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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_______
Date of Report (Date of earliest event reported) December 8, 1995
------------------------------
SECTOR ASSOCIATES, LTD.
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(Exact name of registrant as specified in its charter)
Delaware 017827 11-2788282
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(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
2343 West 76th Street, Hialeah, Florida 33016
---------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 557-6000
-------------------------
401 City Avenue, Suite 725, Bala Cynwyd, PA 19004
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
On September 20, 1995, Sector Associates, Ltd. (the "Company")
entered into an Agreement and Plan of Reorganization ("Agreement") pursuant to
which the Company agreed to acquire 100% of the issued and outstanding stock of
Viragen (Scotland) Limited, a Scottish private limited company ("VSL"), in
exchange for the distribution to Viragen, Inc. ("Viragen"), the sole
stockholder of VSL, of newly-issued shares of convertible preferred stock that
upon conversion will represent 78,400,000 shares of Common Stock of the Company
or approximately 94% of the outstanding capital stock interest of the Company.
On November 8, 1995, the Company, VSL, and Viragen entered
into an Amendment to Agreement and Plan of Reorganization (the "Amendment") to
extend the Closing Date to December 8, 1995. Additionally, the Amendment
provided for an interim loan of $500,000 to VSL which is to be deemed satisfied
at the Closing. The Amendment also provided for an additional cash
contribution of $300,000 by the Company, payable at Closing.
On December 8, 1995, the consummation of the transactions
contemplated by the Agreement and the Amendment occurred, all consideration was
paid by the parties and Viragen is currently the owner of approximately 94% of
the outstanding capital stock interest of the Company. Upon Closing, Mr.
Andrew Panzo resigned as the President and a director of the Company and Mr.
Gerald Smith was elected as the President and a director of the Company. Ms.
Cecile Coady resigned as the treasurer of the Company, but shall continue as
the Secretary of the Company and a member of the board of directors.
The foregoing summary of the Agreement and the Amendment is
qualified in its entirety by reference to the Agreement and the Amendment,
copies of which follow as exhibits hereto and incorporated herein by reference.
Item 2. Acquisition or Disposition of Assets.
As described in Item 1 above, the Company entered into the
Agreement and Amendment with VSL and Viragen. In consideration of these
agreements, the Company (i) issued 2,000,000 shares of Series B Convertible
Preferred Stock (the "Series B Preferred Stock") that upon conversion will
represent 78,400,000 shares of Common Stock of the Company or approximately 94%
of the outstanding capital stock interest of the Company, (ii) cancelled the
Secured Promissory Note described in Item 1 above; and (iii) paid the
additional cash contribution of $300,000 and VSL became a wholly-owned
subsidiary of the Company.
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Through an exclusive license granted by Viragen Technology,
Inc., a wholly owned subsidiary of Viragen, VSL has secured certain exclusive
rights applicable to the European Union countries to engage in the research,
development and manufacture of certain proprietary products and technologies
that relate to the therapeutic application of human leukocyte interferon.
Pursuant to these rights, on July 20, 1995, VSL entered into a License and
Manufacturing Agreement with the Common Services Agency of Scotland (the
"Agency"), an agency acting on behalf of the Scottish National Blood
Transfusion Service ("SNBTS") pursuant to which SNBTS, on behalf of VSL, will
manufacture VSL's natural human interferon product for exclusive distribution
within the European Union and non-exclusively worldwide at an agreed upon
purchase price based upon SNBTS' costs and other considerations including
preferential access to the drug for Scottish patients at a preferential price.
VSL is a newly-formed subsidiary of Viragen, Inc., which commenced operations
concurrent with the execution of its agreement with the SNBTS. VSL had no
material assets or liabilities as of September 20, 1995. Viragen, Inc. is a
publicly-held company.
The term of the License and Manufacturing Agreement is for a
five-year period with two additional five- year extension terms at the option
of VSL. The Agreement also contains provisions protecting proprietary rights
of VSL and Viragen and the preclusion of certain competitive activities by the
Agency.
VSL has been organized by Viragen to manufacture its natural
alpha interferon and produced in the European Union ("EU") and other countries
outside the United States. Viragen has transferred patent and related
proprietary rights associated with the production of its natural interferon
("Product") and related technology to VSL for this purpose. The Agency has
committed to manufacture the Product in sufficient scale to accommodate the EU
clinical trials and, subsequently, for limited commercial sales in amounts to
be agreed upon by the parties. The Agency on behalf of VSL is also expected to
conduct certain studies relevant to the Product and cooperate with VSL and
Viragen to enable them to comply with the laws and regulations of the EU in
connection with the laws and regulations of the EU's regulatory authorities in
connection with the production, clinical trials and distribution of the
Product.
VSL and Viragen Technology, Inc., will be establishing it's
own manufacturing facility on the SNBTS campus and pursuant to the License and
Manufacturing Agreement, will provide the Agency with full access to the
proprietary technology and specialized equipment, provide suitable training to
the Agency's personnel and defray all costs associated with securing permits
and regulatory approvals, augmenting the Agency's facilities as if necessary,
to manufacture the Product and secure documentation substantiating compliance
of the Product with United Kingdom and/or EU regulatory requirements. The
Agency will receive compensation for Products manufactured for use in clinical
trials in the EU, for Products manufactured for sales prior to obtaining new
drug application approval, and for sales following such approval, at varying
percentages in
3
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relation to manufacturing costs. Products manufactured and utilized for
humanitarian purposes or for medical use by Scottish patients will be made at
substantially discounted prices.
In order to conduct clinical trials, the Scottish
manufacturing plant must be approved by UK and/or EU regulatory authorities
under approved manufacturing Standard Operating Procedures ("SOPS"). Viragen
has engaged professionally recognized consultants familiar with the European
regulatory process to assist in all matters prerequisite to UK and/or EU
approval. The SNBTS will provide its best efforts, working in conjunction with
Viragen, in assisting VSL in a manufacturing license and subsequent product
approval at the conclusion of the EU and/or UK clinical studies. At such time
as the SNBTS obtains a manufacturing license for its Product, Viragen intends
to seek U.S. FDA manufacturing approval of the Scottish manufacturing facility.
There can be no assurance or guarantee that the EU and/or UK regulators will
approve the manufacturing facility or permit clinical testing and distribution
of Viragen's product within the EU and/or UK, or that within the United States
the FDA will license or approve the Scottish manufacturing facility or
Viragen's Product for clinical trials and subsequent distribution in the United
States.
Viragen's Product is a natural human leukocyte alpha
interferon. Medical studies show that natural interferon is a group of
proteins that inhibit malignant cell growth without materially interfering with
normal cells. Natural interferon stimulates and modulates the human immune
systems and, in addition, impedes the growth and propagation of various
viruses. The Product is a natural product procured from human white blood
cells. Omniferon(TM) is the tradename for Viragen's Product in injectable
form. Viragen has primarily been working with human leukocyte alpha interferon
which is one of the body's natural defenses to foreign substances such as
viruses, and is so named because it "interferes" with viral growth. Interferon
consists of multiple protein molecules that include anti-viral, anti-tumor and
immunomodulatory responses in the body.
There are two basic types of alpha interferon differentiated
primarily by their method of manufacturer and resultant composition. The
first, as produced by Viragen, is natural, human leukocyte alpha interferon
produced by stimulated human white blood cells. The human white blood cells are
cultivated and stimulated by the introduction of an FDA approved harmless virus
that induces the cells to produce natural interferon which, importantly,
contains multiple subtypes. The natural interferon is then extracted and
purified by special processes to produce a highly concentrated product for
clinical use. The second, recombinant alpha interferon, is a genetically
engineered synthetic interferon produced by recombinant DNA techniques
("Synthetic Interferon") (not from human leukocytes) and contains only one
subtype.
Studies have indicated that there may be significant
differences between the use of Natural Interferon and Synthetic Interferon.
Medical studies have found that treatment with Synthetic Interferon in certain
cases may cause an immunological response
4
<PAGE> 5
("Neutralizing and/or Binding Antibodies") that reduces the effectiveness of
the treatment in a segment of the patient population. Viragen believes that
the production of Neutralizing and/or Binding Antibodies is virtually
non-existent in patients treated with Natural Interferon. Furthermore,
primarily due to other differences including dosage requirements (less of the
natural product may be required to treat the subject diseases), the side
effects of treatment with Natural Interferon, in most instances, appears to be
far less severe.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of VSL are not available at the
time of the filing of this Form 8-K Report. Such
required financial statements will be filed no later
than 60 days after this Report on Form 8-K is filed.
(b) Pro Forma financial information of VSL is not
available at the time of the filing of this Form 8-K
Report. The required pro forma financial statements
will be filed not later than 60 days after this
Report on Form 8-K is filed.
Exhibit 2(a) The Agreement and Plan of Reorganization dated as of
September 20, 1995, by and among Sector Associates,
Ltd., Viragen (Scotland) Limited, and Viragen, Inc.
Exhibit 2(b) The Amendment to Agreement and Plan of Reorganization
dated November 8, 1995, by and among Sector
Associates, Ltd., Viragen (Scotland) Limited, and
Viragen, Inc. and Exhibits thereto.
Exhibit 99 Letter Agreement dated November 7, 1995, between
Viragen, Inc. and FAC Enterprises, Inc. wherein FAC
Enterprises, Inc. agreed to identify a public
corporation to acquire Viragen (Scotland) Ltd.
5
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECTOR ASSOCIATES, LTD.
By:/s/Gerald Smith
------------------------------------
Gerald Smith, President
DATED: December 18, 1995
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EXHIBIT 2(a)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. DELIVERY OF SHARES AND POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE AND THE STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . 3
4.1 Organization of Acquiree and Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Binding Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Capitalization of the Acquiree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Business of Acquiree; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5.1 Business of Acquiree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5.2 Acquiree Newly Formed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5.3 Financial Statements of Acquiree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Securities Exchange Act of 1934 Reports; Registration Statement . . . . . . . . . . . . . . . . . . 5
4.7 Exclusive License Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.8 Assignment of Proprietary Technologies and Products . . . . . . . . . . . . . . . . . . . . . . . . 6
4.9 Proprietary Technologies and Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.10 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.11 Obligations; Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.12 Adverse Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.13 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.14 Management Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. REPRESENTATIONS OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Binding Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Shares to be Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Capitalization of the Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 Securities Exchange Act of 1934 Reports; Financial Statements; Other Financial Information . . . . 10
5.7 Obligations; Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Adverse Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. COVENANTS OF THE PARTIES TO THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
<S> <C> <C>
7.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 All Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.7 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.9 Investor Representation Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Delivery of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.11 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.12 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.13 Interim Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.14 Shares to be Issued to the Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIREE AND THE STOCKHOLDER . . . . . . . . . . . . . . . . . . 17
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10. CONDITIONS SUBSEQUENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12. NATURE AND SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. DOCUMENTS AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.7 Facsimile Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.9 Binding Effect and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15.12 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
VIRAGEN (SCOTLAND) LIMITED,
SECTOR ASSOCIATES, LTD.
AND
VIRAGEN, INC.
<PAGE> 4
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION dated as of September __,
1995, by and among SECTOR ASSOCIATES, LTD. a Delaware corporation,
(hereinafter "Acquiror"), VIRAGEN (SCOTLAND) LIMITED, a Scottish private
limited company (hereinafter "Acquiree") and VIRAGEN, INC., a Delaware
corporation (the "Stockholder").
W I T N E S S E T H:
WHEREAS, Acquiror is a Delaware corporation that has a class of
securities registered with the Securities and Exchange Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934;
WHEREAS, Stockholder is a Delaware corporation that has a class of
securities registered with the Securities and Exchange Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934;
WHEREAS, Acquiree is a newly formed wholly-owned subsidiary of
Stockholder;
WHEREAS, Stockholder and certain affiliates thereof, have since
inception been engaged in the research, development and manufacture of certain
proprietary products and technologies that relate to the therapeutic
application of human leukocyte interferon to various diseases that affect the
human immune system (the "Proprietary Technologies and Products");
WHEREAS, through a license granted by an affiliate of the Stockholder,
Acquiree has secured certain rights to the Proprietary Technologies and
Products and based upon such rights has entered into an agreement with an
agency on behalf of the Scottish National Blood Transfusion Service ("SNBTS"),
pursuant to which the SNBTS has agreed to, among other things, continue the
development and manufacturing of certain of the Stockholder's Proprietary
Technologies and Products on behalf of Acquiree, under and subject to the terms
of a License and Manufacturing Agreement, attached hereto and made a part
hereof as Exhibit "A" (the "License and Manufacturing Agreement");
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WHEREAS, for good and valid consideration, the receipt and sufficiency
of which is hereby acknowledged, Stockholder, Acquiree and Acquiror seek to
engage in a Plan of Reorganization whereby Acquiror, pursuant to the terms
hereof, shall acquire all of the issued and outstanding common stock of
Acquiree owned by the Stockholder, thus making Acquiree a wholly-owned
subsidiary of Acquiror; and
WHEREAS, in pursuance of such Plan of Reorganization, the Stockholder
has agreed and will, pursuant to the terms hereof, agree to exchange its shares
of Acquiree's common stock for shares of Acquiror's common stock as more
particularly described hereafter.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, intending to be legally bound hereby, the
parties hereto do covenant and agree as follows:
1. PLAN OF REORGANIZATION.
The Stockholder is the owner of one hundred percent (100%) of
the issued and outstanding common stock of Acquiree. It is the intention of
the parties hereto that the shares of common stock of Acquiree (the "Acquiree
Shares") shall be acquired by Acquiror in exchange solely for Acquiror voting
preferred stock subject to the terms and conditions herein stated in this Plan
of Reorganization.
2. EXCHANGE OF SHARES.
2.1 Under and subject to the terms of this Plan of
Reorganization, upon the "Closing Date" (as hereinafter defined), the Acquiror
shall issue an aggregate of 2,000,000 shares of its newly designated Class B
Convertible Preferred Stock to the Stockholder (the "Acquiror Shares") in
exchange for one hundred percent (100%) of the common stock of Acquiree held by
the Stockholder (the "Acquiree Shares"). The terms and conditions of the Class
B Convertible Preferred Stock are set forth upon Exhibit F, attached hereto and
made a part hereof.
