of such action 10 days in advance of
its effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the Holder of the Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
Section 7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or of any reorganization,
consolidation or merger or dissolution or liquidation, the Company shall mail to
each Warrant Holder, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right and, in the case of any
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not
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<PAGE> 10
then known, a reasonable approximation thereof by the Company) when the same
shall take place. Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case my be. Such notice shall be given at least 30 days prior to the record date
or the date on which the Company's books are closed in respect thereto.
Section 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Notes, the
Registration Rights Agreement, the Escrow Agreement and the Agreement contain
the entire understanding of the parties with respect to the matters covered
hereby and thereby. No provision of this Warrant may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 12. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act in reliance upon the provisions of Section 4(2) of the Securities
Act. This Warrant and the Warrant Shares issuable upon exercise of this Warrant
may not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws.
(b) LEGEND. Any replacement Warrants issued pursuant to
Section 3 hereof and any Warrant Shares issued upon exercise hereof, shall bear
the legend set forth on the face hereof, unless removed in accordance with
applicable law.
(c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 12(b) has been or shall be placed on the
share certificates representing the Warrant Shares and no instructions or stop
transfer orders, or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Section 12.
(d) ASSIGNMENT. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or
in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company shall
effect the assignment at no cost to the Warrant Holder within 10 days, and shall
deliver to the assignee(s)
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<PAGE> 11
designated by the Warrant Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
(e) SUBSCRIBER'S COMPLIANCE. Nothing in this Section 12 shall
affect in any way the Subscriber's obligations under any agreement to comply
with all applicable securities laws upon resale of the Common Stock.
Section 13. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
New River Center, Suite 1900
200 East Las Olas Blvd.
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
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<PAGE> 12
If to the Subscriber:
Elliott, Lane & Associates
31951 Sunset Avenue
Laguna Beach, CA 92677
Attention: Mark Lane
Telephone: (714) 499 6720
Facsimile: (714) 499 6065
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 13 by giving at least 10 days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 14. MISCELLANEOUS. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision. This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
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<PAGE> 13
IN WITNESS WHEREOF, this Warrant was duly executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
VIRAGEN, INC.
By:
--------------------------------
Name:
Title:
Attested:
By:
--------------------------------
Name:
Title: Secretary
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<PAGE> 14
EXHIBIT A TO THE WARRANT
EXERCISE FORM
VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Viragen, Inc., a Delaware
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full in the
form of (check the appropriate box) (i) cash or certified check in the amount of
$________; (ii) wire transfer to the Company's account at __________________,
_________, _________ (Account No.:_________); or (iii) ______ Warrant Shares,
which represent the amount of Warrant Shares as provided in the attached Warrant
to be canceled in connection with such exercise, all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:
---------------------------------------
- ---------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
- ---------------------------------------------
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
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<PAGE> 15
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of Viragen, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
- --------------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE> 1
EXHIBIT 10(lxix)
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF MARCH 17 1999, AMONG BALLSBRIDGE FINANCE, LTD., ELLIOTT, LANE &
ASSOCIATES, INC. AND VEN-GUA CAPITAL MARKETS LTD. AND VIRAGEN, INC. (THE
"REGISTRATION RIGHTS AGREEMENT"). A COPY OF THE PORTION OF SUCH AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM VIRAGEN, INC.'S EXECUTIVE
OFFICES.
MARCH 17, 1999
Warrant to Purchase up to 38,835 Shares of Common Stock of Viragen,
Inc. (hereinafter, a "Warrant").
Viragen, Inc., a Delaware corporation (the "Company"), hereby agrees
that Ballsbridge Finance Ltd. (the "Subscriber") or any other Warrant Holder is
entitled, on the terms and conditions set forth below, to purchase from the
Company at any time during the Exercise Period up to 38,835 fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 6 hereof, at the Exercise Price (hereinafter defined). The resale of the
shares of Common Stock or other securities issuable upon exercise or exchange of
this Warrant is subject to the provisions of the Registration Rights Agreement.
Section 1. DEFINITIONS.
"AGREEMENT" shall mean the Purchase Agreement, dated March 17, 1999
between the Company and The Isosceles Fund Limited and Cefeo Investments
Limited.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"DATE OF EXERCISE" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not sent advance notice by facsimile, the
Date of Exercise shall be the date the original Exercise Form is received by the
Company.
<PAGE> 2
"EXERCISE PERIOD" shall mean the period beginning from the Purchase
Date to 5 years from the initial Purchase Date.
"EXERCISE PRICE" as of the date hereof shall mean an exercise price
equal to one hundred twenty percent (120%) of the Closing Market Price subject
to adjustment as set forth in Section 6 hereof.
"PRE-PAYMENT" shall have the meaning defined in the Purchase Agreement.
"PURCHASE DATE" shall mean the Initial Purchase Date as defined in the
Purchase Agreement.
"PRINCIPAL MARKET" shall mean the NASDAQ National Market, the NASDAQ
Small Cap Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
"WARRANT HOLDER" shall mean the Subscriber or any assignee or
transferee of all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Purchase Agreement.
Section 2. EXERCISABILITY. Half the Warrants are exercisable at any
time during the Exercise Period. The remaining half of the Warrants shall be
exercisable upon Pre-Payment. In the event that Pre-Payment does not occur by
the Pre-Payment Deadline, such half of the Warrants shall be reconveyed by the
Subscriber to the Company.
Section 3. EXERCISE; CASHLESS EXERCISE.
(a) METHOD OF EXERCISE. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period, by the Warrant Holder by (i)
surrender of this Warrant, with the form of exercise attached hereto as Exhibit
A duly executed by the Warrant Holder (the "Exercise Notice"), to the Company at
the address set forth in Section 13 hereof, accompanied by payment of the
Exercise Price multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Aggregate Exercise Price") or (ii) telecopying
an executed and completed Exercise Notice to the Company and delivering to the
Company within 3 business days thereafter the original Exercise Notice, this
Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice
is received by the Company in accordance with clause (i) and each date on which
the Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date."
(b) PAYMENT OF AGGREGATE EXERCISE PRICE. Payment of the
Aggregate Exercise Price shall be made by check or bank draft payable to the
order of the Company or by wire transfer to an account designated by the
Company. If the amount of the payment received by the Company is less than the
Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency
and shall make payment in that amount within five business days. In the event
the
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<PAGE> 3
payment exceeds the Aggregate Exercise Price, the Company will refund the
excess to the Warrant Holder within three business days of receipt.
(c) CASHLESS EXERCISE. As an alternative to payment of the
Aggregate Exercise Price in accordance with paragraph (b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Common Stock on the Principal Market on
the date preceding the Date of Exercise minus the Exercise Price in effect at
such time.
(d) REPLACEMENT WARRANT. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 4. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable shares of Common Stock
("Warrant Shares") to which the Warrant Holder shall be entitled on such
exercise, together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is entitled upon
such exercise in accordance with the provisions hereof; PROVIDED, HOWEVER, that
any such delivery to a location outside of the United States shall be made
within five Trading Days after the exercise of this Warrant in full or in part.
