SUBSCRIPTION AGREEMENT
EXHIBIT 10.1
THIS SUBSCRIPTION AGREEMENT (this “Agreement”) dated as of _______________, 2006, by and among
VIRAGEN, INC., a Delaware corporation (the “Company”), and the subscribers identified on the
signature page hereto (each a “Subscriber” and collectively “Subscribers”).
WHEREAS, the Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the provisions of Section 4(2),
Section 4(6) and/or Regulation D (“Regulation D”) as promulgated by the United States Securities
and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933
Act”).
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell (the “offering”) to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase up to Six Million Dollars ($6,000,000) of
Units each Unit consisting of one share of Series J 24% Cumulative Convertible Preferred Stock of
the Company (“Preferred Stock”) at a stated value of $100.00 per Unit (the “Purchase Price”) which
shall be convertible into shares of the Company’s common stock, $.01 par value (the “Common Stock”)
at a conversion price of $1.25 per share subject to the rights and preferences described in the
form of Certificate of Designation, Preferences and Rights (“Certificate of Designation”), and a
common stock purchase warrants (the “Warrants”) to purchase 80 shares of Common Stock (the “Warrant
Shares”)(the “Units”). The Preferred Stock, shares of Common Stock issuable upon conversion of the
Preferred Stock (the “Shares”), the Warrants and the Warrant Shares are collectively referred to
herein as the “Securities”; and
WHEREAS, the aggregate proceeds of the sale of the Preferred Stock and the Warrants
contemplated hereby shall be held in escrow pursuant to the terms of an Agreement to be executed by
the parties (the “Escrow Agreement”).
NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in
this Agreement the Company and the Subscribers hereby agree as follows:
1. Closing. Subject to the satisfaction or waiver of the terms and conditions of this
Agreement, on the “Closing Date” (as defined in Section 2 hereof), each Subscriber shall purchase
and the Company shall sell to each Subscriber the Units having the Stated Value set forth on the
signature page hereto and the amount of Warrants determined pursuant to Section 3 below. The
aggregate stated value of the Units to be purchased by the Subscribers on the Closing Date, in the
aggregate, shall not exceed $6,000,000.
2. Closing. The consummation of the transactions contemplated herein shall take place
at the offices of Xxxxxx Xxxxx Securities, Inc. (“Xxxxxx Xxxxx”), 000 Xxxxx Xxxxxxx Xxxxxxx,
0xx Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000, upon the satisfaction of all conditions to Closing
set forth in the Confidential Term Sheet (“Closing Date”). There may be one or more Closing Dates.
3. Warrants. On the Closing Date, the Company will issue and deliver Warrants to the
Subscribers. Eighty (80) Class A Warrants will be issued for each share of Preferred Stock. The
per Warrant Share exercise price to acquire a Warrant Share upon exercise of a Class A Warrant
shall be $1.25. The Warrants shall be exercisable until five (5) years after the Issue Date of the
Warrants.
4. Subscriber’s Representations and Warranties. Each Subscriber hereby represents and
warrants to and agrees with the Company only as to such Subscriber that:
(a) Organization and Standing of the Subscribers. If the Subscriber is an entity,
such Subscriber is a corporation, partnership or other entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Subscriber has the requisite power and authority to
enter into and perform this Agreement and to purchase the Units being sold to it hereunder. The
execution, delivery and performance of this Agreement by such Subscriber and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or authorization of such Subscriber or its
Board of Directors, stockholders, partners, members, as the case may be, is required. This
Agreement has been duly authorized, executed and delivered by each Subscriber and constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of the Subscriber
enforceable against the Subscriber in accordance with the terms thereof.
(c) No Conflicts. The execution, delivery and performance of this Agreement and the
consummation by each Subscriber of the transactions contemplated hereby or relating hereto do not
and will not (i) result in a violation of such Subscriber’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or
obligation to which such Subscriber is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to such Subscriber or its properties (except for such
conflicts, defaults and violations as would not, individually or in the aggregate, have a material
adverse effect on such Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations under this Agreement
or to purchase the Preferred Stock or acquire the Warrants in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, such Subscriber is assuming
and relying upon the accuracy of the relevant representations and agreements of the Company herein.
(d) Information on Company. The Subscriber has had access at the XXXXX Website of the
Commission to the Company’s Form 10-K for the year ended June 30, 2005 and all periodic and current
reports as filed with the Commission (hereinafter referred to as the “Reports”). In addition,
Subscriber has received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Subscriber has requested in writing (such
other information is collectively, the “Other Written Information”), and considered all factors
Subscriber deems material in deciding on the advisability of investing in the Securities.
