EX-10.98 Letter Agreement



 



EXHIBIT 10.98


January 5, 2004



Mr. Dennis Healey

Chief Financial Officer

Viragen, Inc.

865 SW 78th Avenue

Suite 100

Plantation, FL 33324


Re: Engagement Letter


Dear Mr. Healey:


     This letter agreement (this “Agreement”) confirms Viragen Inc.’s (the
“Company”) engagement of HPC Capital Management (“HPC”) as investment banker,
financial advisor and consultant of the Company and sets forth the terms and
conditions pursuant to which HPC shall perform in said capacity.


     1.     Retention Subject to the terms and conditions of this Agreement,
the Company hereby engages HPC to act on behalf of the Company as a
non-exclusive investment banker, financial advisor and consultant commencing on
the date hereof and continuing for a period of 12 months hereafter (the
“Engagement”). Either party may cancel this Agreement upon 60-calendar day’s
written notice.


     2.     Services. During the Engagement and subject to the terms and
conditions herein, HPC agrees to provide financial services to the Company
consisting of: (i) evaluating the Company’s requirements for funding growth
and expansion of the Company’s operations; (ii) advising the Company as to
alternative modes and sources of financing; (iii) analyzing the impact of
business decisions, policies, and practices on the value of the Company’s
business and securities; (iv) increasing the public exposure of the Company
through introductions to institutions, brokers and the investment community;
(v) bringing to the attention of the Company possible business opportunities
and evaluating business opportunities generally, whether or not HPC or others
originate such opportunities; and (vi) providing a research report respecting
the Company in accordance with HPC’s typical format and practices for such
reports. Any opinions expressed in such report shall consist solely of the
independent opinions of HPC’s research department, and HPC does not represent
to the Company that such report shall contain a favorable investment
recommendation or any investment recommendation at all. HPC agrees to devote
such time, attention, and energy as may be necessary to perform the services
hereunder. The Company expressly acknowledges and agrees that nothing herein
shall be construed, however, to require HPC to (i) provide a minimum number of
hours of service to the Company or to limit the right of HPC to perform similar
services for the benefit of persons or entities other than the Company, (ii)
commit to purchase securities of the Company or secure financing on behalf of
the Company by third parties, (iii) ensure that any potential investor(s)
introduced to the Company by HPC will execute final agreements with the
Company, or (iv) guaranty the


 






 


obligations of any investor(s) introduced to the Company by HPC under any final
agreements with such investor(s).


     3.     Remuneration. For undertaking the Engagement and for other good and
valuable consideration, including but not limited to, the substantial benefit
the Company will derive from the ability to announce its relationship with HPC,
the Company agrees as follows:



		
	 	     (a) Commencement Retainer. The Company will agree to issue and
deliver to HPC Capital Management within 10 business days from the date
hereof 480,000 shares of the Company’s common stock, in the aggregate
(the “Commencement Retainer Shares”), which shares are nonrefundable.
	 
	 	     (b) Placement Fees. The Company shall pay to HPC a cash placement
fee equal to 6.5 % of the total purchase price of the Company’s
securities sold, including all amounts placed in an escrow account or
payable in the future (including future issuances resulting from anti
dilution provisions) and all amounts paid or payable upon exercise,
conversion or exchange of such securities received or receivable directly
by the Company (“Aggregate Consideration”) in any placement of the
Company’s securities in connection with HPC’s efforts hereunder. Such
consideration paid in cash shall be paid directly to HPC out of escrow,
as and when such consideration is paid to the Company. Notwithstanding
the foregoing, in connection with the exercise of any investor warrants
issued in connection with a placement of the securities in connection
with HPC’s efforts hereunder, HPC’s placement fee shall be reduced to 4%
of the cash proceeds and shall be paid on receipt of such funds into the
escrow account established for this purpose by the Company.
	 
	 	     (c) Warrants. On each closing date on which Aggregate Consideration
is paid or becomes payable, the Company shall issue to HPC 40,000
warrants (the “Warrants”) per $1 million raised by HPC. The exercise
price of the Warrants shall equal the lower price (to any investor(s)) at
which any common equity of the Company is or may be sold in such
placement or upon the conversion, exercise or exchange of such
securities. The Warrants shall be exercisable immediately after the date
of issuance, and shall expire 5 years after the date of issuance, unless
otherwise extended by the Company. The Warrants shall include a cashless
exercise provision and will be non-redeemable and provide for automatic
exercise upon expiration. The Warrants shall be transferable, subject
only to the securities laws, by the holders thereof.
	 
	 	     (d) Mergers and Acquisitions. The Company agrees that if HPC,
directly or indirectly, introduces the Company, during the term of this
Agreement, to any person or entity that becomes a party to a merger,
acquisition, joint venture or other similar transaction with the Company
or any affiliate thereof, then the Company shall pay to HPC a cash fee
calculated as a percentage of the Transaction Value (as defined herein)
in accordance with the following scale:




	 	•	 	6% on the first $5,000,000
	 
	 	•	 	5% on the amount from $5,000,001 to $7,000,000
	 
	 	•	 	4% on the amount from $7,000,001 to $9,000,000
	 
	 	•	 	3% on the amount from $9,000,001 to $11,000,000
	 
	 	•	 	2% on the amount from $11,000,001 to $13,000,000
	 
	 	•	 	1% on the amount above $13,000,001




		
	 	     “Transaction Value” shall mean the aggregate value of all cash,
securities, notes,



 






