<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VIRAGEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
VIRAGEN, INC.
865 S.W. 78TH AVENUE, SUITE 100
PLANTATION, FLORIDA 33324
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 29, 1999
To The Stockholders of Viragen, Inc.
PLEASE TAKE NOTICE that the 1998 Annual Meeting of Stockholders of Viragen,
Inc., a Delaware corporation (the "Company"), will be held at the Signature
Grand located at 6900 State Road 84, Davie, Florida, on June 29, 1999 at 3:00
P.M., Local Time, or at any and all adjournments thereof, for the following
purposes:
1. To elect three directors to the Board of Directors, who will be
classified as Class A directors, to serve for the term of their designated
class and until their successors have been elected and qualified;
2. To approve the possible issuance of in excess of 19.99% of the
presently issued and outstanding Common Stock of the Company for purposes
of complying with the NASDAQ Stock Market, Marketplace Rule 4460(i)(1)(D);
3. To authorize the Board of Directors to effect up to a 1-for-8
reverse stock split of the Company's outstanding Common Stock and
simultaneously therewith reduce the number of shares of Common Stock the
Company is authorized to issue;
4. In the event the Board of Directors decides not to implement the
aforementioned reverse stock split and reduction in capital, to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company;
5. To ratify the appointment of the Company's independent auditors;
and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Proxy Statement dated June 4, 1999 is attached.
The Board of Directors has fixed the close of business on May 3, 1999, as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting. The financial statements of the Company for the fiscal
year ended June 30, 1998 are contained in the accompanying Annual Report on Form
10-K/A. The Annual Report does not form any part of the material for the
solicitation of proxies. Stockholders who do not expect to be present at the
meeting are urged to complete, date, sign and return the enclosed proxy. No
postage is required if the enclosed envelope is used and mailed in the United
States.
By Order of the Board of Directors,
/s/ DENNIS W. HEALEY
------------------------------------
Dennis W. Healey, Secretary
Plantation, Florida
June 4, 1999
THIS IS AN IMPORTANT MEETING, AND ALL STOCKHOLDERS ARE INVITED TO ATTEND
THE MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AT THEIR
EARLIEST CONVENIENCE. PROMPTNESS IN RETURNING THE EXECUTED PROXY CARD WILL BE
APPRECIATED. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE> 3
VIRAGEN, INC.
865 S.W. 78TH AVENUE, SUITE 100
PLANTATION, FLORIDA 33324
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Viragen, Inc., a Delaware corporation (the "Company"),
of proxies for use at the 1998 Annual Meeting of Stockholders ("Annual Meeting")
to be held at The Signature Grand located at 6900 State Road 84, Davie, Florida,
on June 29, 1999 at 3:00 P.M., Local Time, or at any and all adjournments
thereof. The cost of this solicitation will be borne by the Company. Directors,
officers and employees of the Company may solicit proxies by telephone,
telegraph or personal interview. The Company's Annual Report on Form 10-K/A for
the fiscal year ended June 30, 1998, is being mailed together with this Proxy
Statement and form of Proxy. The date of mailing of this Proxy Statement and
form of Proxy is approximately June 8, 1999.
OUTSTANDING STOCK AND VOTING RIGHTS
In accordance with the By-Laws of the Company, the Board of Directors has
fixed the close of business on May 3, 1999 as the record date for determining
the stockholders entitled to notice of, and to vote at, the Annual Meeting. Only
stockholders of record on that date will be entitled to vote. A stockholder who
submits a proxy on the accompanying form has the power to revoke it by notice of
revocation directed to the proxy holder at any time before it is voted. Unless
authority is withheld in writing, proxies which are properly executed will be
voted for the proposals thereon. Although a stockholder may have given a proxy,
such stockholder may nevertheless attend the meeting, revoke the proxy and vote
in person. The election of the directors nominated requires the affirmative vote
of a plurality of the shares of the Company's common stock voting at the Annual
Meeting in person or by proxy. The ratification of the appointment of the
Company's auditors and the approval of the possible issuance of in excess of
19.99% of the presently issued and outstanding Common Stock of the Company will
require the affirmative vote of a majority of the shares of the Company's common
stock voting at the Annual Meeting in person or by proxy. The amendment to the
Company's Certificate of Incorporation to increase the number of shares of
Common Stock the Company is authorized to issue, or alternatively, to implement
up to a 1-for-8 reverse stock split of the outstanding shares of the Company's
common stock and simultaneously reduce the number of shares of common stock the
Company is authorized to issue will require the affirmative vote of a majority
of the shares of the Company's Common Stock outstanding on the record date.
As of May 3, 1999, the record date for determining the stockholders of the
Company entitled to vote at the Annual Meeting, 66,450,289 shares of the Common
Stock of the Company, $.01 par value ("Common Stock"), were issued, of which
845,277 shares are held as treasury stock. Each share of Common Stock
outstanding entitles the holder to one vote on all matters brought before the
Annual Meeting. The quorum necessary to conduct business at the Annual Meeting
consists of a majority of the outstanding shares of Common Stock outstanding
(33,889,648 shares) as of the record date. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum and have
the effect of a negative vote on the approval of the Amendment to the Company's
Certificate of Incorporation to increase the Company's authorized Common Stock,
the reverse stock split and the reduction in authorized capital. Abstentions and
broker non-votes will have no effect for the election of directors, the
ratification of the Company's auditors or the issuance of in excess of 19.99% of
the presently issued and outstanding Common Stock of the Company.
2
<PAGE> 4
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors is responsible for the overall affairs of the
Company. On February 28, 1997, the Company amended its Certificate of
Incorporation and established a classified Board of Directors pursuant to which
the Board of Directors of the Company was divided into three subclasses
consisting of Class A, Class B and Class C, respectively. Each subclass of
Directors has staggered terms of three years. The number of Directors in each
class may be increased or decreased by the Board of Directors but each
respective class must consist of as nearly equal a number of Directors as
possible.
At each Annual Meeting of Stockholders, directors of the respective class
whose term expired shall be elected, and the directors chosen to succeed those
whose terms shall have expired shall be elected to hold office for a term to
expire at the third ensuing Annual Meeting of Stockholders after their election,
and until their respective successors are elected and qualified. Because the
term of the Class A Directors expires after the Annual Meeting for which this
proxy is being solicited, the names of the nominees listed are being nominated
to serve as Class A directors only. The term of the Class B Directors initially
shall expire after the 1999 Annual Meeting of Stockholders, and the term of the
Class C Directors initially shall expire after the 2000 Annual Meeting of
Stockholders. The term of the Class A Directors elected at this Annual Meeting
will expire at the Company's 2001 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
SERVED AS
OFFICER AND/OR
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE CLASS
- ---- --- ---------------------------------- -------------- -----
<S> <C> <C> <C> <C>
Gerald Smith...................... 68 Chairman of the Board and 1994 C
President 1993
Robert Zeiger..................... 54 Vice Chairman 1995 B
Dennis W. Healey.................. 50 Chief Financial Officer and 1980 B
Treasurer
Director, Executive Vice President 1984
And Secretary 1993
1994
Dr. Jay Sawardeker................ 60 Chief Operating Officer and 1996
Executive Vice-President --
Technical Affairs
Carl N. Singer.................... 80 Director 1997 C
Peter D. Fischbein................ 58 Director 1981 B
Sidney Dworkin, Ph.D.............. 77 Director 1994 A
Charles J. Simons................. 80 Director 1998 A
Robert C. Salisbury............... 54 Director 1998 A
Jose I. Ortega.................... 26 Controller 1996
</TABLE>
Gerald Smith, In May 1993, Mr. Smith became President of the Company. Since
1982, Mr. Smith was a principal stockholder, President, Chief Executive Officer
and director of Business Development Corp. ("BDC"), which has served as a
managing entity and consultant to several high technology ventures including
Compupix Technology Joint Venture. From August 1991 to December 1991, Mr. Smith
was the Chief Executive Officer of Electronic Imagery, Inc., a company engaged
in the development of imaging software. Mr. Smith is also the President, Chief
Executive Officer and a director of Cinescopic Corporation and International
Database Service, Inc., computer-oriented companies which developed database
technology using the personal computer for audio, video, animation and real time
communication.
Mr. Smith has discontinued BDC's operations in order to devote all of his
time to the Company. Mr. Smith is also Chairman of the Board and President of
Viragen (Europe) Ltd ("VEL") and Viragen U.S.A., Inc.
