================================================================================
Series F Convertible Preferred Stock
Exchange Agreement
================================================================================
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT, dated as of July 23, 1997 (this
"Agreement"), by and between VIRAGEN, INC., a Delaware corporation (the
"Company"), located at 000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx
00000, and P.R.I.F., L.P., a limited partnership organized under the laws of
Ontario, Canada (the "Holder") located at 000 Xxxxx Xxxxxx Xxxx, Xxxxx Tower,
0xx Xxxxx, Xxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on February 5, 1997 the Company issued to the Holder 15,000
shares of its Series D Convertible Preferred Stock, $1.00 par value ("Series D
Preferred Stock"), pursuant to a Private Securities Subscription Agreement,
dated as of December 31, 1996, between the Company and the Holder (the
"Subscription Agreement");
WHEREAS, in order to change the dividend rate and the optional
redemption premium applicable to the Holder's securities, the parties desire to
exchange (the "Exchange") the Holder's outstanding Series D Preferred Stock for
a like number of newly issued shares of Series F Convertible Preferred Stock,
$1.00 par value, of the Company ("Series F Preferred Stock"); and
WHEREAS, the parties intend that all of their respective rights and
obligations under the Subscription Agreement and the Registration Rights
Agreement, dated as of December 31, 1996, between the Company and the Holder
(the "Registration Rights Agreement"), shall, upon the Exchange and subject to
the other terms of this Agreement, continue to apply in full force and effect to
the Series F Preferred Stock issued to the Holder;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO EXCHANGE; AMENDMENT OF SUBSCRIPTION AGREEMENT AND
REGISTRATION RIGHTS AGREEMENT.
(A) EXCHANGE. The Company and the Holder hereby agree to exchange
on the Closing Date (as defined herein) a number of shares (the "Series F
Preferred Shares") of Series F Preferred Stock of the Company equal to the
number of shares (the "Series D Preferred Shares") of Series D Preferred Stock
held by the Holder on the Closing Date for the number of Series D Preferred
Shares held by the Holder on the Closing Date. The Series F Preferred Shares
shall have the rights, designations and terms as set forth in the form of
Certificate of Designations attached as ANNEX I to this Agreement (the
-1-
"Certificate of Designations"). The shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), issuable upon conversion of the Series F
Preferred Shares are referred to herein as the "Common Shares." The Common
Shares and the Series F Preferred Shares are referred to herein collectively as
the "Shares."
(B) CLOSING. (1) The exchange of Series F Preferred Shares for
Series D Preferred Shares shall occur at a closing (the "Closing") to be held on
the next business day (the "Closing Date") following the Stockholder Notice
Period (as defined in Section 4(e)(1)) but which in no event shall be later than
August 21, 1997. Either party may terminate this Agreement if the Closing does
not occur on or before August 21, 1997. The Closing shall occur on the Closing
Date at Law Offices of Xxxxx X Xxxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
(2) Each of the parties acknowledges that time is of the essence
in effecting the Closing hereunder and shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to complete the
Exchange set forth in Section 6 or 7, as the case may be, of this Agreement on
or before the Closing Date.
(C) AMENDMENT OF SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT. Subject to the terms of this Agreement which shall govern any
inconsistent provisions, effective upon the Closing, (1) the parties hereby
amend each of the Subscription Agreement and the Registration Rights Agreement
such that all references to the Series D Preferred Shares therein shall be
deemed to be references to the Series F Preferred Shares; and (2) the respective
rights and obligations of the parties with respect to the Series D Preferred
Shares as of the date hereof shall apply with full force and effect to the
Series F Preferred Shares and the Common Shares issuable pursuant thereto.
Except as amended hereby or as otherwise provided herein, the Subscription
Agreement (including, without limitation, the proviso to Section 2(x) thereof)
and the Registration Rights Agreement shall continue in full force and effect.
2. HOLDER REPRESENTATIONS, WARRANTIES, ETC.
The Holder represents and warrants to, and covenants and agrees
with, the Company as follows:
(A) INVESTMENT PURPOSE. The Holder is acquiring the Series F
Preferred Shares for its own account for investment only and not with a view
towards the public sale or distribution thereof.
(B) ACCREDITED INVESTOR. The Holder is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under the
Securities Act of 1933, as amended (the "1933 Act") by reason of Rule 501(a)(3).
-2-
(C) REOFFERS AND RESALES. All subsequent offers and sales of the
Shares by the Holder shall be made pursuant to registration of the Shares being
offered and sold under the 1933 Act or pursuant to an exemption from
registration.