2.2 The Acquiror Shares will permit the Stockholder to
convert into 84,507,976 shares of common stock of the Acquiror (that number of
shares of common stock of the Acquiror that as of the Closing Date would
constitute approximately ninety-four (94%)
2
<PAGE> 6
percent of the issued and outstanding shares of common stock of the Acquiror)
following the effective date of those transactions identified at Paragraph 10.2
hereafter, and represent the consideration that Acquiror is giving for the
Acquiree Shares (as set forth above), and the Stockholder agrees to accept the
Acquiror Shares in full, complete and final exchange for the Acquiree Shares.
3. DELIVERY OF SHARES AND POWERS OF ATTORNEY.
On or at the Closing Date, the Stockholder will deliver
certificates representing the Acquiree Shares, duly endorsed or accompanied by
duly executed stock powers with signatures guaranteed, so as to render Acquiror
the sole holder thereof, free and clear of all liens, levies, pledges, claims,
encumbrances, warrants, options, mortgages, security interests and rights of
others; and on such Closing Date, the delivery of the Acquiror Shares, which
will be appropriately restricted as to transfer, as set forth at Paragraph 7.14
hereof, will be made to the Stockholder as set forth herein. The Acquiree
Shares to be delivered to Acquiror and the Acquiror Shares to be delivered to
Stockholder shall be restricted as to transfer, as set forth at Paragraph 7.14,
such shares having not been subject to registration with the United States
Securities and Exchange Commission ("SEC").
4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIREE AND THE
STOCKHOLDER.
The Acquiree and the Stockholder do hereby jointly and
severally represent, warrant and covenant to the Acquiror, as an inducement for
the Acquiror to enter into this Plan of Reorganization and to consummate the
transactions contemplated hereby, that, as of the date hereof:
4.1 Organization of Acquiree and Stockholder. Each of
the Acquiree and Stockholder is a corporation duly organized, validly existing
and in good standing under the laws of Scotland and Delaware, respectively; is
duly qualified to do business and in good standing in each other jurisdiction
in which such qualification is necessary; and, has the requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted.
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4.2 Binding Plan of Reorganization. This Plan of
Reorganization constitutes the valid and binding obligations of the Stockholder
and Acquiree, enforceable against each of them in accordance with its terms.
The Acquiree and the Stockholder have all requisite power and authority to
execute and deliver this Plan of Reorganization, and to consummate the
transactions contemplated thereby. Neither the execution and delivery of this
Plan of Reorganization, nor the consummation of the transactions contemplated
thereby will: (a) violate any provision of the Articles of Incorporation,
Charter and By-Laws of the Acquiree or the Stockholder; (b) violate, conflict
with, or result in the breach or termination of, or otherwise give any other
contracting party the right to terminate, or constitute a material default (by
way of substitution, novation or otherwise) under the terms of any material
contract, franchise, lease, license, agreement or instrument to which the
Acquiree or the Stockholder are a party, all of which shall continue to remain
in full force and effect in accordance with their respective terms following
the consummation of the transactions contemplated thereby; (c) to Acquiree's
and Stockholder's knowledge result in the creation of any lien, charge or
encumbrance upon the properties, assets or other securities of the Acquiree or
the Stockholder; (d) violate any judgment, order, injunction, decree or award
against, binding upon, or effecting the securities, assets, properties,
operations or business of the Acquiree or the Stockholder; or (e) violate any
law or regulation as such law or regulation relates to the securities, assets,
properties, operations or business of the Acquiree or the Stockholder, the
breach of which would have a material adverse effect on the business of the
Acquiree or Stockholder.
4.3 Authority. The execution and delivery of this Plan
of Reorganization and the documents and instruments to be delivered and
executed pursuant thereto, and the consummation of the transactions
contemplated hereby, have been duly authorized by the Board of Directors of
Acquiree and of the Stockholder and no other action or proceedings on the part
of Acquiree or Stockholder is necessary to authorize the execution and delivery
of such agreements or such other documents and instruments necessary or
required to consummate the transactions contemplated hereby and thereby.
4.4 Capitalization of the Acquiree.
The authorized capital stock of the Acquiree consists of 100
shares of common stock, of which 100 shares of common stock are issued and
outstanding on the date hereof (the "Acquiree Shares").
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The Stockholder owns, in the aggregate, one hundred percent (100%) of the
Acquiree Shares, free and clear of any liens, levies, pledges, claims,
encumbrances, warrants, options, mortgages, security interests and rights of
others. The Acquiree Shares are duly authorized, have been validly issued and
fully paid and are non-assessable.
4.5 Business of Acquiree; Financial Statements.
4.5.1 Business of Acquiree. The Acquiree has been
formed as a wholly-owned subsidiary of the Stockholder for the purpose of,
among other things, engaging in the utilization and commercial application of
the Proprietary Technologies and Products, including, but not limited to,
engaging in those activities provided for in the License and Manufacturing
Agreement.
4.5.2 Acquiree Newly Formed
. Acquiree is a newly formed
corporation that, with the exception of information contained within the
Financial Statements or otherwise provided to Acquiror under Schedule 4.5.2,
has no material assets or liabilities, debts or obligations or claims asserted
against it, whether accrued, absolute, contingent or otherwise. Schedule 4.5.2
also includes a list, if applicable, and description of: (i) all pending or
threatened law suits, actions and administrative, arbitration or other similar
legal proceedings and investigations; and (ii) all contracts and agreements of
the Acquiree.
4.5.3 Financial Statements of Acquiree. The
Acquiree will prior to the Closing Date deliver to Acquiror financial
statements representing the financial condition and results of operations of
Acquiree for the period ended June 30, 1995 which shall be attached hereto as
Schedule 4.5.3. The financial statements set forth in Schedule 4.5.3 (in the
aggregate, the "Financial Statements"), shall be accurate and complete and
present fairly and accurately the financial condition, assets, liabilities and
results of operations for the period therein indicated in accordance with
generally accepted accounting principles, consistently applied. Throughout the
periods covered by the foregoing Financial Statements there have been no
changes in accounting principles or practices or their application. The
Financial Statements are accurate and complete, and to the best of
Stockholder's and Acquiree's knowledge and belief, have been prepared and
conform in all material respects with the provisions
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of Item 310 of Regulation S-B ("Regulation S-B"), promulgated under the
Securities Act of 1933, as amended (the "Act").
4.6 Securities Exchange Act of 1934 Reports;
Registration Statement.
4.6.1 The Stockholder has heretofore delivered to
the Acquiror a true and complete copy of its Annual Report on Form 10-K for the
fiscal year ended June 30, 1994, as well as most recent Quarterly Report on
Form 10-QSB for the fiscal quarter ended March 31, 1995, (hereinafter referred
to in the aggregate as the "Reports"). A true and correct copy of such Reports
is attached hereto as Schedules 4.6.1(a) and 4.6.1(b). The Reports have been
prepared in compliance with all applicable securities regulations, including
but not limited to the Securities Exchange Act of 1934. These Reports contain
all information required to be included therein, do not contain any untrue
statement of a material fact and do not omit to state a material fact required
to be stated therein or necessary in order to make the statements contained
therein not misleading.
4.6.2 The Stockholder has filed all reports required
to be filed under the Securities Exchange Act of 1934.
4.6.3(a) The Stockholder has prior hereto delivered
to Acquiror a definitive Prospectus dated August 14, 1995 (the "Prospectus").
(b) The Prospectus was prepared by the
Stockholder in conformity with the requirements of the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder. The
Prospectus contained all statements which were required to be stated therein,
did not contain any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary in order to
make the statements contained therein not misleading.
4.7 Exclusive License Rights. The Acquiree has the
exclusive rights, by assignment or by license, to engage in the utilization and
commercial application of the Proprietary Technologies and Products in the
manner and to the extent set forth within the License Agreement between
Acquiree as licensee and Viragen Technology, Inc. (a wholly-owned subsidiary of
Stockholder) as
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"licensor" (the "License Agreement"), a true and correct copy of which is
attached hereto and made a part hereof as Exhibit B.
4.8 Assignment of Proprietary Technologies and Products.
Viragen Technology, Inc. ("VTI") acquired all of the right, title and interest
in and to all of the Proprietary Technologies and Products by virtue of an
assignment from the Stockholder and Vira-Tech, Inc. (a wholly-owned subsidiary
of Stockholder) (the "Assignment"), a true and correct copy of which is
attached hereto and made a part hereof as Exhibit "C". For this purpose, the
term "Proprietary Technologies and Products" shall include any and all
information, confidential or otherwise, trade secrets, proprietary material and
information, fabrications, production materials or data, designs, drawings and
techniques, formulations and know-how utilized in connection with the business
of Stockholder, Acquiree and any affiliates thereof; any patents, registered
trademarks, service marks, copyrights or applications therefor, owned, licensed
or utilized by the Stockholder, Acquiree and any affiliates thereof as defined
in the Assignment.
4.9 Proprietary Technologies and Products. To the best
knowledge of Stockholder and Acquiree; (i) The development and use of the
Proprietary Technologies and Products does not infringe upon or conflict with
the rights of any third party; (ii) no proceeding has been instituted,
threatened, nor has any claim been made, alleging an infringement or violation
of the rights of any third party in connection with the ownership, licensure or
utilization by the Stockholder, Acquiree or any affiliates thereof of any of
the Proprietary Technologies and Products; and (iii) all such patents,
trademarks, service marks, or copyrights are validly issued and enforceable in
the United States and in all applicable countries in which the Acquiree intends
to undertake business pursuant to the terms of the License and Manufacturing
Agreement.
4.10 Binding Agreements.
4.10.1 The Assignment is a valid and binding
obligation of the parties thereto, which remains in full force and effect,
enforceable in accordance with its terms. There has not occurred any default
or event which, with the giving of notice or passage of time, or both, has been
or will become a default under the Assignment.
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4.10.2 The License Agreement is a valid and binding
obligation of the parties thereto, which remains in full force and effect,
enforceable in accordance with its terms. There has not occurred any default
or event which, with the giving of notice or passage of time, or both, has been
or will become a default under the License Agreement.
4.10.3 The License and Manufacturing Agreement,
attached hereto and made a part here of as Exhibit A, is a valid and binding
obligation of the parties thereto, which remains in full force and effect,
enforceable in accordance with its terms. There has not occurred any default
or event which, with the giving of notice or passage of time, or both, has been
or will become a default under the License and Manufacturing Agreement.
4.11 Obligations; Authorization. Except as disclosed in
Schedule 4.11, the Acquiree and the Stockholder, to their knowledge, are not:
(i) in violation of any judgment, order, injunction, award or decree which is
binding on them or any of their assets, properties, operations, securities or
business; or (ii) in violation of any law or regulation or any other
requirement of any governmental body, court or arbitrator relating to them, or
to any of their securities, assets, operations, properties or businesses which
violation, by itself or in conjunction with other violations of any other law,
regulation or other requirement could reasonably be expected to materially
adversely affect the Acquiree, Stockholder or any of their securities, assets,
operations, properties or business or result in a cost, expense, liability or
other damage or loss to the Acquiree, Stockholder or any of their securities,
assets, operations, properties or businesses. Except as disclosed in Schedule
4.11 attached hereto and made a part hereof, the Acquiree and the Stockholder
to their knowledge have in all material respects performed all obligations
required to be performed by them, are not in default or violation in any
material respect and are not aware of any material default or violation that
has occurred or imminent to occur under any of their respective agreements,
obligations or undertakings. All licenses, permits, and other governmental
authorizations that are required for the conduct of the business of the
Acquiree and Stockholder as now conducted are in full force and effect. Except
as disclosed in Schedule 4.11, the Acquiree and Stockholder have not taken any
action, or failed to take any action, or permitted or allowed to exist any
condition which, with notice or lapse of time or both, would result in the
termination, cancellation, forfeiture of, or
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cause a default under, any such license, permit or other governmental
authorization.
4.12 Adverse Events. Since the date hereof, there has not
been any occurrence, event, or condition which has or is anticipated to have a
materially adversely affect on the assets, properties, business, operations or
condition (financial or otherwise) of the Acquiree or Stockholder.
4.13 Consents. To the knowledge of Stockholder and
Acquiree, all requisite consents of third parties, including, but not limited
to, governmental or other regulatory agencies, federal, state or municipal,
required to be received by or on the part of the Acquiree or Stockholder for
the execution and delivery of any of this Plan of Reorganization and the
License and Manufacturing Agreement, as well as the performance of the
obligations of the Stockholder or Acquiree hereunder or under such other
agreements have been or, prior to the Closing Date, will be obtained and are,
or will be in full force and effect, except as otherwise disclosed herein. The
Stockholder and Acquiree have fully complied, or will, on or prior to the
Closing Date, fully comply with all conditions of such consents.
4.14 Management Biographies. Attached hereto as Schedule
4.15 are copies of the biographical and other information required by Item 401
of Regulation S-B for individuals, who are anticipated to serve as directors
and officers of Acquiror subsequent to the Closing Date.
4.15 Disclosure. No representations or warranties
contained within this Plan of Reorganization, and no statements contained in
any of the schedules attached hereto, or any instrument, list, certificate or
right delivered by any of the parties hereto to the Acquiror pursuant to this
Plan of Reorganization contains or will contain any untrue statement of a
material fact or will omit or fail to state any material fact necessary to make
these statements herein or therein misleading.
5. REPRESENTATIONS OF ACQUIROR. The Acquiror represents,
warrants and covenants as an inducement for the Acquiree and the Stockholder to
enter into this Plan of Reorganization and to consummate the transactions
contemplated hereby, that, as of the date hereof:
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5.1 Organization. The Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; is duly qualified to do business and in good standing in each other
jurisdiction in which such qualification is necessary; and has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
5.2 Binding Plan of Reorganization. This Plan of
Reorganization constitutes the valid and binding obligation of the Acquiror,
enforceable in accordance with its terms. The Acquiror has all requisite power
and authority to execute and deliver this Plan of Reorganization and to
consummate the transactions contemplated hereby. Neither the execution and
delivery of this Plan of Reorganization nor the consummation of the
transactions contemplated hereby will: (a) violate any provision of the
Certificate of Incorporation or By-Laws of the Acquiror; (b) violate, conflict
with or result in the breach or termination of, or otherwise give any other
contracting party the right to terminate, or constitute a default (by way of
substitution, novation or otherwise) under the terms of any contract,
franchise, lease, license, agreement or instrument to which the Acquiror is a
party, all of which shall continue to remain in full force and effect in
accordance with their respective terms following the consummation of the
transactions contemplated hereby; (c) result in the creation of any lien,
charge or encumbrance upon the shares of common stock of Acquiror or the
properties, assets or other securities of the Acquiror; (d) violate any
judgment, order, injunction, decree or award against, binding upon, or
affecting the shares of common stock of Acquiror, or upon the securities,
assets, properties, operations or business of the Acquiror; or (e) violate any
law or regulation as such law or regulation relates to the shares of common
stock of Acquiror, or to the securities, assets, properties, operations or
business of the Acquiror.