The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall receive in cash an amount equal to the
Bid Price of such fractional share within three Trading Days.
(c) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon exercise of this
Warrant is more than one business day after the date set forth in (a) above the
Company shall pay to the Holder $500 per day in cash, for each of the first
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<PAGE> 4
two days beyond such deadline and $2,500 per day in cash for each day thereafter
that the Company fails to deliver such Common Stock. Such cash amount shall be
paid to Holder by the fifth day of the month following the month in which it has
accrued.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder.
(b) At all times during the Exercise Period, the Company shall
take all steps reasonably necessary and within its control to insure that the
Common Stock remains listed or quoted on the Principal Market.
(c) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to
the Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
Section 6. ADJUSTMENT OF THE EXERCISE PRICE. The Exercise
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) RECLASSIFICATION, CONSOLIDATION, MERGER OR MANDATORY SHARE
EXCHANGE. If the Company (i) reclassifies or changes its Outstanding Capital
Shares or (ii) consolidates, merges or effects a mandatory share exchange with
or into another corporation (other than a merger or mandatory share exchange
with another corporation in which the Company is a continuing corporation and
that does not result in any reclassification or change, or as a result of a
subdivision or combination of Outstanding Capital Shares issuable upon exercise
of this Warrant), then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Warrant or issue a new warrant
providing that the Warrant Holder shall have rights not less favorable to the
holder than those then applicable to this Warrant and to receive upon exercise
under such amendment of this Warrant or new warrant, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant hereunder, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, mandatory
share exchange, sale or transfer by the holder of one share of Common Stock
issuable upon exercise of this Warrant had this Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The provisions of this subsection
(a) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, mandatory share exchanges and sales and transfers.
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<PAGE> 5
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
subdivide its Common Stock, the number of shares of Common Stock issuable to the
Subscriber hereunder shall be proportionately increased as of the effective date
of such subdivision, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time between the Subscription Date
and the Effective Date shall combine its Common Stock, the number of shares of
Common Stock issuable to the Subscriber hereunder shall be proportionately
decreased as of the effective date of such combination, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
of such record date, whichever is earlier.
(c) STOCK DIVIDENDS. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Exercise Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Capital Shares for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other distribution
by a fraction:
the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend
or distribution, and
the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution. The provisions of this subsection (c) shall not
apply under any of the circumstances for which an adjustment
is provided in subsections (a) or (b).
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6 the number of
Warrant Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
the numerator of which shall be the Exercise Price before any
adjustment pursuant to this Section 6; and
the denominator of which shall be the Exercise Price after
such adjustment.
(e) LIQUIDATING DIVIDENDS, ETC. If the Company, at any time
while this Warrant is unexpired and not exercised in full, makes a distribution
of its assets or evidences of indebtedness to the holders of its Capital Shares
as a full or partial dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets (other
than under the circumstances provided for in the foregoing subsections (a)
through (d)) while an exercise is pending, then the Warrant Holder shall be
entitled to receive upon such exercise of the Warrant in addition to the Warrant
Shares receivable in connection therewith, and without payment of any
consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per
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<PAGE> 6
Capital Share multiplied by the number of Warrant Shares that, on the record
date for such distribution, are issuable upon such exercise of the Warrant (with
no further adjustment being made following any event which causes a subsequent
adjustment in the number of Warrant Shares issuable), and an appropriate
provision therefor shall be made a part of any such distribution. The value of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company.
(f) ANTIDILUTION PROVISIONS.
(i) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in (b) and (e) above, if
and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with paragraph (f)(ii) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Closing market price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
paragraph (f)(ii) hereof, received by the Company upon such Dilutive Issuance
divided by the Closing market price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance. "Common
Stock Deemed Outstanding" shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury
of the Company), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of Options (as defined below), as of the date of such
issuance or grant of such Options, if any, and (y) the maximum total number of
shares of Common Stock issuable upon conversion or exchange of Convertible
Securities (as defined below), as of the date of issuance of such Convertible
Securities, if any.
(ii) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph f(i) hereof, the
following will be applicable:
(A) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Closing market price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance
or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is
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<PAGE> 7
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or granting
of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all
such Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for such Common Stock
issuable upon such conversion or exchange is less than the Closing
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(C) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company upon
the conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold.
(D) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact,
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<PAGE> 8
issued and the rights to exercise such Option or to convert or exchange
such Convertible Securities shall have expired or terminated, the
Exercise Price then in effect will be readjusted to the Exercise Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(E) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor, before
deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Company
in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount
of the consideration other than cash received by the Company will be
the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company will be the Closing market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good
faith by the Board of Directors of the Company.
(F) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon the
grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of
such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the
members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions will be applicable to the making of
adjustments in any Exercise Price hereinabove provided in this Section 6:
1. OTHER ACTION AFFECTING CAPITAL SHARES. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors would have a materially adverse effect upon the
rights of the Warrant Holder at the time of exercise of the Warrant, the
Exercise Price shall
8
<PAGE> 9
be adjusted in such manner and at such time as the Board or Directors on the
advice of the Company's independent public accountants may in good faith
determine to be equitable in the circumstances.
2. NOTICE OF CERTAIN ACTIONS. In the event the Company shall, at a time
while the Warrant is unexpired and outstanding, take any action which pursuant
to subsections (a) through (f) of this Section 6 may result in an adjustment of
the Exercise Price, the Company shall give to the Warrant Holder at its last
address known to the Company written notice of such action 10 days in advance of
its effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the Holder of the Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
Section 7. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right or of any reorganization,
consolidation or merger or dissolution or liquidation, the Company shall mail to
each Warrant Holder, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right and, in the case of any
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not
9
<PAGE> 10
then known, a reasonable approximation thereof by the Company) when the same
shall take place. Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case my be. Such notice shall be given at least 30 days prior to the record date
or the date on which the Company's books are closed in respect thereto.
Section 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. CHOICE OF LAW. This Agreement shall be construed under the
laws of the State of New York.
Section 11. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Notes, the
Registration Rights Agreement, the Escrow Agreement and the Agreement contain
the entire understanding of the parties with respect to the matters covered
hereby and thereby. No provision of this Warrant may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 12. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act in reliance upon the provisions of Section 4(2) of the Securities
Act. This Warrant and the Warrant Shares issuable upon exercise of this Warrant
may not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws.
(b) LEGEND. Any replacement Warrants issued pursuant to
Section 3 hereof and any Warrant Shares issued upon exercise hereof, shall bear
the legend set forth on the face hereof, unless removed in accordance with
applicable law.
(c) NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 12(b) has been or shall be placed on the
share certificates representing the Warrant Shares and no instructions or stop
transfer orders, or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Section 12.