(e) Information on Subscriber. The Subscriber is, and will be at the time of the
conversion of the Preferred Stock and exercise of the Warrants, an “accredited investor”, as such
term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in
investments and business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in the past and, with
its representatives, has such knowledge and experience in financial, tax and other business matters
as to enable the Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the authority and is duly
and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk
of such investment for an indefinite period and to afford a complete loss of the entire investment.
The information set forth on the signature page hereto regarding the Subscriber is accurate.
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(f) Purchase of Preferred Stock and Warrants. On the Closing Date, the Subscriber
will purchase the Units as principal for its own account for investment only and not with a view
toward, or for resale in connection with, the public sale or any distribution thereof.
(g) Compliance with Securities Act. The Subscriber understands that the Units
are “restricted Securities” and have not been registered under the Securities Act or any applicable
state securities law and is acquiring the Units (including the underlying securities) as principal
for its own account for investment and not with a view to, or for sale in connection with, any
distribution of such Units or any part thereof, has no present intention of distributing any of
such Units (including the underlying securities) and has no arrangement or understanding with any
other persons regarding the distribution of such Units (including the underlying securities). The
Subscriber is acquiring the Units (including the underlying securities) hereunder in the ordinary
course of its business. The Subscriber does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Units (including the underlying securities).
The Subscriber is not purchasing the Units as a result of any advertisement, article, notice or
other communication regarding the Units published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other general solicitation or
general advertisement.
(h) Shares Legend. The Shares and the Warrant Shares shall bear the following
or similar legend:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VIRAGEN, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(i) Warrants Legend. The Warrants shall bear the following or similar legend:
“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
VIRAGEN, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
(j) Preferred Stock Legend. The Preferred Stock shall bear the following or similar
legend:
“THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS PREFERRED STOCK AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THESE PREFERRED STOCK MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE PREFERRED
STOCK UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
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SATISFACTORY TO VIRAGEN, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(k) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any
other form of general advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(l) Authority; Enforceability. This Agreement and other agreements delivered together
with this Agreement or in connection herewith have been duly authorized, executed and delivered by
the Subscriber and are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights generally and to general
principles of equity; and Subscriber has full corporate power and authority necessary to enter into
this Agreement and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.
(m) Restricted Securities. Subscriber understands that the Securities have not been
registered under the 1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless pursuant to an effective
registration statement under the 1933 Act or appropriate exemption thereunder. Notwithstanding
anything to the contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as
defined below) provided that each such Affiliate is an “accredited investor” under Regulation D and
such Affiliate agrees to be bound by the terms and conditions of this Agreement. For the purposes
of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly
or indirectly controlling, controlled by or under direct or indirect common control with such
person or entity. Affiliate includes each subsidiary of the Company. For purposes of this
definition, “control” means the power to direct the management and policies of such person or firm,
directly or indirectly, whether through the ownership of voting securities, by contract or
otherwise.
(n) No Governmental Review. Each Subscriber understands that no United States federal
or state agency or any other governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the Securities.
(o) Correctness of Representations. Each Subscriber represents as to such Subscriber
that the foregoing representations and warranties are true and correct as of the date hereof and,
unless a Subscriber otherwise notifies the Company prior to the Closing Date shall be true and
correct as of the Closing Date.
(p) Access to Information. The Subscriber has been afforded the opportunity to
ask questions of, and receive answers from the officers and/or directors of the Company acting on
its behalf concerning the terms and conditions of this transaction and to obtain any additional
information, to the extent that the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and
has availed himself of such opportunity to the extent the undersigned considers appropriate in
order to permit the undersigned to evaluate the merits and risks of an investment in the Company.
It is understood that all documents, records and books pertaining to this investment have been made
available for inspection, and that the books and records of the Company will be available upon
reasonable notice for inspection by investors during reasonable business hours at its principal
place of business or other mutually agreeable location.
(q) Survival. The foregoing representations and warranties shall survive until
three years after the Closing Date.
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5. Company Representations and Warranties. The Company represents and warrants to and
agrees with each Subscriber that except as set forth in the Reports and as otherwise qualified in
the Transaction Documents as hereinafter defined.