5.3 Authority. The execution and delivery of this Plan
of Reorganization and the documents and instruments to be delivered and
executed by Acquiror pursuant hereto and the consummation by the Acquiror of
the transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of Acquiror and no other corporate or other proceedings
on the part of Acquiror are necessary to authorize the execution and delivery
of this Plan of Reorganization or such other documents or instruments necessary
or
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required to consummate the transactions contemplated hereby and thereby.
5.4 Shares to be Issued. The shares of Acquiror's newly
designated Class B Convertible Preferred Stock, (as well as the Shares of
Acquiror's common stock issuable upon conversion of the Class B Convertible
Preferred Stock) to be issued to the Stockholder pursuant to this Plan of
Reorganization will, when issued, be validly issued, fully paid, non-assessable
and free and clear of all liens, levies, pledges, claims, encumbrances,
warrants, options, mortgages, security interests and rights of others, except
as set forth at Paragraph 7.14 hereof.
5.5 Capitalization of the Acquiror. The authorized capital
stock of the Acquiror presently consists of 50,000,000 shares of common stock,
of which 2,034,129 shares are issued and outstanding on the date hereof and
2,500,000 shares of Preferred Stock, none of which are presently outstanding.
As of the Closing Date, Acquiror will have no more than approximately 5,394,129
shares of its common stock outstanding. The shares of common stock presently
outstanding are duly authorized, have been validly issued and fully paid and
are non-assessable. There are also presently outstanding 618,750 Class F
Warrants and 2,638,000 Class B Warrants, the terms of which are described in
the Acquiror's Annual Report on Form 10-KSB for the year ended June 30, 1994.
Except as set forth upon Schedule 5.5, Acquiror has outstanding no additional
securities including any derivative instruments (including options, warrants or
debentures) that may be converted or exercised for additional securities of
Acquiror. Acquiror intends to undertake a private placement of 336,000 Units
prior to the Closing of this Plan of Reorganization. Each Unit shall include
ten (10) shares of common stock and thirty-five (35) common stock purchase
warrants, each warrant bearing an exercise price per share of $.43. The
Acquiror anticipates that the Units will be priced at $2.00.
5.6 Securities Exchange Act of 1934 Reports; Financial
Statements; Other Financial Information. The Acquiror has heretofore delivered
to the Acquiree a true and complete copy of its Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1994. Copies of Quarterly Reports on Form
10-QSB for the quarters ended September 30, 1994, December 31, 1994 and March
31, 1995 will be delivered to the Stockholder before the Closing. (The
aforementioned Annual Report and Quarterly Reports shall be referred to in the
aggregate as the "Reports.") The Reports
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contained all statements which were required to be stated therein, did not
contain any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein not misleading; the financial statements contained
within the Reports (the "Acquiror Financial Statements"), are accurate and
complete and, to the best of Acquiror's knowledge and belief, have been
prepared in accordance with all applicable securities regulations including,
but not limited to the Securities Exchange Act of 1934. The Acquiror Financial
Statements have been prepared in accordance with generally accepted accounting
principals and present fairly and accurately the financial condition, assets,
liabilities, profit, loss and results of operations for the periods therein
indicated in accordance with generally accepted accounting principles,
consistently applied. As of the Closing Date, the Acquiror shall have filed
all Reports required to be filed under the Securities Exchange Act of 1934.
5.7 Obligations; Authorization. Except as disclosed in
Schedule 5.7, the Acquiror, to its knowledge, is not: (i) in violation of any
judgment, order, injunction, award or decree which is binding on it or any of
its assets, properties, operations, securities or business; or (ii) in
violation of any law or regulation or any other requirement of any governmental
body, court or arbitrator relating to it, or to any of its securities, assets,
operations, properties or businesses which violation, by itself or in
conjunction with other violations of any other law, regulation or other
requirement could reasonably be expected to materially adversely affect the
Acquiror or any of its securities, assets, operations, properties or business
or result in a cost, expense, liability or other damage or loss to the Acquiror
or any of its securities, assets, operations, properties or businesses. Except
as disclosed in Schedule 5.7 attached hereto and made a part hereof, the
Acquiror to its knowledge has in all material respects performed all
obligations required to be performed by it, is not in default or violation in
any material respect and is not aware of any material default or violation that
has occurred or imminent to occur under any of its respective agreements,
obligations or undertakings.
5.8 Adverse Events. Since the date hereof, there has not
been any occurrence, event, or condition which has or is anticipated to have a
materially adversely affect on the assets,
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properties, business, operations or condition (financial or otherwise) of the
Acquiror.
5.9 Consents. To the knowledge of Acquiror, all
requisite consents of third parties, including, but not limited to,
governmental or other regulatory agencies, federal, state or municipal,
required to be received by or on the part of the Acquiror for the execution and
delivery of this Plan of Reorganization has been or, prior to the Closing Date,
will be obtained and are, or will be in full force and effect. The Acquiror
has fully complied, or will, on or prior to the Closing Date, fully comply with
all conditions of such consents.
5.10 Disclosure. No representations or warranties
contained within this Plan of Reorganization, and no statements contained in
any of the Schedules attached hereto, or in any instrument, list, certificate
or right delivered by Acquiror pursuant to this Plan of Reorganization contains
or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary to make the statements herein or therein
misleading.
6. CLOSING DATE. The Closing of the transactions contemplated by
this Plan of Reorganization shall take place at the offices of Acquiree or its
counsel the later of fifteen (15) business days following the date hereof, at
such later date as the Conditions Precedent to the Obligations of Acquiree and
Stockholder identified at Paragraph 8 hereof and the Conditions Precedent to
the Obligations of Acquiror identified at Paragraph 9 hereof, however, in no
event later than forty-five (45) days from the date hereof unless the parties
may mutually agree. The date of Closing shall hereafter be referred to as the
"Closing Date".
7. COVENANTS OF THE PARTIES TO THIS AGREEMENT.
7.1 Access to Information. At all times prior to the
Closing Date or the earlier termination of this Plan of Reorganization, each of
the parties hereto shall provide to the other parties (and the other parties'
authorized representatives) full access during normal business hours to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of
or relating to such party, and will cooperate with the other party in
conducting its due diligence investigation of such party.
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7.2 Confidentiality.
(i) With respect to information concerning
Stockholder or Acquiree that is made available to Acquiror pursuant to the
provisions of this Subparagraph (i), Acquiror agrees that it shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating this Plan of Reorganization and related transactions
and shall not disseminate or disclose any of such information other than to its
directors, officers, employees, shareholders, affiliates, agents, lenders and
representatives who need to know such information for the sole purpose of
evaluating this Plan of Reorganization and the related transactions (each of
whom shall be informed in writing by Acquiror of the confidential nature of
such information, the prohibition under federal securities laws of trading upon
any material non-public information and directed by Acquiror in writing to
treat such information confidentially.) If this Plan of Reorganization is
terminated, Acquiror shall immediately return all such information, all copies
thereof and all information prepared by Acquiror based upon the same, upon
Stockholder's request; provided, however, that one copy of all such material
may be retained by Acquiror's outside legal counsel for purposes only of
resolving any disputes under this Plan of Reorganization. The above
limitations on use, dissemination and disclosure shall not apply to information
that; (a) is learned by Acquiror from a third party entitled to disclose it;
(b) becomes known publicly other than through Acquiror or any party who
received the same through Acquiror (c) is required by law or court order to be
disclosed by Acquiror or; (d) is disclosed with the express prior written
consent thereto of Stockholder. Acquiror shall undertake all necessary steps
to ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this subparagraph (i).
(ii) With respect to information concerning
Acquiror that is made available to Stockholder or Acquiree pursuant to the
provisions of this Subparagraph (ii), Stockholder and Acquiree jointly and
severally agree that they shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating the
Plan of Reorganization and the related transactions and shall not disseminate
or disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents,
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lenders and representatives who need to know such information for the sole
purpose of evaluating the Plan of Reorganization and the related transactions
(each of whom shall be informed in writing by Stockholder or Acquiree, as
appropriate, of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this Plan
of Reorganization is terminated, Stockholder and Acquiree jointly and severally
agree to return immediately all such information, all copies thereof and all
information prepared by either of them based upon the same, upon Acquiror's
request; provided, however, that one copy of all such material may be retained
by Stockholder's outside legal counsel for purposes only of resolving any
disputes under this Plan of Reorganization. The above limitations on use,
dissemination and disclosure shall not apply to information that: (a) is
learned by Stockholder or Acquiree from a third party entitled to disclose it;
(b) becomes known publicly other than through Stockholder or Acquiree or any
party who received the same through either of them; (c) is required by law or
court order to be disclosed by Stockholder or Acquiree; or (d) is disclosed
with the express prior written consent thereto of Acquiror. Stockholder and
Acquiree jointly and severally agree to undertake all necessary steps to ensure
that the secrecy and confidentiality of such information will be maintained in
accordance with the provisions of this subparagraph (ii).
7.3 Nondisclosure. Neither Stockholder, Acquiror, or
Acquiree shall disclose to the public or to any third party the existence of
this Plan of Reorganization or the transactions contemplated hereby or any
other material non-public information concerning or relating to the other
parties hereto, other than with the express prior written consent of the other
party hereto, except as may be required by applicable securities laws as they
pertain to public companies, law or court order or to enforce the rights of
such disclosing party under this Plan of Reorganization, in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the
contrary contained in this Plan of Reorganization, any party hereto may
disclose this Plan of Reorganization to any of its directors, officers,
employees, shareholders, affiliates, agents and representative who need to know
such information for the sole purpose of evaluating this Plan of
Reorganization, to any party whose consent is required in connection with this
Plan of Reorganization this Plan of Reorganization; or to any regulatory body
where such disclosure is required under federal or state law.
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7.4 Consents. Stockholder, Acquiror and Acquiree shall
cooperate and use their best efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts as are necessary
for the consummation of the transactions contemplated by this Plan of
Reorganization.
7.5 Filings. Stockholder, Acquiror and Acquiree shall,
as promptly as practicable, make any required filings and submissions, under
any law, statute, order rule or regulation with respect to this Plan of
Reorganization and the related transactions and shall cooperate with each other
with respect to the foregoing.
7.6 All Reasonable Efforts. Subject to the terms and
conditions of this Plan of Reorganization and to the fiduciary duties and
obligations of their respective boards of directors, each of the parties to
this Plan of Reorganization shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate this Plan of Reorganization and the other
transactions contemplated by this Plan of Reorganization.
7.7 Notification of Certain Matters. Acquiror shall give
prompt notice to Stockholder and Acquiree, and Stockholder and Acquiree shall
give prompt notice to Acquiror, of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would cause any of its
representations or warranties in this Plan of Reorganization to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (ii) any
material failure of Acquiror, on the one hand, or Stockholder or Acquiree, on
the other hand, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this Plan
of Reorganization; provided, however, the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available to the
party receiving such notice under this Plan of Reorganization.
7.8 Registration Rights. On or prior to the Closing
Date, Acquiror shall have agreed to the registration provisions set
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forth in paragraph 10.7 hereafter, and in confirmation thereof shall agree to
conduct such registration in accordance with the terms set forth in Paragraph
10.7 and the registration procedures identified in substantially the form and
substance of Exhibit D, attached hereto and made a part hereof.
7.9 Investor Representation Letter. On or prior to the
Closing Date, the Stockholder shall execute an Investor Representation Letter
substantially in form and substance similar to that attached hereto and made a
part hereof as Exhibit "E".
7.10 Delivery of Schedules. Except as otherwise noted
herein, the parties hereto shall deliver all of the Schedules required herein,
and copies of the documents referred to therein, to each other within five (5)
business days following the execution of this Plan of Reorganization and such
Schedules and documents shall be in reasonably acceptable form and substance to
Stockholder and Acquiror.
7.11 Officer's Certificate. On or prior to the Closing Date,
Acquiree and Stockholder shall deliver an officer's certificate to Acquiree to
the effect that all of the representations and warranties contained in this
Plan of Reorganization are true and complete in all respects as of the Closing
Date, and that the Acquiree and Stockholder have complied in all material
respects with the covenants and agreements set forth herein required to be
complied with by the Closing; and there shall be delivered to Stockholder and
Acquiree a officer's certificate provided by the Acquiror to the effect that
the representations and warranties of the Acquiror set forth herein are true
and correct in all material respects and that the Acquiror has complied in all
material respects with the covenants and agreements set forth herein required
to be complied with by the Closing.
7.12 Resignations. On or prior to the Closing Date, Acquiror
shall take all actions necessary to secure and effect the resignation of all of
the current directors and officers subject to the provisions of paragraph 10.6
hereafter.
7.13 Interim Operations. During the period from the date of
this Plan of Reorganization and continuing until the Closing Date, Acquiror,
Acquiree and Stockholder agree (except as expressly contemplated by this Plan
of Reorganization, including any Exhibits and Schedules hereto, or to the
extent that the other
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parties shall otherwise consent in writing) to carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such
businesses, use all reasonable efforts to preserve intact their respective
present business organizations, keep available the services of their present
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them. Acquiror shall
conduct a private placement of Units in the manner identified at Paragraph 5.5.
