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EXHIBIT 10(vii)
(vii) Engagement to perform certain investment banking
services between the Company and FAC Enterprises,
Inc. dated November 7, 1995.
November 7, 1995
FAC Enterprises, Inc.
0000 Xxxxxxxxx Xxxxx
Xx. Lauderdale, FL 33332
RE: ENGAGEMENT TO PERFORM CERTAIN
INVESTMENT BANKING SERVICES
Gentlemen:
This correspondence will confirm our agreement to engage FAC
Enterprises, Inc. (the "Advisor") in order to perform certain services on
behalf of Viragen, Inc. (the "Company") in the manner and upon the terms and
conditions hereinafter set forth.
1. Background. As we have discussed, the Company has since
inception been engaged in the research, development and manufacture of certain
proprietary products and technologies that relate to the therapeutic
application of human leukocyte interferon to various diseases that affect the
human immune system. The Company has recently, through license and other
assignments, created a wholly-owned subsidiary, Viragen (Scotland) Ltd. (the
"Subsidiary") to which certain of the Company's proprietary rights and
technologies have been assigned and/or licensed. The Subsidiary has, in turn,
secured an agreement from an agency associated with the Scottish National Blood
Transfusion Service ("SNBTS") pursuant to which the SNBTS has agreed to, among
other things, continue the development and manufacturing of certain of the
Company's proprietary technologies on behalf of the Subsidiary, under and
subject to the terms of a license and manufacturing agreement.
2. Scope of the Engagement. The Board of Directors of the
Company believes that it is in the Company's best interest that the operations
of the Subsidiary be separate and independent, to the best extent possible,
from the Company and in that regard, this correspondence will confirm that
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we have engaged the Advisor to identify a public corporation which will acquire
the Subsidiary in a reverse acquisition pursuant to which the Company would
remain the majority stockholder of the newly combined corporations. The
proposed acquiring corporation ("Acquiror") must either acquire by merger, or
retain the operations of the Subsidiary as an wholly-owned subsidiary in a
stock-for-stock transaction.
3. Compensation. If, as a result of your efforts, the Company
locates a suitable Acquiror and a business combination is consummated pursuant
to which the resulting corporation remains a public corporation with the
Company remaining as its principal stockholder, then, and in that event, upon
the closing date of such transaction (the "Closing Date") the Advisor will be
entitled to receive 4.425% of the securities received by the Company from the
Acquiror in such transaction.
4. Registration Rights.
4.1 The Company will cause the preparation and filing by
the Acquiror within ninety (90) days following the Closing Date, at the
Acquiror's sole cost and expense of a Registration Statement with the SEC, the
purpose of which is to register the resale of any shares of common stock issued
to the Advisor pursuant to Paragraph 3 above (the "Restricted Stock"). The
Acquiror shall not, without the written consent of the Advisor, register with
the SEC, the public sale or resale of any further securities other than the
Restricted Stock until at least ninety (90) days after the effectiveness of the
Registration Statement referred to above. The Registration Statement to be
filed by the Acquiror pursuant to the terms of this Paragraph 4, shall adhere
to and follow those registration procedures established and set forth
hereafter.
4.2 Registration Procedures. If and whenever the
Acquiror is required by the provisions of sub- paragraph 4.1 of this Agreement
to effect the registration of any of the Restricted Stock under the Securities
Act of 1933, as amended (the "Securities Act"), the Company will cause the
Acquiror to use its best efforts to:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a Registration Statement with respect to such
Restricted Stock and use its best efforts to cause such Registration Statement
to become and remain effective for the period of the distribution contemplated
thereby or as required under the Securities Act;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
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effective for the period specified in Subparagraph 4.2(a) above and as
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Restricted Stock covered by such Registration Statement
in accordance with the Holders' intended method of disposition set forth in
such Registration Statement for such period;
(c) furnish to each Holder and to each underwriter such
number of copies of the Registration Statement and the prospectus included
therein (including each preliminary prospectus), as such persons may reasonably
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such Registration Statement;
(d) cause the Acquiror to use its best efforts to register or
qualify the Restricted Stock covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as the Holders, or, in the
case of an underwritten public offering, the managing underwriter shall
reasonably request; provided, however, that the Acquiror shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) immediately notify each Holder under such Registration
Statement and each underwriter, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required or necessary to be stated therein
in order to make the statements contained therein not misleading in light of
the circumstances then existing;
(f) make available for inspection by each Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Acquiror's officers,
directors and employees to supply all information reasonably requested by any
such Holder, underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(g) For purposes of Subparagraphs 4.2(a) and 4.2(b) above,
the period of distribution of Restricted Stock shall be deemed to extend for
nine months or such earlier date as (A) in an underwritten public offering,
each underwriter has completed the distribution of all securities purchased by
it; and (B) in any other registration, all shares of Restricted Stock covered
thereby shall have been sold; and
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(h) if the Common Stock of the Acquiror is listed on any
securities exchange or automated quotation system, the Company shall cause the
Acquiror to use its best efforts to list (with the listing application being
made at the time of the filing of such Registration Statement or as soon
thereafter as is reasonably practicable) the Restricted Stock covered by such
Registration Statement on such exchange or automated quotation system.
