EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
     THIS SUBSCRIPTION AGREEMENT (this “Agreement”) dated as of _______________,
2006, by and among VIRAGEN, INC., a Delaware corporation (the “Company”), and
the subscribers identified on the signature page hereto (each a “Subscriber” and
collectively “Subscribers”).
     WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”) under the Securities Act of 1933, as amended (the
“1933 Act”).
     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell (the “offering”)
to the Subscribers, as provided herein, and the Subscribers, in the aggregate,
shall purchase up to Six Million Dollars ($6,000,000) of Units each Unit
consisting of one share of Series J 24% Cumulative Convertible Preferred Stock
of the Company (“Preferred Stock”) at a stated value of $100.00 per Unit (the
“Purchase Price”) which shall be convertible into shares of the Company’s common
stock, $.01 par value (the “Common Stock”) at a conversion price of $1.25 per
share subject to the rights and preferences described in the form of Certificate
of Designation, Preferences and Rights (“Certificate of Designation”), and a
common stock purchase warrants (the “Warrants”) to purchase 80 shares of Common
Stock (the “Warrant Shares”)(the “Units”). The Preferred Stock, shares of Common
Stock issuable upon conversion of the Preferred Stock (the “Shares”), the
Warrants and the Warrant Shares are collectively referred to herein as the
“Securities”; and
     WHEREAS, the aggregate proceeds of the sale of the Preferred Stock and the
Warrants contemplated hereby shall be held in escrow pursuant to the terms of an
Agreement to be executed by the parties (the “Escrow Agreement”).
     NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
          1. Closing. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the “Closing Date” (as defined in Section 2
hereof), each Subscriber shall purchase and the Company shall sell to each
Subscriber the Units having the Stated Value set forth on the signature page
hereto and the amount of Warrants determined pursuant to Section 3 below. The
aggregate stated value of the Units to be purchased by the Subscribers on the
Closing Date, in the aggregate, shall not exceed $6,000,000.
          2. Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Dawson James Securities, Inc. (“Dawson
James”), 925 South Federal Highway, 6th Floor, Boca Raton, Florida 33432, upon
the satisfaction of all conditions to Closing set forth in the Confidential Term
Sheet (“Closing Date”). There may be one or more Closing Dates.
          3. Warrants. On the Closing Date, the Company will issue and deliver
Warrants to the Subscribers. Eighty (80) Class A Warrants will be issued for
each share of Preferred Stock. The per Warrant Share exercise price to acquire a
Warrant Share upon exercise of a Class A Warrant shall be $1.25. The Warrants
shall be exercisable until five (5) years after the Issue Date of the Warrants.
          4. Subscriber’s Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company only as to such
Subscriber that:

 

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               (a) Organization and Standing of the Subscribers. If the
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.
               (b) Authorization and Power. Each Subscriber has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Units being sold to it hereunder. The execution, delivery and performance of
this Agreement by such Subscriber and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or authorization of such
Subscriber or its Board of Directors, stockholders, partners, members, as the
case may be, is required. This Agreement has been duly authorized, executed and
delivered by each Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of the Subscriber enforceable
against the Subscriber in accordance with the terms thereof.
               (c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by each Subscriber of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Subscriber’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Subscriber or its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Preferred Stock or acquire
the Warrants in accordance with the terms hereof, provided that for purposes of
the representation made in this sentence, such Subscriber is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Company herein.
               (d) Information on Company. The Subscriber has had access at the
EDGAR Website of the Commission to the Company’s Form 10-K for the year ended
June 30, 2005 and all periodic and current reports as filed with the Commission
(hereinafter referred to as the “Reports”). In addition, Subscriber has received
in writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively, the “Other Written Information”), and
considered all factors Subscriber deems material in deciding on the advisability
of investing in the Securities.
               (e) Information on Subscriber. The Subscriber is, and will be at
the time of the conversion of the Preferred Stock and exercise of the Warrants,
an “accredited investor”, as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss of the entire investment. The information
set forth on the signature page hereto regarding the Subscriber is accurate.