Robert H. Zeiger, was appointed Chief Executive Officer and Chief Operating
Officer and was elected as a Director in May 1995. Mr. Zeiger has served as a
pharmaceutical executive since 1971. From 1985 to 1994, Mr. Zeiger was employed
by Glaxo, Inc., Research Triangle Park, North Carolina, serving as Vice
President
3
<PAGE> 5
and General Manager of their Dermatological Division from 1985 to 1988 and Vice
President and General Manager of Glaxo Pharmaceuticals from 1991 to 1994. Mr.
Zeiger also served as Vice President, Marketing and Sales with Stiefel
Laboratories, Inc., Coral Gables, Florida, from 1979 to 1985 and as National
Sales Manager to Knoll Pharmaceutical Company, Whipping, New Jersey from 1971 to
1979. Mr. Zeiger was also Chief Executive Officer and a Director of VEL. On July
31, 1998 Mr. Zeiger resigned for health reasons his position as Chief Executive
Officer of the Company and Director of VEL, effective September 30, 1998. He
will continue to serve as Vice Chairman and Senior Pharmaceutical Advisor to the
Board and a member of the Executive Committee of the Board of Directors.
Dennis W. Healey, is a Certified Public Accountant and was appointed
Chairman of the Board and Chief Executive Officer on April 13, 1993. In June
1994, Mr. Healey relinquished that position as Chairman of the Board to Mr.
Smith and in July 1994, relinquished the position of Chief Executive Officer
upon the employment of Mr. Fistel. Upon Gerald Smith becoming President in May
1993, Mr. Healey became Executive Vice President and has served as Chief
Financial Officer and Treasurer of the Company since 1980. Mr. Healey was
appointed Secretary in 1994. Until his resignation in July 1996, Mr. Healy
served as Senior Vice President, Principal Financial Officer and Treasurer of
Medicore, Inc. a public company engaged primarily in electronics assembly and
ownership of dialysis centers ("Medicore") and Executive Vice President of its
Techdyne affiliate. He also served as Treasurer of most of Medicore's
subsidiaries and as a Vice President of Dialysis Corporation of America ("DCA"),
a subsidiary of Medicore and Secretary, Treasurer and director of other DCA
subsidiaries. Mr. Healey joined Medicore in 1976 as its Controller. Mr. Healey
is also Executive Vice President, Treasurer, Secretary and a Director of VEL and
VUSA.
Dr. Jay Sawardeker, the Company's Chief Operating Officer, joined the
Company in 1996 as Executive Vice President, Technical Affairs. For over 25
years, Dr. Sawardeker has served in various pharmaceutical senior technical
management capacities, primarily with the Glaxo Holdings organization. Most
recently, he served as Corporate Vice President -- Worldwide Quality Assurance
for Glaxo Holdings. Prior thereto, he served as Corporate Vice
President -- Manufacturing and Vice President -- Quality Assurance of Glaxo,
Inc. Dr. Sawardeker also previously served as Director of QA for the Whitehall
Laboratories division of American Home Products and Group Manager of QA for the
Ortho Pharmaceutical division of Johnson & Johnson.
Carl N. Singer was elected a Director in August 1997 and also serves as
Chairman of the Executive Committee of the Board of Directors. Mr. Singer is the
Chairman of Fundamental Management Corporation, a Florida-based institutional
investment fund. Mr. Singer has served as a Director, President and CEO of
Sealy, Inc., Scripto, Inc. and the BVD Company.
Peter D. Fischbein, is an attorney who has been practicing law for
approximately 33 years. Mr. Fischbein served as the Company's Secretary between
May and December 1994. His former law firm on occasion represented the Company,
Medicore and the Viragen Research Associates Limited Partnership which has
certain contracts with the Company. Mr. Fischbein is also a director of Medicore
(since 1984) and Techdyne (since 1985). Mr. Fischbein has been general partner
of several limited partnerships engaged in oil exploration and real estate
development.
Sidney Dworkin, Ph.D., elected a Director in August 1994, was a founder,
former President, Chief Executive Officer and Chairman of Revco, Inc. Between
1987 and the present, Dr. Dworkin has also served as Chairman of Stonegate
Trading, Inc., an importer and exporter of various health, beauty aids,
groceries and sundries. Between 1988 and the present, Dr. Dworkin has served as
Chairman of the Board of Advanced Modular Systems, which is engaged in the sale
of modular buildings. Between June 1993 and the present, Dr. Dworkin has also
served as Chairman of Comtrex Systems, Inc., which is engaged in development and
sale of programmable cash registers. Dr. Dworkin also serves on the Board of
Directors of CCA Industries, Inc., Interactive Technologies, Inc., Northern
Technologies International Corporation and Crager Industries, Inc., all of which
are publicly-traded companies.
Charles J. Simons was elected to the Board of Directors in July 1998 and
serves as Chairman of the Audit, Finance and Compensation Committee of the Board
of Directors. Mr. Simons has been a Director of Renex Corp. since its inception
in July 1993. Mr. Simons is the Vice Chairman of the Board of G.W. Plastics,
Inc., a plastics manufacturer, and is an independent management and financial
consultant. From 1940 to 1981,
4
<PAGE> 6
he was employed by Eastern Airlines, last serving as Vice Chairman, Executive
Vice President and as a Director. Mr. Simons is a Director of Arrow Air, Inc., a
cargo air carrier; Veridian, Inc., an aerospace company; and a number of private
companies. He was also a Director of Home Intensive Care, Inc. from 1988 until
July 1993. Mr. Simons is also a Director of MedWaste, Inc.
Robert C. Salisbury was appointed a Director of the Company in December
1998. From 1974 to 1995, Mr. Salisbury was employed by the Upjohn Company
serving in several financial related positions including Manager of Cash
Management, Internal Control and Corporate Finance from 1975 to 1981, Vice
President from 1985 to 1990, Senior Vice President from 1991 to 1994 and
Executive Vice President for Finance and Chief Financial Officer from 1994 to
1995. Following the merger of Pharmacia and Upjohn, Inc. in 1995, Mr. Salisbury
served as Executive Vice President and Chief Financial Officer until 1998.
Jose I. Ortega is a Certified Public Accountant and joined the Company as
its Controller in June 1996. From 1993 until joining the Company, Mr. Ortega was
a member of the Audit Staff of Ernst & Young LLP, the Company's independent
audit firm.
There is no family relationship between any of the officers and directors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned at May 3, 1999 (i) by each person who is known
by the Company to beneficially own, or exercise voting or dispositive control,
5% or more the Company's Common Stock on the record date based upon certain
reports regarding ownership filed with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (ii) by each of the Company's directors or nominees for
directors and certain executive officers, and (iii) by all officers and
directors as a group. A person is also deemed to be a beneficial owner of any
securities of which the person has the right to acquire beneficial ownership
within 60 days. Except as otherwise indicated the business address for the
persons set forth below is 865 S.W. 78th Avenue, Suite 100, Plantation, Florida
33324. At May 3, 1999, there were 65,605,012 shares of Common Stock of the
Company outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------- ------------ ----------
<S> <C> <C>
Gerald Smith................................................ 3,000,000(3) 4.4%
Robert H. Zeiger............................................ 1,050,000(4) 1.6
Carl N. Singer.............................................. 1,915,541(5) 2.8
Dennis W. Healey............................................ 1,025,000(6) 1.5
Peter D. Fischbein.......................................... 450,000(7) 0.4*
Sidney Dworkin, Ph.D........................................ 375,244(8) 0.6*
Charles J. Simons........................................... 35,000(9) *
Robert C. Salisbury......................................... 25,000(10) *
Officers & Directors as a Group (11 persons)................ 9,860,890 15.7
</TABLE>
- ---------------
* Denotes less than 1%.
(1) Based upon information furnished to the Company by the principal security
holders or obtained from the stock transfer books of the Company. Other
than indicated in the notes, the Company has been informed that such
persons have sole voting and dispositive power with respect to their
shares.
(2) Based on 65,605,015 shares of Common Stock outstanding as of May 3, 1999.
Exclusive of (i) 11,289 shares of Common Stock reserved for issuance
pursuant to the conversion of 2,650 outstanding shares of
5
<PAGE> 7
Preferred Stock each convertible into 4.26 shares of Common Stock; and (ii)
12,429,674 shares of Common Stock reserved for issuance pursuant to
exercise of options and warrants of the Company.