7.14 Shares to be Issued to the Stockholder. The Acquiror
Shares issuable to the Stockholder in exchange for the Acquiree Shares will,
when issued and delivered in accordance with the terms and conditions of this
Plan of Reorganization, be validly issued, fully paid and non-assessable, free
and clear of all liens, levies, pledges, claims, encumbrances, warrants,
options, mortgages, security interests and rights of others. The Stockholder
acknowledges and agrees (a) that it has reviewed the quarterly, annual and
periodic reports of the Acquiror as filed with the Securities and Exchange
Commission, and that it has such knowledge and experience in financial and
business matters that it is capable of utilizing the information set forth
therein concerning the Acquiror to evaluate the risks of investing in the
Acquiror; (b) that it has been advised that the Acquiror Shares to be issued to
it by the Acquiror will not be registered under the Act, and accordingly, it
may not be able to sell or otherwise dispose of Acquiror Shares when it wishes
to do so; (c) that the Acquiror Shares so issued are being acquired by
Stockholder for its own benefit and for investment purposes and not with a view
to, or for resale in connection with a public offering or distribution thereof;
(d) that the Acquiror Shares so issued will not be resold (i) without
registration thereof under the Act (unless in the opinion of counsel to the
Acquiror, an exemption from such registration is available), or (ii) in
violation of any law; (e) that the certificate or certificates representing the
Acquiror Shares to be issued will be imprinted with a legend in form and
substance as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
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REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
BASED ON AN OPINION LETTER OF COUNSEL FOR THE
CORPORATION OR A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION."
and the Acquiror is hereby authorized to notify its transfer agent of the
status of the Acquiror Shares and to take such other action including, but not
limited to, the placing of a stop-transfer order on the transfer agents' books
and records to insure compliance with the Act.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIREE AND THE
STOCKHOLDER. All of the obligations of the Stockholder and Acquiree under this
Plan of Reorganization are subject to the fulfillment, prior to or as of the
Closing Date, of each of the following conditions:
8.1 The representations and warranties by or on behalf of
Acquiror contained in this Plan of Reorganization, or in any certificate or
document delivered pursuant to the provisions hereof, shall be true in all
material respects at and as of the time of Closing as though such
representations and warranties were made at and as of such time.
8.2 Acquiror shall have performed and complied with all
covenants, agreements, and conditions required by this Plan of Reorganization
to be performed or complied with by it prior to or on the Closing Date.
8.3 The present Board of Directors of Acquiror shall have, as
of the Closing Date, tendered their resignations in favor of a newly
constituted Board of Directors consisting of designees of the Stockholder,
inclusive of those designees provided at Paragraph 10.5 hereof. The present
Board of Directors shall also have obtained the resignations of the existing
officers of Acquiror effective immediately upon the Closing Date.
8.4 Acquiror shall upon the Closing Date have on hand
assets net of liabilities consisting of cash of $800,000; and shall have an
outstanding capitalization that consists of no more than approximately
5,394,129 Shares of its common stock and those common stock purchase warrants
described within Paragraph 5.5;
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8.5 Acquiror shall execute and deliver any and all
agreements, documents or instruments of any kind whatsoever necessary to
effectuate this Plan of Reorganization and the transactions referred to herein,
contemplated hereby or requested by Acquiree, which shall be in form and
substance satisfactory to Acquiree and Stockholder.
8.6 There shall be delivered to Acquiree a Certificate of the
Acquiror's President and Secretary to the effect that all of the
representations and warranties set forth within Section 5 of this Plan of
Reorganization are true and complete in all respects as of the Closing Date,
and that the Acquiror has complied in all material respects with the covenants
and agreements set forth in this Plan of Reorganization.
8.7 Acquiror shall have delivered all of the Schedules
referred to herein, and copies of the documents referred to therein, to
Stockholder and such schedules and documents shall have been reasonably
acceptable to Stockholder.
8.8 Stockholder shall have completed prior to the Closing
Date, to its satisfaction, a due diligence review of the financial condition,
properties, assets, liabilities, business or prospects of the Acquiror,
including but not limited to the indemnification being provided to Acquiror by
one of Acquiror's former principal stockholders relating to potential or
pending liabilities, claims or litigation of Acquiror's former subsidiaries.
8.9 Acquiror shall have as of the Closing Date filed all
Reports required to be filed with the SEC under the Securities Exchange Act of
1934 so that Acquiror shall be current in its filing obligations under the
Securities Exchange Act of 1934.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIROR. All
obligations of Acquiror under this Plan of Reorganization are subject to the
fulfillment, prior to or at the Closing on the Closing Date, of each of the
following conditions:
9.1 The representations and warranties contained within
Section 4 of this Plan of Reorganization, or in any certificate or document
delivered to Acquiror pursuant to the provisions hereof, shall be true at and
as of the time of the Closing Date as though
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such representations and warranties were made at and as of such time.
9.2 Acquiree and Stockholder shall have performed and
complied with all covenants, agreements, and conditions required by this Plan
of Reorganization to be performed or complied with by them prior to or at the
Closing Date; including the delivery of the stock of Acquiree being exchanged
hereunder.
9.3 Stockholder and Acquiree shall have delivered all of the
Schedules referred to herein, and copies of the documents referred to therein,
to Acquiror, and such Schedules and documents shall have been reasonably
acceptable to Acquiror.
9.4 There shall be delivered to Acquiror a Certificate of the
Acquiree and Stockholder's President and Secretary to the effect that all of
the representations and warranties set forth within Section 4 of this Plan of
Reorganization are true and complete in all respects as of the Closing Date,
and that the Acquiree and Stockholder have complied in all material respects
with the covenants and agreements set forth in this Plan of Reorganization.
9.5 Acquiror shall have completed prior to the Closing
Date, to its satisfaction, a due diligence review of the contracts, agreements,
licenses, financial condition, results of operations, properties, assets,
liabilities, business or prospects of the Acquiree.
9.6 The execution of those Registration Procedures
substantially in form and substance similar to that attached hereto and made a
part hereof as Exhibit "D".
9.7 Stockholder shall deliver to Acquiror an Investor
Representation Letter in form and substance set forth in Schedule F, attached
hereto and made a part hereof, agreeing that the Acquiror Shares are being
acquired for investment purposes.
9.8 Acquiree and Stockholder shall execute and deliver
any and all agreements, documents or instruments of any kind whatsoever
necessary to effectuate this Plan of Reorganization and the transactions
referred to herein, contemplated hereby or requested by Acquiror, which shall
be in form and substance satisfactory to Acquiror.
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10. CONDITIONS SUBSEQUENT TO CLOSING.
Subsequent to the Closing Date, Acquiror and/or Acquiree, as
appropriate, will take the following actions or consent thereto to the
effectuation of the following transactions:
10.1 Acquiror will, as promptly as possible, prepare and file
with the Securities and Exchange Commission a Current Report on Form 8-K for
the purpose of disclosing the effectuation of the transactions within this Plan
of Reorganization.
10.2 Acquiror will take whatever actions are necessary to
amend its Certificate of Incorporation in order to: (i) change its name to
"Viragen (Europe), Ltd."; (ii) effectuate a fourteen for one reverse split of
its outstanding shares of common stock; and (iii) increase to 50,000,000 the
number of shares of common stock authorized.
10.3 Acquiror will use its best efforts to undertake the sale
of additional securities and whatever other actions are necessary to increase
its total assets and capital and surplus (in the manner provided at Paragraph
10.4 hereafter) and to make application for and resume the listing of its
outstanding common stock on The NASDAQ Stock MarketTM Small-Cap Index.
10.4(i) Within thirty (30) days following the completion of
those matters set forth at Paragraph 10.2 above, Acquiror shall have
successfully completed the sale of Common Stock which yields net proceeds to
the Acquiror of no less than $1,200,000. The obligation to secure such net
proceeds shall be unconditionally guaranteed by the Stockholder who shall have
an additional period of fifteen (15) days in order to either: (i) arrange for
and secure proceeds from third party investors to the extent such investors
contribute net proceeds of $1,200,000 to Acquiror; or (ii) provide an infusion
of equity capital to Acquiror of a net amount of $1,200,000.
10.5. The Stockholder acknowledges that the Acquiror
presently owns securities of The Eastwind Group, Inc. (Eastwind) and that
Eastwind has filed a Registration Statement with the SEC relating to the
distribution of such securities by the Acquiror to its stockholders. In
recognition of this pending distribution, the Stockholder agrees to the
following: (i) to effectuate the
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distribution of the Eastwind Securities to the Stockholders of Acquiror upon
being advised by counsel to Eastwind as to the effectiveness of the
Registration Statement; (ii) to waive all right, title and interest in and to
the distribution of the securities of Eastwind at such time of distribution,
and (iii) to secure similar waivers from any other individuals or entities that
become stockholders of Acquiror following the Closing Date in conjunction with
the sale of securities identified at Paragraph 10.4 herein.
10.6 For a period of two (2) years from the Closing Date, the
Stockholder will vote its Acquiror Shares for the election of a single designee
of the individuals who presently are members of Acquiror's Board of Directors
as of the date hereof (the "Designee"), to the Board of Directors of Acquiror
following the Closing Date.
10.7 The Acquiror shall within sixty (60) days following the
Closing Date, prepare and file, at its sole cost and expense, a Registration
Statement with the SEC, the purpose of which is to register the resale of any
shares of common stock (or common stock which may be acquired upon the exercise
or conversion of common stock purchase warrants, convertible preferred stock or
any other derivative securities) (in the aggregate, the "Restricted Stock")
issued by the Acquiror from November 1993 until the Closing Date in private
placement transactions that have not previously been subject to registration
with the SEC and which otherwise are not available for public sale pursuant to
Rule 144, promulgated under the Securities Act of 1933, as amended. The
Acquiror shall use its best efforts to facilitate and secure effectiveness of
such Registration Statement, as promptly as is practicable. With the exception
of the registration rights granted to Rozel International Holdings Limited, the
Acquiror shall not, without the written consent of those individuals serving as
members of its Board of Directors as of the date hereof, register with the SEC,
the public sale or resale of any further securities other than the Restricted
Stock until at least ninety (90) days after the effectiveness of the
Registration Statement referred to above. The Registration Statement to be
filed by the Acquiror pursuant to the terms of this Paragraph 10.7, shall
adhere to and follow those registration procedures established and set forth
upon Exhibit "D", attached hereto and made a part hereof.
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10.8 Acquiror shall not make distributions or payments to
Stockholder, or any affiliates thereof, except in accordance with Paragraphs
10.8.1 below.
10.8.1 The first $2,000,000 of net equity capital
secured by Acquiree or Acquiror (including those funds available upon the
Closing Date) shall be made available and reserved exclusively for the purposes
of establishing, administering and maintaining the working capital necessary to
fund the operations of the Acquiree's project with the SNBTS under the License
and Manufacturing Agreement. These funds shall be set aside for these purposes
and shall not be utilized as a source from which any payments to Stockholder
are to be made. Net equity capital secured by Acquiree or Acquiror in excess
of $2,000,000 may be utilized for corporate purposes.
10.9 The relative interests as of the Closing Date of the
historic Acquiror stockholders (the Historic Acquiror Stockholders) in the
common stock of the Acquiror as an aggregate percentage of six (6%) percent
shall be preserved and protected against dilution in accordance with the
following provisions. The Historic Acquiror Stockholders shall retain an
aggregate six (6%) percent interest (the "Protected Interest") in the
outstanding common stock of the Acquiror following the Closing Date and shall
be preserved and protected against further dilution or reduction of their
aggregate six (6%) percent ownership until after that period in which Acquiror
has secured net equity capital of $4,000,000 (the "Restricted Period")
following the Closing Date (including for this purpose, any net equity funding
that was available upon the Closing Date). To the extent that during the
Restricted Period the Company issues any "Securities" (as hereafter defined),
it shall in conjunction therewith immediately issue to the Historic Acquiror
Stockholders that number of shares of common stock that shall be equal to the
product of the Protected Interest and the aggregate number of Securities
issued. For this purpose, the term "Securities" shall include shares of common
stock issued, as well as that number of shares of common stock that may be
issued upon the exercise of warrants or options or upon the conversion of
convertible preferred stock, convertible debt instruments or any other
derivative-based securities.
10.10 The parties hereto will use their best efforts to
comply with all legal requirements imposed upon them with respect to the
transactions contemplated by this Plan of Reorganization.
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Each party agrees to execute and deliver any and all further agreements,
documents or instruments necessary to effectuate this Plan of Reorganization
and the transactions referred to herein, contemplated hereby or reasonably
requested by the other party. Each party hereto will use its best efforts to
effectuate this Plan of Reorganization and to complete the transactions
contemplated by this Plan of Reorganization as promptly as practicable and will
promptly notify the other part of any information, that would prevent or
materially affect the consummation of the transactions contemplated by this
Plan of Reorganization, or would indicate or constitute a breach of the terms,
conditions, representations, warranties or agreement of any of the parties to
this Plan of Reorganization.
11. REMEDIES.
11.1 In the event that any party to this Plan of
Reorganization has breached any of the terms, conditions or covenants of this
Plan of Reorganization, the consequence of which is that a Closing hereunder
does not occur, the other party shall have the option to pursue either of the
following remedies:
(i) To immediately recover liquidated damages from
the breaching party to the extent of the costs and expenses incurred by the
non-breaching party during the course of negotiation, preparation and due
diligence review relating to the transactions contemplated by this Plan of
Reorganization, including accounting and legal fees related thereto; or
(ii) To seek injunctive or other equitable relief
seeking to enforce any covenant or agreement made by the breaching party, which
action shall, if successful, require the payment of costs and reasonable
counsel fees by the breaching party.
11.2 In the event that any party to this Plan of
Reorganization breaches any of the terms, conditions or covenants of this Plan
of Reorganization following the Closing, the breaching party shall: (i)
indemnify and hold harmless the non-breaching party from and against any and
all demands, claims, actions or causes or action, judgments, assessments,
losses, liabilities, damages or penalties and reasonable attorneys' fees and
related disbursements incurred by the non-breaching party which arise out of,
or result from, a misrepresentation, breach of warranty, or breach of any
covenant contained in this Plan of Reorganization or
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in the Schedules annexed hereto, or in any exhibit, closing certificate,
Schedule or any ancillary certificates or other documents or instruments
furnished in connection with the transactions contemplated hereby; or; (ii) at
its option, the non-breaching party may seek injunction or other equitable
relief seeking to enforce any covenant or agreement made by the breaching
party, which action shall, if successful, requires the payment of costs and
reasonable counsel fees by the breaching party.
12. NATURE AND SURVIVAL OF REPRESENTATIONS.
All representations, warranties and covenants made by any
party to this Plan of Reorganization shall survive the Closing hereunder and
the consummation of the transactions contemplated hereby for six (6) months
from the Closing Date. All of the parties hereto are executing and carrying
out the provisions of this Plan of Reorganization in reliance solely on the
representations, warranties and covenants and agreements contained in this Plan
of Reorganization or at the Closing of the transactions herein provided for and
not upon any investigation upon which it might have made or any representation,
warranty, agreement, promise or information, written or oral, made by the other
party or any other person other than as specifically set forth herein.