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               (f) Purchase of Preferred Stock and Warrants. On the Closing
Date, the Subscriber will purchase the Units as principal for its own account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.
               (g) Compliance with Securities Act. The Subscriber understands
that the Units are “restricted Securities” and have not been registered under
the Securities Act or any applicable state securities law and is acquiring the
Units (including the underlying securities) as principal for its own account for
investment and not with a view to, or for sale in connection with, any
distribution of such Units or any part thereof, has no present intention of
distributing any of such Units (including the underlying securities) and has no
arrangement or understanding with any other persons regarding the distribution
of such Units (including the underlying securities). The Subscriber is acquiring
the Units (including the underlying securities) hereunder in the ordinary course
of its business. The Subscriber does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Units
(including the underlying securities). The Subscriber is not purchasing the
Units as a result of any advertisement, article, notice or other communication
regarding the Units published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
               (h) Shares Legend. The Shares and the Warrant Shares shall bear
the following or similar legend:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRAGEN, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”
               (i) Warrants Legend. The Warrants shall bear the following or
similar legend:
“THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIRAGEN, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.”
               (j) Preferred Stock Legend. The Preferred Stock shall bear the
following or similar legend:
“THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THESE PREFERRED STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE PREFERRED
STOCK UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY

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SATISFACTORY TO VIRAGEN, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
               (k) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber by the Company. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
               (l) Authority; Enforceability. This Agreement and other
agreements delivered together with this Agreement or in connection herewith have
been duly authorized, executed and delivered by the Subscriber and are valid and
binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
generally and to general principles of equity; and Subscriber has full corporate
power and authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all other
agreements entered into by the Subscriber relating hereto.
               (m) Restricted Securities. Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act or appropriate exemption thereunder. Notwithstanding anything to
the contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
“accredited investor” under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement. For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity. Affiliate includes each
subsidiary of the Company. For purposes of this definition, “control” means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
               (n) No Governmental Review. Each Subscriber understands that no
United States federal or state agency or any other governmental or state agency
has passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
               (o) Correctness of Representations. Each Subscriber represents as
to such Subscriber that the foregoing representations and warranties are true
and correct as of the date hereof and, unless a Subscriber otherwise notifies
the Company prior to the Closing Date shall be true and correct as of the
Closing Date.
               (p) Access to Information. The Subscriber has been afforded the
opportunity to ask questions of, and receive answers from the officers and/or
directors of the Company acting on its behalf concerning the terms and
conditions of this transaction and to obtain any additional information, to the
extent that the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information furnished; and has availed himself of such opportunity to the extent
the undersigned considers appropriate in order to permit the undersigned to
evaluate the merits and risks of an investment in the Company. It is understood
that all documents, records and books pertaining to this investment have been
made available for inspection, and that the books and records of the Company
will be available upon reasonable notice for inspection by investors during
reasonable business hours at its principal place of business or other mutually
agreeable location.
               (q) Survival. The foregoing representations and warranties shall
survive until three years after the Closing Date.

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          5. Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that except as set forth in the
Reports and as otherwise qualified in the Transaction Documents as hereinafter
defined.
               (a) Due Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as disclosed in the Reports. The Company is duly qualified
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect. For purpose of this Agreement, a
“Material Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, properties or business of the Company taken as
a whole. For purposes of this Agreement, “Subsidiary” means, with respect to any
entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (i) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity. All the Company’s Subsidiaries as of the
Closing Date are set forth in the Reports.
               (b) Outstanding Stock. All issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable.
               (c) Authority; Enforceability. This Agreement, the Preferred
Stock, Certificate of Designation, the Warrants, the Escrow Agreement, and any
other agreements delivered together with this Agreement or in connection
herewith (collectively “Transaction Documents”) have been duly authorized,
executed and delivered by the Company and are valid and binding agreements
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights generally and to
general principles of equity. The Company has full corporate power and authority
necessary to enter into and deliver the Transaction Documents and to perform its
obligations thereunder.
               (d) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its Affiliates, any Principal Market (as defined in Section
8(b) of this Agreement), nor the Company’s stockholders is required for the
execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities. The
Offering and Transaction Documents have been approved by the Company’s Board of
Directors.
               (e) No Violation or Conflict. Assuming the representations and
warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company’s
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:
                    (i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default in any
material respect) of a material nature under (A) the certificate of
incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates,