(a) Due Incorporation. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the requisite corporate power
to own its properties and to carry on its business as disclosed in the Reports. The Company is
duly qualified to do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. For
purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the
financial condition, results of operations, properties or business of the Company taken as a whole.
For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any
corporation, limited or general partnership, limited liability company, trust, estate, association,
joint venture or other business entity) of which more than 50% of (i) the outstanding capital stock
having (in the absence of contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more intermediaries, by
such entity. All the Company’s Subsidiaries as of the Closing Date are set forth in the Reports.
(b) Outstanding Stock. All issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the Preferred Stock, Certificate of
Designation, the Warrants, the Escrow Agreement, and any other agreements delivered together with
this Agreement or in connection herewith (collectively “Transaction Documents”) have been duly
authorized, executed and delivered by the Company and are valid and binding agreements enforceable
in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of equity. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction Documents and to perform
its obligations thereunder.
(d) Consents. No consent, approval, authorization or order of any court, governmental
agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates, any
Principal Market (as defined in Section 8(b) of this Agreement), nor the Company’s stockholders is
required for the execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities. The Offering and Transaction Documents have
been approved by the Company’s Board of Directors.
(e) No Violation or Conflict. Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale of the Securities nor
the performance of the Company’s obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably likely to constitute a
default in any material respect) of a material nature under (A) the certificate of incorporation,
charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates,
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(C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which the Company or any of
its Affiliates is bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar
agreement to which the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect; or to the Company’s knowledge
(ii) result in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates; or
(iii) result in the activation of any anti-dilution rights or a reset or repricing of any debt
or security instrument of any other creditor or equity holder of the Company, nor result in the
acceleration of the due date of any obligation of the Company; or
(iv) result in the activation of any piggy-back registration rights of any person or entity
holding securities or debt of the Company or having the right to receive securities of the Company.
(f) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and any applicable state
securities laws;
(ii) have been, or will be, duly and validly authorized and on the date of issuance of the
Shares upon conversion of the Preferred Stock and issuance of the Warrant Shares upon exercise of
the Warrants will be duly and validly issued, fully paid and nonassessable or if registered
pursuant to the 1933 Act, and resold pursuant to an effective registration statement, will be free
trading and unrestricted);
(iii) will not have been issued or sold in violation of any preemptive or other similar rights
of the holders of any securities of the Company;
(iv) will not subject the holders thereof to personal liability by reason of being such
holders, provided Subscriber’s representations herein are true and accurate and Subscribers take no
actions or fail to take any actions required for their purchase of the Securities to be in
compliance with all applicable laws and regulations; and
(v) will not result in a violation of Section 5 under the 0000 Xxx.
(g) Litigation. There is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the
execution by the Company or the performance by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending or, to the best knowledge of
the Company, basis for or threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its
Affiliates which litigation if adversely determined would have a Material Adverse Effect.
(h) Reporting Company. The Company is a publicly-held company subject to reporting
obligations pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934 (the “1934
Act”) and has a class of common shares registered pursuant to Section 12(b) of the 1934 Act.
Pursuant to the
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provisions of the 1934 Act, the Company has timely filed all reports and other materials
required to be filed thereunder with the Commission during the preceding twelve months.
(i) No Market Manipulation. The Company and its Affiliates have not taken, and will
not take, directly or indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities or affect the price at which the Securities may be issued or
resold, provided, however, that this provision shall not prevent the Company from engaging in
investor relations/public relations activities consistent with past practices.
(j) Information Concerning Company. The Reports, as amended, contain all material
information relating to the Company and its operations and financial condition as of their
respective dates and all the information required to be disclosed therein. Since the last day of
the fiscal year of the most recent annual audited financial statements included in the Reports
(“Latest Financial Date”), and except as modified in the Other Written Information or in the
Schedules hereto, there has been no Material Adverse Event relating to the Company’s business,
financial condition or affairs not disclosed in the Reports. The Reports do not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the circumstances when made.
(k) Stop Transfer. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice of such instruction
is given to the Subscriber.
(l) Defaults. The Company is not in violation of its certificate or articles of
incorporation or bylaws. The Company, to the best of its knowledge, is (i) not in default under or
in violation of any material agreement or instrument to which it is a party or by which it or any
of its properties are bound or affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court, arbitrator or governmental body
or subject to or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint
of trade, unfair competition or similar matters, or (iii) not in violation of any statute, rule or
regulation of any governmental authority which violation would have a Material Adverse Effect.