4.3. Expenses.
(a) For the purposes of this sub-paragraph 4.3, the term
"Registration Expenses" shall mean: all expenses incurred by the Acquiror and
Company in complying with this Paragraph 4 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the
Acquiror, fees of the National Association of Securities Dealers, Inc.
("NASD"), fees and expenses of listing shares of Restricted Stock on any
securities exchange or automated quotation system on which the Acquiror's
shares are listed and fees of transfer agents and registrars. The term
"Selling Expenses" shall mean: all underwriting discounts and selling
commissions applicable to the sale of Restricted Stock and all accountable or
non-accountable expenses paid to any underwriter in respect of the sale of
Restricted Stock.
(b) The Acquiror will pay all Registration Expenses in
connection with the Registration Statement filed pursuant to this Paragraph 4
hereof. All Selling Expenses in connection with any Registration Statement
hereof shall be borne by the participating sellers in proportion to the number
of shares sold by each, or by such persons other than the Acquiror (except to
the extent the Acquiror shall be a seller) as they may agree.
4.4 Obligations of Holder.
(a) In connection with each registration hereunder, each
selling Holder will furnish to the Acquiror in writing such information with
respect to such seller and the securities held by such seller, and the proposed
distribution by them as shall be reasonably requested by the Acquiror in order
to assure compliance with federal and applicable state securities laws, as a
condition precedent to including such seller's Restricted Stock in the
Registration Statement. Each selling Holder also shall agree to promptly
notify the Acquiror of any changes in such information included in the
Registration Statement or prospectus as a result of which there is an untrue
statement of material fact or an omission to state any material fact required
or necessary to be stated therein in order to make the statements
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contained therein not misleading in light of the circumstances then existing.
(b) In connection with each registration, the Holders
included therein will not effect sales thereof until notified by the Acquiror
of the effectiveness of the Registration Statement, and thereafter will suspend
such sales after receipt of telegraphic or written notice from the Acquiror to
suspend sales to permit the Acquiror to correct or update a Registration
Statement or prospectus. At the end of any period during which the Acquiror is
obligated to keep a Registration Statement current, the Holders included in
said Registration Statement shall discontinue sales of shares pursuant to such
Registration Statement upon receipt of notice from the Acquiror of its
intention to remove from registration the shares covered by such Registration
Statement which remain unsold, and such Holders shall notify the Acquiror of
the number of shares registered which remain unsold immediately upon receipt of
such notice from the Acquiror.
4.5 Obligations of Company.
(a) The Company agrees to indemnify and hold harmless
each Holder of Restricted Stock, its officers, directors and agents, and each
person, if any, who controls such Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of 1934, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or prospectus relating to the Restricted Stock (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by such Holder or on such
Xxxxxx's behalf expressly for use therein. The Company also agrees to provide
any underwriters engaged in connection with resale or sale of the Restricted
Stock, their officers and directors and each person who controls such
underwriters with substantially the same indemnification as that provided to
the Holders in this sub-paragraph 4.5.
4.6. Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to sub- paragraphs
4.4 or 4.5 above, such person (an
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"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (an "Indemnifying Party") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Party, and shall assume
the payment of all fees and expenses of such counsel in connection with such
proceeding. In any such proceeding, any Indemnified Party shall have the right
to retain its own separate counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such separate counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
It is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by the Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its consent, but if settled with its consent, or if there be a final judgment
for the plaintiff, the Indemnifying Party shall indemnify and hold harmless
such Indemnified Parties from and against any loss or liability (to the extent
stated above) by reason of such settlement or judgement. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
1. Protection Against Dilution. The relative interests as of the
Closing Date of the Advisor in the common stock of the Acquiror as an aggregate
percentage of shall be preserved and protected against dilution in accordance
with the following provisions. The Advisor shall retain this percentage
interest (the "Protected Interest") in the outstanding common stock of the
Acquiror following the Closing Date and shall be preserved and protected
against further dilution or reduction of its Protected Interest ownership until
after that period in which Acquiror has secured net equity capital of
$4,000,000 (the "Restricted Period") following the Closing Date (including for
this purpose, any net equity funding that was available upon the Closing Date).
To the extent that during the Restricted Period the Company issues any
"Securities" (as hereafter defined), it shall in conjunction therewith
immediately issue to the Advisor that number of shares of common stock that
shall be equal to the product of the Protected Interest
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and the aggregate number of Securities issued. For this purpose, the term
"Securities" shall include shares of common stock issued, as well as that
number of shares of common stock that may be issued upon the exercise of
warrants or options or upon the conversion of convertible preferred stock,
convertible debt instruments or any other derivative- based securities.