(D) EXCHANGE AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Holder and is a valid and
binding agreement of the Holder enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Holder that:
(A) CONCERNING THE SHARES. The Shares have been duly authorized
and the Series F Preferred Shares, when issued in exchange for the Series D
Preferred Shares in accordance with this Agreement, and the Common Shares, when
issued upon conversion of the Series F Preferred Shares, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire any of
the Shares. The Common Stock is listed for trading on the Nasdaq National Market
("Nasdaq") and (1) the Company and the Common Stock meet the criteria for
continued listing and trading on Nasdaq; (2) the Company has not been notified
since January 1, 1997 by the National Association of Securities Dealers, Inc.
(the "NASD") of any failure or potential failure to meet the criteria for
continued listing and trading on Nasdaq and (3) no suspension of trading in the
Common Stock is in effect. The Common Shares are listed for trading on Nasdaq.
(B) EXCHANGE AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(C) NON-CONTRAVENTION. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the issuance of
the Series F Preferred Shares and the other transactions contemplated by this
Agreement, and the terms of the Series F Preferred Stock do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the certificate of incorporation
or by-laws of the Company, or any indenture, mortgage, deed of trust or other
-3-
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, or any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets.
(D) APPROVALS. No authorization, approval or consent of or filing
with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained by the Company for the issuance and sale of the Series F
Preferred Shares and the Common Shares as contemplated by this Agreement, except
for the filing of the Certificate of Designations with the Secretary of State of
the State of Delaware.
(E) SEC REPORTING STATUS AND FILINGS. The Company has filed with
the Securities and Exchange Commission (the "SEC") all reports and other
information required to be filed under Sections 13(a), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act").
(F) INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Holder in connection with the transactions contemplated by
this Agreement, including, without limitation, all reports and other information
filed with the SEC since January 1, 1996 (the "SEC Reports"), does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(G) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company, except as disclosed in the SEC Reports.
(H) ABSENCE OF LITIGATION. Except as set forth in SCHEDULE 3(H)
attached hereto, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries taken as a whole or the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
-4-
(I) EXCHANGES OF STOCK. The Company has not and will not pay any
commission or other remuneration for soliciting exchanges of Series D Preferred
Shares for Series F Preferred Shares.
(J) REGISTRATION STATEMENT. Registration Statement (Registration
No. 333-23061) (as amended to date, the "Registration Statement") registering
the resale of the shares of Common Stock issuable upon conversion of the Series
D Preferred Shares has been declared effective by the SEC and no stop-order or
similar proceeding relating to the Registration Statement is pending or
threatened.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(A) TRANSFER RESTRICTIONS. The Holder and the Company acknowledge
and agree that (1) the Series F Preferred Shares have not been and are not being
registered under the provisions of the 1933 Act and may not be transferred
unless (A) subsequently registered thereunder or (B) the Holder shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Series F Preferred
Shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Series F Preferred Shares
made in reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any such resale of Series F Preferred Shares under circumstances in
which the seller, or the person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
wit some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; (3) neither the Company nor any other person is under any
obligation to register the Series F Preferred Shares under the 1933 Act or to
comply with the terms and conditions of any exemption thereunder (other than
pursuant to Section 4(c) hereof), with respect to the sale or other transfer of
the Series F Preferred Shares; and (4) the Company shall agree in writing with
any transferee of the Series F Preferred Share that the Company and such
transferee shall be bound by and entitled to the respective rights and
obligations of the Company and the Holder as set forth in this Section 4.
(B) RESTRICTIVE LEGEND. The Holder acknowledges and agrees that
the certificates for the Series F Preferred Shares may bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Series F Preferred Shares):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
-5-
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THE HOLDER OF
THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
SET FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE
COMPANY AND P.R.I.F., L.P., DATED DECEMBER 31, 1996, AS AMENDED BY THE
EXCHANGE AGREEMENT BETWEEN THE COMPANY AND P.R.I.F., L.P., DATED AS OF
JULY 23, 1997. A COPY OF THE AFORESAID SUBSCRIPTION AGREEMENT AND EXCHANGE
AGREEMENT MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
Upon conversion of the Series F Preferred Shares into Common Shares,
the Company shall issue a Common Stock certificate or certificates without any
restrictive legend to the holder of such shares. Such Common Shares shall not be
subject to any stop transfer instructions and shall be freely transferable on
the books and records of the Company.