(d) ASSIGNMENT. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or
in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company shall
effect the assignment at no cost to the Warrant Holder within 10 days, and shall
deliver to the assignee(s)
10
<PAGE> 11
designated by the Warrant Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
(e) SUBSCRIBER'S COMPLIANCE. Nothing in this Section 12 shall
affect in any way the Subscriber's obligations under any agreement to comply
with all applicable securities laws upon resale of the Common Stock.
Section 13. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
New River Center, Suite 1900
200 East Las Olas Blvd.
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
11
<PAGE> 12
If to the Subscriber:
Ballsbridge Finance, Ltd.
38 Hertford Street
London W1Y 7TG
England
Attention: James Martin
Telephone: + 44 171 355 2051
Facsimile: + 44 171 355 4975
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 13 by giving at least 10 days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 14. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision. This Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company's assets.
12
<PAGE> 13
IN WITNESS WHEREOF, this Warrant was duly executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
VIRAGEN, INC.
By:
--------------------------------------
Name:
Title:
Attested:
By:
--------------------------------------
Name:
Title: Secretary
13
<PAGE> 14
EXHIBIT A TO THE WARRANT
EXERCISE FORM
VIRAGEN, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Viragen, Inc., a Delaware
corporation (the "Company"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full in the
form of (check the appropriate box) (i) cash or certified check in the amount of
$________; (ii) wire transfer to the Company's account at __________________,
_________, _________ (Account No.:_________); or (iii) ______ Warrant Shares,
which represent the amount of Warrant Shares as provided in the attached Warrant
to be canceled in connection with such exercise, all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:
---------------------------------------
- ---------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
- ---------------------------------------------
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the
name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
14
<PAGE> 15
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUE RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of Viragen, Inc.
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:
- -----------------------------------------
Signature
Fill in for new Registration of Warrant:
- -----------------------------------------
Name
- -----------------------------------------
Address
- -----------------------------------------
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE> 1
EXHIBIT 10(lxx)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
March 17, 1999, is made and entered into between VIRAGEN, INC., a Delaware
corporation (the "Company"), and THE ISOSCELES FUND and CEFEO INVESTMENTS
LIMITED (the "Subscribers").
WHEREAS, the Company and the Subscribers have entered into a Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to
which the Company has issued to the Subscribers an aggregate of $2,000,000
principal amount of Redeemable Convertible Notes and Warrants, which Notes and
Warrants are convertible into or exercisable for common stock of the Company
(the "Registerable Securities");
WHEREAS, pursuant to the terms of, and in consideration for, the
Subscribers' agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Subscribers with certain registration rights with respect
to the Registrable Securities;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the meaning ascribed to such terms in the Purchase
Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENT.
(a) FILING OF REGISTRATION STATEMENT. Subject to the terms and
conditions of this Agreement, the Company shall file with the SEC within 20 days
following the Initial Purchase Date a registration statement on Form S-3 under
the Securities Act for the registration of the Registerable Securities for
resale by the Subscribers to the public (each a "Registration Statement").
(b) FAILURE TO FILE REGISTRATION STATEMENT. In the event that a
Registration Statement is not filed within 20 days following each issuance of
the Redeemable Convertible Notes (the "Purchase Date"), the Company will pay a
penalty in cash pro rata to the Subscribers in the amount of two percent of the
Penalty Amount (as defined below) and an additional penalty of two percent in
cash at the end of each 30 day period thereafter until the Registration
Statement is filed with the SEC (pro-rated for each period less than 30 days).
(c) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Company shall use
its reasonable best efforts to have the Registration Statement declared
effective by the SEC by no
<PAGE> 2
later than 90 days following the Purchase Date, if there are no comments from
the SEC, and 105 days if there are comments from the SEC and to ensure that the
Registration Statement remains in effect throughout the term of this Agreement
as set forth in Section 11.2, subject to the terms and conditions of this
Agreement; PROVIDED, HOWEVER, that if the Purchase Agreement shall be terminated
in accordance with Section 4.2 thereof, the Company shall have no further
obligation to cause the Registration Statement to become effective.
(d) FAILURE TO HAVE REGISTRATION STATEMENT DECLARED EFFECTIVE. In the
event that the Registration Statement is not effective within 90 days after the
Purchase Date, if there are no comments from the SEC, and 105 days after the
Purchase Date if there are comments from the SEC (the "Registration Period"),
then the Company will pay a penalty pro rata to the Subscribers of two percent
of the Penalty Amount in cash and an additional penalty of two percent of the
Penalty Amount in cash at the end of each 30 day period thereafter (pro-rated
for each period less than 30 days).
(e) FAILURE TO MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT OR
LISTING. In the event the Company fails to maintain the effectiveness of the
Registration Statement (or the underlying prospectus) throughout the period set
forth in Section 4.2, other than temporary suspensions as set forth in Section
2.1(i), and the Subscribers hold any Registrable Securities at any time during
the period of such ineffectiveness (an "Ineffective Period") or the Company
fails to maintain the listing of its Common Stock on NASDAQ, the Company shall
pay a penalty pro rata to the Subscribers of two percent of the Penalty Amount
in cash and an additional penalty of two percent of the Penalty Amount in cash
at the end of each 30 day period thereafter (pro-rated for each period less than
30 days).
(f) REDEMPTION UPON FAILURE TO MAINTAIN EFFECTIVENESS. At any time
after 180 days following the Initial Purchase Date, provided that: (A) the
Registration Statement is not yet effective; or (B) the Registration Statement
ceases to be effective for 30 consecutive business days or a total of 60
business days during any 12 month period, the Subscribers will have the right to
require the Company within 30 days of a written notice from a Subscriber to the
Company to redeem all such Subscriber's Notes and Warrants and such Common Stock
as has been received upon conversion or exercise for a cash price equal to the
greater of: (A) "Parity" where Parity is defined as (A1) the number of shares
that the Notes and Warrants can be converted into plus the number of Common
Stock already so converted but not resold, multiplied by (A2) the high trade
price of the Company's Common Stock on the date of such notice; or (B) the sum
of (B1) 115% of the Penalty Amount (as defined below), and (B2) the amount of
all other penalties outstanding up to the date of the notice.
(g) LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sums payable under Sections 1(d),(e) and (f) above shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement, (c)
one of the reasons for the parties reaching an agreement as to such amounts was
the uncertainty and cost of litigation regarding the
2
<PAGE> 3
question of actual damages, and (d) the parties are sophisticated business
parties and have been represented by legal and financial counsel and negotiated
this Agreement at arm's length.