2. Right of First Refusal On Subsequent Financings. For the
period of twenty-four (24) months following the Closing Date the Company shall
cause the Advisor to have a preferential right of refusal to secure any future
debt or equity financings on behalf of the Acquiror, any successor-in-interest,
subsidiary or affiliate thereof. This shall also include any funding
undertaken by Partnerships to be formed by the Subsidiary (or any affiliate) to
fund clinical trials in the European Union.
Should the Acquiror seek to undertake any debt or equity
financings during the period covered by this subparagraph, then the Acquiror
must first provide the Advisor with written notification to that effect, which
notification must specify the proposed terms of the debt or equity financings
desired. The Advisor shall then have ninety (90) days in which to secure such
debt or equity financings on terms acceptable to the Acquiror. If Advisor is
unable to do so, then the Acquiror shall have the right to secure the debt or
equity financings from any other third party. In the event, however, that the
debt or equity financings to be secured from a third party are on terms
materially different than those proposed in writing to the Advisor, then, and
in that event, the Acquiror shall, prior to securing any such debt or equity
financings from such third party, provide a written explanation of the terms
thereof to the Advisor and provide the Advisor with an additional period of
sixty (60) days in which to secure debt or equity financings on those terms.
If the Advisor is unable to do so within said sixty day period, then the
Acquiror is free of any restrictions of this subparagraph to pursue the debt or
equity financings proposed accordingly. To the extent that Advisor is able to
secure for the Acquiror any such debt or equity financings, the Advisor shall
receive the compensation otherwise anticipated to be provided to investment
bankers, brokers, finders or others in connection with such financing, however,
in no event to be less than 10% of the proceeds secured, plus warrants which
for a period of three years permit the purchase of additional shares of common
stock of the Acquiror to the extent of 10% of the securities sold by Acquiror
in such financing transaction at a purchase price of 110% of the price sold in
the financing.
1. Expenses. The Company shall reimburse the Advisor for all
reasonable out-of-pocket expenses, including but not limited to printing,
travel, long distance telephone charges, postage and photocopying. The Company
shall cause the Acquiror to reimburse the Advisor within 30 days
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from the date the Advisor presents the Company with any expense invoice and
supporting documentation.
2. Independent Contractor. The Advisor is acting hereunder as an
independent contractor to the Company and shall not be considered an agent of
the Company for any purposes other than those expressly set forth in this
Agreement. Neither party to this Agreement is granted any right or authority
to assume or create any obligation or liability, expressed or implied, on
behalf of the other or to bind the other in any manner whatsoever.
3. Indemnification.
The Company shall:
(a) indemnify the Advisor and hold it harmless against any
losses, claims, damages or liabilities to which the Advisor may become subject
arising in any manner out of or in connection with the rendering of services by
its hereunder, unless it is finally judicially determined that such losses,
claims, damages or liabilities arose out of the negligence or bad faith of the
Advisor;
(b) indemnify Advisor and hold it harmless against any losses,
claims, damages, liabilities to which Advisor may become subject arising in any
manner out of or in connection with any misrepresentation or error contained in
any documents, schedules or other information provided by the Company to
Advisor for use in any transactions contemplated herein. The Advisor shall not
be liable for the verification and shall not verify any such information
provided by the Company hereunder; and
(c) reimburse the Advisor within a reasonable period of time
for any legal or other expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending any lawsuits, claims or other
proceedings arising in any manner out of or in connection with the rendering of
services by the Advisor hereunder; provided, however, that in the event a final
judicial determination is made to the effect specified in subparagraph (a)
above, the Advisor will remit to the Company any amounts reimbursed under this
subparagraph 9(c).
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(d) The Company agrees that the indemnification and
reimbursement commitments set forth in this paragraph shall apply whether or
not the Advisor is a formal party to any such lawsuits, claims or other
proceedings, that the Advisor is entitled to retain separate counsel of its
choice in connection with any of the matters to which such commitments relate
and that such commitments shall extend upon the terms set forth in this
paragraph to any controlling person, director, officer, employee or agent of
Xxxxxx.
1. Assignment. Neither party may assign its rights or
obligations hereunder without the written consent of the other party.
2. Entire Agreement. This Agreement contains the entire
agreement of the parties as to the subject matter hereof. This Agreement may
be amended only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
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3. Notices. All notices, requests, demands, consents or other
communications under this Agreement shall be in writing and sent by registered
or certified mail, return receipt requested, or by personal delivery (including
delivery by a nationally recognized courier service) as follows:
Company:
Viragen, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
FAC Enterprises, Inc.
0000 Xxxxxxxxx Xxxxx
Xx. Lauderdale, FL 33332
or to such other addresses as may be specified by notice given in accordance
with this Section.
If you agree to be bound by the terms hereof, would you kindly place
your signature on the line provided below.
Very truly yours,
VIRAGEN, INC.
BY:
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Agreed and Accepted
FAC ENTERPRISES, INC.
BY:
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