(C) REPORTING STATUS. So long as the Holder beneficially owns any
of the Series F Preferred Shares or the Common Shares, the Company shall file
all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of
the 1934 Act and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
(D) RESTRICTION ON CONVERSIONS. Effective on the Closing Date, the
Holder hereby agrees that during each two (2) week period commencing on the
Closing Date, and continuing for as long as the Holder shall hold any Series F
Preferred Shares, the Holder may not request the conversion into Common Shares
of Series F Preferred Shares having a stated value (including accrued and unpaid
dividends for which conversion into Common Shares is requested by the Holder)
greater than $800,000; PROVIDED, HOWEVER, that the foregoing restriction shall
apply only so long as the Company is in compliance with all of its material
obligations to the Holder under this Agreement, the Certificate of Designations,
the Subscription Agreement and the Registration Rights Agreement.
(E) NASD MATTERS. (1) The Company represents and warrants to the
Holder that (A) it has received the NASD's concurrence ("NASD Approval") with
the Company's position that the approval by the Company's stockholders given at
a Special Meeting of the Stockholders held on June 27, 1997 of the issuance of
the Series D Preferred Shares shall be deemed shareholder approval of the
issuance of the Series F Preferred Shares for purposes of Rule 4460(i)(1)(D)(ii)
(the "Rule") of the Nasdaq National Market Issuer Designation Requirements such
that the issuance of Common Shares upon conversion of the Series F Preferred
Shares would not be subject to any restrictions under the Rule and (B) as a
condition of such NASD Approval, the NASD has required the Company to mail a
notice to all stockholders (the "Notice") advising them of the Exchange ten days
prior to the Closing Date (such ten day period is referred to herein as the
-6-
"Stockholder Notice Period") and to file a Current Report on Form 8-K with the
SEC reporting the Exchange. The Company agrees to promptly prepare the Notice,
obtain the NASD's prior approval thereof (if so required), and mail the Notice
to its stockholders.
(2) If, notwithstanding the NASD Approval, at any time the Holder
is unable to receive on a timely basis Common Shares upon submission to the
Company of a notice of conversion of the Series F Preferred Shares by reason of
the Rule or the provisions of Section 4(v) of the Subscription Agreement, within
five days of receipt of a written request from the Holder, the Company shall
redeem such inconvertible Series F Preferred Shares (the "Inconvertible Shares")
by paying the Holder for each such Inconvertible Share a cash amount equal to
(A) the sum of (1) $1,000 and (2) an amount equal to the accrued but unpaid
dividends on such Inconvertible Shares through the payment date TIMES (B) 118%.
(F) FAILURE TO REDEEM. If at any time the Company shall exercise
its Cash-Out Option (as defined in Section 7(i) of the Certificate of
Designations) with respect to a requested conversion of Series F Preferred
Shares and thereafter fail to make the required cash payment to the Holder
within ten business days after receipt by the Company of the notice of
conversion (the "Notice Date") with respect to such Series F Preferred Shares,
the Company shall compensate the Holder for such late paymen by paying the
Holder an additional amount, as liquidated damages and not as a penalty, equal
to one-half of one percent (0.5%) of the requested conversion amount (equal to
the stated value plus accrued interest on the Series F Preferred Shares
requested to be converted), per day, beginning on the eleventh business day
after the Notice Date. Such additional amounts shall accrue each day through the
date the entire cash amount due the Holder pursuant to the Cash-Out Option plus
such additional amounts are paid in full, and shall be paid by wire transfer to
an account designated by the Holder on each weekly anniversary of the eleventh
business day after the Notice Date.
(G) AMENDED PROSPECTUS. At least three business days prior to the
Closing Date, the Company shall provide to the Holder and its counsel for review
a draft amended prospectus, forming part of the Registration Statement, to be
filed by the Company on or before the Closing Date with the SEC covering the
resale of the Common Shares under the 1933 Act.
(H) PAYMENT OF DIVIDENDS ON SERIES D PREFERRED STOCK. For the
period commencing June 23, 1997 to and including the date prior to the Closing
Date, the Company agrees to pay the Holder dividends on its Series D Preferred
Stock at the rate of ten percent (10%) per annum of the stated value of the
Series D Preferred Stock as if such 10% rate were set forth in Section 2 of the
-7-
Certificate of Designations, Preferences and Rights of the Series D Preferred
Stock. Prior to the Closing Date, the Company shall pay to the Holder in cash an
amount equal to all accrued and unpaid dividends on the Series D Preferred Stock
payable to and including the date prior to the Closing Date.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
On or prior to the Closing Date, the Company will irrevocably
instruct (the "Transfer Agent Instructions") its transfer agent for the Common
Stock, ChaseMellon Shareholder Services L.L.C. (the "Transfer Agent"), to issue
certificates for Common Shares from time to time upon conversion of Series F
Preferred Shares in such amounts as specified from time to time to the Transfer
Agent in the conversion notices surrendered in connection with such conversions.