(3) Mr. Smith is Chairman of the Board of Directors and President of the
Company. Includes (i) 550,000 shares owned directly by Mr. Smith; (ii)
1,400,000 shares of Common Stock issuable upon the exercise of options
exercisable at $.50 per share granted pursuant to Mr. Smith's October 6,
1995 Employment Agreement; (iii) 1,000,000 shares of Common Stock issuable
upon the exercise of options exercisable at $3.22 per share granted
pursuant to Mr. Smith's March 1, 1997 Employment Agreement and (iv) 50,000
shares of Common Stock issuable upon the exercise of options exercisable at
$3.22 per share granted to all Directors in February 1997.
(4) Mr. Zeiger is Chief Executive Officer and a Director of the Company.
Includes (i) 1,000,000 shares of Common Stock issuable upon the exercise of
options exercisable at $.96 per share pursuant to Mr. Zeiger's May 9, 1995
Employment Agreement and (ii) 50,000 shares of Common Stock issuable upon
the exercise of options exercisable at $3.22 per share granted to all
Directors in February 1997.
(5) Mr. Singer is a director of the Company. Includes (i) 79,500 shares owned
directly by Mr. Singer and (ii) 1,836,041 shares held by Fundamental
Management Corporation, an institutional investment fund for which Mr.
Singer serves as Chairman.
(6) Mr. Healey is Executive Vice President, Treasurer, Chief Financial Officer,
Secretary and a Director of the Company. Includes (i) 375,000 shares held
in Mr. Healey's name; (ii) 300,000 shares of Common Stock issuable upon the
exercise of options exercisable at $.50 per share granted pursuant to Mr.
Healey's October 6, 1995 Employment Agreement; (iii) 300,000 shares of
Common Stock issuable upon the exercise of options exercisable at $3.22 per
share granted pursuant to Mr. Healey's March 1, 1997 Employment Agreement
and (iv) 50,000 shares of Common Stock issuable upon the exercise of
options exercisable at $3.22 per share granted to all Directors in February
1997.
(7) Mr. Fischbein is a Director of the Company. Includes (i) 325,000 shares
held in Mr. Fischbein's name; (ii) 50,000 shares of Common Stock issuable
upon the exercise of options exercisable at $1.00 per share granted to all
Directors in August 1994; (iii) 25,000 shares of Common Stock issuable upon
the exercise of options exercisable at $.50 per share granted in October
1995; (iv) and 50,000 shares of Common Stock issuable upon the exercise of
options exercisable at $3.22 per share granted to all Directors in February
1997.
(8) Mr. Dworkin is a Director of the Company. Includes (i) 175,244 shares owned
directly by Mr. Dworkin and his wife; (ii) 50,000 shares of Common Stock
issuable upon the exercise of options exercisable at $1.00 per share
granted to all Directors in August 1994; (iii) 100,000 shares of Common
Stock issuable upon the exercise of options exercisable at $.50 per share
granted in October 1995; and (iv) 50,000 shares of Common Stock issuable
upon the exercise of options exercisable at $3.22 per share granted to all
Directors in February 1997.
(9) Mr. Simons was elected a Director of the Company in July 1998. Includes (i)
10,000 shares owned directly by Mr. Simons and (ii) 25,000 shares of Common
Stock issuable upon the exercise of options exercisable at $1.88 per share
granted on July 31, 1998.
(10) Mr. Salisbury was appointed as Director of the Company in December 1998.
Includes 25,000 shares of Common Stock issuable upon the exercise of
options exercisable at $.75 per share granted on December 28, 1998.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "Commission") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten (10%) stockholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, during the fiscal year ended June 30, 1998, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent (10%) beneficial owners were timely filed.
6
<PAGE> 8
ELECTION OF CLASS A DIRECTORS
The following table sets forth the names of the nominees, their positions
with the Company, the year, if applicable, in which they became Directors and
other related information. Executive officers are elected annually and, except
to the extent governed by employment contracts, serve at the discretion of the
Board of Directors.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
POSITION WITH SERVED AS
NAME AGE THE COMPANY DIRECTOR SINCE CLASS
- ---- --- ------------- -------------- -----
<S> <C> <C> <C> <C>
Sidney Dworkin, Ph.D....................................... 76 Director 1994 A
Charles J. Simons.......................................... 80 Director 1998 A
Robert C. Salisbury........................................ 54 Director 1998 A
</TABLE>
During fiscal 1998, the Company's Board of Directors met twice.
The Company has constituted an Audit, Finance and Compensation Committee
and an Executive Committee. The Audit, Finance and Compensation Committee
consists of Messrs. Simons (Chairperson), Dworkin, Salisbury and Healey. The
Executive Committee consists of Messrs. Singer (Chairperson), Smith and Zeiger.
The Audit, Finance and Compensation Committee oversees the Company's audit
activities to protect against improper and unsound practices and to furnish
adequate protection to all assets and records. The Audit, Finance and
Compensation Committee also acts as liaison to the Company's independent
certified public accountants, and conducts such work as is necessary and
receives written reports, supplemented by such oral reports as it deems
necessary, from the audit firm. The Audit, Finance and Compensation Committee
also provides overall guidance for officer compensation programs, including
salaries and other forms of compensation and for implementation of the Company's
budget process. Prior to fiscal 1998, the Company's Board of Directors acted as
a whole as the Audit, Finance and Compensation Committee. During fiscal 1998,
the Audit, Finance and Compensation Committee met on three occasions.
The Executive Committee is empowered to act for the full Board in intervals
between Board meetings, with the exception of certain matters which by law may
not be delegated. The Executive Committee will meet as necessary, and all
actions by the Committee are to be reported at the next Board of Directors
meeting. During fiscal 1998, the Executive Committee met on four occasions.
AUDIT, FINANCE AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
Currently, there are four members of the Audit, Finance and Compensation
Committee, which was reorganized in February 1998, three of whom are outside
Directors and one is an inside Director. The one inside Director is Dennis W.
Healey, an Executive Vice President, Treasurer, Chief Financial Officer, and
Secretary of the Company. Mr. Healey also serves in a similar capacity for one
or more of the Company's subsidiaries. Mr. Healey abstains from any discussions
or votes concerning his salary and other forms of compensation received from the
Company. Discussions concerning the compensation received by Mr. Healey are set
forth elsewhere in this Notice of Annual Meeting of Proxy Statement.
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
Audit, Finance and Compensation Committee Report on Executive
Compensation. Under the rules established by the Securities and Exchange
Commission, the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's Chief
Executive Officer (CEO) and other executive officers. The disclosure
requirements for the CEO and executive officers include
7
<PAGE> 9
the use of tables and a report explaining the rationale and considerations that
led to the fundamental compensation decision affecting those individuals.
Compensation Report. The Audit, Finance and Compensation Committee of the
Board of Directors is responsible for establishing compensation levels and
benefits for the executive officers of the Company. The Audit, Finance and
Compensation Committee is also responsible for reviewing recommendations made by
management regarding compensation, including stock options, and benefits for
other employees.
Executive Compensation Policy. For the last fiscal year, the goals
established by the Audit, Finance and Compensation Committee for executive
compensation are as follows:
- to provide a compensation package which would attract and retain
experienced, scientific pharmaceutical and administrative personnel;
- to maintain reasonable yet competitive base salaries while conserving the
liquid assets of the Company;
- to provide an environment where innovation, dedication and success are
rewarded; and
- to provide participation in stock appreciation as part of an incentive
based compensation package.
The performance of executive officers is evaluated routinely by the Audit,
Finance and Compensation Committee as well as by the Board of Directors as a
whole. The Audit, Finance and Compensation Committee considers each employee's
total compensation package, including base salary, stock options and other
benefits as provided in their respective employment agreements.
Chief Executive Officer. The Chief Executive Officer entered into a
one-year employment agreement with the Company in August 1997; however,
effective September 1998, the Chief Executive Officer resigned from his position
for health reasons. Prior to such resignation, the Chief Executive Officer's
employment agreement provided for the bulk of his compensation to be derived
from appreciation in the Company stock and market value. His compensation
consisted of a base annual salary of $120,000 and 1,000,000 stock options at the
then current market value of $.96 per share, with 500,000 of such options being
exercisable through May 8, 2001 and the remaining 500,000 options being
exercisable through May 8, 2002. The Audit, Finance and Compensation Committee
believed that this structure, heavily weighted towards performance compensation,
would provide the motivational structure necessary for the competitive
environment in which the Company operates.