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(C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any “lock-up” or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect; or to the Company’s knowledge
                    (ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company or
any of its Affiliates; or
                    (iii) result in the activation of any anti-dilution rights
or a reset or repricing of any debt or security instrument of any other creditor
or equity holder of the Company, nor result in the acceleration of the due date
of any obligation of the Company; or
                    (iv) result in the activation of any piggy-back registration
rights of any person or entity holding securities or debt of the Company or
having the right to receive securities of the Company.
               (f) The Securities. The Securities upon issuance:
                    (i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and any applicable state securities laws;
                    (ii) have been, or will be, duly and validly authorized and
on the date of issuance of the Shares upon conversion of the Preferred Stock and
issuance of the Warrant Shares upon exercise of the Warrants will be duly and
validly issued, fully paid and nonassessable or if registered pursuant to the
1933 Act, and resold pursuant to an effective registration statement, will be
free trading and unrestricted);
                    (iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
                    (iv) will not subject the holders thereof to personal
liability by reason of being such holders, provided Subscriber’s representations
herein are true and accurate and Subscribers take no actions or fail to take any
actions required for their purchase of the Securities to be in compliance with
all applicable laws and regulations; and
                    (v) will not result in a violation of Section 5 under the
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

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provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months.
               (i) No Market Manipulation. The Company and its Affiliates have
not taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities or affect the price at which the Securities may be issued or
resold, provided, however, that this provision shall not prevent the Company
from engaging in investor relations/public relations activities consistent with
past practices.
               (j) Information Concerning Company. The Reports, as amended,
contain all material information relating to the Company and its operations and
financial condition as of their respective dates and all the information
required to be disclosed therein. Since the last day of the fiscal year of the
most recent annual audited financial statements included in the Reports (“Latest
Financial Date”), and except as modified in the Other Written Information or in
the Schedules hereto, there has been no Material Adverse Event relating to the
Company’s business, financial condition or affairs not disclosed in the Reports.
The Reports do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.
               (k) Stop Transfer. The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any of the
Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.
               (l) Defaults. The Company is not in violation of its certificate
or articles of incorporation or bylaws. The Company, to the best of its
knowledge, is (i) not in default under or in violation of any material agreement
or instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court, arbitrator
or governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) not in violation of any statute, rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.
               (m) Not an Integrated Offering. Neither the Company, nor any of
its Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the American Stock Exchange (“AMEX”) any Principal Market [as defined in
Section 8(b)] which would impair the exemptions relied upon in this Offering or
the Company’s ability to timely comply with its obligations hereunder. Nor will
the Company or any of its Affiliates take any action or steps that would cause
the offer or issuance of the Securities to be integrated with other offerings
which would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. The Company will not
conduct any offering other than the transactions contemplated hereby that will
be integrated with the offer or issuance of the Securities, which would impair
the exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.
               (n) No General Solicitation. Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

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               (o) Listing. The Common Stock is listed on the AMEX. Except as
disclosed in the Reports, the Company has not received any oral or written
notice that the Common Stock is not eligible, nor will become ineligible for
listing on the AMEX, nor that its Common Stock does not meet all requirements
for the continuation of such listing.
               (p) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company’s businesses since the Latest
Financial Date and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
               (q) No Undisclosed Events or Circumstances. Since the Latest
Financial Date, no event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
               (r) Capitalization. The authorized and outstanding capital stock
of the Company as of the date of this Agreement and the Closing Date (not
including the Securities) are set forth in the Reports or other Written
Information. Except as set forth therein, there are no options, warrants, or
rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company or any of its Subsidiaries. All of the outstanding shares
of Common Stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable.
               (s) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind during the two fiscal years preceding the date of this
Agreement, presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.
               (t) Correctness of Representations. The Company represents that
the foregoing representations and warranties are true and correct as of the date
hereof in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.
               (u) Survival. The foregoing representations and warranties shall
survive until three years after the Closing Date.
          6. Regulation D Offering. The offer and issuance of the Securities to
the Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder.
          7 Concerning the Preferred Stock and Warrants.
               (a) Conversion. Upon the conversion of any Preferred Stock, the
Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the Company’s
transfer agent shall issue stock certificates in the name of Subscriber (or its
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion.
               (b) No Interest. Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or