The Transfer Agent Instructions shal provide that the certificates for the
Common Shares shall not bear any restrictive legend and the Common Shares shall
not be subject to any stop transfer instructions. The Company warrants that no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 4(a) hereof with respect to the
Series F Preferred Shares will be given by the Company to the Transfer Agent and
that the Common Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement. Nothing
in this Section 5 shall affect in any way the Holder's obligations and agreement
to comply with all applicable securities laws upon resale of the Common Shares
and to comply with the terms and conditions of the Certificate of Designations.
If the Holder provides the Company with an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that registration of a
resale by the Holder of any of the Series F Preferred Shares in accordance with
clause (1)(B) of Section 4(a) of this Agreement is not required under the 1933
Act, the Company shall permit the transfer of such Series F Preferred Shares.
6. CONDITIONS TO THE HOLDER'S OBLIGATIONS.
The Holder's obligation to exchange its Series D Preferred Shares
for Series F Preferred Shares is conditioned upon the following:
(a) Delivery by the Company to the Holder on the Closing Date of
duly executed certificates representing the Series F Preferred Shares duly
registered in the name of the Holder;
(b) Receipt by the Holder on or before the Closing Date of
confirmation of the filing of the Certificate of Designations with the Secretary
of State of the State of Delaware, in form reasonably satisfactory to the
Holder;
(c) The Company shall have transmitted to the SEC for filing,
pursuant to Rule 424(b) under the 1933 Act, an amended prospectus, in form and
substance reasonably satisfactory to the Holder, relating to the resale of the
-8-
Common Shares issuable upon conversion of the Series F Preferred Shares, and
shall have provided the Holder with a reasonable number of copies of such
amended prospectus;
(d) The Registration Statement shall have been declared effective
by the SEC, no stop-order or similar proceeding relating to the Registration
Statement shall be pending or threatened and the Registration Statements
register the Common Shares for resale in compliance with the 1933 Act;
(e) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement;
(f) The representations and warranties of the Company contained in
this Agreement shall have been true and correct on the date of this Agreement
and shall be true and correct on the Closing Date as if given on and as of the
Closing Date, and on or before the Closing Date the Company shall have performed
all covenants and agreements of the Company contained herein required to be
performed by the Company on or before the Closing Date;
(g) On the Closing Date, the Holder having received an opinion of
Atlas, Xxxxxxxx, Trop & Borkson, P.A., counsel for the Company, dated the
Closing Date, addressed to the Holder, in form, scope and substance reasonably
satisfactory to the Holder, substantially in the form of ANNEX II attached
hereto; and
(h) On or before the Closing Date, the Holder shall have received
a copy of the Transfer Agent Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Company's obligations to exchange the new Series F Preferred
Shares for the Holder's Series D Preferred Shares is conditioned upon the
following:
(a) Delivery by the Holder to the Company for cancellation on the
Closing Date of certificates representing all outstanding Series D Preferred
Shares, together with executed stock powers;
(b) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement; and
(c) The representations and warranties of the Holder contained in
this Agreement shall have been true and correct on the date of this Agreement
and shall be true and correct on the Closing Date as if given on and as of the
Closing Date, and on or before the Closing Date the Holder shall have performed
all covenants and agreements of the Holder required to be performed by the
Holder on or before the Closing Date.
-9-
8. GOVERNING LAW; MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida.
(b) This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) No failure or delay by any party in exercising any right or
remedy under this Agreement or otherwise, and no course of dealing between the
parties, shall operate as a waiver thereof or amendment of this Agreement, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or exercise of any other right or
power.
(f) Neither this Agreement nor any term thereof (including this
paragraph) may be amended, changed, waived, discharged or terminated unless such
amendment, change, waiver, discharge or termination is in writing signed by the
party to be charged with enforcement.
(g) Any notices, deliveries and payments required or permitted to
be given or made under the terms of this Agreement shall be given or made in
accordance with the terms of the Subscription Agreement; provided that notices
to the Company should be addressed to the Company at the address shown in the
introductory paragraph of this Agreement and may be sent by telephone line
facsimile to (000) 000-0000.
(h) This Agreement and the Certificate of Designations, together
with the Subscription Agreement and the Registration Rights Agreement, each as
amended hereby, contain the entire understanding of the parties with respect to
the matters covered herein and therein.
-10-
IN WITNESS WHEREOF, the parties have caused this Exchange Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
VIRAGEN, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
P.R.I.F., L.P.
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx
President, HB and Co., Inc.
General Partner,
P.R.I.F., L.P.
11