Chairman of the Board. The Chairman of the Board of Directors entered into
two two-year employment agreements with the Company and Viragen (Europe) Ltd. in
March 1997. The agreements entitle the Chairman to receive a combined salary of
$262,000 and $282,000 for the first and second years of the agreement,
respectively, and options to purchase 1,000,000 shares of common stock of the
Company at an exercise price of $3.22 per share exercisable over a period of
five years. The Audit, Finance and Compensation Committee believed that this
structure, heavily weighted towards performance compensation, would provide the
motivational structure necessary for the competitive environment in which the
Company operates.
Other Executive Officers. As with the compensation of the CEO, the Audit,
Finance and Compensation Committee evaluates and establishes the compensation
packages for other executive officers of the Company. These executives are
evaluated routinely based on the effectiveness of their efforts in their
respective areas of responsibility as well as their contribution to achieving
the overall goals of the Company. The Audit, Finance and Compensation Committee
has structured compensation packages so that the base salaries are conservative
by pharmaceutical industry standards. The emphasis is on compensation through
the issuance of stock options. As a consequence, the executive officers may
maximize their total compensation through the attainment of corporate goals as
reflected in appreciated stock values.
Submitted by the Audit, Finance and Compensation Committee of the Board of
Directors:
Charles J. Simons Sidney Dworkin, Ph.D. Robert C. Salisbury
Dennis W. Healey
8
<PAGE> 10
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation and
employment agreements of the Chief Executive Officers of the Company and four
other most highly compensated executive officers as of June 30, 1998.
<TABLE>
<CAPTION>
OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS (#) PAYOUTS COMPENSATION
- ------------------ ---- -------- -------- ------------ ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Smith.............. 1998 $263,000
Chairman of Board 1997 175,885 1,050,000
and President(1) 1996 154,615 $225,000 $14,000 1,600,000
Robert H. Zeiger.......... 1998 111,347
CEO and Director(2) 1997 65,250 12,500 5,000 50,000
1996 66,653 100,000
Dennis W. Healey ......... 1998 240,500
Exec. V.P., Treasurer,
CFO 1997 163,345 350,000
and Director(3) 1996 78,653 37,500 8,500 500,000
Charles F. Fistel......... 1998 150,000
Exec. V.P. 1997 138,886 300,000
and Director(4) 1996 110,000 6,000 110,000
Jay Sawardeker............ 1998 148,470
Exec. V.P., and 1997 113,462 200,000
COO(5) 1996 250,000
</TABLE>
- ---------------
(1) The Company entered into a two-year employment agreement with Mr. Smith,
effective October 6, 1995 providing for an annual salary of $160,000 and
$170,000 for the first and second years, respectively. The agreement
provided for health, life insurance and similar employee benefits generally
available to other employees of the Company, use of an automobile and
related maintenance expenses and reimbursement of expenses incurred in
fulfilling his normal responsibilities to the Company. In January 1996, Mr.
Smith exercised options to purchase 750,000 shares of Common Stock through
the issuance of a note in the principal amount of $217,500 with the shares
being issued into escrow pending cash payments further providing the shares
may be released from escrow in increments of no less than $3,000. Mr. Smith
received a bonus equal to the par value ($7,500) of the shares purchased. On
June 6, 1996, the Company forgave Mr. Smith's note in lieu of bonus for the
1996 fiscal year, following unanimous approval of the independent members of
the Board of Directors. On March 1, 1997 Mr. Smith entered into a two-year
employment agreement, superseding all previous agreements, under terms
similar to his previous employment agreement. The agreement provided for a
salary of $190,000 and $200,000 for the first and second years,
respectively, and further provided for options to purchase 1,000,000 shares
of common stock at $3.22 per share, exercisable over five years.
On March 1, 1997, Viragen (Europe) Ltd. also entered into a two-year
employment agreement with Mr. Smith under terms similar to his employment
agreement with the Company, providing for an annual salary of $10,000 and
$20,000 for the first and second years, respectively. This agreement was
amended on July 3, 1997, providing for an annual salary of $72,000 for the
period July 1, 1997 through June 30, 1998 and $82,000 for the period from
July 1, 1998 through February 28, 1999. Mr. Smith serves as the President
and Chairman of Viragen (Europe) Ltd.
(2) On May 9, 1995, the Company entered into a two-year employment agreement
expiring May 1, 1997, with Robert H. Zeiger to serve as Chief Executive
Officer and Chief Operating Officer of the Company at an annual salary of
$120,000. The agreement provided for health, life and similar employee
benefits generally made available to other employees of the Company, use of
an automobile and related maintenance expenses and reimbursement for
expenses incurred in fulfilling his normal responsibilities to the Company.
The agreement provided for the issuance of options to purchase the aggregate
of 1,000,000 shares of Common Stock of the Company at an exercise price of
$.96 per share, exercisable with respect
9
<PAGE> 11
to 500,000 shares commencing May 8, 1996 through May 8, 2001 and exercisable
for the remaining 500,000 shares commencing May 8, 1997 through May 8, 2002.
The options are terminable prior to the lapse of their respective terms only
if Mr. Zeiger's employment should be terminated for cause, and, in that
event, the options must be exercised to the extent that they have vested
within 90 days of such termination. On August 1, 1997 Mr. Zeiger entered
into a one year employment agreement under terms similar to his previous
agreement except for certain notice of termination provisions. This
agreement provided for a salary of $120,000 per year with an additional
$5,000 per month, payable monthly, for the first six months of the contract
term. In July 1998, Mr. Zeiger resigned for health reasons his position as
Chief Executive Officer of the Company and Director of VEL, effective
September 30, 1998. Mr. Zeiger will continue to serve as Vice Chairman and
as Senior Pharmaceutical Advisor to the Board and a member of the Executive
Committee of the Board of Directors.
(3) The Company entered into a two-year employment agreement with Mr. Healey,
effective October 6, 1995, providing for an annual salary of $80,000 and
$85,000 for the first and second years, respectively. In July 1996, Mr.
Healey entered into an additional employment agreement with Viragen (Europe)
Ltd. This agreement provided for a salary of $85,000 per year and expired in
September 1997. In January 1996, Mr. Healey exercised options to purchase
125,000 shares of Common Stock through the issuance of a note in the
principal amount of $36,250 with the shares being issued into escrow pending
cash payments further providing the shares may be released from escrow in
increments of no less than $3,000. Mr. Healey received a bonus equal to the
par value ($1,250) of the shares purchased. On June 6, 1996, the Company
forgave Mr. Healey's note in lieu of bonus for the 1996 fiscal year,
following unanimous approval of the independent members of the Board of
Directors. On March 1, 1997 Mr. Healey entered into two-year employment
agreement, superseding all previous agreements, under terms similar to his
previous employment agreements. The agreement as amended July 1, 1997,
provided for a salary $190,000 and $195,000 for the first and second years,
respectively, and further provided for options to purchase 300,000 shares of
common stock at $3.22 per share, exercisable over five years.
On July 30, 1996 Viragen (Europe) Ltd. entered into a two-year employment
agreement with Mr. Healey under the terms similar to his employment
agreement with the Company, providing for a salary of $14,200 for the two
month period ending September 30, 1996 and $85,000 for the year ended
September 30, 1997. On March 1, 1997 Mr. Healey entered into a two-year
employment agreement subsequently amended on July 3, 1997, to run concurrent
with Mr. Smith's and superseding all previous agreements. This agreement
provided for a salary of $31,700 for the four month period ending June 30,
1997, $52,000 for the year ended June 30, 1998 and $38,000 for the eight
month period ending February 28, 1998. Mr. Healey serves as Executive Vice
President, Chief Financial Officer, Secretary and Director of Viragen
(Europe) Ltd.
(4) On July 1, 1996, the Company entered into a two-year employment agreement
with Charles Fistel to serve as Executive Vice President, providing for an
annual salary of $140,000 and $150,000 for the first and second years,
respectively. The agreement provided for health and life insurance, and
similar employee benefits generally made available to other employees of the
Company, use of an automobile and related expenses. In February 1997, the
Company issued to Mr. Fistel five-year options to purchase 250,000 shares at
$2.75 per share. The Company recognized $218,750 in compensation expenses as
a result of the issuance of these options. On July 1, 1998, upon the
expiration of Mr. Fistel's 1996 agreement, the Company entered into a two
year employment agreement with Mr. Fistel under terms similar to his
previous employment, modified to increase his salary to $172,500 during the
two year term. In May 1999, Mr. Fistel resigned from the Company upon the
expiration of his employment agreement.