(h) THE PENALTY AMOUNT. The Penalty Amount shall be (a) with respect to
any common stock converted from Notes, the principal amount of such converted
Notes, plus (b) with respect to common stock received upon exercise of Warrants,
the Closing Market Price relating to such Warrants and (c) the principal amount
of any outstanding and unconverted Notes; provided that no common stock sold by
such Subscriber shall be included in the Penalty Amount.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the registration and
sale of the Registrable Securities in accordance with the intended methods of
disposition thereof. Without limiting the foregoing, the Company will do the
following as expeditiously as possible, but in no event later than the deadline,
if any, prescribed therefor in this Agreement:
(a) The Company shall (i) prepare and file with the SEC a Registration
Statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method of
distribution of the Registrable Securities); (ii) use reasonable best efforts to
cause such filed Registration Statement to become and remain effective (pursuant
to Rule 415 under the Act or otherwise); (iii) prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the Registration
Statement effective for the time periods prescribed by Section 1.1(b); and (iv)
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by the Registration Statement during such period in
accordance with the intended methods of disposition by the Subscribers set forth
in the Registration Statement. The number of shares of Common Stock to be
registered shall be sufficient to cover the Company's obligations under the
Purchase Agreement and, in any case, shall be at least 10,844,661 shares of
Common Stock with respect to sales by the Subscribers.
(b) The Company shall file all necessary amendments to the Registration
Statement in order to effectuate the purpose of this Agreement and the Purchase
Agreement.
(c) If so requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Registrable
Securities being sold in connection with the filing of the Registration
Statement under the Securities Act for the offering on a continuous or delayed
basis in the future of all of the Registrable Securities (a "Shelf
Registration"), the Company shall (i) promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters, if any, and such holders agree should be included therein, and
(ii) make all required filings of such prospectus
3
<PAGE> 4
supplement or post-effective amendment as soon as practicable after the Company
has received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 2.1(c)(ii)
that would, in the opinion of counsel for the Company, violate applicable law.
(d) In connection with the filing of a Shelf Registration, the Company
shall enter into such agreements and take all such other reasonable actions in
connection therewith (including those reasonably requested by the managing
underwriters, if any, or the holders of a majority in aggregate principal amount
of the Registrable Securities being sold) in order to expedite or facilitate the
disposition of the Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such representations and
warranties to the holders of the Registrable Securities and the underwriters, if
any, with respect to the business of the Company (including with respect to
businesses or assets acquired or to be acquired by the Company), and the
Registration Statement, prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm such representations and warranties if and when
requested; (ii) if an underwriting agreement is entered into, the same shall
contain indemnification provision and procedures no less favorable to the
selling holders of the Registrable Securities and the underwriters, if any, than
those set forth herein (or such other provisions and procedures acceptable to
the holders of a majority in aggregate principal amount of Registrable
Securities covered by the Registration Statement and the managing underwriters,
if any); and (iii) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Registrable Securities being sold, their counsel and the managing underwriters,
if any, to evidence the continued validity of their representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
(e) Five Business Days prior to filing the Registration Statement or
prospectus, or any amendment or supplement thereto (excluding amendments deemed
to result from the filing of documents incorporated by reference therein), the
Company shall deliver to the Subscribers and one firm of counsel representing
the Subscribers, in accordance with the notice provisions of Section 4.8, copies
of the Registration Statement as proposed to be filed, together with exhibits
thereto, which documents will be subject to review by such parties, and
thereafter deliver to the Subscribers and their counsel, in accordance with the
notice provisions of Section 4.8, copies of any correspondence with the SEC, and
further deliver such number of copies of the Registration Statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in the Registration Statement (including each
preliminary prospectus) and such other documents or information as the
Subscribers or counsel may reasonably request in order to facilitate the
disposition of the Registrable Securities.
(f) The Company shall deliver, in accordance with the notice provisions
of Section 4.8, to each seller of Registrable Securities covered by the
Registration Statement such number of conformed copies of the Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by
4
<PAGE> 5
reference), such number of copies of the prospectus contained in the
Registration Statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus file under Rule 424 promulgated under the
Securities Act relating to such seller's Registrable Securities, and such other
documents, as such seller may reasonably request to facilitate the disposition
of its Registrable Securities.
(g) After the filing of the Registration Statement, the Company shall
promptly notify the Subscribers of any stop order issued or threatened by the
SEC in connection therewith and the resolution thereof and use its best efforts
to prevent the entry of such stop order or to remove it if entered.
(h) The Company shall (i) register or qualify the Registrable
Securities under such other securities or blue sky laws of such jurisdictions in
the United States as the Subscribers may reasonably (in light of their intended
plan of distribution) request, and (ii) cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
in the United States as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable the Subscribers to consummate the
disposition of the Registrable Securities; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this paragraph (h), subject itself
to taxation in any such jurisdiction, or consent or subject itself to general
service of process in any such jurisdiction.
(i) The Company shall immediately notify the Subscribers upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for additional information, amendments or supplements
to the Registration Statement or related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Subscribers any such supplement or amendment to the related prospectus and
(vi) the Effective Date of such Registration Statement (such notification to be
made by facsimile) with a copy to any other parties set forth in Section 4.8
below.
5
<PAGE> 6
(j) The Company shall enter into customary agreements and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities (whereupon the Subscribers may, at
their option, require that any or all of the representations, warranties and
covenants of the Company also be made to and for the benefit of the
Subscribers).
(k) The Company shall make available to the Subscribers (and will
deliver to Subscribers' counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or auditors and
will also make available for inspection by the Subscribers and any attorney,
accountant or other professional retained by the Subscribers (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with the
Registration Statement. Records that the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Subscribers agree that information obtained by them solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Subscribers after reasonable inquiry, is not
prohibited from providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company or
its affiliates unless and until such information is made generally available to
the public. The Subscribers further agree that they will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(l) The Company shall deliver, in accordance with the notice provisions
of Section 4.8, to the Subscribers a signed counterpart, addressed to each
Subscriber, of (1) an opinion or opinions of counsel to the Company, and (2) to
the extent required by law or reasonably necessary to effect a sale of
Registrable Securities in accordance with prevailing business practices at the
time of any sale of Registrable Securities pursuant to a Registration Statement,
a comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered
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by opinions or comfort letters, as the case may be, as the Subscribers therefor
reasonably requests.
(m) The Company shall otherwise comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
(n) The Company shall appoint a transfer agent and registrar for all
Registrable Securities covered by a Registration Statement not later than the
effective date of the Registration Statement.
(o) The Company may require the Subscribers to promptly furnish in
writing to the Company such information as may be legally required in connection
with the registration including, without limitation, all such information as may
be requested by the SEC or the National Association of Securities Dealers. The
Subscribers agree to provide such information requested in connection with the
registration within ten business days after receiving such written request and
the Company shall not be responsible for any delays in obtaining or maintaining
the effectiveness of the Registration Statement caused by the Subscribers'
failure to timely provide such information.
(p) The Company shall hold in confidence and not make any disclosure of
information concerning the Subscribers provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities law, (ii) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a
Subscriber is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such investor prior
to making such disclosure, and allow such Subscriber, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for,such information.
(q) The Company shall ensure the continued quotation of the Registrable
Securities on NASDAQ and the coverage of the Registrable Securities by at least
two market makers.