13. DOCUMENTS AT CLOSING.
At the Closing, the following transactions shall occur, all of
such transactions being deemed to occur simultaneously:
13.1 Stockholder and Acquiree will deliver, or cause to be
delivered, to Acquiror the following:
(a) stock certificates for the Acquiree Shares being
tendered hereunder, duly endorsed in blank, or accompanied by duly executed
stock powers;
(b) a certificate executed by the President and
Secretary of Acquiree and Stockholder to the effect that all of the
representations and warranties made in this Plan of Reorganization are true and
correct as of the Closing Date, the same as though originally given to Acquiror
on said date;
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(c) a certificate from the appropriate authority in
Scotland and from the Secretary of State of the State of Delaware dated at or
about the Closing Date to the effect that Acquiree and Stockholder are in
corporate good standing under the laws of said jurisdictions;
(d) a certificate from the appropriate officer of
the SNBTS establishing that the License and Manufacturing Agreement remains in
full force and that no breaches or events of default have occurred thereunder;
(e) The Investment Representation Letter executed
by the Stockholder;
(f) Acknowledgement of the Registration
Procedures; and
(g) Certified copies of resolutions by the Board of
Directors of Acquiree and Stockholder authorizing the consummation of the
transactions set forth herein.
13.2 Acquiror will deliver or cause the following documents
to be delivered to the Stockholder and Acquiree;
(a) stock certificates representing Acquiror Shares
to be issued as a part of this Plan of Reorganization;
(b) a certificate of the President and Secretary of
Acquiror to the effect that all representations and warranties of Acquiror made
under this Plan of Reorganization are reaffirmed on the Closing Date, the same
as though originally given to the Stockholder on said date;
(c) copies of resolutions by Acquiror's Board of
Directors authorizing this transaction;
(d) a certificate from the Secretary of State of
Delaware dated at or about the date of Closing that Acquiror is in good
standing under the laws of said State;
(e) such other instruments and documents as are
required to be delivered pursuant to the provisions of this Plan of
Reorganization.
14. TERMINATION.
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14.1 This Plan of Reorganization may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing
Date;
(a) by mutual consent of all of the parties hereto;
(b) by any of the parties hereto;
(i) if the Plan of Reorganization shall not
have occurred by the Closing Date unless such date is extended by the mutual
written agreement of all of the parties hereto, and in such event, only until
the Closing Date has been so extended; provided, however, that the right to
terminate this Plan of Reorganization under this Section shall not be available
to any party whose failure to fulfill any obligation under this Plan of
Reorganization has been the cause of, or resulted in, the failure of the
Closing Date to occur on or before that date; or
(ii) if any court of competent jurisdiction,
or any governmental body, regulatory or administrative agency or commission
having appropriate jurisdiction shall have issued an order, decree or filing or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Plan of Reorganization, and such order,
decree, ruling or other action shall have become final and nonappealable.
(c) Any of the parties hereto upon a breach of this
Plan of Reorganization by either of the other parties, which breach continues
for ten (10) days after written notice thereof is given to all parties, in each
case with reservation of rights against the breaching party or parties for
indemnification for resulting damages as provided elsewhere herein.
15. MISCELLANEOUS.
15.1 Notices. All notices given hereunder shall be in
writing and shall be effective if personally delivered or if sent by registered
or certified mail, postage prepaid, addressed to the appropriate party at the
following address:
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If to Acquiror:
SECTOR ASSOCIATES, LTD.
401 City Avenue, Ste 725
Bala Cynwyd, PA 19004
With copies to:
Stephen M. Cohen, Esquire
Clark, Ladner, Fortenbaugh & Young
One Commerce Square
2005 Market Street, 22nd Floor
Philadelphia, PA 19103
If to Acquiree:
Viragen (Scotland) Limited
6/7 Blythswood Square
Glasgow, Scotland G24AD
With a copies to:
Dorman Jeffrey & Co., Solicitors
Attn: David Gibson, Esq.
6/7 Blythswood Square
Glasgow, Scotland G24AD
If to the Stockholder:
Viragen, Inc.
2343 West 76th Street
Hialeah, Florida 33016
With copies to:
Jim Schneider, Esquire
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33301
Any party hereto may change the address to which any notice
hereunder is to be sent to it by giving notice of such change of address as
provided in this Paragraph 15.1.
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15.2 Waiver. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions hereunder will not
constitute a waiver, however, may be waived in writing by the party to whom
such compliance is owed.
15.3 Brokers. Other than as set forth upon Schedule 15.3,
attached hereto and made a part hereof, neither party has employed any brokers
or finders with regard to this Plan of Reorganization unless otherwise
described in writing to all parties hereto.
15.4 Expenses. The parties hereto shall each pay their
respective expenses and costs incurred or to be incurred by them in negotiating
and preparing this Plan of Reorganization and in closing and carrying out the
transactions contemplated by this Plan of Reorganization, including, without
limitation, all of their attorney's fees and accounting fees.
15.5 Headings. The section and subsection headings in this
Plan of Reorganization are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Plan of Reorganization.
15.6 Counterparts. This Plan of Reorganization may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
15.7 Facsimile Signature. This Plan of Reorganization may be
executed and accepted by facsimile signature and such signature shall be of the
same force and effect as an original signature.
15.8 Governing Law. This Plan of Reorganization shall be
governed by the laws of the State of Florida.
15.9 Binding Effect and Assigns. This Plan of Reorganization
shall be binding upon the parties hereto and inure to the benefit of the
parties, their respective heirs, administrators, executors, successors and
assigns. Neither party hereto shall assign its respective rights nor delegate
its respective obligations hereunder to any other party without the prior
written consent of all other parties hereto.
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15.10 Entire Agreement. This Plan of Reorganization
represents the entire agreement of the parties hereto with respect to the
transactions contemplated hereby, and shall not be amended or terminated except
by written instrument duly executed by all of the parties hereto. Any and all
previous agreements, correspondence, letters of intent or understandings
between the parties regarding the subject matter hereof are superseded in their
entirety by this Plan of Reorganization.
15.11 Severability. If any part of this Plan of
Reorganization is deemed to be unenforceable the balance of the Plan of
Reorganization shall remain in full force and effect.
15.12 Arbitration.
(i) If a dispute,controversy or claim arises between
any of the parties to this Plan of Reorganization including without limitation
any dispute, controversy or claim that arises out of or relates to this Plan of
Reorganization or any other agreement or instrument between the parties, or the
breach, termination or invalidity of the Plan of Reorganization or any such
other agreement or instrument, and if said dispute cannot be settled through
direct discussions, the parties agree to first endeavor to settle the dispute
in an amicable manner by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules, before resorting to
arbitration; provided, that nothing contained herein shall preclude any party
from commencing arbitration if said mediation is not completed within 30 days
of such party requesting or agreeing to mediation. Thereafter, any unresolved
dispute, controversy or claim arising between the parties, shall be settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules (the "Rules"), and judgment upon any
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Any mediation or arbitration hereunder shall be pursuant
to the applicable rules of the American Arbitration Association as set out
above except to the extent expressly provided otherwise in this Plan of
Reorganization.
(ii) The parties hereto expressly agree that any
court with jurisdiction may order the consolidation of any arbitrable
dispute,controversy or claim under this Plan of Reorganization with any related
arbitrable dispute, controversy or
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claim not arising under this Plan of Reorganization, as the court may deem
necessary in the interests of justice or efficiency or on such other grounds as
the court may deem appropriate.
(iii) The site of the mediation and, if necessary,
the arbitration shall be in Miami, Florida and shall take place in the officers
of the American Arbitration Association or such other place as the parties may
agree.
(iv) The parties agree that the Federal and state
courts located in the State of Florida shall have exclusive jurisdiction over
an action brought to enforce the rights and obligations created in or arising
from this Plan of Reorganization to arbitrate, and each of the parties hereto
irrevocably submits to the jurisdiction of said courts. Notwithstanding the
above, application may be made by a party to any court of competent
jurisdiction wherever situated for enforcement of any judgment and the entry of
whatever orders are necessary for such enforcement.
(v) Process in any action arising out of or relating
to this Plan of Reorganization may be served on any party to the Plan of
Reorganization anywhere in the world by delivery in person against receipt or
by registered or certified mail, return receipt requested.
(vi) No party nor the arbitrators may disclose the
existence, content, or results of any arbitration hereunder without the prior
written consent of both parties.
(vii) The parties agree that all questions
concerning the arbitrator's jurisdiction shall be decided by the arbitrator.
(viii) All fees and expenses of the arbitration
(exclusive of filing fees for claims and counterclaims) shall be borne by the
parties equally. Each party shall bear the expense of its own counsel,
experts, witnesses, and presentation of proofs.
(ix) This agreement to arbitrate is intended to be
binding upon the signatories hereto, their principals, successors, assigns,
subsidiaries or affiliates.
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(x) The arbitrator shall determine the rights and
obligations of the parties according to the substantive laws of the State of
Florida (excluding conflicts of laws principles).
(xi) The arbitrator shall hear and determine any
preliminary issue of law asserted by a party to be dispositive of any claim, in
whole or part, in the manner of a court hearing a motion to dismiss for failure
to state a claim or for summary judgment, pursuant to such terms and procedures
as the arbitrator deems appropriate.
(xii) It is the intent of the parties that, barring
extraordinary circumstances, any arbitration shall be concluded within three
months of the date the statement of claim is received by the arbitrator.
Unless the parties otherwise agree, once commenced, hearings shall be held five
days a week, four weeks a month, with each hearing day to begin at 9:00 A.M.
and to conclude at 5:00 P.M. These time limits can be extended or altered by
an agreement by the parties or by a determination by the arbitrator that such
extension or alteration is in the interests of justice. The arbitrator shall
use his or her best efforts to issue the final award or awards within a period
of thirty days after closure of the proceedings. Failure to do so shall not be
a basis for challenging the award.
(xiii) The procedures to be followed in any
arbitration hereunder shall be as prescribed herein and in such directives that
shall be issued by the arbitrator following consultation with the parties.
Unless otherwise agreed by the parties, the procedures shall provide for the
submission of briefs by the parties the introduction of documents and the oral
testimony of witnesses, cross-examination of witnesses, oral arguments, the
closure of the proceedings and such other matters as the arbitrator may deem
appropriate. Further, the arbitrator shall regulate all matters relating to
the conduct of the arbitration not otherwise provided for in this Plan of
Reorganization or in the Rules.
(xiv) In the event a party, having been given notice
and opportunity, shall fail or shall refuse to appear or participate in an
arbitration hereunder or in any stage thereof, the proceedings shall
nevertheless be conducted to conclusion and final award. Any award rendered
under such circumstances shall be as valid and enforceable as if both parties
had appeared and participated fully at all stages.
33
<PAGE> 37
(xv) The parties agree that discovery shall be
limited and shall be handled expeditiously. Discovery procedures available in
litigation before the courts shall not apply in an arbitration conducted
pursuant to this Plan of Reorganization. However, each party shall produce
relevant and non-privileged documents or copies thereof requested by the other
parties within the time limits set and to the extent required by order of the
arbitrator. All disputes regarding discovery shall be promptly resolved by the
arbitrator.
(xvi) It is the intent of the parties that the
testimony of witnesses be subject to cross- examination. It is agreed that the
direct testimony of a witness may be submitted by sworn affidavit, provided
that such affiant be subject to cross-examination.
(xvii) Strict rules of evidence shall not apply in
an arbitration conducted pursuant to this Plan of Reorganization. The parties
may offer such evidence as they desire and the arbitrator shall accept such
evidence as the arbitrator deems relevant to the issues and accord it such
weight as the arbitrator deems appropriate.
(xviii) No witness or party may be required to
waive any privilege recognized by law.
34
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Plan of
Reorganization the day and year first above written.
ATTEST: SECTOR ASSOCIATES, LTD.
BY:/s/Andrew Panzo
- -------------------------- --------------------------
ATTEST: VIRAGEN (SCOTLAND) LTD.
/S/Patricia Zambrano BY:/s/Gerald Smith
- -------------------------- ---------------------------
ATTEST: VIRAGEN, INC.
/S/Patricia Zambrano BY:/s/Dennis W. Healey
- -------------------------- ---------------------------
Executive Vice President
35
<PAGE> 1
EXHIBIT 2(b)
AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
Amendment ("Amendment") to Agreement and Plan of Reorganization
entered into as of November 8, 1995 by and among Sector Associates, Ltd., a
Delaware corporation ("Acquiror"), Viragen (Scotland) Limited, a Scottish
private limited company ("Acquiree") and Viragen, Inc., a Delaware corporation
("Stockholder").
W I T N E S S E T H:
WHEREAS, Acquiror, Acquiree and Stockholder entered into an Agreement
and Plan of Reorganization, dated September 20, 1995, as modified by that
letter of agreement dated October 2, 1995 ("Agreement and Plan of
Reorganization");
WHEREAS, Acquiror, Acquiree and Stockholder deem it to be in their
respective best interests to amend the Agreement and Plan of Reorganization in
order to complete arrangements for the closing of the transaction identified
within the Agreement and Plan of Reorganization; and
WHEREAS, upon the terms and conditions set forth herein, Acquiror,
Acquiree and Stockholder have agreed to the following amendments to the
Agreement and Plan of Reorganization.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Closing Date. The Closing Date of the Agreement and Plan of
Reorganization shall occur five (5) days following the filing by Acquiror of
its Annual Report on Form 10-KSB for the year ended June 30, 1995 and its
Quarterly Report on Form 10-QSB for the quarterly period ended September 30,
1995; provided, however, that the Closing Date shall occur no later than 30
days from the date hereof unless the parties mutually agree otherwise. The
parties agree that the extension of the Closing Date to accommodate the filing
of the aforementioned periodic reports are not intended to extend the period
for the undertaking of due diligence by Acquiree and Stockholder, and that such
period for completion of due diligence shall expire as of the date hereof,
notwithstanding Section 9.5 of the Agreement and Plan of Reorganization.
Acquiror represents and warrants that it is unaware of any material changes to
be included in the aforementioned periodic reports to be filed not otherwise
previously disclosed in the periodic reports filed by Acquiror or information
delivered in writing to Acquiree and Stockholder pursuant to the Agreement and
Plan of Reorganization.