(5) From March 1996 to May 1996, Dr. Sawardeker served as an consultant to the
Company in scientific affairs. On May 6, 1996, Dr. Sawardeker entered into a
two year employment agreement effective July 1, 1996, providing for a salary
of $100,000 for the first and second years, respectively, and the issuance
of a five year option to acquire 250,000 shares of Common Stock, exercisable
at $1.80 per share, with one third of the options vesting on the effective
date of the employment agreement and an additional one third vesting on the
first and second anniversary dates, respectively. Dr. Sawardeker's
employment agreement was subsequently amended and extended through June 30,
1999, providing for an annual salary of
10
<PAGE> 12
$150,000 for the period from February 10, 1997 to February 9, 1998 and
$160,000 for the period from February 10, 1998 to June 30, 1999. Dr.
Sawardeker's amended employment agreement also provided for the grant of an
option to acquire 200,000 shares of Common Stock, exercisable at $l.59 per
share with all options vesting June 30, 1999.
In November 1995, Viragen (Scotland) Ltd. ("VSL"), a wholly-owned subsidiary of
VEL issued an aggregate of 7.144 shares of VSL common stock at $56.00 per share
to individual's serving as officers and directors of VEL and one employee of the
Company. Pursuant to the Agreement and Plan of Reorganization, these shares were
exchangeable into an aggregate of 400,000 shares of VEL. Of these options,
100,000 were granted each to (i) Mr. Gerald Smith, (ii) Mr. Robert H. Zeiger,
and (iii) Mr. Dennis W. Healey, all serving as officers and directors of VEL,
and one employee of the Company. All options on VSL were exercised and the
related shares exchanged for VEL common stock. The Company recognized $243,000
in compensation expense in fiscal 1996 as a result of the issuance of these
shares.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1998 to each person named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARES) DATE
- ---- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Gerald Smith.................................. -- -- -- --
Robert H. Zeiger.............................. -- -- -- --
Dennis W. Healey.............................. -- -- -- --
Charles F. Fistel............................. -- -- -- --
Jay Sawardeker................................ -- -- -- --
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the exercise of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1998 to each person named in the Summary Compensation Table and the unexercised
options held as of the end of the 1998 fiscal year.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND 1998 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
VALUE REALIZED IN THE MONEY OPTIONS AT
MARKET PRICE NUMBER OF UNEXERCISED FY-END (BASED ON FY-END
SHARES AT EXERCISE OPTIONS AT FY-END PRICE OF $1.87 END/SHARE
ACQUIRED LESS PRICE ---------------------------- ----------------------------
NAME ON EXERCISE EXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Smith.............. -- $ -- 2,700,000 $2,235,500 $
Robert H. Zeiger.......... -- -- 1,050,000 910,000
Dennis W. Healey.......... -- -- 900,000 728,500
Charles F. Fistel......... -- -- 710,000 621,700
Jay Sawardeker............ -- -- 250,000 200,000 17,500 56,000
</TABLE>
1997 AMENDED STOCK OPTION PLAN AND 1995 AMENDED STOCK OPTION PLAN
On May 15, 1995, the Board of Directors adopted, subject to approval by the
stockholders, a stock option plan called the "1995 Stock Option Plan." On
September 22, 1995, the Board of Directors amended the 1995 Stock Option Plan
(collectively the "95 Plan") to define certain terms and clarify the minimum
exercise price of the Non-Qualified Options, described herein, as not less than
55% of the fair market value. The 95 Plan was
11
<PAGE> 13
submitted to the stockholders of the Company at the Annual Meeting of
Stockholders held on December 15, 1995, and the Stockholders ratified the Plan
at that time.
On January 27, 1997 the Board of Directors adopted, subject to approval by
the stockholders, a stock option plan called the "1997 Stock Option Plan" (the
"97 Plan"), containing terms and provisions similar to the 95 Plan. The 97 Plan
was submitted to the Stockholders for approval at the Annual Meeting of
Stockholders held on February 28, 1997 at which time the Plan was ratified. On
April 24, 1998 the Board of Directors adopted, subject to ratification by the
stockholders, an amendment to the 1997 Plan reserving an additional 1,000,000
shares of Common Stock for issuance under the 1997 Plan, thereby reserving an
aggregate of 4,000,000 shares of Common Stock for issuance pursuant to options
granted under the 1997 Plan. On July 31, 1998, the stockholders ratified this
amendment to the 1997 Plan.
Under both the 95 Plan and the 97 Plan (collectively the "Plans"), the
Company has reserved 8,000,000 shares (4,000,000 shares -- 95 Plan and 4,000,000
shares -- 97 Plan) of Common Stock for issuance pursuant to options granted
under the Plans ("Plan Options"). The Audit, Finance and Compensation Committee
of the Board of Directors (the "Committee") and the Board of Directors currently
administer the Plans including, without limitation, the selection of the persons
who will be granted Plan Options under the Plans, the type of Plan Options to be
granted, the number of shares subject to each Plan Options and the Plan Options
price.
Plan Options granted under the Plans may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plans also allow for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
Directors or the Committee, provided that no Plan Option may be exercisable more
than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plans may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plans.
Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non-Qualified Options under the Plans. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.
Incentive Options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. Under a recent amendment to
the 1997 Plan, Non-qualified Options may be transferable under limited
circumstances to facilitate estate planning if authorized by the Board of
Directors or the Committee. If an optionee's employment is terminated for any
reason, other than his death or disability or termination for cause, or if an
optionee is not an employee of the Company but is a member of the Company's
Board of Directors and his service as a director is terminated for any reason,
other then death or disability, the Plan Option granted to him shall lapse to
the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination unless otherwise extended by the Board. If the
optionee dies during the term of his employment, the Plan Option granted to him
shall lapse to the extent unexercised on the earlier of the expiration date of
the
12
<PAGE> 14
Plan Option or the date one year following the date of the optionee death. If
the optionee is permanently and totally disabled within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, the Plan Option granted to him
lapses to the extent unexercised on the earlier of the expiration date of the
option or one year following the date of such disability.
The Board of Directors or Committee may amend, suspend or terminate the
Plans at any time, except that no amendment shall be made which (i) changes the
minimum purchase price therefor (except in either case in the event of
adjustments due to changes in the Company's capitalization), (ii) affects
outstanding Plan Options or any exercise right thereunder, (iii) extends the
term of any Plan Option beyond ten years, or (iv) extends the termination date
of the Plans. Unless the Plans shall theretofore have been suspended or
terminated by the Board of Directors, the 95 Plan shall terminate on May 15,
2005 and the 97 Plan shall terminate on January 27, 2007. Any such termination
of either Plan shall not affect the validity of any Plan Options previously
granted thereunder.
As of May 3, 1999, 3,991,500 options have been issued under the 1995
Amended Stock Option Plan and 3,081,000 options have been issued under the 1997
Stock Option Plan.
ADDITIONAL STOCK OPTIONS
During fiscal 1998, the Company issued 449,500 options to purchase Common
Stock to a consultant and employees of the Company exercisable at prices varying
from $1.00 to $2.50 per share during the five-year term of the options.
In February 1997, the Board of Directors awarded options to purchase
1,750,000 shares of Common Stock to officers and directors of the Company
exercisable over five years at an exercise price of $3.22 per share. The options
were granted to the following individuals: Gerald Smith (1,050,000), Robert H.
Zeiger (50,000), Dennis W. Healey (350,000), Charles F. Fistel (50,000), Peter
D. Fischbein (50,000), Sidney Dworkin (50,000), Jay Haft (50,000), William B.
Saeger (50,000) and Fred D. Hirt (50,000). In addition, between August 1996 and
June 1997, the Company awarded options to purchase up to 459,500 shares of
Common Stock to other employees of the Company (inclusive of 250,000 shares to
Charles F. Fistel), which options are exercisable at prices ranging from $1.97
to $3.69 per share during the five-year term of the options.
On October 6, 1995, the Board of Directors awarded options to purchase
2,935,000 shares of Common Stock to the officers, directors and key employees of
the Company exercisable of $0.50 per share at any time on or prior to October 6,
2000. The options were granted to the following individuals: Gerald Smith
(1,600,000), Robert H. Zeiger (100,000), Dennis W. Healey (500,000), Charles F.
Fistel (110,000), Peter D. Fischbein (225,000), Sidney Dworkin (100,000), Jay W.
Haft (100,000), William B. Saeger (100,000) and to key employees (100,000). In
addition, between October 1995 and June 1996, the Company awarded options to
purchase up to 500,500 shares of Common Stock to other employees of the Company,
which options are exercisable at prices ranging from $0.50 to $5.90 per share
during the five-year term of the options.