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dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.
               (c) Adjustments. The Conversion Price, Warrant exercise price and
amount of Shares issuable upon conversion of the Preferred Stock and exercise of
the Warrants shall be equitably adjusted and as described in this Agreement, the
Certificate of Designation and Warrants.
               (d) Redemption. The Preferred Stock and Warrants shall not be
redeemable or callable except as described in the Certificate of Designation or
Warrants.
          8. Covenants of the Company. The Company covenants and agrees with the
Subscribers use its best efforts in good faith as follows:
               (a) Stop Orders. The Company will advise the Subscribers, within
four hours after the Company receives notice of issuance by the Commission, any
state securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
               (b) Listing. The Company shall promptly secure the listing of the
Shares and the Warrant Shares upon each national securities exchange, or
electronic or automated quotation system upon which they are or become eligible
for listing and shall maintain such listing so long as any Preferred Stock or
Warrants are outstanding. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National
Market System, Bulletin Board, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock (the “Principal Market”)), and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Principal Market, as applicable. As of the date of this Agreement, the AMEX
is the Principal Market.
               (c) Market Regulations. The Company shall notify the Commission,
the Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers.
               (d) Filing Requirements. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will (A) comply in all
respects with its reporting and filing obligations under the 1934 Act, (B) cause
its Common Stock to continue to be registered under Section 12(b) or 12(g) of
the 1934 Act, and (C) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or two (2) years after the Warrants have been exercised, the Company
will use its best efforts to continue the listing or quotation of the Common
Stock on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. The Company agrees to timely file a Form D with respect to the
Securities if required under Regulation D.
               (e) Use of Proceeds. The proceeds of the Offering will be
employed by the Company for the purposes set forth in the Confidential Term
Sheet to which this is annexed as Exhibit A.

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               (f) Reservation. Prior to the Closing Date, the Company
undertakes to reserve, pro rata, on behalf of the Subscribers from its
authorized but unissued common stock, a number of common shares of common stock
necessary to allow each Subscriber to be able to convert all Preferred Stock
issuable pursuant to this Agreement and dividends thereon and reserve 100% of
the amount of Warrant Shares issuable upon exercise of the Warrants. Failure to
have sufficient shares reserved pursuant to this Section 8(f) for five
(5) consecutive business days or fifteen (15) days in the aggregate shall be a
material default of the Company’s obligations under this Agreement.
               (g) Taxes. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
               (h) Insurance. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company’s line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured; and the
Company will maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated and to the extent available on commercially reasonable terms.
               (i) Books and Records. From the date of this Agreement and until
the sooner of (i) two (2) years after the Closing Date, or (ii) until all the
Shares and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will keep true records and books of account
in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
               (j) Governmental Authorities. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall duly observe and conform
in all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
               (k) Intellectual Property. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall maintain in full force
and effect its corporate existence, rights and franchises and all licenses and
other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business, unless it is
sold for value.
               (l) Properties. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred

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by all the Subscribers pursuant to the Registration Statement (as defined in
Section 10.1(iv) hereof) or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a Material Adverse
Effect.
               (m) Non-Public Information. The Company covenants and agrees that
neither it nor any other person acting on its behalf will provide any Subscriber
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
          9. Covenants of the Company and Subscriber Regarding Indemnification.
               (a) The Company agrees to indemnify, hold harmless, reimburse and
defend the Subscribers, the Subscribers’ officers, directors, agents,
Affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.
               (b) Each Subscriber agrees to indemnify, hold harmless, reimburse
and defend the Company and each of the Company’s officers, directors, agents,
Affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by such Subscriber of any
covenant or undertaking to be performed by such Subscriber hereunder, or any
other agreement entered into by the Company and Subscribers, relating hereto.
               (c) In no event shall the liability of any Subscriber or
permitted successor hereunder or under any Transaction Document or other
agreement delivered in connection herewith be greater in amount than the dollar
amount of the net proceeds actually received by such Subscriber upon the sale of
Registrable Securities (as defined herein).
               (d) The procedures set forth in Section 10.6 shall apply to the
indemnification set forth in Sections 9(a) and 9(b) above.
          10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
               (i) On one occasion, for a period commencing one hundred and
fifty-one (151) days after the Closing Date, but not later than two (2) years
after the Closing Date, upon a written request therefor from any record holder
or holders of more than 50% of the Shares issued and issuable upon conversion of
the outstanding Preferred Stock and outstanding Warrant Shares, the Company
shall prepare and file with the Commission a registration statement under the
1933 Act registering the Registrable Securities, as defined in Section 10.1(iv)
hereof, which are the subject of such request for unrestricted public resale by
the holder thereof. For purposes of Sections 10.1(i) and 10.1(ii), Registrable
Securities shall not include Securities