(m) Not an Integrated Offering. Neither the Company, nor any of its Affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any offers or sales of
any security or solicited any offers to buy any security under circumstances that would cause the
offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the American Stock Exchange (“AMEX”) any
Principal Market [as defined in Section 8(b)] which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations hereunder. Nor will the
Company or any of its Affiliates take any action or steps that would cause the offer or issuance of
the Securities to be integrated with other offerings which would impair the exemptions relied upon
in this Offering or the Company’s ability to timely comply with its obligations hereunder. The
Company will not conduct any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities, which would impair the exemptions relied
upon in this Offering or the Company’s ability to timely comply with its obligations hereunder.
(n) No General Solicitation. Neither the Company, nor any of its Affiliates, nor to
its knowledge, any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under the 0000 Xxx) in
connection with the offer or sale of the Securities.
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(o) Listing. The Common Stock is listed on the AMEX. Except as disclosed in the
Reports, the Company has not received any oral or written notice that the Common Stock is not
eligible, nor will become ineligible for listing on the AMEX, nor that its Common Stock does not
meet all requirements for the continuation of such listing.
(p) No Undisclosed Liabilities. The Company has no liabilities or obligations which
are material, individually or in the aggregate, which are not disclosed in the Reports and Other
Written Information, other than those incurred in the ordinary course of the Company’s businesses
since the Latest Financial Date and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
(q) No Undisclosed Events or Circumstances. Since the Latest Financial Date, no event
or circumstance has occurred or exists with respect to the Company or its businesses, properties,
operations or financial condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(r) Capitalization. The authorized and outstanding capital stock of the Company as of
the date of this Agreement and the Closing Date (not including the Securities) are set forth in the
Reports or other Written Information. Except as set forth therein, there are no options, warrants,
or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for
or giving any right to subscribe for any shares of capital stock of the Company or any of its
Subsidiaries. All of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable.
(s) No Disagreements with Accountants and Lawyers. There are no disagreements of any
kind during the two fiscal years preceding the date of this Agreement, presently existing, or
reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to disputes or conflicts
over payment owed to such accountants and lawyers.
(t) Correctness of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior to the Closing Date, shall be true
and correct in all material respects as of the Closing Date.
(u) Survival. The foregoing representations and warranties shall survive until three
years after the Closing Date.
6. Regulation D Offering. The offer and issuance of the Securities to the Subscribers
is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded
by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated
thereunder.
7 Concerning the Preferred Stock and Warrants.
(a) Conversion. Upon the conversion of any Preferred Stock, the Company shall, at its
own cost and expense, take all necessary action, including obtaining and delivering, an opinion of
counsel to assure that the Company’s transfer agent shall issue stock certificates in the name of
Subscriber (or its nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of Common Stock
issuable upon such conversion.
(b) No Interest. Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest or
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dividends required to be paid or other charges hereunder exceed the maximum permitted by such
law, any payments in excess of such maximum shall be credited against amounts owed by the Company
to the Subscriber and thus refunded to the Company.
(c) Adjustments. The Conversion Price, Warrant exercise price and amount of Shares
issuable upon conversion of the Preferred Stock and exercise of the Warrants shall be equitably
adjusted and as described in this Agreement, the Certificate of Designation and Warrants.
(d) Redemption. The Preferred Stock and Warrants shall not be redeemable or
callable except as described in the Certificate of Designation or Warrants.
8. Covenants of the Company. The Company covenants and agrees with the Subscribers
use its best efforts in good faith as follows:
(a) Stop Orders. The Company will advise the Subscribers, within four hours after the
Company receives notice of issuance by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing. The Company shall promptly secure the listing of the Shares and the
Warrant Shares upon each national securities exchange, or electronic or automated quotation system
upon which they are or become eligible for listing and shall maintain such listing so long as any
Preferred Stock or Warrants are outstanding. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System,
Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the “Principal Market”)), and will comply in all
respects with the Company’s reporting, filing and other obligations under the bylaws or rules of
the Principal Market, as applicable. As of the date of this Agreement, the AMEX is the Principal
Market.
(c) Market Regulations. The Company shall notify the Commission, the Principal Market
and applicable state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and valid issuance of
the Securities to the Subscribers.