(r) The Company shall cooperate with the Subscribers and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or the Subscribers may
reasonably request and register in such names as the managing underwriter or
underwriters, if any, or the Subscribers may request, and the Company shall
deliver to the transfer agent for the Registrable Securities (with copies to the
Subscribers) an instruction in the form attached as Exhibit F to the Purchase
Agreement in the period specified therein.
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<PAGE> 8
(s) The Company shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto without the consent of the holders of a majority-in-interest of the
Registrable Securities.
(t) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Subscibers of Registrable Securities
pursuant to a Registration Statement.
Section 2.2. REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"),
including, without limitation: (i) all registration, filing, securities exchange
listing and fees required by the National Association of Securities Dealers,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all word processing, duplicating, printing,
messenger and delivery expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any special audits or comfort letters or
costs associated with the delivery by independent certified public accountants
of such special audit(s) or comfort letter(s) requested pursuant to Section
2.1(l) hereof), (vii) the fees and expenses of any special experts retained by
the Company in connection with the registration, (viii) all reasonable fees and
expenses of one firm of counsel for the Subscribers retained as the Subscribers'
counsel with respect to the Registration Statement up to an amount of $5,000,
unless a greater amount is required due the nature of the review performed by
Subscribers' counsel (an estimate of such greater fees and expenses of such firm
of counsel to be provided to the Company prior to the undertaking of such
counsel's review), (ix) premiums and other costs of policies of insurance
obtained at the discretion of the Company against liabilities arising out of any
public offering of the Registrable Securities being registered, and (x) any fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts, transfer taxes or
commissions, if any, attributable to the sale of Registrable Securities, which
shall be payable by each holder of Registrable Securities pro rata on the basis
of the number of Registrable Securities of each such holder that are included in
a registration under this Agreement.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Subscriber, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the Subscriber within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
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<PAGE> 9
Person or entity (collectively, the "Controlling Persons"), from and against any
loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and costs and expenses
of investigating and defending any such claim) (collectively, "Damages"), joint
or several, and any action or proceeding in respect thereof to which the
Subscriber, its partners, affiliates, officers, directors, employees and duly
authorized agents, and any such Controlling Person may become subject under the
Securities Act or otherwise as incurred and, insofar as such Damages (or actions
or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or prospectus relating to the Registrable Securities or
any preliminary prospectus, or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by such
Subscriber expressly for use therein, and shall reimburse each Subscriber, its
partners, affiliates, officers, directors, employees and duly authorized agents,
and each such Controlling Person for any legal and other expenses reasonably
incurred by the Subscriber, its partners, affiliates, officers, directors,
employees and duly authorized agents, or any such Controlling Person, as
incurred, in investigating or defending or preparing to defend against any such
Damages or actions or proceedings; provided, however, that the Company shall not
be liable to a Subscriber to the extent that any such Damages arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) the Subscriber failed to send or deliver a copy of the final
prospectus delivered by the Company to the Subscriber with or prior to the
delivery of written confirmation of the sale by the Subscriber to the Person
asserting the claim from which such Damages arise, and (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Subscribers.
Section 3.2. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
any person or entity in respect of which indemnity may be sought pursuant to
Section 3.1 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the person or entity against whom such indemnity may be sought
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
claim or the commencement of such action; in the event an Indemnified Party
shall fail to give such notice as provided in this Section 3.2 and the
Indemnifying Party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, that the failure to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have to an Indemnified Party otherwise than under Section
3.1. If any such claim or action shall be brought against an Indemnified Party,
and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall
be entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the
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<PAGE> 10
Indemnified Party of its election to assume the defense of such claim or action,
the Indemnifying Party shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and its Controlling
Persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Indemnified Party against the Indemnifying
Party, but the fees and expenses of such counsel shall be for the account of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of the Company and such Indemnified Party, representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties, or for fees and expenses that are not reasonable. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability arising
out of such claim or proceeding. Whether or not the defense of any claim or
action is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
Section 3.3. OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding paragraphs of this Article 3 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act. The provisions of this Article III shall be in addition to
any other rights to indemnification, contribution or other remedies which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
Section 3.4. CONTRIBUTION. If the indemnification provided for in this Article
III is unavailable to the Indemnified Parties in respect of any Damages referred
to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Damages as between the Company on the one hand and the
relevant Subscriber on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of such Subscriber in connection
with such statements or omissions, as well as other equitable considerations.
The relative fault of the Company on the one hand and of the Subscriber on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
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<PAGE> 11
The Company and the Subscribers agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the Damages referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3.4, the
Subscribers shall in no event be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities of each
Subscriber were sold to the public (less underwriting discounts and commissions)
exceeds the amount of any damages which the Subscriber has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1. NO OUTSTANDING REGISTRATION RIGHTS. The Company represents and
warrants to the Subscribers that there is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register or qualify such securities
under the Securities Act or any securities or blue sky laws of any jurisdiction
that would conflict or be inconsistent with any provision of this Agreement or
the Purchase Agreement.
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Purchased
Shares (i) have been disposed of pursuant to the Registration Statement, (ii)
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) have been otherwise transferred to holders who may
trade such shares without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (iv) may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to the Subscribers;
PROVIDED, HOWEVER, that the registration rights shall not terminate sooner than
two years following the Subscription Date. Notwithstanding the foregoing,
paragraphs (d) and (e) of Section 1.1, Article III, Section 4.8, and Section 4.9
shall survive the termination of this Agreement.
Section 4.3. RULE 144. The Company covenants that it will file all reports
required to be filed by it under the Act and the Exchange Act and that it will
take such further action as holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable the Subscribers
to sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. If at any time the
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Company is not required to file such reports, it will, upon the request of any
holder of Registrable Securities, make publicly available other information so
long as necessary to permit sales pursuant to Rule 144. Upon the request of the
Subscribers, the Company will deliver to the Subscribers a written statement as
to whether it has complied with such requirements.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the
request of any holder of Registrable Securities, deliver to such holder a
certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least 90 days prior to the date of
such certificate and in addition has filed the most recent annual report
required to be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The Subscribers may
assign their rights under this Agreement to any subsequent holder or holders of
the Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder;
provided further that such holder is an "accredited investor" as defined in Rule
501 of Regulation D of the Securities Act. This Agreement, together with the
Purchase Agreement the terms of the Notes and the Warrants sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
Section 4.7. SEPARABILITY In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that
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provision held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
Section 4.8. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
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<PAGE> 14
If to The Isosceles Fund Limited:
The Isosceles Fund Limited
c/o Citco Fund Services Ltd.
Bahamas Financial Centre, 3rd Floor
Shirley & Charlotte Streets
P.O. Box CB 13136
Nassau, Bahamas
Attention Ruth Beneby
Telephone: (242) 356-5928
Facsimile: (242) 356-0221
with copies to (which communication shall not constitute notice):
Mohammed Manzur
c/o Manzur Associates Ltd.
