Exhibit 10.1

EXHIBIT A

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) dated as of July     , 2006, by
and among VIRAGEN INTERNATIONAL, 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 One Million Eight Hundred Thousand Dollars ($1,800,000) of Units
each Unit consisting of one share of Series C 24% Cumulative Preferred Stock of
the Company (“Preferred Stock”) at a stated value of $100.00 per Unit (the
“Purchase Price”) and 200 shares of Viragen International, Inc. Common Stock,
$.01 par value (the “Common Stock”), subject to the rights and preferences
described in the form of Certificate of Designation, Preferences and Rights
(“Certificate of Designation”) attached as an exhibit to the Confidential Term
Sheet, (the “Units”). The Preferred Stock and shares of Common Stock are
collectively sometimes referred to herein as the “Securities”; and

WHEREAS, the aggregate proceeds of the sale of the Preferred Stock and Common
Stock 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 in the amount set forth on the signature page hereto. The aggregate amount
of the Units to be purchased by the Subscribers on the Closing Date shall not
exceed $1,800,000.

2. Closing. The consummation of the transactions contemplated herein shall take
place at the offices of Dawson James Securities, Inc. (“Dawson James”), 925
South Federal Highway, 6th Floor, Boca Raton, Florida 33432, the placement agent
for the Offering, upon the satisfaction of all conditions to Closing (“Closing
Date”) as established by Dawson James the Placement Agent for this offering.
There may be one or more Closing Dates. The conditions to closing are annexed
hereto as Schedule 1.

3. 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
entity action, and no

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further consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, or other persons 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 the Common Stock 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 EDGAR Website
of the Commission to the Company’s Form 10-K for the year ended June 30, 2005
and all the 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, 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.

(f) Purchase of Preferred Stock and Common Stock. 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 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 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. The

 

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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) Common Stock Legend. The Common Stock 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 INTERNATIONAL, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.”

(i) Preferred Stock Legend. The Preferred Stock shall bear the following or
similar legend:

“THIS PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS 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 SATISFACTORY
TO VIRAGEN INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

(j) 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.

(k) 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 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.

(l) 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.

 

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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.

(m) 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.

(n) 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.

(o) 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.

(p) Survival. The foregoing representations and warranties shall survive until
three years after the Closing Date.

4. 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 and its subsidiaries 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.

 

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(c) Authority; Enforceability. This Agreement, the Preferred Stock, Certificate
of Designation, 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 7(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 3 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 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, (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;

 

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(ii) have been, or will be, duly and validly authorized and on the date of
issuance of the Securities, 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 1933 Act.

(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 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 subsidiaries and their
operations and financial condition and other information, as of their respective
dates 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, 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

 

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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 of any Principal Market [as defined in
Section 7(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 and its
Affiliates 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 1933 Act) in connection with the offer or sale of the
Securities.

(o) Quotation. The Common Stock is included for quotation on the
Over-the-Counter Market. 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 trading on the Over-the-Counter Market, nor that its
Common Stock does not meet all requirements for the continuation of such
inclusion.

(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 included in the Units) are set forth in the Confidential Term Sheet.
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.

 

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(t) Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(u) 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.

(v) Survival. The foregoing representations and warranties shall survive until
three years after the Closing Date.

5. 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.

6 Concerning the Preferred Stock.

(a) 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 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.

(b) Redemption. The Preferred Stock shall not be redeemable or callable except
as described in the Certificate of Designation.

7. Covenants of the Company. The Company covenants and agrees with the
Subscribers to 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) Over-the-Counter Market. The Company will continue the inclusion for the
quotation of its Common Stock in the Over-the-Counter Market (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 Over-the-Counter Market 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

 

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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 Common Stock
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 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 by
each Subscriber , the Company will use its best efforts to continue the
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.

(f) 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 Preferred Stock is no
longer outstanding and Common Stock has 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.

(g) 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 Preferred Stock is no
longer outstanding and Common Stock has 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.

(h) 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 Preferred Stock
is no longer outstanding and Common Stock has 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.

 

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(i) 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
Preferred Stock is no longer outstanding and Common Stock has 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.

(j) 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 Preferred
Stock is no longer outstanding and Common Stock has 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.

k) 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 Preferred Stock is no
longer outstanding and Common Stock has been resold or transferred by all the
Subscribers pursuant to the Registration Statement (as defined in
Section 9.1(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.

(l) 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.

8. 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 or other equity holders against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees and expenses) 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
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits 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 and expenses) 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.

 

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(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 9.6 shall apply to the indemnification
set forth in Sections 8(a) and 8(b) above.

9. Registration Rights.

9.1. The Company hereby grants the following registration rights to holders of
the Common Stock issued in this offering.

(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 therefore from any record holder or holders
of more than 50% of the Common Stock shares issued pursuant to this Agreement
(“Registrable Securities”), the Company shall prepare and file with the
Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined hereafter, hereof, which are the subject of
such request for unrestricted public resale by the holder thereof. For purposes
of Sections 9.1(i) and 9.1(ii), Registrable Securities shall not include
Securities 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 9.1(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 S-4, S-8 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 9.1(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 9.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 9.1(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 9.1(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,

 

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such written request shall be deemed to have been given pursuant to
Section 9.1(ii) rather than Section 9.1(i), and the rights of the holders of
Registrable Securities covered by such written request shall be governed by
Section 9.1(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 ninety (90) calendar days after the
Closing Date (the “Filing Date”), and cause to be declared effective not later
than ninety (90) calendar days after the Filing 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 100% of the Common Stock
shares issuable pursuant to this Agreement. (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.