(d) Filing Requirements. From the date of this Agreement and until the sooner of (i)
two (2) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company will (A) comply in all respects with
its reporting and filing obligations under the 1934 Act, (B) cause its Common Stock to continue to
be registered under Section 12(b) or 12(g) of the 1934 Act, and (C) comply with all requirements
related to any registration statement filed pursuant to this Agreement. The Company will use its
best efforts not to take any action or file any document (whether or not permitted by the 1933 Act
or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said acts until two (2) years after the
Closing Date. Until the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or two (2) years after the Warrants have been exercised, the Company will use its best
efforts to continue the listing or quotation of the Common Stock on a Principal Market and will
comply in all respects with the Company’s reporting, filing and other obligations under the bylaws
or rules of the Principal Market. The Company agrees to timely file a Form D with respect to the
Securities if required under Regulation D.
(e) Use of Proceeds. The proceeds of the Offering will be employed by the Company for
the purposes set forth in the Confidential Term Sheet to which this is annexed as Exhibit A.
9
(f) Reservation. Prior to the Closing Date, the Company undertakes to reserve,
pro rata, on behalf of the Subscribers from its authorized but unissued common
stock, a number of common shares of common stock necessary to allow each Subscriber to be able to
convert all Preferred Stock issuable pursuant to this Agreement and dividends thereon and reserve
100% of the amount of Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 8(f) for five (5) consecutive business days or
fifteen (15) days in the aggregate shall be a material default of the Company’s obligations under
this Agreement.
(g) Taxes. From the date of this Agreement and until the sooner of (i) two (2) years
after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges
or levies imposed upon the income, profits, property or business of the Company; provided, however,
that any such tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the Company shall have set
aside on its books adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefore.
(h) Insurance. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the Company’s line of
business, in amounts sufficient to prevent the Company from becoming a co-insurer and not in any
event less than one hundred percent (100%) of the insurable value of the property insured; and the
Company will maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated and to the extent available on commercially
reasonable terms.
(i) Books and Records. From the date of this Agreement and until the sooner of (i)
two (2) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted accounting principles
applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have
been resold or transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company shall duly observe and
conform in all material respects to all valid requirements of governmental authorities relating to
the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company shall maintain in full force and effect
its corporate existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be necessary to the conduct
of its business, unless it is sold for value.
(l) Properties. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred
10
by all the Subscribers pursuant to the Registration Statement (as defined in Section 10.1(iv)
hereof) or pursuant to Rule 144, without regard to volume limitations, the Company will keep its
properties in good repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each provision of all leases to
which it is a party or under which it occupies property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect.
(m) Non-Public Information. The Company covenants and agrees that neither it nor any
other person acting on its behalf will provide any Subscriber or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior
thereto such Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
9. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend the Subscribers, the
Subscribers’ officers, directors, agents, Affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Subscriber or any such person which results,
arises out of or is based upon (i) any material misrepresentation by Company or breach of any
warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any
breach or default in performance by the Company of any covenant or undertaking to be performed by
the Company hereunder, or any other agreement entered into by the Company and Subscriber relating
hereto.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company and
each of the Company’s officers, directors, agents, Affiliates, control persons against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which results, arises out of or
is based upon (i) any material misrepresentation by such Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after
any applicable notice and/or cure periods, any breach or default in performance by such Subscriber
of any covenant or undertaking to be performed by such Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber or permitted successor hereunder or
under any Transaction Document or other agreement delivered in connection herewith be greater in
amount than the dollar amount of the net proceeds actually received by such Subscriber upon the
sale of Registrable Securities (as defined herein).
(d) The procedures set forth in Section 10.6 shall apply to the indemnification set forth in
Sections 9(a) and 9(b) above.
10.1. Registration Rights. The Company hereby grants the following registration
rights to holders of the Securities.
(i) On one occasion, for a period commencing one hundred and fifty-one (151) days after the
Closing Date, but not later than two (2) years after the Closing Date, upon a written request
therefor from any record holder or holders of more than 50% of the Shares issued and issuable upon
conversion of the outstanding Preferred Stock and outstanding Warrant Shares, the Company shall
prepare and file with the Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 10.1(iv) hereof, which are the subject of such
request for unrestricted public resale by the holder thereof. For purposes of Sections 10.1(i) and
10.1(ii), Registrable Securities shall not include Securities
11
which are (A) registered for resale in an effective registration statement, (B) included for
registration in a pending registration statement, or (C) which have been issued without further
transfer restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
receipt of such request, the Company shall promptly give written notice to all other record holders
of the Registrable Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received written requests
within ten (10) days after the Company gives such written notice. Such other requesting record
holders shall be deemed to have exercised their demand registration right under this Section
10.1(i).