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which are (A) registered for resale in an effective registration statement,
(B) included for registration in a pending registration statement, or (C) which
have been issued without further transfer restrictions after a sale or transfer
pursuant to Rule 144 under the 1933 Act. Upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it has
received written requests within ten (10) days after the Company gives such
written notice. Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section 10.1(i).
               (ii) If the Company at any time proposes to register any of its
securities under the 1933 Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms 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 10.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 10.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 10.1(ii) without thereby incurring any
liability to the Seller.
               (iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company’s own account and the Company actually
does file such other registration statement, such written request shall be
deemed to have been given pursuant to Section 10.1(ii) rather than
Section 10.1(i), and the rights of the holders of Registrable Securities covered
by such written request shall be governed by Section 10.1(ii).
               (iv) The Company shall file with the Commission a Form S-1
registration statement (the “Registration Statement”) (or such other form that
it is eligible to use) in order to register the Registrable Securities for
resale and distribution under the 1933 Act within thirty (30) calendar days
after the Closing Date (the “Filing Date”), and cause to be declared effective
not later than one hundred and twenty (120) calendar days after the Closing Date
(the “Effective Date”). The Company will register not less than a number of
shares of common stock in the aforedescribed registration statement that is
equal to 175% of the Shares issuable upon conversion of all of the Preferred
Stock issuable to the Subscribers, and 175% of the Warrant Shares issuable
pursuant to this Agreement upon exercise of the Warrants and Finder’s Warrants
(collectively the “Registrable Securities”). The Registrable Securities shall be
reserved and set aside exclusively for the benefit of each Subscriber and
Warrant holder, pro rata, and not issued, employed or reserved for anyone other
than each such Subscriber and Warrant holder. The Registration Statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of Common Stock
to allow the public resale of all Common Stock included in and issuable by
virtue of the Registrable Securities.

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          10.2. Registration Procedures. If and whenever the Company is required
by the provisions of this Section to effect the registration of any Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:
               (a) subject to the timelines provided in this Agreement, prepare
and file with the Commission a registration statement required by Section 10,
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), promptly
provide to the holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify 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 10.2(a) shall be a material breach of the
Company’s obligation and an Event of Default as defined in the Preferred Stock
and a Non-Registration Event as defined in Section 11.4 of this Agreement);
               (b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two
(2) years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Sellers’ intended method of disposition set
forth in such registration statement for such period;
               (c) furnish to the Sellers, at the Company’s expense, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement or make them electronically available;
               (d) use its commercially reasonable best efforts to register or
qualify the Registrable
Securities covered by such registration statement under the securities or “blue
sky” laws of New York and such jurisdictions as the Sellers shall request in
writing, provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
               (e) if applicable, list the Registrable Securities covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed; and
               (f) notify the Subscribers of the Company’s becoming aware that a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or which
becomes subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the Shares.
          10.3. Provision of Documents. In connection with each registration
described in this Section 11, each Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
          10.4. Non-Registration Events. The Company and the Subscribers agree
that the Sellers will suffer damages if the Registration Statement is not filed
by the Filing Date and not declared effective by the Commission by the Effective
Date, and any registration statement required under Section 10.1(i) or 10.1(ii)
is not filed within 30 days after written request and declared effective by the
Commission within 120 days after