In June 1995, the Company issued 33,000 Incentive Stock Options to
non-executive employees under the 1995 Plan. The options granted vest over
different periods not exceeding two years.
In May 1995, the Company issued options to purchase 1,000,000 shares to Mr.
Robert H. Zeiger, former Chief Executive Officer, and a Director, pursuant to an
Employment Agreement. Under the terms of the Agreement, 500,000 options became
exercisable in May 1996 and 500,000 options became exercisable in May 1997. The
options carry a five year term and are exercisable at $.96 per share, which
represented the market value of the Common Stock at the date of grant.
In August 1994, the Company issued five-year options to purchase an
aggregate of 350,000 shares exercisable at $1.00 per share which were divided
equally among the seven directors of the Company (one of whom subsequently
resigned). In addition, between May 1994 and March 1995, the Company issued
five-year options to purchase an aggregate of 570,000 shares of Common Stock at
exercise prices ranging from $.62 to $1.00 per share to six key employees.
13
<PAGE> 15
PERFORMANCE GRAPH -- STOCKHOLDER RETURN
ON COMMON STOCK
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG VIRAGEN, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
(PERFORMANCE GRAPH)
- ----------------------
* $100 INVESTED ON 6/30/93 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 8, 1995, the Company consummated an Agreement and Plan of
Reorganization with Sector Associates, Ltd. (the former name for Viragen
(Europe), Ltd.) ("VEL") pursuant to which VEL acquired 100% of the outstanding
capital stock of Viragen (Scotland) Ltd. in exchange for which Viragen received
newly issued shares of convertible securities of VEL which represented
approximately 94% of the then issued and outstanding capital of VEL. Prior
thereto, on July 12, 1995, Viragen Technology, Inc., a wholly-owned subsidiary
of the Company, entered into a License Agreement with VSL pursuant to which VSL
obtained certain exclusive rights applicable to the EU countries and
none-exclusive rights throughout the world (except within the United States and
its territories) to engage in the manufacture and distribution of certain
proprietary products and technologies relating to the therapeutic application of
human Leukocyte interferon. The term of the license is for 15 years, which is
automatically renewed for successive 15-year periods. At the present time, the
Company maintains an 87% capital stock interest in VEL, which in turn owns all
of the capital stock of VSL.
14
<PAGE> 16
Messrs. Gerald Smith and Dennis W. Healey, who are principal executive
officers with the Company, also serve as the principal executive officers of
VEL. Messrs. Smith and Healey also serve as principal executive officers of the
Company's majority-owned subsidiary Viragen U.S.A., Inc. Commencing in July
1996, following his resignation from Medicore and subsidiaries, Mr. Healey who
is serving as VEL's Executive Vice President, Treasurer and Secretary, began
receiving an annual salary of $85,000 per year from VEL. On March 1, 1997,
Messrs. Smith and Healey entered into two year employment agreements,
subsequently amended, with VEL until terms similar to their employment
agreements with the Company. The Agreements provide for annual salaries of
$72,000 and $52,000, respectively. In November 1995, VSL issued options to
purchase 100,000 share of each of its Common Stock to Messrs. Smith, Zeiger
(former VEL Director) and Healey, which following the consummation of the Sector
reorganization agreements, were converted into options to purchase and aggregate
of 300,000 shares of Common Stock of VEL exercised at $.001 per share. All of
such options were exercised on January 31, 1996.
On April 25, 1997, the Company loaned William Saeger, a former Director
$100,000, receiving a one year Promissory Note bearing interest at 8 1/2%. In
April 1998, Mr. Saeger defaulted on the Note. Due to a subsequent deterioration
in Mr. Saeger's health and financial condition, the Company was unable to
ascertain the amounts, if any, which could ultimately be realized on the
Promissory Note. Accordingly, the entire amount due under the Note with related
accrued interest of approximately $10,000 was written-off as uncollectible at
June 30, 1998.
On September 1, 1998, Messrs. Smith and Healey each exercised 250,000
options to purchase Common Stock of the Company. The options were exercised
through the issuance of Promissory Notes payable to the Company totaling
$300,000, and related Pledge and Escrow Agreements. The Promissory Notes bear
interest at 5.47%, payable semi-annually and are secured by the underlying
Common Stock purchased, which shares are being held in escrow pending payment of
the related Notes pursuant to the provisions of the Pledge and Escrow
Agreements.
APPROVAL OF NOMINEES
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES FOR THE CLASS A DIRECTORS SET FORTH ABOVE.
APPROVAL OF THE POSSIBLE ISSUANCE OF IN EXCESS OF
19.99% OF THE PRESENTLY ISSUED AND OUTSTANDING
COMMON STOCK OF THE COMPANY.
On March 17, 1999, we entered into a purchase agreement (the "Agreement")
with The Isosceles Fund ("Isosceles") and Cefeo Investments Limited ("Cefeo").
The Agreement:
- 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
"Warrant aggregate");
- 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;
- 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
- 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.
At the same time we executed the Agreement, we entered into a Memorandum of
Agreement with Isosceles which gives the Company the option, subject to the
Company's complying with certain conditions, to
15
<PAGE> 17
sell Isosceles an aggregate of up to $7,000,000 of promissory notes and warrants
materially identical to the Notes and Warrants.
The Board has unanimously approved and recommended for submission to the
stockholders of the Company the ratification and confirmation of the
transactions set forth in the Agreement and the Memorandum of Agreement and the
issuances of the shares of Common Stock issuable upon conversion or exercise of
the notes and warrants issued pursuant thereto. Pursuant to Rule 4460(i)(1)(D)
of the Nasdaq Stock Market, Inc. ("Rule 4460(i)(1)(D)"), the Company is required
to obtain Stockholder approval in connection with any transaction, other than a
public offering, which involves the issuance by the Company of Common Stock (or
securities convertible into or exercisable for Common Stock) at a price below
market value which equals 20% or more of the Common Stock of the Company
outstanding before the issuance of such securities. Inasmuch as the number of
shares of Common Stock of the Company to be issued pursuant to the Agreement and
the Memorandum of Agreement will be determined at the time of conversion is
based on a conversion factor calculated on the market price of the Company's
Common Stock as described below, the exact number of shares of Common Stock to
be received pursuant to the Agreement cannot be currently determined, but could
possibly exceed such 20% limitation.
Accordingly, the Board has determined to obtain ratification and
confirmation of the shares issuable upon conversion and exercise of the Notes
and Warrants and the notes and warrants issued pursuant to the Memorandum of
Agreement in order to avoid a possible conflict with Rule 4460(i)(1)(D), which
could possibly result in the removal of the Company's Common Stock from
inclusion on the Nasdaq National Market.
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 June 30, 1999 (the "Registration Period").
Mandatory Redemption. If we do not obtain the approval of our stockholders
to complete up to a 1 to 8 reverse stock split of our outstanding common stock
by May 30, 1999, subsequently amended to June 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:
- conversion of the remaining Note(s);
- re-sale of the Conversion Shares;
- issuance of the Additional Shares (as defined below); and
- 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 Pre-Payment 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 per share(the "Conversion Price") will
be the lesser of (a) $0.644 (the "Closing Market Price") 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 be
determined by dividing the principal balance and accrued interest on the Notes
by the respective Conversion Price.
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<PAGE> 18
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.
In addition to the Late Fee, 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 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
699,029 shares of our common stock subject to adjustment (the "Warrant Shares").
The placement agent also received 155,339 warrants. The Warrants are exercisable
until March 17, 2004. Subject to certain adjustments, the Warrants are
exercisable at $0.77, 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 are required to pay the
Warrant holders a
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<PAGE> 19
fee of up to $2,500 per day if we do not deliver the Warrant Shares within three
trading days after the Warrant as specified.
REGISTRATION RIGHTS
If any of the following events occur we will be required to pay Isosceles
and Cefeo an additional fee.
i. We fail to have a registration statement registering the shares of
Common Stock issuable on the exercise or conversion of the notes and
warrants effective on or before June 30, 1999;
ii. We fail to maintain the effectiveness of the registration
statement registering such shares; or
iii. Our Common Stock is de-listed from trading on NASDAQ.
The amount of the fee for each separate default is two percent (2%) of the
principal amount of the Notes converted plus the exercise price paid for
Warrants exercised plus the principal amount of outstanding unconverted Notes.