(ii) If the Company at any time proposes to register any of its securities under the 1933 Act
for sale to the public, whether for its own account or for the account of other security holders or
both, except with respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Subscribers or Holder
pursuant to an effective registration statement, each such time it will give at least fifteen (15)
days’ prior written notice to the record holder of the Registrable Securities of its intention so
to do. Upon the written request of the holder, received by the Company within ten (10) days after
the giving of any such notice by the Company, to register any of the Registrable Securities not
previously registered, the Company will cause such Registrable Securities as to which registration
shall have been so requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to permit the sale or
other disposition of the Registrable Securities so registered by the holder of such Registrable
Securities (the “Seller” or “Sellers”). In the event that any registration pursuant to this Section
10.1(ii) shall be, in whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and the underwriter
shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the foregoing provisions, or Section 10.4
hereof, the Company may withdraw or delay or suffer a delay of any registration statement referred
to in this Section 10.1(ii) without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is received by the Company pursuant
to Section 10.1(i), the Company has determined to proceed with the actual preparation and filing of
a registration statement under the 1933 Act in connection with the proposed offer and sale for cash
of any of its securities for the Company’s own account and the Company actually does file such
other registration statement, such written request shall be deemed to have been given pursuant to
Section 10.1(ii) rather than Section 10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section 10.1(ii).
(iv) The Company shall file with the Commission a Form S-1 registration statement (the
“Registration Statement”) (or such other form that it is eligible to use) in order to register the
Registrable Securities for resale and distribution under the 1933 Act within thirty (30) calendar
days after the Closing Date (the “Filing Date”), and cause to be declared effective not later than
one hundred and twenty (120) calendar days after the Closing Date (the “Effective Date”). The
Company will register not less than a number of shares of common stock in the aforedescribed
registration statement that is equal to 175% of the Shares issuable upon conversion of all of the
Preferred Stock issuable to the Subscribers, and 175% of the Warrant Shares issuable pursuant to
this Agreement upon exercise of the Warrants and Finder’s Warrants (collectively the “Registrable
Securities”). The Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber and Warrant holder, pro rata, and not issued, employed
or reserved for anyone other than each such Subscriber and Warrant holder. The Registration
Statement will immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of Common Stock to allow the public
resale of all Common Stock included in and issuable by virtue of the Registrable Securities.
12
10.2. Registration Procedures. If and whenever the Company is required by the
provisions of this Section to effect the registration of any Registrable Securities under the 1933
Act, the Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and file with the Commission
a registration statement required by Section 10, with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), promptly provide to the holders
of the Registrable Securities copies of all filings and Commission letters of comment and notify
Xxxxxx Xxxxx Securities, Inc. (by telecopier or by email ) on or before 6:00 PM EST not later than
the first business day after the Company receives notice that (i) the Commission has no comments or
no further comments on the Registration Statement, and (ii) the registration statement has been
declared effective (failure to timely provide notice as required by this Section 10.2(a) shall be a
material breach of the Company’s obligation and an Event of Default as defined in the Preferred
Stock and a Non-Registration Event as defined in Section 11.4 of this Agreement);
(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 until such registration statement has been effective for a period
of two (2) years, and comply with the provisions of the 1933 Act with respect to the disposition of
all of the Registrable Securities covered by such registration statement in accordance with the
Sellers’ intended method of disposition set forth in such registration statement for such period;
(c) furnish to the Sellers, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each preliminary prospectus)
as such persons reasonably may request in order to facilitate the public sale or their disposition
of the securities covered by such registration statement or make them electronically available;
(d) use its commercially reasonable best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or “blue sky” laws of New
York and such jurisdictions as the Sellers shall request in writing, provided, however, that the
Company 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) if applicable, list the Registrable Securities covered by such registration statement with
any securities exchange on which the Common Stock of the Company is then listed; and
(f) notify the Subscribers of the Company’s becoming aware that a prospectus relating thereto
is required to be delivered under the 1933 Act, of the happening of any event of which the Company
has knowledge 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 a material fact
required to be stated therein or necessary to make the statements therein not misleading in light
of the circumstances then existing or which becomes subject to a Commission, state or other
governmental order suspending the effectiveness of the registration statement covering any of the
Shares.