Witan Court, 270 Witan Gate West
Milton Keynes, MK9 1EJ
United Kingdom
Telephone: + 44-1908-231-007
Facsimile: + 44-1908-231-006
Sara Hanks, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Telephone: (212) 878-8014
Facsimile: (212) 878-8375
If to Cefeo Investments Limited:
Cefeo Investments Limited
6901 Lugano
Switzerland
Attn: Mr. Rolf Marthaler
Telephone: + 41-91-913-4560
Facsimile: + 41-91-913-4502 (fax)
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 4.8 by giving at least ten days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the laws of
the State of New York.
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Section 4.10. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 4.13. REMEDIES. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
VIRAGEN, INC.
By:
----------------------------------------
Dennis W. Healey
Chief Financial Officer
THE ISOSCELES FUND
By:
----------------------------------------
Name:
Title:
CEFEO INVESTMENTS LIMITED
By:
----------------------------------------
Name:
Title:
15
<PAGE> 1
EXHIBIT 10(lxxi)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
March 17, 1999, is made and entered into between VIRAGEN, INC., a Delaware
corporation (the "Company"), and Ballsbridge Finance, Limited, Elliott, Lane &
Associates, Inc. and Ven-Gua Capital Markets Ltd. (the "Holders").
WHEREAS, the Company has issued to the Holders Warrants, which Warrants
are exercisable for common stock of the Company (the "Registerable Securities");
WHEREAS, the Company has agreed to provide the Holders with certain
registration rights with respect to the Registrable Securities;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the meaning ascribed to such terms in the Purchase
Agreement dated as of the date hereof between the Company and The Isosceles Fund
Limited and Cefeo Investments Limited):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENT.
(a) FILING OF REGISTRATION STATEMENT. Subject to the terms and
conditions of this Agreement, the Company shall file with the SEC within 20 days
following the Initial Purchase Date a registration statement on Form S-3 under
the Securities Act for the registration of the Registerable Securities for
resale by the Holders to the public (each a "Registration Statement").
(b) FAILURE TO FILE REGISTRATION STATEMENT. In the event that a
Registration Statement is not filed within 20 days following each issuance of
the Redeemable Convertible Notes (the "Purchase Date"), the Company will pay a
penalty in cash pro rata to the Holders in the amount of two percent of the
Penalty Amount (as defined below) and an additional penalty of two percent in
cash at the end of each 30 day period thereafter until the Registration
Statement is filed with the SEC (pro-rated for each period less than 30 days).
(c) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Company shall use
its reasonable best efforts to have the Registration Statement declared
effective by the SEC by no later than 90 days following the Purchase Date if
there are no comments from the SEC, and 105 days if there are comments from the
SEC and to ensure that the Registration Statement remains in effect throughout
the term of this Agreement as set forth in Section 11.2, subject to the terms
and conditions of this Agreement; PROVIDED, HOWEVER, that if the Purchase
Agreement shall be
<PAGE> 2
terminated in accordance with Section 11.2 thereof, the Company shall have no
further obligation to cause the Registration Statement to become effective.
(d) FAILURE TO HAVE REGISTRATION STATEMENT DECLARED EFFECTIVE. In the
event that the Registration Statement is not effective within 90 days after the
Purchase Date, if there are no comments from the SEC, and 105 days after the
Purchase Date if there are comments from the SEC (the "Registration Period"),
then the Company will pay a penalty pro rata to the Holders of two percent of
the Penalty Amount in cash and an additional penalty of two percent of the
Penalty Amount in cash at the end of each 30 day period thereafter (pro-rated
for each period less than 30 days).
(e) FAILURE TO MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT OR
LISTING. In the event the Company fails to maintain the effectiveness of the
Registration Statement (or the underlying prospectus) throughout the period set
forth in Section 4.2, other than temporary suspensions as set forth in Section
2.1(i), and the Holders hold any Registrable Securities at any time during the
period of such ineffectiveness (an "Ineffective Period") or the Company fails to
maintain the listing of its Common Stock on NASDAQ, the Company shall pay a
penalty pro rata to the Holders of two percent of the Penalty Amount in cash and
an additional penalty of two percent of the Penalty Amount in cash at the end of
each 30 day period thereafter (pro-rated for each period less than 30 days).
(f) REDEMPTION UPON FAILURE TO MAINTAIN EFFECTIVENESS. At any time
after 180 days following the Initial Purchase Date, provided that: (A) the
Registration Statement is not yet effective; or (B) the Registration Statement
ceases to be effective for 30 consecutive business days or a total of 60
business days during any 12 month period, the Holders will have the right to
require the Company within 30 days of a written notice from a Holder to the
Company to redeem all such Holder's Notes and Warrants and such Common Stock as
has been received upon conversion or exercise for a cash price equal to the
greater of: (A) "Parity" where Parity is defined as (A1) the number of shares
that the Notes and Warrants can be converted into plus the number of Common
Stock already so converted but not resold, multiplied by (A2) the high trade
price of the Company's Common Stock on the date of such notice; or (B) the sum
of (B1) 115% of the Penalty Amount (as defined below), and (B2) the amount of
all other penalties outstanding up to the date of the notice.
(g) LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sums payable under Sections 1(d),(e) and (f) above shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement, (c)
one of the reasons for the parties reaching an agreement as to such amounts was
the uncertainty and cost of litigation regarding the question of actual damages,
and (d) the parties are sophisticated business parties and have been represented
by legal and financial counsel and negotiated this Agreement at arm's length.
(h) THE PENALTY AMOUNT. The Penalty Amount shall be (a) with respect to
any common stock converted from Notes, the principal amount of such converted
Notes, plus (b)
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with respect to common stock received upon exercise of Warrants, the Closing
Market Price relating to such Warrants and (c) the principal amount of any
outstanding and unconverted Notes; provided that no common stock sold by such
Holder shall be included in the Penalty Amount.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the registration and
sale of the Registrable Securities in accordance with the intended methods of
disposition thereof. Without limiting the foregoing, the Company will do the
following as expeditiously as possible, but in no event later than the deadline,
if any, prescribed therefor in this Agreement:
(a) The Company shall (i) prepare and file with the SEC a Registration
Statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method of
distribution of the Registrable Securities); (ii) use reasonable best efforts to
cause such filed Registration Statement to become and remain effective (pursuant
to Rule 415 under the Act or otherwise); (iii) prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the Registration
Statement effective for the time periods prescribed by Section 1.1(b); and (iv)
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by the Registration Statement during such period in
accordance with the intended methods of disposition by the Holders set forth in
the Registration Statement. The number of shares of Common Stock to be
registered shall be sufficient to cover the Company's obligations under the
Purchase Agreement and, in any case, shall be at least 155,339 shares of Common
Stock with respect to sales by the Holders.
(b) The Company shall file all necessary amendments to the Registration
Statement in order to effectuate the purpose of this Agreement and the Purchase
Agreement.