We are also obligated to redeem all notes, warrants and common stock issued
upon exercise or conversion of either Notes or Warrants if, beginning September
13, 1999, the registration statement ceases to be effective for a period of 30
consecutive business days or 60 business days during any 12 month period.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE POSSIBLE ISSUANCE OF IN EXCESS OF 19.99% OF THE PRESENTLY ISSUED AND
OUTSTANDING COMMON STOCK OF THE COMPANY PURSUANT TO THE AGREEMENT AND THE
MEMORANDUM OF AGREEMENT.
AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT UP TO A 1-FOR-8 REVERSE
STOCK SPLIT OF OUR OUTSTANDING COMMON STOCK AND SIMULTANEOUSLY
REDUCE THE NUMBER OF SHARES OF COMMON STOCK, DEPENDING UPON A
DETERMINATION BY THE BOARD THAT A REVERSE STOCK SPLIT IS IN OUR BEST
INTEREST AND OUR STOCKHOLDERS.
On January 29, 1999, our Board of Directors voted unanimously to authorize
and recommend that our shareholders approve a proposal to effect up to a 1-for-8
reverse stock split (the "Reverse Stock Split") of our Common Stock that may be
effected in one or more increments by our Board depending on market conditions
at any time or from time-to-time, until the 1999 Annual Meeting. Pursuant to the
Reverse Stock Split, each eight (or such lesser number of as the Board of
Directors deems appropriate) of the outstanding shares of our Common Stock on
the date of the Reverse Stock Split (the "Old Shares") will be automatically
converted into one share of our Common Stock (the "New Shares"). Simultaneously
with the effectuation of the Reverse Stock Split, we will reduce the number of
shares of our Common Stock we are authorized from 75,000,000 shares to
50,000,000 shares (the "Reduction") in the event of a 1-for-8 reverse stock
split. In the event of a reverse stock split of less than 1-for-8, the Reduction
will be proportionate to the reverse split. Accordingly, if the Company were to
undertake a 1-for-2 reverse split, the number of authorized shares of Common
Stock will be reduced to 68,750,000 shares. The Reverse Stock Split and
Reduction, if authorized by our stockholders, will be effected only upon a
determination by our Board of Directors to such effect, that the Reverse Stock
Split and Reduction will result in the greatest marketability and liquidity of
our Common Stock, based upon the prevailing market conditions, the likely effect
on the market price of our Common Stock and other relevant factors. The Reverse
Stock Split and Reduction will become effective upon filing of a Certificate of
Amendment (the "Certificate of Amendment") to our Certificate of Incorporation
with the Delaware Secretary of State, but our Board of Directors reserves the
right not to implement the Reverse Stock Split and Reduction and make such
filing if it deems it appropriate not to do so.
PURPOSE AND EFFECT OF PROPOSED REVERSE STOCK SPLIT AND THE REDUCTION
The Board believes the Reverse Stock Split may be desirable because it will
assist us in continuing to meet the requirements for continued listing on the
Nasdaq Stock Market's National Market ("Nasdaq") by helping to raise the trading
price of our Common Stock. One of the key requirements for continued listing on
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<PAGE> 20
Nasdaq is that our Common Stock must maintain a minimum bid price above $1.00
per share. We were notified by Nasdaq that we were not in compliance with the
listing rules because the closing minimum bid price per share of our Common
Stock has remained below $1.00 for 30 consecutive business days. While we had
anticipated that with the elimination of the overhand overlong represented by
the existence of shares of convertible preferred stock would improve the price
level of our Common Stock, our Common Stock price level has still not recovered
sufficiently in the short term. In addition our Board also believes that the
higher share price which should result from the Reverse Stock Split will help
generate interest in us among investors.
The effect of the Reverse Stock Split upon the market price for our Common
Stock cannot be predicted. There can be no assurance that the market price per
New Share of our Common Stock after the Reverse Stock Split will rise in
proportion to the reduction in the number of Old Shares of our Common Stock
outstanding resulting from the Reverse Stock Split, or that such price will
either exceed or remain in excess of the $1.00 minimum bid price as required by
Nasdaq. The market price of our Common Stock may also be based on our
performance and other factors, some of which may be unrelated to the number of
shares outstanding.
The Reverse Stock Split will effect all of our stockholders uniformly and
will not affect any stockholder's percentage ownership interests in us or
proportionate voting power, except to the extent that the Reverse Stock Split
results in any of our stockholders owning a fractional share. In lieu of issuing
fractional shares, we will issue any stockholder who otherwise would have been
entitled to receive a fractional share as a result of the Reverse Stock Split
one Share of our Common Stock.
The Reverse Stock Split would have the following effects upon the number of
shares of our Common Stock outstanding and the number of authorized and unissued
shares of our Common Stock. Upon the effectiveness of the Reverse Stock Split,
the number of shares owned by each holder of Common Stock will be reduced by the
ratio of 8 to 1 (or such lesser ratio as the Board of Directors deems
appropriate) shares of Common Stock he or she owned immediately prior to the
Reverse Stock Split. If the Board chooses to effectuate the Reverse Stock Split,
the Board will simultaneously reduce the number of shares of common stock we are
authorized to issue to 50,000,000 shares if it effects a 1 for 8 reverse split
and proportionately for a lesser Reverse Stock Split. The per share loss and net
book value of our Common Stock will be increased because there will be fewer
shares of our Common Stock outstanding.
Assuming a 1-for-8 Reverse Stock Split, the principal effect of the Reverse
Stock Split and the Reduction will be that (i) the number of shares of Common
Stock issued and outstanding will be reduced from 65,605,012 shares to
approximately 8,200,627 shares, (ii) the Reduction would result in the number of
shares of Common Stock we are authorized to issue being reduced from 75,000,000
to 50,000,000; (iii) all outstanding shares of Series A Preferred Stock and
Series I Preferred Stock entitling holders thereof to receive, upon conversion,
shares of Common Stock will enable such holders to receive, upon conversion
thereof, the same percentage of outstanding shares of Common Stock which such
holders would have received upon conversion thereof immediately preceding the
Reverse Stock Split, (iv) all outstanding options and warrants entitling the
holders thereof to purchase shares of Common Stock will enable such holders to
purchase, upon exercise of their options, one-eighth of the number of shares of
Common Stock which such holders would have been able to purchase upon exercise
of their options immediately preceding the Reverse Stock Split at the same
aggregate price required to be paid therefor upon exercise thereof immediately
preceding the Reverse Stock Split, and (v) the number of shares included in the
our 1997 Amended Stock Option Plan and 1995 Amended Stock Option Plan will be
reduced to one-eighth of the number of shares currently included in such Stock
Option Plans. Options held by officers and directors of the Company will be
similarly effected.
Pursuant to the Reverse Stock Split, the par value of the Common Stock will
remain $.01 per share. As a result, on the effective date of the Reverse Stock
Split, the stated capital on our balance sheet attributable to the Common Stock
will be reduced to one-eighth of its present amount (assuming a 1-for-8 Reverse
Stock Split), and the additional paid-in capital account shall be credited with
the amount by which the stated capital is reduced.
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<PAGE> 21
MANNER OF EFFECTING THE REVERSE STOCK SPLIT, THE REDUCTION AND THE EXCHANGE
STOCK CERTIFICATES
In the event our stockholders approve the Reverse Stock Split and the
Reduction and following the determination by our Board of whether or not the
Reverse Stock Split and Reduction should be effected, the Reverse Stock Split
and the Reduction will be effected by the filing of the Certificate of Amendment
with the Secretary of the State of Delaware. The Reverse Stock Split and the
Reduction will become effective on the date of filing the Certificate of
Amendment unless we specify otherwise (the "Effective Date"). As soon as
practicable after the Effective Date, we will send a letter of transmittal to
each holder of record of Old Shares outstanding on the Effective Date. The
letter of transmittal will contain instructions for the surrender of
certificates representing the Old Shares. Upon proper completion and execution
of the letter of transmittal and return thereof, together with certificates
representing Old Shares, a stockholder will be entitled to receive a certificate
representing the number of New Shares into which his Old Shares have been
reclassified as a result of the Reverse Stock Split. Stockholders should not
submit any certificates until requested to do so. No new certificate will be
issued to a stockholder until such stockholder has surrendered his outstanding
certificates together with the properly completed and executed letter of
transmittal. Until so surrendered, each outstanding certificate representing Old
Shares will be deemed for all corporate purposes after the Effective Date to
evidence ownership of New Shares in the appropriately reduced number.