The Company shall not be obligated to file the registration statement at a time
when such filing would, in the good faith determination of the board of
directors of the Company in consultation with its counsel, cause the integration
of the transactions contemplated by this Agreement with any other offering. In
such event, the registration statement shall be filed on the first day following
which such integration will not occur, and the 90-day period described in this
paragraph shall commence on such date.

9.2. 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 9, 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 Dawson James 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 9.2(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 9.4 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;

 

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(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.

9.3. Provision of Documents. In connection with each registration described in
this Section 9, 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.

9.4. 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 9.1(i) or 9.1(ii) is not
filed within 90 days after written request and declared effective by the
Commission within 180 days after such request, and maintained in the manner and
within the time periods contemplated by Section 9 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) any registration statement described in Sections 9.1(i), 9.1(ii) or 9.1(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 (D) of this Section 9.4 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 Units 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 twenty (20) 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 (20) 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 9.4 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 9.4 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.

 

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9.5. Expenses. All expenses incurred by the Company in complying with Section 9,
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 9. Selling Expenses in connection with each registration statement
under Section 9 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.

9.6. Indemnification and Contribution.

(a) In the event of a registration of any Registrable Securities under the 1933
Act pursuant to Section 9, 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 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 9, 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 9.6(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 9, 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 9, 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

 

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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 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(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 9.6(c) for any legal
expenses subsequently incurred 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.

10. 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 International,
Inc., 865 S.W. 78th Avenue, Suite 100, Plantation, Florida 33324, telecopier:
(954) 233-1414, 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

 

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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 and all disputes arising
therefrom and the transaction contemplated thereby 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 any party
against another party concerning this Agreement or any of 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 personal jurisdiction of such courts for such purposes
and hereby waive trial by jury in any such action or proceeding. The prevailing
party shall be entitled to recover from the adverse party its reasonable
attorney’s fees, costs and expenses. 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 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 10(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

 

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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
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]

 

17

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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 INTERNATIONAL, INC. a Delaware corporation By:  

/s/ Dennis W. Healey

Name:   Dennis W. Healey Title:   Executive Vice President/CFO Dated: July     ,
2006

 

SUBSCRIBER

  

PURCHASE

PRICE AND STATED VALUE

OF PREFERRED STOCK

  

COMMON

SHARES

[NAME]

[Address]

 

Fax:

 

 

     

(Signature)

     

By:

     

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SCHEDULE 1

1.1. Deliveries.

(a) On the Closing Date, the Company shall deliver or cause to be delivered to
each Subscriber the following:

(i) this Agreement duly executed by the Company;

(ii) a legal opinion of Company Counsel, in the form of Exhibit A attached
hereto;

(iii) certificates registered in the name of the Subscriber representing the
number of shares of Series C Preferred Stock being sold to such Subscriber
hereunder as set forth opposite such Subscriber’s name on the signature page
hereto;

(iv) certificates registered in the name of the Subscriber representing the
number of shares of Common Stock being sold to such Subscriber hereunder as set
forth opposite such Subscriber’s name on the signature page hereto;

(v) a certificate evidencing the incorporation (or other organization) and good
standing of the Company and each of its Subsidiaries in such entity’s state of
incorporation or organization and, as to the Company, in the State of Florida,
as of a date within ten (10) days of the Closing Date;

(vi) a certified copy of the Corporation’s Certificate of Incorporation as
amended, including the Certificate of Designation with respect to the Series C
Preferred Stock, as certified by the Secretary of State of the State of Delaware
as of a date within ten days of the Closing Date; and

(vii) a certificate of the chief executive officer and chief financial officer
of the Company to the effect of compliance with Section 1.2 (b)(i), (ii),
(iv) and (v).

(b) On the Closing Date, each Subscriber shall deliver or cause to be delivered
to the Company the following:

(i) this Agreement duly executed by such Subscriber; and

(ii) such Subscriber’s Purchase Price for the Units being purchased, which
amount has been previously deposited in escrow with Sterling Bank by wire
transfer to the account specified in writing by the Company.

1.2. Closing Conditions.

(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

(i) the accuracy in all respects when made and on the Closing Date of the
representations and warranties of the Subscribers contained herein;

(ii) all obligations, covenants and agreements of the Subscribers required to be
performed at or prior to the Closing Date shall have been performed; and

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(iii) the delivery by the Subscribers of the items set forth in Section 1.1(b)
of this Agreement.

(b) The respective obligations of the Subscribers hereunder in connection with
the Closing are subject to the following conditions being met:

(i) the accuracy in all respects on the date hereof and on the Closing Date of
the representations and warranties of the Company contained herein;

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

(iii) the delivery by the Company of the items set forth in Section 2.1(a) of
this Agreement;

(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

(v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission, and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg Financial Markets
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or Florida or New York State authorities nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Subscriber, makes it impracticable or inadvisable to purchase
the Units at the Closing.