(c) If so requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Registrable
Securities being sold in connection with the filing of the Registration
Statement under the Securities Act for the offering on a continuous or delayed
basis in the future of all of the Registrable Securities (a "Shelf
Registration"), the Company shall (i) promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters, if any, and such holders agree should be included therein, and
(ii) make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after the Company has received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
action pursuant to this Section 2.1(c)(ii) that would, in the opinion of counsel
for the Company, violate applicable law.
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(d) In connection with the filing of a Shelf Registration, the Company
shall enter into such agreements and take all such other reasonable actions in
connection therewith (including those reasonably requested by the managing
underwriters, if any, or the holders of a majority in aggregate principal amount
of the Registrable Securities being sold) in order to expedite or facilitate the
disposition of the Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such representations and
warranties to the holders of the Registrable Securities and the underwriters, if
any, with respect to the business of the Company (including with respect to
businesses or assets acquired or to be acquired by the Company), and the
Registration Statement, prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm such representations and warranties if and when
requested; (ii) if an underwriting agreement is entered into, the same shall
contain indemnification provision and procedures no less favorable to the
selling holders of the Registrable Securities and the underwriters, if any, than
those set forth herein (or such other provisions and procedures acceptable to
the holders of a majority in aggregate principal amount of Registrable
Securities covered by the Registration Statement and the managing underwriters,
if any); and (iii) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Registrable Securities being sold, their counsel and the managing underwriters,
if any, to evidence the continued validity of their representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
(e) Five Business Days prior to filing the Registration Statement or
prospectus, or any amendment or supplement thereto (excluding amendments deemed
to result from the filing of documents incorporated by reference therein), the
Company shall deliver to the Holders, in accordance with the notice provisions
of Section 4.8, copies of the Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
such parties, and thereafter deliver to the Holders, in accordance with the
notice provisions of Section 4.8, copies of any correspondence with the SEC, and
further deliver such number of copies of the Registration Statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in the Registration Statement (including each
preliminary prospectus) and such other documents or information as the Holders
may reasonably request in order to facilitate the disposition of the Registrable
Securities.
(f) The Company shall deliver, in accordance with the notice provisions
of Section 4.8, to each seller of Registrable Securities covered by the
Registration Statement such number of conformed copies of the Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in the Registration Statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus file
under Rule 424 promulgated under the Securities Act relating to such seller's
Registrable Securities, and such other documents, as such seller may reasonably
request to facilitate the disposition of its Registrable Securities.
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(g) After the filing of the Registration Statement, the Company shall
promptly notify the Holders of any stop order issued or threatened by the SEC in
connection therewith and the resolution thereof and use its best efforts to
prevent the entry of such stop order or to remove it if entered.
(h) The Company shall (i) register or qualify the Registrable
Securities under such other securities or blue sky laws of such jurisdictions in
the United States as the Holders may reasonably (in light of their intended plan
of distribution) request, and (ii) cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
in the United States as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable the Holders to consummate the
disposition of the Registrable Securities; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this paragraph (h), subject itself
to taxation in any such jurisdiction, or consent or subject itself to general
service of process in any such jurisdiction.
(i) The Company shall immediately notify the Holders upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for additional information, amendments or supplements
to the Registration Statement or related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Holders any such supplement or amendment to the related prospectus and (vi)
the Effective Date of such Registration Statement (such notification to be made
by facsimile) with a copy to any other parties set forth in Section 4.8 below.
(j) The Company shall enter into customary agreements and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities (whereupon the Holders may, at their
option, require that any or all of the representations, warranties and covenants
of the Company also be made to and for the benefit of the Holders).
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(k) The Company shall make available to the Holders, subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all correspondence between the SEC and the
Company, its counsel or auditors and will also make available for inspection by
the Holders and any attorney, accountant or other professional retained by the
Holders (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested by any Inspectors in connection with
the Registration Statement. Records that the Company determines, in good faith,
to be confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Holders agree that information obtained by them solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Holders after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
affiliates unless and until such information is made generally available to the
public. The Holders further agree that they will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(l) The Company shall deliver, in accordance with the notice provisions
of Section 4.8, to the Holders a signed counterpart, addressed to each Holder,
of (1) an opinion or opinions of counsel to the Company, and (2) to the extent
required by law or reasonably necessary to effect a sale of Registrable
Securities in accordance with prevailing business practices at the time of any
sale of Registrable Securities pursuant to a Registration Statement, a comfort
letter or comfort letters from the Company's independent public accountants,
each in customary form and covering such matters of the type customarily covered
by opinions or comfort letters, as the case may be, as the Holders therefor
reasonably requests.
(m) The Company shall otherwise comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
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(n) The Company shall appoint a transfer agent and registrar for all
Registrable Securities covered by a Registration Statement not later than the
effective date of the Registration Statement.
(o) The Company may require the Holders to promptly furnish in writing
to the Company such information as may be legally required in connection with
the registration including, without limitation, all such information as may be
requested by the SEC or the National Association of Securities Dealers. The
Holders agree to provide such information requested in connection with the
registration within ten business days after receiving such written request and
the Company shall not be responsible for any delays in obtaining or maintaining
the effectiveness of the Registration Statement caused by the Holders' failure
to timely provide such information.
(p) The Company shall hold in confidence and not make any disclosure of
information concerning the Holders provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities law,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such investor prior to making such disclosure, and
allow such Holder, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for such information.
(q) The Company shall ensure the continued quotation of the Registrable
Securities on NASDAQ and the coverage of the Registrable Securities by at least
two market makers.
(r) The Company shall cooperate with the Holders and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or the Holders may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Holders may request, and the Company shall deliver
to the transfer agent for the Registrable Securities (with copies to the
Holders) an instruction in the form attached as Exhibit F to the Purchase
Agreement in the period specified therein.
(s) The Company shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto hereof without the consent of the holders of a majority-in-interest of
the Registrable Securities.
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(t) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Subscibers of Registrable Securities
pursuant to a Registration Statement.