2
<PAGE> 3
2. Interim Loan. Pending the closing contemplated by Paragraph
1 above, Acquiror agrees to make an interim loan to Acquiree of $500,000
pursuant to a Secured Promissory Note attached hereto as Exhibit A and Pledge
and Escrow Agreement attached hereto as Exhibit B. In the event the
aforementioned closing under the Agreement and Plan of Reorganization is not
undertaken as provided in Paragraph 1 above, the Secured Promissory Note shall
be due and payable on May 8, 1996. At such time as the contemplated closing
takes place, the Secured Promissory Note shall be deemed satisfied, and the
principal amount thereof and related interest shall be contributed to and shall
become part of the capital of the Acquiror to be on hand net of liabilities as
referred to in Section 8.4 of the Agreement and Plan of Reorganization.
3. Additional Contribution. Not later than 30 days from the date
hereof, there shall be contributed to the capital of Acquiror the sum of
$300,000 through a private placement to be undertaken on behalf of Acquiror of
the equivalent of 1,790,490 shares of common stock of Acquiror.
4. Determination of Net Worth. For purposes of determining cash
assets on hand net of liabilities of $800,000 as provided in Section 8.4 of the
Agreement and Plan of Reorganization and consisting of the sum of $500,000 to
be delivered simultaneously
3
<PAGE> 4
with the execution hereof as provided in Paragraph 2 above and the additional
$300,000 to be delivered as provided in Paragraph 3 above, such $800,000 of
assets on hand shall be net of those liabilities (existing, accrued or
contingent) as of the Closing Date, as well as those expenses associated with
(i) completing a private placement required to raise the balance of the
$800,000 and (ii) the preparation and filing of the Form 10-KSB for the fiscal
year ended June 30, 1995 and the Form 10-QSB for the quarterly period ended
September 30, 1995. It is understood, however, that information concerning the
Acquiree and the Stockholder provided to the Acquiror to be included in such
periodic reports shall be prepared at the costs of the Acquiree, and the costs
associated with filing of the Form 8-K Current Report subsequent to the closing
and reflecting (i) the completion of the acquisition of Acquiree and (ii) the
anticipated change in accountants will be borne by the Acquiree.
5. Capitalization. Upon the 30th day immediately following the
Closing Date and the issuance of the additional shares of Common Stock as
provided in Paragraph 3 above, Acquiror shall have an outstanding
capitalization that consists of no more than approximately 5,037,617 shares of
its common stock, inclusive of the shares issued in order to comply with
Section 8.4 and exclusive
4
<PAGE> 5
of the shares issued to the Stockholder on the Closing Date and any shares
issued other than in connection with Paragraph 8.4 of the Agreement and Plan of
Reorganization. The parties hereto do adopt the terms of correspondence dated
October 2, 1995 as though the same were set forth within this Amendment.
6. Composition of Board of Directors Immediately following the
Closing Date. On or prior to the Closing Date, all members except one member
of the present board of directors of Acquiror shall have tendered their
resignation in favor of a new member of the board of directors, with such
remaining member being a designee of the Stockholder. The new board of
directors shall remain in effect until the earlier of 30 days following the
Closing Date or the date of delivery of the balance of the funds necessary to
satisfy the requirements of Section 8.4 of the Agreement and Plan of
Reorganization.
7. Conversion of Acquiror Shares. The Acquiror Shares will
permit the Stockholder to convert into 78,400,000 shares of common stock of the
Acquiror, each share of Class B Convertible Preferred Stock to be convertible
into 39.2 shares of common stock of the Acquiror such that the Stockholder
shall hold no less than 94% of the capital stock and interest of the Acquiror.
5
<PAGE> 6
8. Investment Banking Arrangements. Pursuant to an Investment
Banking Agreement, FAC Enterprises, Inc. shall receive from the Stockholder
71,429 shares of the Acquiror Shares ("FAC Shares") upon delivery of the
balance of the funds necessary to satisfy the requirements of Section 8.4.
Until that time, the FAC Shares shall remain held by the Stockholder as
collateral for performance of delivery of the balance of the funds required
pursuant to Section 8.4 and this Amendment. In the event requirements of
Section 8.4 are not satisfied within 30 days of the Closing Date, the right to
the FAC Shares by FAC Enterprises, Inc. shall be forfeited. Furthermore, to the
extent that the outstanding capitalization of Acquiror exceeds 5,037,617 Shares
of common stock, exclusive of the shares held by Stockholder and those shares
not issued in connection with completing the funding requirements of Section 1
of this Amendment, at the end of the 30 days immediately following the Closing
Date, such excess amount shall be deducted from the FAC Shares in its common
stock equivalent (39.2 shares of common stock equal to one share of Class B
Convertible Preferred Stock.) The previous Investment Banking Agreement between
Stockholder and Rozel International Holdings Limited ("Rozel") has been
terminated and a release therefrom shall be provided by Rozel on or prior to
the Closing Date.
6
<PAGE> 7
9. Supersedes. Each of Acquiror, Acquiree and Stockholder agree
that this Amendment shall be read in conjunction with the Agreement and Plan of
Reorganization and all the terms and provisions contained herein, shall
supersede those terms and provisions of the Agreement and Plan of
Reorganization which are not currently stated or are contrary to those terms
and provisions of the Agreement and Plan of Reorganization.
10. Full Force and Effect. This Amendment only affects those
terms and provisions of the Agreement and Plan of Reorganization that are not
currently stated or are contrary to this Amendment, and the balance of the
Agreement and Plan of Reorganization shall remain in full force and effect.
11. Binding Agreement. This Amendment shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns. The parties hereto shall
not assign their respective rights nor delegate their respective obligations
hereunder to any other party without the prior written consent of all other
parties hereto.
12. Counterparts. This Amendment may be executed simultaneously
in two or more counterparts, each of which shall be
7
<PAGE> 8
deemed an original, but all of which together shall constitute one and the same
instrument.
13. Facsimile Signature. This Amendment may be executed and
accepted by facsimile signature and such signature shall be in the same force
and effect as an original signature.
14. Governing Law. This Amendment shall be governed by the laws
of the State of Florida.
IN WITNESS WHEREOF, intending to be legally bound hereby the parties
hereto have caused this Amendment to be executed by their duly authorized
officers on the date first appearing above.
Attest: SECTOR ASSOCIATES, LTD.
/s/ Cecil Coady By: /s/ Andrew Panzo
- -------------------------- -----------------------
Attest: VIRAGEN (SCOTLAND) LIMITED
/s/ Steven Sanders By: /s/ Dennis W. Healey
- -------------------------- -----------------------
Managing Director
Attest: VIRAGEN, INC.
/s/ Charles F. Fistel By: /s/ Gerald Smith
- --------------------------- ------------------------
AGREED AND ACKNOWLEDGED:
Attest: FAC ENTERPRISES, INC.
By:
- -------------------------- -------------------------
<PAGE> 9
EXHIBIT A
SECURED PROMISSORY NOTE
November 8, 1995 $500,000.00
FOR VALUE RECEIVED, the undersigned, VIRAGEN (SCOTLAND) LIMITED
("Maker"), a Scottish private limited company, hereby promises to pay to the
order of SECTOR ASSOCIATES, LTD. ("Payee"), a Delaware corporation, the
principal sum of Five Hundred Thousand Dollar ($500,000.00) with interest on
the unpaid principal amount at the rate of 4% per annum and on any overdue
payment of principal or interest at the rate of 1% per month (12% per annum),
and with the principal balance and all accrued interest being due and payable
on May 7, 1996, all as hereinafter provided. This Note shall be subject to the
terms and conditions of an Agreement and Plan of Reorganization dated as of
September 20, 1995, as Amended, between Maker, Payee and Viragen, Inc. (the
"Agreement and Plan of Reorganization"), particularly as it relates to the
satisfaction of this Note upon the Closing of the Agreement and Plan or
Reorganization.
1. Payments of Interest and Principal.
(a) Interest. Maker shall pay interest to Payee on the
unpaid outstanding principal balance owed to Payee hereunder at the rate of
four percent (4%) per annum to be paid at the time of payment of the principal
as herein provided.
(b) Principal. Maker shall have no duty or obligation to
pay any portion of the outstanding principal owed hereunder, except as
hereinafter provided, until May 7, 1996. On May 7, 1996, all accrued interest
and outstanding principal shall be due and payable, and shall be paid, to
Payee.
(c) Payments. All payments made hereunder shall be
applied as made first to the payment of interest then due, and the balance of
said payment shall be applied to the payment of the principal sum.
2. Place of Payment. So long as Payee shall hold this Note, all
payments of principal and interest shall be made at the address of Maker as
specified herein upon presentment of this Note.
<PAGE> 10
3. Prepayment. From and after the date hereof, Maker shall have
the option to prepay any portion or all of the remaining principal balance of
this Note without penalty or premium. All optional prepayments of principal
made pursuant to this Note shall be accompanied by the payment of all accrued
interest on such principal through the date of payment.
4. Security Interest.
(a) Security Interest. As collateral security for the
payment of this Note, Maker hereby pledges, transfers, assigns, sets over and
grants to Payee a first priority security interest in the Collateral (as
hereinafter defined) wherever located.
(b) Continuation of Security Interest. The security
interest granted in this Agreement shall continue in full force and effect
until the payment in full of this Note.
(c) Collateral. The term "Collateral" shall inventory,
shares of capital stock and refer to 3.77 shares of Common Stock of Maker,
including all replacements, modifications, alterations, additions,
substitutions and replacements therefore and all proceeds and products of the
foregoing now owned or hereafter acquired by Maker. The Collateral shall be
provided as security pursuant to a Pledge and Escrow Agreement entered into
simultaneously herewith.
(d) Further Assurance. Maker shall take such steps and
execute and deliver such financing statements and other documents relating to
the creation, validity or perfection of the security interests provided for
herein.
(e) Representations and Warranties. Maker hereby
represents and warrants that Maker has due authorization to issue the
Collateral free and clear of any and all liens, encumbrances or other security
interests whatsoever.
(f) Covenants of Maker. Until payment in full of the
Note, Maker hereby covenants and agrees as follows:
(i) Observe Covenants, etc. Maker shall observe,
perform and comply with the covenants, terms and conditions of this
Note.
2
<PAGE> 11
(ii) Payment of Proceeds. After the occurrence of
an "Event of Default," as hereinafter defined, and for so long as such
default is continuing, Maker shall forthwith upon receipt of any
proceeds of Collateral, pay such proceeds over for the benefit of
Payee, and such proceeds shall thereupon be used to the full extent
necessary to satisfy Maker's obligations to Payee.
(iii) Other Liens. Maker shall not incur, create
or permit to exist any mortgage, assignment, pledge, hypothecation,
security interest, lien or other encumbrance on any of the Collateral.
(g) Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default"):
(i) Failure to Pay. Maker fails to pay, when
due, any of the obligations provided for in this Note at their due
date or under any other note or obligations of Maker to the Payee.
(ii) Denominated Events. The occurrence of any
event expressly denominated as an Event of Default in this Note.
(iii) Failure to Perform. Maker fails to perform
or observe any material covenant, term or condition of this Note, or
any other note or obligation issued or owing in respect to Payee and
to be performed or observed by Maker, and such failure continues
unremedied for a period of ten (10) days after written or facsimile
notice from Payee to Maker of such failure.
(iv) Petition By or Against Maker. There is filed
by or against Maker any petition or complaint with respect to its own
financial condition under any state or federal bankruptcy law or any
amendment thereto (including without limitation a petition or
reorganization, arrangement or extension of debts) or under any other
similar or insolvency laws providing for the relief of debtors; or
(v) Appointment of Receiver. A receiver,
trustee, conservator or liquidator is appointed for Maker, or for all
or a substantial part of its assets; or Maker shall be
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<PAGE> 12
adjudicated bankrupt or in need of any relief provided to debtors by
any court.
(h) Remedies.
(i) Acceleration, Proceed Against Collateral.
Upon the occurrence of an Event of Default and for so long as such
default is continuing:
(1) The total amount of (i) of this Note
and all other sums owing to Payee which are (A) then due and
unpaid or (B) thereafter to become due and payable; and (ii)
interest on the foregoing sums, at the rate of one percent
(1%) per month from said occurrence until paid in full (the
"Default Amount") shall, at the option of Payee, become
immediately due and payable without notice or demand;
(2) The proceeds of the Collateral shall
be applied. First, to the payment of all reasonable fees and
expenses incurred by Payee as a result of such Event of
Default, including without limitation any legal fees and
expenses incurred in connection therewith; Second to pay the
Default Amount to the extent not previously paid by Maker; and
Third to pay any excess remaining thereafter to Maker;
(3) In lieu of any such sale, Payee may
retain the Collateral in full satisfaction of Maker's
obligations under this Note; and
(4) Payee may exercise any of the other
remedies provided under applicable laws.
(ii) Cumulative Remedies; Waivers. No remedy
referred to herein is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or
otherwise available to Payee at law or in equity. No express or
implied waiver by Payee of any default or Event of Default hereunder
shall in any way be, or be construed to be, a waiver of any future or
subsequent default or Event of Default. The failure or delay of Payee
in exercising any rights granted it hereunder under any occurrence of
any of the contingencies set forth herein shall not constitute a
waiver of any such right upon the continuation or recurrence of any
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<PAGE> 13
such contingencies or similar contingencies, and any single or partial
exercise of any particular right by Payee shall not exhaust the same
or constitute a waiver of any other right provided herein.
(iii) Costs and Expenses. Maker shall be liable
for all costs, charges and expenses incurred by Payee by reason of the
occurrence of any Event of Default or the exercise of Payee's remedies
with respect thereto.
(iv) No Marshalling. Payee shall be under no
obligation to proceed against any or all of the collateral before
proceeding directly against Maker. Payee shall be under no obligation
whatsoever to proceed first against any of the collateral before
proceeding against any other of the Collateral. It is expressly
understood and agreed that all of the collateral stands as equal
security for all obligations described above, and that Payee shall
have the right to proceed against any or all of the collateral in any
order, or simultaneously, as in its sole discretion it shall
determine. It is further understood and agreed that Payee shall have
the right, as it, in its sole discretion, shall determine, to retain,
sell or dispose of any or all of the Collateral in any order or
simultaneously.
(v) Other Remedies. The remedies granted to
Payee herein upon an Event of Default are not restrictive of any and
all other rights and remedies of Payee provided for by this Agreement,
any of the relevant documents and applicable law.
5. Contribution to Capital Upon Closing of Agreement and Plan of
Reorganization.