NO RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law, our dissenting stockholders are
not entitled to appraisal rights with respect to our proposed amendment to the
Charter to effect the Reverse Stock Split and the Reduction, and we will not
independently provide our stockholders with any such right.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
We believe that the federal income tax consequences of the Reverse Stock
Split to holders of Old Shares and holders of New Shares will be as follows:
1. Except as set forth in (5) below, no gain or loss will be
recognized by a stockholder on the surrender of the Old Shares or receipt
of a certificate representing New Shares.
2. Except as set forth in (5) below, the aggregate tax basis of the
New Shares will equal the aggregate tax basis of the Old Shares exchanged
therefor.
3. Except as set forth in (5) below, the holding period of the New
Share will include the holding period of the Old Shares if such Old Shares
were held as capital assets.
4. The conversion of the Old Shares into the New Shares will produce
no gain or loss to us.
5. The federal income tax consequences of the receipt of an additional
hare in lieu of a fractional interest is not clear but may result in tax
liabilities which should not be material in amount in view of the low value
of the fractional interest.
Our beliefs regarding, the tax consequence of the Reverse Stock Split are
not binding upon the Internal Revenue Service or the courts, and there can be no
assurance that the Internal Revenue Service or the courts will accept the
positions expressed above.
This summary does not purport to be complete and does not address the tax
consequences to holders that are subject to special tax rules, such as bank,
insurance companies, regulated investment companies, personal holding companies,
foreign entities, nonresident foreign individuals, broker-dealers and tax exempt
entities.
The state and local tax consequences of the Reverse Stock Split may vary
significantly as to each stockholder, depending upon the state in which he
resides.
The foregoing summary is included for general information only.
Accordingly, stockholders are urged to consult their own tax advisors with
respect to the Federal, State and local tax consequences of the Reverse Stock
Split.
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<PAGE> 22
Approval of the Reverse Stock Split and Reduction will require the
affirmative vote of a majority of the outstanding shares of our Common Stock.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
REVERSE STOCK SPLIT AND REDUCTION.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
IF THE REVERSE STOCK SPLIT AND THE REDUCTION ARE NOT IMPLEMENTED
If the Board does not effectuate the Reverse Stock Split and the Reduction,
the Board of Directors will vote to amend the Company's Certificate of
Incorporate to increase the authorized shares of Common Stock, par value $.01
per share, from 75,000,000 to 125,000,000 shares (the "Amendment"). The Board of
Directors determined that such Amendment is advisable and directed that the
proposed Amendment be considered at the Annual Meeting of Stockholders to be
held on June 29, 1999. The Amendment will not effect the number of shares of
Preferred Stock authorized.
The Board of Directors believes that an increase in authorized capital may
be desirable for a number of reasons, including but not limited to, facilitating
the ability of the Company to effect growth through future acquisitions and
financings, future stock splits or dividends for other corporate purposes.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock is required for approval of the Amendment. If the
Amendment is approved by the Stockholders, the Amendment will become effective
upon the filing with the Secretary of State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AND AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
THE COMPANY IS AUTHORIZED TO ISSUE FROM 75,000,000 TO 125,000,000 IF THE REVERSE
STOCK SPLIT AND THE REDUCTION ARE NOT IMPLEMENTED.
APPOINTMENT OF THE COMPANY'S AUDITORS
The appointment of Ernst & Young LLP as independent auditors of the Company
for the fiscal year ended June 30, 1999, will be submitted for ratification by
the stockholders.
Although the Board of Directors of the Company is submitting the
appointment of Ernst & Young LLP for stockholder approval, it reserves the right
to change the selection of Ernst & Young LLP as auditors, at any time during the
fiscal year, if it deems such change to be in the best interest of the Company,
even after stockholder approval. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING JUNE 30, 1999.
INTEREST OF CERTAIN PERSONS IN
OPPOSITION TO MATTERS TO BE ACTED UPON
The Company is not aware of any substantial interest, direct or indirect,
by securities holdings or otherwise of any officer, director, or associate of
the foregoing persons in any matter to be acted on, as described herein, other
than elections to offices.
OTHER MATTERS
Management is not aware of any other business which may come before the
meeting. However, if additional matters properly come before the meeting,
proxies will be voted at the discretion of the proxy holders.
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<PAGE> 23
STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT THE
COMPANY'S NEXT ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders of the Company must be received by the Company, at its principal
executive offices not later than February 8, 2000 or if the Company's 1999
Annual Meeting of Stockholders differentiates more than 30 days from the date of
the 1998 Annual Meeting, then a reasonable time before the Company prints and
mails its proxy materials for the 1999 Annual Meeting, for inclusion in the
Proxy Statement and Proxy relating to the 1999 Annual Meeting of Stockholders.
Any such proposal will be subject to the Company's Bylaws and 17 C.F.R
sec.240.14a-8 of the Rules and Regulations under the Securities Act of 1933, as
amended.
In addition, the proxy solicited by the Board of Directors for the 1999
Annual Meeting of stockholders will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless the Company is
provided with notice of such proposal no later than April 24, 2000, or if the
Company's 1999 Annual Meeting of Stockholders differentiates more than 30 days
from the date of the 1998 Annual Meeting, then a reasonable time before the
Company prints and mails its proxy materials for the 1999 Annual Meeting.
AVAILABILITY OF FORM 10-K/A ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K/A for the year ended
June 30, 1998, has been included with this Proxy Statement, but is exclusive of
certain exhibits filed therewith, including related exhibits as filed with the
Securities and Exchange Commission. These exhibits are available without charge
to stockholders upon request to Gerald Smith, President, 865 S.W. 78th Avenue,
Suite 100, Plantation, Florida 33324.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DENNIS W. HEALEY
------------------------------------
Dennis W. Healey, Secretary
Plantation, Florida
June 4, 1999
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<PAGE> 24
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
VIRAGEN, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- JUNE 29, 1999
The undersigned, revoking all previous proxies, hereby appoint(s) Gerald Smith
as Proxy, with full power of substitution, to represent and to vote all Common
Stock of Viragen, Inc. owned by the undersigned at the Annual Meeting of
Stockholders to be held in Davie, Florida on June 29, 1999, including any
original or subsequent adjournment thereof, with respect to the proposals set
forth in the Notice of Annual Meeting and Proxy Statement. No business other
than matters described below is expected to come before the meeting, but should
any other matter requiring a vote of stockholders arise, the person named herein
will vote thereon in accordance with his best judgment. All powers may be
exercised by said Proxy. Receipt of the Notice of Annual Meeting and Proxy
Statement is hereby acknowledged.
The Board of Directors recommends a vote FOR each of the following:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR all WITHHOLD
nominees authority
at right to vote
[X] PLEASE MARK 1. To elect 3 directors to the [ ] [ ] NOMINEES: Class A
YOUR Board of Directors, who Directors
VOTES AS IN will be classified as Class Sidney Dworkin
THIS A directors, to serve for Charles J. Simons
EXAMPLE the term of their designated Robert Salisbury
class and until their
successors have been elected
and qualified.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, PLEASE DRAW A LINE THROUGH THAT
NOMINEE'S NAME)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
2. To approve the possible [ ] [ ] [ ] 3. To authorize the Board of [ ] [ ] [ ]
issuance of in excess of Directors to effect up to a
19.99% of the presently 1-for-8 reverse stock
issued and outstanding split of the Company's
Common Stock of the outstanding Common Stock
Company for purposes of and simultaneously
complying with the NASDAQ therewith reduce the
Stock Market, Marketplace number of shares of
Rule 4460(i)(1)(D). Common Stock the Company
is authorized to issue.
</TABLE>
(Continued and to be signed on reverse side)
<TABLE>
<S> <C>
------------
SEE REVERSE
SIDE
------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
4. In the event the Board of [ ] [ ] [ ] 5. To ratify the appointment [ ] [ ] [ ]
Directors decides not to of the Company's independent
implement the auditors.
aforementioned reverse
stock split and reduction
in capital to amend the
Company's Certificate of
Incorporation to increase
the number of authorized
shares of Common Stock of
the Company.
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2, PROPOSAL 3, PROPOSAL 4 AND
PROPOSAL 5.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement and hereby revokes any proxy or
proxies heretofore given. This proxy may be revoked at any time prior to the
Annual Meeting. If you received more than one proxy card, please date, sign and
return all cards in the accompanying envelope.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation or other
entity, please sign in the corporate name by President or other authorized
officer or person. If a partnership, please sign in partnership name by
authorized person.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED
ENVELOPE.
--------------------------------
Signature
--------------------------------
Signature If Held Jointly
--------------------------------
(Please Print Name)
--------------------------------
Number of Shares Subject to
Dated: Proxy
------------------- , 1999