Section 2.2. REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"),
including, without limitation: (i) all registration, filing, securities exchange
listing and fees required by the National Association of Securities Dealers,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all word processing, duplicating, printing,
messenger and delivery expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any special audits or comfort letters or
costs associated with the delivery by independent certified public accountants
of such special audit(s) or comfort letter(s) requested pursuant to Section
2.1(l) hereof), (vii) the fees and expenses of any special experts retained by
the Company in connection with the registration, (viii) premiums and other costs
of policies of insurance obtained at the discretion of the Company against
liabilities arising out of any public offering of the Registrable Securities
being registered, and (ix) any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding underwriting
fees, discounts, transfer taxes or commissions, if any, attributable to the sale
of Registrable Securities, which shall be payable by each holder of Registrable
Securities pro rata on the basis of the number of Registrable Securities of each
such holder that are included in a registration under this Agreement.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Holder, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person or entity (collectively, the "Controlling Persons"), from and against any
loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and costs and expenses
of investigating and defending any such claim) (collectively, "Damages"), joint
or several, and any action or proceeding in respect thereof to which the Holder,
its partners, affiliates, officers, directors, employees and duly authorized
agents, and any such Controlling Person may become subject under the Securities
Act or otherwise as incurred and, insofar as such Damages (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or prospectus relating to the Registrable Securities or
any preliminary prospectus, or arises out of, or are based upon, any omission or
alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon information furnished in writing to the Company by such
Holder expressly for use therein, and shall reimburse each Holder, its partners,
affiliates, officers, directors, employees and duly authorized agents, and each
such Controlling Person for any legal and other expenses reasonably incurred by
the Holder, its partners, affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person, as incurred, in investigating
or defending or preparing to defend against any such Damages or actions or
proceedings; provided, however, that the Company shall not be liable to a Holder
to the extent that any such Damages arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) the Holder
failed to send or deliver a copy of the final prospectus delivered by the
Company to the Holder with or prior to the delivery of written confirmation of
the sale by the Holder to the Person asserting the claim from which such Damages
arise, and (ii) the final prospectus would have corrected such untrue statement
or alleged untrue statement or such omission or alleged omission and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Holders.
Section 3.2. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
any person or entity in respect of which indemnity may be sought pursuant to
Section 3.1 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the person or entity against whom such indemnity may be sought
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
claim or the commencement of such action; in the event an Indemnified Party
shall fail to give such notice as provided in this Section 3.2 and the
Indemnifying Party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, that the failure to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have to an Indemnified Party otherwise than under Section
3.1. If any such claim or action shall be brought against an Indemnified Party,
and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall
be entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to
assume the defense of such claim or action, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation; provided that the Indemnified Party
shall have the right to employ separate counsel to represent the Indemnified
Party and its Controlling Persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Indemnified Party
against the Indemnifying Party, but the fees and expenses of such counsel shall
be for the account of such Indemnified Party unless (i) the Indemnifying Party
and the Indemnified Party shall have mutually agreed to the retention of such
counsel or (ii) in the reasonable judgment of the Company and such Indemnified
Party, representation of both parties by the same counsel
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would be inappropriate due to actual or potential conflicts of interest between
them, it being understood, however, that the Indemnifying Party shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all Indemnified Parties, or for fees and expenses that
are not reasonable. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any claim or pending
or threatened proceeding in respect of which the Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such claim or
proceeding. Whether or not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any liability
for any settlement made without its consent, which consent will not be
unreasonably withheld.
Section 3.3. OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding paragraphs of this Article 3 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act. The provisions of this Article III shall be in addition to
any other rights to indemnification, contribution or other remedies which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
Section 3.4. CONTRIBUTION. If the indemnification provided for in this Article
III is unavailable to the Indemnified Parties in respect of any Damages referred
to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Damages as between the Company on the one hand and the
relevant Holder on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of such Holder in connection with such
statements or omissions, as well as other equitable considerations. The relative
fault of the Company on the one hand and of the Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the Damages referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3.4, the Holders
shall in no event be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities of each Holder were
sold to the public (less underwriting discounts and commissions) exceeds the
amount of any damages which the Holder has otherwise been required
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to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1. NO OUTSTANDING REGISTRATION RIGHTS. The Company represents and
warrants to the Holders that there is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register or qualify such securities
under the Securities Act or any securities or blue sky laws of any jurisdiction
that would conflict or be inconsistent with any provision of this Agreement or
the Purchase Agreement.
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Purchased
Shares (i) have been disposed of pursuant to the Registration Statement, (ii)
have been sold under circumstances under which all of the applicable conditions
of Rule 144 (or any similar provision then in force) under the Securities Act
("Rule 144") are met, (iii) have been otherwise transferred to holders who may
trade such shares without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (iv) may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to the Holders;
PROVIDED, HOWEVER, that the registration rights shall not terminate sooner than
two years following the Subscription Date. Notwithstanding the foregoing,
paragraphs (d) and (e) of Section 1.1, Article III, Section 4.8, and Section 4.9
shall survive the termination of this Agreement.
Section 4.3. RULE 144. The Company covenants that it will file all reports
required to be filed by it under the Act and the Exchange Act and that it will
take such further action as holders of Registrable Securities may reasonably
request, all to the extent required from time to time to enable the Holders to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. If at any time the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144. Upon the request of the Holders, the Company will deliver
to the Holders a written statement as to whether it has complied with such
requirements.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the
request of any holder of Registrable Securities, deliver to such holder a
certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of Stock
outstanding as shown by the most recent report or statement published by the
Company,
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and (e) whether the Company has filed the reports required to be filed under the
Exchange Act for a period of at least 90 days prior to the date of such
certificate and in addition has filed the most recent annual report required to
be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The Holders may
assign their rights under this Agreement to any subsequent holder or holders of
the Registrable Securities, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of this
Agreement as a condition to such holder's claim to any rights hereunder;
provided further that such holder is an "accredited investor" as defined in Rule
501 of Regulation D of the Securities Act. This Agreement, together with the
Purchase Agreement the terms of the Notes and the Warrants sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
Section 4.7. SEPARABILITY In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
Section 4.8. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting
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facsimile machine, at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to Viragen, Inc.:
Dennis W. Healey
Chief Financial Officer
Viragen, Inc.
865 SW 78th Avenue, Suite 100
Plantation, Florida 33324-3212
Telephone: (954) 233-8746
Facsimile: (954) 233-1416
with a copy to (which communication shall not constitute notice):
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
If to Elliott Lane:
Mark Lane
Elliott, Lane & Associates, Inc.
31951 Sunset Avenue
Laguna Beach, CA 92677
(714) 499-6720
(714) 499-6065 (fax)
If to Ven-Gua:
Edward Fitzpatrick
VenGua Capital Markets Ltd.
The Mill, Mill Lane
Hatton, Warwickshire CV35 7HN
(44) 0-1926-48-47-46
(44) 0-1926-48-47-30 (fax)
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If to Ballsbridge:
James Martin
Ballsbridge Finance, Ltd.
38 Hertford St.
London W1Y 7TG
(44) 171-355-2051
(44) 171 355-4975 (fax)
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 4.8 by giving at least ten days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the laws of
the State of New York.
Section 4.10. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 4.13. REMEDIES. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
VIRAGEN, INC.
By:
---------------------------
Dennis W. Healey
Chief Financial Officer
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BALLSBRIDGE FINANCE LIMITED
By:
---------------------------
Name:
Title:
VEN-GUA CAPITAL MARKETS LIMITED
By:
---------------------------
Name:
Title:
ELLIOTT, LANE & ASSOCIATES, INC.
By:
---------------------------
Name:
Title:
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EXHIBIT 23(i)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Viragen, Inc. for
the registration of 11,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated September 18, 1998, with
respect to the consolidated financial statements of Viragen, Inc., as amended,
included in its Annual Report (Form 10-K/A) for the year ended June 30, 1998,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Miami, Florida
March 31, 1999