Upon closing of the Agreement and Plan of Reorganization, the
principal amount of this Note together with related interest shall be deemed
contributed to the capital of Sector Associates, Ltd., the payee of this Note,
and this Note shall be deemed satisfied at that time.
Miscellaneous
(a) Waivers. No waiver of any term or condition of this
Note shall be construed to be a waiver of any succeeding breach of the same
term or condition. No failure or delay of Payee
5
<PAGE> 14
to exercise any power hereunder, or it insists upon strict compliance by Maker
of any obligations hereunder, and no custom or other practice at variance with
the terms hereof shall constitute a waiver of the right of Payee to demand
exact compliance with such terms.
(b) Invalid Terms. In the event any provision contained
in this Note shall, for any reason, be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Note, and this Note shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.
(c) Successors. This Note shall be binding upon Maker,
its legal representatives, successors and assigns, and insure to the benefit of
Payee, its legal representatives, successors and assigns.
(d) Controlling Law. This Note shall be read, construed
and governed in all respects in accordance with the laws of the State of
Delaware.
(e) Amendments. This Note may be amended only by an
instrument in writing executed by the party against which enforcement of the
amendment is sought.
(f) Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be
sufficiently given if addressed to the Maker at 2343 W. 76th Street, Hialeah,
Florida 33016, and to the Payee at 401 City Avenue, Suite 725, Bala Cynwyd,
Pennsylvania 19004, posted in the U.S. Mail by certified or registered mail,
return receipt requested or by overnight mail, including appropriate receipts.
Any party may change said address by giving the other party hereto notice of
such change of address. Notice given as hereinabove prescribed shall be deemed
given on the date of its deposit in the U.S. Mail or with the overnight
delivery service.
(g) Headings. All section and subsection headings
herein, wherever they appear, are for convenience only and shall not affect the
construction of any terms herein.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its duly authorized officer and its seal affixed hereto, as of the
day and year first above written.
6
<PAGE> 15
VIRAGEN (SCOTLAND) LIMITED
By: /s/Dennis W. Healey
-------------------
Managing Director
ATTEST:
- ----------------------------
Secretary
Guaranty
In consideration of the acceptance by Payee of the above Note and for
other good and valuable consideration, the undersigned hereby unconditionally
guarantees to Payee the payment of the Note together with all reasonable
attorneys' fees, costs and expenses of collection incurred by Payee. The
guarantee of payment of such interest on the Note shall not exceed the maximum
amount prescribed by law. The undersigned guarantor consents that at any time,
and without notice to the undersigned, payment of any sums due on the Note may
be extended, or the Note may be renewed, in whole or in part, without affecting
the liability of the undersigned. The undersigned hereby waives notice of
acceptance, presentment, demand for payment, protest or notice of dishonor or
non-payment of the Note.
VIRAGEN, INC.
By:/s/Gerald Smith
---------------
President
7
<PAGE> 16
EXHIBIT B
PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT made and entered into as of this 8th
day of November, 1995, by and between VIRAGEN (SCOTLAND), LIMITED ("Viragen
(Scotland)"), VIRAGEN, INC. ("Viragen") (Viragen (Scotland) and Viragen being
collectively referred to as "Pledgor"), SECTOR ASSOCIATES, LTD. (referred to as
"Pledgee"), and ATLAS, PEARLMAN, TROP & BORKSON, P.A. (hereinafter referred to
as "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Viragen (Scotland) has heretofore executed a Promissory Note
(the "Note") in favor of Pledgee and Viragen has guaranteed the Note, a copy of
which is attached hereto as Exhibit "A;"
WHEREAS, to secure the payment of said Note, Pledgor has agreed to
grant to Pledgee a security interest in 3.77 shares of the Common Stock of the
Pledgor (the "Pledged Shares");
WHEREAS, the Pledgor and the Pledgee have requested the Escrow Agent
to act as escrow agent for the Pledged Shares in accordance with the terms of
this Agreement;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements hereinafter set forth, the parties mutually agree as follows:
1. SECURITY INTEREST. Pledgor hereby grants to Pledgee a first
lien security interest, superior to all other liens and encumbrances, in and to
the Pledged Shares. Copies of Stock Powers representing such Pledged Shares,
endorsed in blank, and copies of the Certificates representing such Pledged
Shares, are attached as Exhibit "B." The Pledged Shares and Stock Powers shall
be held by Escrow Agent as collateral for the indebtedness owed by the Company
to Pledgee pursuant to the Note.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor hereby
represents, warrants and covenants that, except for the security interest
granted hereunder, the Pledged Shares are free and clear of all liens, charges,
encumbrances and security interest of every kind and nature, and that Pledgor
will make no assignment, pledge, mortgage, hypothecation or transfer of the
Pledged Shares;
<PAGE> 17
that Pledgor has good right and legal authority to pledge the Pledged Shares in
the manner hereby done or contemplated and will defend Pledgor's title to such
Pledged Shares against the claim of all person whomsoever; that the pledge of
the Pledged Shares is effective to vest in Pledgee the rights of the Pledgee in
such Pledged Shares set forth herein; and that the Pledged Shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
3. ADJUSTMENTS. In the event that, during the term of this
Agreement, any stock dividend shall be declared on or with respect to any of
the Pledged Shares, or there is a reclassification, readjustment, merger,
consolidation, stock split or any other change is made in the capital structure
of the Pledgor, all new, substituted and additional shares or other securities
issued by reason of such a change shall be delivered and held by Escrow Agent
under the terms of this Agreement in the same manner as the Pledged Shares.
4. ESCROW. Pledgor shall deposit with Escrow Agent the Pledged
Shares, along with the aforesaid Stock Powers (all of which items shall
hereinafter be referred to as the "Pledged Documents," including all stock
assignments), to be held in escrow for future delivery as follows:
(a) Escrow Agent shall deliver the Pledged Documents to
Pledgee within ten (10) days after receiving an affidavit signed by
Pledgee stating that:
(i) Pledgor is in default under the Note and all
periods of time within which to cure such default have
expired;
(ii) Pledgee is accelerating the entire unpaid
balance due under the Note; and
(iii) Pledgee demands delivery of the Pledged
Documents.
Pledgee shall simultaneously furnish Pledgor with a copy of
said affidavit. Upon such delivery of the Pledged Documents, Escrow Agent's
duties hereunder shall terminate.
(b) In the event Escrow Agent has not delivered the
Pledged Documents pursuant to subparagraph (a) above, then
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<PAGE> 18
Escrow Agent shall deliver the Pledged Documents to Pledgor within ten
(10) days after receipt of the original of the Note marked "satisfied
in full," accompanied by instructions from Pledgee indicating that
said Note has been satisfied in full and the Pledged Documents shall
be delivered to Pledgor at the address specified therein. Upon such
delivery of the Pledged Documents, Escrow Agent's duties hereunder
shall terminate. Pledgee agrees to deliver the Note to Pledgor marked
"satisfied in full," immediately upon satisfaction thereof.
5. DISPUTE. It is specifically understood and agreed that should
any dispute arise between the parties hereto concerning this Agreement or its
construction, or for any other reason, the Escrow Agent in its sole discretion,
shall have the right to deposit the Pledged Documents held by it pursuant to
this Escrow Agreement and Escrow Agent, with the Clerk of the Circuit Court of
Broward County, Florida, and notify all parties concerned, and whereupon, all
liability hereunder on the part of the Escrow Agent shall fully cease except to
the extent of accounting for the Pledged Documents and any other documents that
may have been delivered to it.
6. INTERPLEADER. In the event the Escrow Agent places the
Pledged Documents that have actually been delivered to Escrow Agent in the
registry of the Circuit Court in and for Broward County, Florida, and files an
action of interpleader naming Pledgor and Pledgee, and other necessary parties,
Escrow Agent shall be released and relieved from any and all further
obligations and liabilities hereunder or in connection herewith. Pledgor and
Pledgee hereby , jointly and severally, indemnify and hold Escrow Agent
harmless from any damages or losses arising hereunder or in connection
herewith, including, but not limited to, all costs and expenses incurred by
Escrow Agent in connection with the filing of such action and reasonable
attorneys' fees and costs for Escrow Agent's attorney(s) through and including
all appeals.
7. NATURE OF ESCROW AGENT'S DUTIES. It is agreed that the duties
of Escrow Agent are only such as are herein specifically provided and are
purely ministerial in nature. Hence, Escrow Agent shall not be held liable for
any matter or thing except for Escrow Agent's gross negligence or willful
misconduct. Pledgor and Pledgee shall at all times hereafter, jointly and
severally, indemnify Escrow Agent and hold Escrow Agent harmless from any claim
asserted against it and from any damages, costs, expenses, liability and/or
losses sustained by Escrow Agent (except for Escrow Agent's gross negligence or
willful misconduct), including,
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<PAGE> 19
but not limited to, reasonable attorneys' fees and costs for Escrow Agent's
attorneys(s) through and including all appeals and whether or not litigation is
instituted. The obligations and duties of the Escrow Agent are confined to
those specifically enumerated in this Agreement. The Escrow Agent shall not be
subject to nor be under any obligation to ascertain or construe the terms and
conditions of any obligation to ascertain or construe the terms and conditions
of any instrument whether or not now or hereafter deposited with or delivered
to the Escrow Agent be obliged to inquire as to the form, execution and
sufficiency or validity or any instruments, or to inquire as to the identity,
authority or rights of any person executing or delivering the same.
8. RETENTION OF LEGAL COUNSEL. It is agreed that Escrow Agent
shall have full discretion as to whom it may retain as legal counsel to protect
its interests (including retaining itself as a law firm) and same shall not
affect or in any way prejudice or limit Escrow Agent's entitlement to
reasonable attorneys' fees for the services of such attorneys as set forth in
this Escrow Agreement.
9. VENUE. It is recognized that this Escrow Agreement shall be
deemed to have been entered into by the parties hereto in Broward County,
Florida, and that the property which is the subject of this Escrow Agreement is
located in Broward County, Florida. Therefore, it is agreed that venue with
respect to any matter arising herefrom shall only lie in Broward County,
Florida, except to the extent, and only to the extent, that this provision with
respect to venue is deemed in contravention of any applicable law.
10. AMBIGUITY; CONFLICTING INSTRUCTIONS. In the event the Escrow
Agent shall be uncertain as to its duties or rights hereunder or shall receive
instructions, claims or demands from any of the parties hereto or from third
persons with respect to the Pledged Documents held hereunder, which in its sole
opinion, care in conflict with any provision of this Agreement, it shall be
entitled to refrain from taking any action until it shall be directed otherwise
in writing by all the parties hereto and said third persons, if any, or by a
final order or judgment of a court of competent jurisdiction.
11. NOTICES. Notices and deliveries under this Agreement shall be
given or made by certified mail, return receipt requested, as follows:
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PLEDGOR:
VIRAGEN (SCOTLAND), LIMITED
VIRAGEN, INC.
2343 W. 76th Street
Hialeah, FL 33016
PLEDGEE:
SECTOR ASSOCIATES LTD.
401 City Avenue, Suite 725
Bala Cynwyd, PA 19004
ESCROW AGENT:
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 E. Las Olas Boulevard, Suite 1900
Ft. Lauderdale, FL 33301
or such other address as any of the above-mentioned parties shall have
designated in writing to the other parties.
12. TERMINATION. All parties agree that the services of the
Escrow Agent may be terminated by the Escrow Agent or by the joinder of both
Pledgee and Pledgor upon ten (10) days written notice to the other. In the
event of such termination, the Pledgee and Pledgor shall mutually agree to a
Successor Escrow Agent. Failing such mutual agreement, application shall be
made to the appropriate court of Broward County, Florida, for the appointment
of a Successor Escrow Agent. Upon such appointment, ATLAS, PEARLMAN, TROP &
BORKSON, P.A. shall deliver all escrow documents to such successor for
continuation of the escrow in accordance with the terms of this Agreement.
13. MISCELLANEOUS.
(a) Benefit of Agreement. This Agreement shall be
binding upon the parties hereto and their successors and assigns.
(b) Modification. The Escrow Agent shall not be bound by
any modification, cancellation or rescission of this Agreement unless in
writing and signed by the parties hereto. In no event, however, shall any
modification of this Agreement, which shall affect the rights or duties of the
Escrow Agent, be binding upon Escrow Agent unless it shall have given its prior
written consent.
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(c) Attorneys' Fees. In the event Pledgor or Pledgee
shall seek to enforce this Agreement, whether or not through litigation, the
prevailing party shall be entitled to receive reasonable attorneys' fees and
all costs incurred in connection with such enforcement, including fees and
costs of appeal.
(d) Further Cooperation. From and after the date of this
Agreement, each of the parties hereto agrees to execute whatever additional
documentation or instruments as are necessary to carry out the intent and
purposes of this Agreement.
(e) Waiver. No indulgences extended by any party hereto
or any other party shall be construed as a waiver of any breach on the part of
such other party, nor shall any waiver of one breach be construed as a wavier
of any rights or remedies with respect to any subsequent breach.
(f) Construction. It is the intention of the parties
that the laws of the State of Florida shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties. The parties agree and acknowledge that each party
has reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting parties shall not be employed in the interpretation of this Agreement
or any amendment or exhibits thereto.
(g) Truth of Recitals. The recitals and statements
contained on page 1 of this Agreement are true and correct and are hereby
incorporated into this Agreement.
(h) Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties on the subject matter hereof
and supersedes all prior agreements and understandings relating thereto.
(i) Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions hereof and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision was omitted.
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<PAGE> 22
(j) Headings. The headings used in this Agreement are
used for reference purposes only and are not to be deemed controlling with
respect to the contents thereof.
(k) Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall for all purposes be
deemed to be an original.
(l) Incorporation by Reference. The Exhibits referred to
in this Agreement are hereby incorporated into this Agreement by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PLEDGOR:
VIRAGEN (SCOTLAND), LIMITED
By: /s/Dennis W. Healey
------------------------------
Managing Director
VIRAGEN, INC.
By: /s/Gerald Smith, President
------------------------------
Managing Director
PLEDGEE:
SECTOR ASSOCIATES, LTD.
By: /s/Andrew Panzo
------------------------------
ESCROW AGENT:
ATLAS,PEARLMAN,TROP & BORKSON, P.A.
By:
------------------------------
<PAGE> 1
EXHIBIT 99
November 7, 1995
FAC Enterprises, Inc.