10.3. Provision of Documents. In connection with each registration described in this
Section 11, each Seller will furnish to the Company in writing such information and representation
letters with respect to itself and the proposed distribution by it as reasonably shall be necessary
in order to assure compliance with federal and applicable state securities laws.
10.4. Non-Registration Events. The Company and the Subscribers agree that the Sellers
will suffer damages if the Registration Statement is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration statement required under
Section 10.1(i) or 10.1(ii) is not filed within 30 days after written request and declared
effective by the Commission within 120 days after
13
such request, and maintained in the manner and within the time periods contemplated by Section
10 hereof, and it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or before the Filing Date, (B) is
not declared effective on or before the Effective Date, (C) due to the action or inaction of the
Company the Registration Statement is not declared effective within three (3) business days after
receipt by the Company or its attorneys of a written or oral communication from the Commission that
the Registration Statement will not be reviewed or that the Commission has no further comments, (D)
if the registration statement described in Sections 10.1(i) or 10.1(ii) is not filed within 45 days
after such written request, or is not declared effective within 150 days after such written
request, or (E) any registration statement described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is
filed and declared effective but shall thereafter cease to be effective without being succeeded
within fifteen (15) business days by an effective replacement or amended registration statement or
for a period of time which shall exceed 20 days in the aggregate per year (defined as a period of
365 days commencing on the Actual Effective Date (each such event referred to in clauses (A)
through (E) of this Section 10.4 is referred to herein as a “Non-Registration Event”), then the
Company shall deliver to the holder of Registrable Securities, as Liquidated Damages, an amount
equal to one and one half percent (1.5%) for each thirty (30) days or part thereof of the Purchase
Price of the Preferred Stock remaining unconverted and purchase price of Shares issued upon
conversion of the Obligation Amount (as defined in the Certificate of Designation) owned of record
by such holder which are subject to such Non-Registration Event. The Company must pay the
Liquidated Damages in cash. The Liquidated Damages must be paid within ten (10) days after the end
of each thirty (30) day period or shorter part thereof for which Liquidated Damages are payable.
In the event a Registration Statement is filed by the Filing Date but is withdrawn prior to being
declared effective by the Commission, then such Registration Statement will be deemed to have not
been filed. All oral or written comments received from the Commission relating to the Registration
Statement must be satisfactorily responded to within ten (10) business days after receipt of
comments from the Commission. Failure to timely respond to Commission comments is a
Non-Registration Event for which Liquidated Damages shall accrue and be payable by the Company to
the holders of Registrable Securities at the same rate set forth above. Notwithstanding the
foregoing, the Company shall not be liable to the Subscriber under this Section 10.4 for any events
or delays occurring as a consequence of the acts or omissions of the Subscribers contrary to the
obligations undertaken by Subscribers in this Agreement. Liquidated Damages will not accrue nor be
payable pursuant to this Section 10.4 nor will a Non-Registration Event be deemed to have occurred
for times during which Registrable Securities are transferable by the holder of Registrable
Securities pursuant to Rule 144(k) under the 1933 Act.
10.5. Expenses. All expenses incurred by the Company in complying with Section 11,
including, without limitation, all registration and filing fees, printing expenses (if required),
fees and disbursements of counsel and independent public accountants for the Company, fees and
expenses (including reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.”