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such request, and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (A) the Registration
Statement is not filed on or before the Filing Date, (B) is not declared
effective on or before the Effective Date, (C) due to the action or inaction of
the Company the Registration Statement is not declared effective within three
(3) business days after receipt by the Company or its attorneys of a written or
oral communication from the Commission that the Registration Statement will not
be reviewed or that the Commission has no further comments, (D) if the
registration statement described in Sections 10.1(i) or 10.1(ii) is not filed
within 45 days after such written request, or is not declared effective within
150 days after such written request, or (E) any registration statement described
in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared effective but
shall thereafter cease to be effective without being succeeded within fifteen
(15) business days by an effective replacement or amended registration statement
or for a period of time which shall exceed 20 days in the aggregate per year
(defined as a period of 365 days commencing on the Actual Effective Date (each
such event referred to in clauses (A) through (E) of this Section 10.4 is
referred to herein as a “Non-Registration Event”), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to one and one half percent (1.5%) for each thirty (30) days or
part thereof of the Purchase Price of the Preferred Stock remaining unconverted
and purchase price of Shares issued upon conversion of the Obligation Amount (as
defined in the Certificate of Designation) owned of record by such holder which
are subject to such Non-Registration Event. The Company must pay the Liquidated
Damages in cash. The Liquidated Damages must be paid within ten (10) days after
the end of each thirty (30) day period or shorter part thereof for which
Liquidated Damages are payable. In the event a Registration Statement is filed
by the Filing Date but is withdrawn prior to being declared effective by the
Commission, then such Registration Statement will be deemed to have not been
filed. All oral or written comments received from the Commission relating to the
Registration Statement must be satisfactorily responded to within ten
(10) business days after receipt of comments from the Commission. Failure to
timely respond to Commission comments is a Non-Registration Event for which
Liquidated Damages shall accrue and be payable by the Company to the holders of
Registrable Securities at the same rate set forth above. Notwithstanding the
foregoing, the Company shall not be liable to the Subscriber under this
Section 10.4 for any events or delays occurring as a consequence of the acts or
omissions of the Subscribers contrary to the obligations undertaken by
Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable
pursuant to this Section 10.4 nor will a Non-Registration Event be deemed to
have occurred for times during which Registrable Securities are transferable by
the holder of Registrable Securities pursuant to Rule 144(k) under the 1933 Act.
          10.5. Expenses. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing fees,
printing expenses (if required), fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, and fees of transfer agents and registrars, are
called “Registration Expenses.” All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called “Selling
Expenses.” The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
          10.6. Indemnification and Contribution.
               (a) In the event of a registration of any Registrable Securities
under the 1933 Act pursuant to Section 10, the Company will, to the extent
permitted by law, indemnify and hold harmless the Seller, each officer of the
Seller, each director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement

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or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the 1933
Act pursuant to Section 10, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made, and will subject to the
provisions of Section 10.6(c) reimburse the Seller, each such underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable to the Seller to the extent that any such damages arise out of or are
based upon an untrue statement or omission made in any preliminary prospectus if
(i) the Seller failed to send or deliver a copy of the final prospectus
delivered by the Company to the Seller with or prior to the delivery of written
confirmation of the sale by the Seller to the person asserting the claim from
which such damages arise, (ii) the final prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by any such Seller, or any such controlling person in writing specifically for
use in such registration statement or prospectus.
               (b) In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 10, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the 1933 Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
               (c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 10.6(c) for any legal
expenses subsequently incurred

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by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
          11.11. Miscellaneous.
               (a) Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Viragen, Inc.,865 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 subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
the Company shall be assigned without prior notice to and the written consent of
the Subscribers.
               (c)  Counterparts/Execution. This Agreement may be executed in
any number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
               (d) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the civil or state courts of Florida or
in the federal courts located in Broward County, Florida. The parties and the
individuals executing this Agreement and other agreements referred to herein or
delivered in connection herewith on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney’s fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to

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conform with such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of any agreement.
               (e) Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber acknowledge and agree that irreparable damage may occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 13(d) hereof, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction in Florida of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper. Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by law.
               (f) Independent Nature of Subscribers. The Company acknowledges
that the obligations of each Subscriber under the Transaction Documents are
several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under the Transaction Documents. The Company
acknowledges that each Subscriber has represented that the decision of each
Subscriber to purchase Securities has been made by such Subscriber independently
of any other Subscriber and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the
(i) inclusion of a Subscriber in the Registration Statement and (ii) review by,
and consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Subscriber shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of the Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the same terms
and Transaction Documents for the convenience of the Company and not because
Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.
               (g) As used in the Agreement, “consent of the Subscribers” or
similar language means the consent of holders of not less than 70% of the total
of the Shares issued and issuable upon conversion of outstanding Preferred Stock
owned by Subscribers on the date consent is requested.
               (h) No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of the Transaction
Documents unless the same consideration is also offered to all the parties to
the Transaction Documents.
[THIS SPACE INTENTIONALLY LEFT BLANK]

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
     Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

            VIRAGEN, INC.
a Delaware corporation
      By:   /s/         Name:       Dated: ______________________, 2006   
Title:        

                   
SUBSCRIBER
    PURCHASE PRICE AND
STATED VALUE OF
PREFERRED STOCK     CLASS A WARRANTS    
[NAME]
[Address]

Fax:

 
(Signature)
By:
               

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