2715 Meadowood Drive
Ft. Lauderdale, FL 33332
RE: ENGAGEMENT TO PERFORM CERTAIN
INVESTMENT BANKING SERVICES
Gentlemen:
This correspondence will confirm our agreement to engage FAC
Enterprises, Inc. (the Advisor) in order to perform certain services on behalf
of Viragen, Inc. (the Company) in the manner and upon the terms and conditions
hereinafter set forth.
1. Background. As we have discussed, the Company has since
inception been engaged in the research, development and manufacture of certain
proprietary products and technologies that relate to the therapeutic
application of human leukocyte interferon to various diseases that affect the
human immune system. The Company has recently, through license and other
assignments, created a wholly-owned subsidiary, Viragen (Scotland) Ltd. (the
Subsidiary) to which certain of the Company's proprietary rights and
technologies have been assigned and/or licensed. The Subsidiary has, in turn,
secured an agreement from an agency associated with the Scottish National Blood
Transfusion Service (SNBTS) pursuant to which the SNBTS has agreed to, among
other things, continue the development and manufacturing of certain of the
Company's proprietary technologies on behalf of the Subsidiary, under and
subject to the terms of a license and manufacturing agreement.
2. Scope of the Engagement. The Board of Directors of the
Company believes that it is in the Company's best interest that the operations
of the Subsidiary be separate and independent, to the best extent possible,
from the Company and in that regard, this correspondence will confirm that we
have engaged the Advisor to identify a public corporation which will acquire
the Subsidiary in a reverse acquisition pursuant to which the Company would
remain the majority stockholder of the newly combined corporations. The
proposed acquiring corporation (Acquiror) must either acquire by merger, or
retain the operations of the Subsidiary as an wholly-owned subsidiary in a
stock-for-stock transaction.
<PAGE> 2
3. Compensation. If, as a result of your efforts, the Company
locates a suitable Acquiror and a business combination is consummated pursuant
to which the resulting corporation remains a public corporation with the
Company remaining as its principal stockholder, then, and in that event, upon
the closing date of such transaction (the Closing Date) the Advisor will be
entitled to receive 4.425% of the securities received by the Company from the
Acquiror in such transaction.
4. Registration Rights.
4.1 The Company will cause the preparation and filing by the
Acquiror within ninety (90) days following the Closing Date, at the Acquiror's
sole cost and expense of a Registration Statement with the SEC, the purpose of
which is to register the resale of any shares of common stock issued to the
Advisor pursuant to Paragraph 3 above (the Restricted Stock). The Acquiror
shall not, without the written consent of the Advisor, register with the SEC,
the public sale or resale of any further securities other than the Restricted
Stock until at least ninety (90) days after the effectiveness of the
Registration Statement referred to above. The Registration Statement to be
filed by the Acquiror pursuant to the terms of this Paragraph 4, shall adhere
to and follow those registration procedures established and set forth
hereafter.
4.2 Registration Procedures. If and whenever the Acquiror is
required by the provisions of sub- paragraph 4.1 of this Agreement to effect
the registration of any of the Restricted Stock under the Securities Act of
1933, as amended (the Securities Act), the Company will cause the Acquiror to
use its best efforts to:
(a) prepare and file with the Securities and Exchange
Commission (the Commission) a Registration Statement with respect to such
Restricted Stock and use its best efforts to cause such Registration Statement
to become and remain effective for the period of the distribution contemplated
thereby or as required under the Securities Act;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the period specified in Subparagraph 4.2(a) above and as
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Restricted Stock covered by such Registration Statement
in accordance with the Holders' intended method of disposition set forth in
such Registration Statement for such period;
(c) furnish to each Holder and to each underwriter such
number of copies of the Registration Statement and the prospectus included
therein (including each preliminary prospectus), as such persons may reasonably
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such Registration Statement;
(d) cause the Acquiror to use its best efforts to register or
qualify the Restricted Stock covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as
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<PAGE> 3
the Holders, or, in the case of an underwritten public offering, the managing
underwriter shall reasonably request; provided, however, that the Acquiror
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
(e) immediately notify each Holder under such Registration
Statement and each underwriter, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required or necessary to be stated therein
in order to make the statements contained therein not misleading in light of
the circumstances then existing;
(f) make available for inspection by each Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Acquiror's officers,
directors and employees to supply all information reasonably requested by any
such Holder, underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(g) For purposes of Subparagraphs 4.2(a) and 4.2(b) above,
the period of distribution of Restricted Stock shall be deemed to extend for
nine months or such earlier date as (A) in an underwritten public offering,
each underwriter has completed the distribution of all securities purchased by
it; and (B) in any other registration, all shares of Restricted Stock covered
thereby shall have been sold; and
(h) if the Common Stock of the Acquiror is listed on any
securities exchange or automated quotation system, the Company shall cause the
Acquiror to use its best efforts to list (with the listing application being
made at the time of the filing of such Registration Statement or as soon
thereafter as is reasonably practicable) the Restricted Stock covered by such
Registration Statement on such exchange or automated quotation system.
4.3. Expenses.
(a) For the purposes of this sub-paragraph 4.3, the term
Registration Expenses shall mean: all expenses incurred by the Acquiror and
Company in complying with this Paragraph 4 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the
Acquiror, fees of the National Association of Securities Dealers, Inc. (NASD),
fees and expenses of listing shares of Restricted Stock on any securities
exchange or automated quotation system on which the Acquiror's shares are
listed and fees of transfer agents and registrars. The term Selling Expenses
shall mean: all underwriting discounts and selling commissions applicable to
the sale of Restricted Stock and all
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<PAGE> 4
accountable or non-accountable expenses paid to any underwriter in respect of
the sale of Restricted Stock.
(b) The Acquiror will pay all Registration Expenses in
connection with the Registration Statement filed pursuant to this Paragraph 4
hereof. All Selling Expenses in connection with any Registration Statement
hereof shall be borne by the participating sellers in proportion to the number
of shares sold by each, or by such persons other than the Acquiror (except to
the extent the Acquiror shall be a seller) as they may agree.
4.4 Obligations of Holder.
(a) In connection with each registration hereunder, each
selling Holder will furnish to the Acquiror in writing such information with
respect to such seller and the securities held by such seller, and the proposed
distribution by them as shall be reasonably requested by the Acquiror in order
to assure compliance with federal and applicable state securities laws, as a
condition precedent to including such seller's Restricted Stock in the
Registration Statement. Each selling Holder also shall agree to promptly
notify the Acquiror of any changes in such information included in the
Registration Statement or prospectus as a result of which there is an untrue
statement of material fact or an omission to state any material fact required
or necessary to be stated therein in order to make the statements contained
therein not misleading in light of the circumstances then existing.
(b) In connection with each registration, the Holders
included therein will not effect sales thereof until notified by the Acquiror
of the effectiveness of the Registration Statement, and thereafter will suspend
such sales after receipt of telegraphic or written notice from the Acquiror to
suspend sales to permit the Acquiror to correct or update a Registration
Statement or prospectus. At the end of any period during which the Acquiror is
obligated to keep a Registration Statement current, the Holders included in
said Registration Statement shall discontinue sales of shares pursuant to such
Registration Statement upon receipt of notice from the Acquiror of its
intention to remove from registration the shares covered by such Registration
Statement which remain unsold, and such Holders shall notify the Acquiror of
the number of shares registered which remain unsold immediately upon receipt of
such notice from the Acquiror.
4.5 Obligations of Company.
(a) The Company agrees to indemnify and hold harmless
each Holder of Restricted Stock, its officers, directors and agents, and each
person, if any, who controls such Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or prospectus relating to the Restricted Stock (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the
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<PAGE> 5
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in
writing to the Company by such Holder or on such Holder's behalf expressly for
use therein. The Company also agrees to provide any underwriters engaged in
connection with resale or sale of the Restricted Stock, their officers and
directors and each person who controls such underwriters with substantially the
same indemnification as that provided to the Holders in this sub-paragraph 4.5.
4.6. Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to sub-paragraphs
4.4 or 4.5 above, such person (an Indemnified Party) shall promptly notify the
person against whom such indemnity may be sought (an Indemnifying Party) in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party,
and shall assume the payment of all fees and expenses of such counsel in
connection with such proceeding. In any such proceeding, any Indemnified Party
shall have the right to retain its own separate counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such separate counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its consent, but if settled with
its consent, or if there be a final judgment for the plaintiff, the
Indemnifying Party shall indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgement. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any 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
proceeding.
1. Protection Against Dilution. The relative interests as of the
Closing Date of the Advisor in the common stock of the Acquiror as an aggregate
percentage of shall be preserved and protected against dilution in accordance
with the following provisions. The Advisor shall retain this percentage
interest (the Protected Interest) in the outstanding common stock of the
Acquiror following the Closing Date and shall be preserved and protected
against further dilution or reduction of its Protected Interest ownership until
after that period in which Acquiror has secured net equity capital of
$4,000,000 (the Restricted Period) following the Closing Date (including for
this purpose, any net
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<PAGE> 6
equity funding that was available upon the Closing Date). To the extent that
during the Restricted Period the Company issues any Securities (as hereafter
defined), it shall in conjunction therewith immediately issue to the Advisor
that number of shares of common stock that shall be equal to the product of the
Protected Interest and the aggregate number of Securities issued. For this
purpose, the term Securities shall include shares of common stock issued, as
well as that number of shares of common stock that may be issued upon the
exercise of warrants or options or upon the conversion of convertible preferred
stock, convertible debt instruments or any other derivative-based securities.
2. Right of First Refusal On Subsequent Financings. For the
period of twenty-four (24) months following the Closing Date the Company shall
cause the Advisor to have a preferential right of refusal to secure any future
debt or equity financings on behalf of the Acquiror, any successor-in-interest,
subsidiary or affiliate thereof. This shall also include any funding
undertaken by Partnerships to be formed by the Subsidiary (or any affiliate) to
fund clinical trials in the European Union.
Should the Acquiror seek to undertake any debt or equity
financings during the period covered by this subparagraph, then the Acquiror
must first provide the Advisor with written notification to that effect, which
notification must specify the proposed terms of the debt or equity financings
desired. The Advisor shall then have ninety (90) days in which to secure such
debt or equity financings on terms acceptable to the Acquiror. If Advisor is
unable to do so, then the Acquiror shall have the right to secure the debt or
equity financings from any other third party. In the event, however, that the
debt or equity financings to be secured from a third party are on terms
materially different than those proposed in writing to the Advisor, then, and
in that event, the Acquiror shall, prior to securing any such debt or equity
financings from such third party, provide a written explanation of the terms
thereof to the Advisor and provide the Advisor with an additional period of
sixty (60) days in which to secure debt or equity financings on those terms.
If the Advisor is unable to do so within said sixty day period, then the
Acquiror is free of any restrictions of this subparagraph to pursue the debt or
equity financings proposed accordingly. To the extent that Advisor is able to
secure for the Acquiror any such debt or equity financings, the Advisor shall
receive the compensation otherwise anticipated to be provided to investment
bankers, brokers, finders or others in connection with such financing, however,
in no event to be less than 10% of the proceeds secured, plus warrants which
for a period of three years permit the purchase of additional shares of common
stock of the Acquiror to the extent of 10% of the securities sold by Acquiror
in such financing transaction at a purchase price of 110% of the price sold in
the financing.
1. Expenses. The Company shall reimburse the Advisor for all
reasonable out-of-pocket expenses, including but not limited to printing,
travel, long distance telephone charges, postage and photocopying. The Company
shall cause the Acquiror to reimburse the Advisor within 30 days from the date
the Advisor presents the Company with any expense invoice and supporting
documentation.
2. Independent Contractor. The Advisor is acting hereunder as an
independent contractor to the Company and shall not be considered an agent of
the Company for any purposes other than those expressly set forth in this
Agreement. Neither party to this Agreement is granted any right or
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<PAGE> 7
authority to assume or create any obligation or liability, expressed or
implied, on behalf of the other or to bind the other in any manner whatsoever.
3. Indemnification.
The Company shall:
(a) indemnify the Advisor and hold it harmless against any
losses, claims, damages or liabilities to which the Advisor may become subject
arising in any manner out of or in connection with the rendering of services by
its hereunder, unless it is finally judicially determined that such losses,
claims, damages or liabilities arose out of the negligence or bad faith of the
Advisor;
(b) indemnify Advisor and hold it harmless against any losses,
claims, damages, liabilities to which Advisor may become subject arising in any
manner out of or in connection with any misrepresentation or error contained in
any documents, schedules or other information provided by the Company to
Advisor for use in any transactions contemplated herein. The Advisor shall not
be liable for the verification and shall not verify any such information
provided by the Company hereunder; and
(c) reimburse the Advisor within a reasonable period of time
for any legal or other expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending any lawsuits, claims or other
proceedings arising in any manner out of or in connection with the rendering of
services by the Advisor hereunder; provided, however, that in the event a final
judicial determination is made to the effect specified in subparagraph (a)
above, the Advisor will remit to the Company any amounts reimbursed under this
subparagraph 9(c).
(d) The Company agrees that the indemnification and
reimbursement commitments set forth in this paragraph shall apply whether or
not the Advisor is a formal party to any such lawsuits, claims or other
proceedings, that the Advisor is entitled to retain separate counsel of its
choice in connection with any of the matters to which such commitments relate
and that such commitments shall extend upon the terms set forth in this
paragraph to any controlling person, director, officer, employee or agent of
Patton.
1. Assignment. Neither party may assign its rights or
obligations hereunder without the written consent of the other party.
2. Entire Agreement. This Agreement contains the entire
agreement of the parties as to the subject matter hereof. This Agreement may
be amended only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
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<PAGE> 8
3. Notices. All notices, requests, demands, consents or
other communications under this Agreement shall be in writing and sent by
registered or certified mail, return receipt requested, or by personal delivery
(including delivery by a nationally recognized courier service) as follows:
Company:
Viragen, Inc.
2343 West 76th Street
Hialeah, FL 33016
Attention: President
FAC Enterprises, Inc.
2715 Meadowood Drive
Ft. Lauderdale, FL 33332
or to such other addresses as may be specified by notice given in accordance
with this Section.
If you agree to be bound by the terms hereof, would you kindly place
your signature on the line provided below.
Very truly yours,
VIRAGEN, INC.
BY:/s/ Gerald Smith
-------------------------------
Agreed and Accepted
FAC ENTERPRISES, INC.
BY:_________________________________
8