All underwriting discounts and selling commissions applicable to the sale of Registrable Securities
are called “Selling Expenses.” The Company will pay all Registration Expenses in connection with
the registration statement under Section 10. Selling Expenses in connection with each registration
statement under Section 10 shall be borne by the Seller and may be apportioned among the Sellers in
proportion to the number of shares sold by the Seller relative to the number of shares sold under
such registration statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the 1933 Act pursuant
to Section 10, the Company will, to the extent permitted by law, indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which the Seller, or such underwriter or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement
14
or alleged untrue statement of any material fact contained in any registration statement under
which such Registrable Securities was registered under the 1933 Act pursuant to Section 10, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made, and will subject to the provisions of Section
10.6(c) reimburse the Seller, each such underwriter and each such controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Company shall not be
liable to the Seller to the extent that any such damages arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) the Seller failed to send or
deliver a copy of the final prospectus delivered by the Company to the Seller with or prior to the
delivery of written confirmation of the sale by the Seller to the person asserting the claim from
which such damages arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with information furnished
by any such Seller, or any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities under the 1933 Act
pursuant to Section 10, each Seller severally but not jointly will, to the extent permitted by law,
indemnify and hold harmless the Company, and each person, if any, who controls the Company within
the meaning of the 1933 Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any underwriter within the
meaning of the 1933 Act, against all losses, claims, damages or liabilities, joint or several, to
which the Company or such officer, director, underwriter or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such Registrable
Securities were registered under the 1933 Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will reimburse the Company
and each such officer, director, underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any such loss, claim,
damage, liability or action, provided, however, that the Seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or alleged omission made
in reliance upon and in conformity with information pertaining to such Seller, as such, furnished
in writing to the Company by such Seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of the Seller hereunder shall be
limited to the net proceeds actually received by the Seller from the sale of Registrable Securities
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so
to notify the indemnifying party shall not relieve it from any liability which it may have to such
indemnified party other than under this Section 10.6(c) and shall only relieve it from any
liability which it may have to such indemnified party under this Section 10.6(c), except and only
if and to the extent the indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent
it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such indemnified party of
its election so to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 10.6(c) for any legal expenses subsequently
incurred
15
by such indemnified party in connection with the defense thereof other than reasonable costs
of investigation and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the indemnifying party or if the
interests of the indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as incurred.
11.11. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall be deemed effective
(a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for such communications
shall be: (i) if to the Company, to: Viragen, Inc.,865 X.X. 00xx Xxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxx 00000, telecopier: (000) 000-0000, and (ii) if to the Subscriber, to: the one
or more addresses and telecopier numbers indicated on the signature pages hereto. The Company may
change its address for notices but only to an address and fax number located in the United States.
(b) Entire Agreement; Assignment. This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both parties. Neither the
Company nor the Subscribers have relied on any representations not contained or referred to in this
Agreement and the documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscribers.
(c) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such counterparts shall constitute but one and
the same instrument. This Agreement may be executed by facsimile signature and delivered by
facsimile transmission.
(d) Law Governing this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without regard to conflicts of laws
principles that would result in the application of the substantive laws of another
jurisdiction. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the civil or state courts of Florida or in
the federal courts located in Broward County, Florida. The parties and the individuals executing
this Agreement and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury.
The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to
16
conform with such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of any other provision
of any agreement.
(e) Specific Enforcement, Consent to Jurisdiction. The Company and Subscriber
acknowledge and agree that irreparable damage may occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to seek one or more
preliminary and final injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity. Subject to Section 13(d) hereof,
each of the Company, Subscriber and any signator hereto in his personal capacity hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction in Florida of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.
Nothing in this Section shall affect or limit any right to serve process in any other manner
permitted by law.
(f) Independent Nature of Subscribers. The Company acknowledges that the obligations
of each Subscriber under the Transaction Documents are several and not joint with the obligations
of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of
the obligations of any other Subscriber under the Transaction Documents. The Company acknowledges
that each Subscriber has represented that the decision of each Subscriber to purchase Securities
has been made by such Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or otherwise) or prospects of
the Company which may have been made or given by any other Subscriber or by any agent or employee
of any other Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from any such information,
materials, statements or opinions. The Company acknowledges that nothing contained in any
Transaction Document, and no action taken by any Subscriber pursuant hereto or thereto (including,
but not limited to, the (i) inclusion of a Subscriber in the Registration Statement and (ii) review
by, and consent to, such Registration Statement by a Subscriber) shall be deemed to constitute the
Subscribers as a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Subscribers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently protect and enforce
its rights, including without limitation, the rights arising out of the Transaction Documents, and
it shall not be necessary for any other Subscriber to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience of the Company and
not because Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no way creates a
presumption that the Subscribers are in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated thereby.
(g) As used in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than 70% of the total of the Shares issued and issuable upon
conversion of outstanding Preferred Stock owned by Subscribers on the date consent is requested.
(h) No consideration shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of the Transaction Documents unless the same consideration is also
offered to all the parties to the Transaction Documents.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and
returning a copy to the undersigned whereupon it shall become a binding agreement between us.
| VIRAGEN, INC. a Delaware corporation |
||||
| By: | /s/ | |||
| Name: | ||||
| Dated: ______________________, 2006 | Title: | |||
SUBSCRIBER
|
PURCHASE PRICE AND STATED VALUE OF PREFERRED STOCK |
CLASS A WARRANTS | ||||||
[NAME] [Address] Fax: By: |
||||||||
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