 







		
	 	debentures purchase options, royalties, management, and consulting
agreements; marketing, licensing and revenue contracts; agreements
not-to-compete, including contingent and installment payments;
consideration paid for assets owned by majority owned subsidiaries of the
Company or entities in any business relationship which are used in or are
potentially useful in the Company ‘s business; the total value of
liabilities avoided by the Company or assumed by the acquirer; the total
value of all liabilities on the Company’s balance sheet that are
transferred to the acquirer of the stock of the Company in a stock
transaction and any other tangible net benefit to the Company, its
shareholders or directed beneficiaries and other property and valuable
consideration of every kind either (i) transferred to the Company and its
affiliates in connection with any transaction involving any investment ,
loan or any other equity or debt financing for, or acquisition of, the
Company or any affiliate thereof, or in connection with an acquisition of
equity or assets thereof or (ii) transferred by the Company and its
affiliates in any transaction involving an investment in or acquisition
of any third party, or acquisition of the equity or assets thereof, by
the Company or any affiliate thereof or (iii) transferred or otherwise
contributed by all parties to enter into any joint venture or similar
joint enterprise or undertaking with the Company or any affiliate
thereof. The aggregate value of all such cash, securities and other
property and valuable consideration shall be the aggregate fair market
value thereof as determined jointly by HPC and the Company, or by an
independent appraiser jointly selected by HPC and the Company.




		
	 	     (e) Tail Period. The Company shall and shall have caused its
affiliates to pay HPC all compensation described in this Section 3 with
respect to all financing candidates at any time prior to the expiration
of 1 year after the Termination Date (the “Tail Period”) if such
candidates were identified to the Company by HPC during the Authorization
Period and HPC provided written notification to the Company of the
introduction and Company does not dispute in writing that HPC identified
such candidates to the Company.



     4.     Representations, Warranties and Covenants of the Company. The Company
hereby represents warrants and covenants as follows:


          (a) (i) The Company has the full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder, (ii) this
Agreement has been duly authorized and executed by and constitutes a valid and
binding agreement of the Company enforceable in accordance with its terms,
(iii) the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not conflict with or result in a breach of
(A) the Company’s certificate of incorporation or by-laws, or (B) any agreement
to which the Company is a party or by which any of its property or assets is
bound.



          (b) Upon the filing of any registration statement by the Company pursuant
to the Securities Act of 1933, as amended, in connection with the proposed
offer and sale of any of its securities by it or any of its security holders,
the Company shall also register for resale by the holder(s) thereof in such
registration statement any common equity securities issued or issuable as a
result of any placement made pursuant to this Agreement.



     5.     Representations, Warranties and Covenants of HPC. HPC hereby
represents and warrants that: (i) it has the full right, power and authority to
enter into this Agreement and to perform all of its obligations hereunder,
(ii) this Agreement has been duly authorized and executed by and constitutes a
valid and binding agreement of HPC enforceable in accordance with its terms,
(iii) the execution and delivery of this Agreement and the consummation of the


 






 


transactions contemplated hereby do not conflict with or result in a breach of
(A) HPC’s certificate of incorporation or by-laws, or (B) any agreement to
which HPC is a party or by which any of its property or assets is bound.


     6.     Independent Contractor. HPC and the Company hereby acknowledge that
HPC is an independent contractor. HPC shall not hold itself out as, nor shall
it take any action from which others might infer that it is a partner or agent
of, or joint venture with, the Company. In addition, HPC shall take no action,
which binds, or purports to bind, the Company.


     7.     Confidentiality. The Company acknowledges that all opinions and
advice, whether oral or written, given by HPC to the Company in connection with
this Agreement are intended solely for the benefit and use of the Company in
considering the transactions to which they relate, and the Company agrees that
no person or entity other than the Company shall be entitled to make use of or
rely upon the advice of HPC to be given hereunder, and no such opinion or
advice shall be used by the Company for any other purpose or reproduced,
disseminated, quoted or referred to by the Company in communications with third
parties at any time, in any manner or for any purpose, nor may the Company make
any public references to HPC or use HPC’s name in any annual report or any
other report or release of the Company without HPC’s prior written consent,
except that the Company may, without HPC’s further consent, disclose this
Agreement (but not information provided to the Company by HPC) in the company’s
filings with the Securities and Exchange Commission, if such disclosure is
required by law. Similarly, the Company may provide proprietary and
confidential information to HPC in connection with this Agreement, which
Company will identify as such at the time it is disclosed to HPC. HPC will keep
such information confidential and not disclose it to any third party without
Company’s consent, and will use any such information provided by the Company
solely for the purpose of providing services to the Company under this
Agreement. The Company does not guarantee the accuracy of any technical or
economic projection and forecasts that may be provided to HPC hereunder.


     8.     Reimbursement. The Company agrees to reimburse promptly HPC, upon
request from time to time, for all reasonable, out-of-pocket expenses incurred
by HPC (including fees and disbursements of counsel and of other consultants
and advisors retained by HPC) in connection with the matters contemplated this
Agreement. The Company’s prior approval in writing will be required for any
individual expenses above $500.00.


     9.     Indemnification. The Company agrees that it shall indemnify and
hold harmless, HPC, its stockholders, directors, officers, employees, agents,
affiliates and controlling persons within the meaning of Section 20 of the
Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933,
each as amended (any and all of whom are referred to as an “Indemnified
Party”), from and against any and all losses, claims, damages, liabilities, or
expenses, and all actions in respect thereof (including, but not limited to,
all legal or other expenses reasonably incurred by an Indemnified Party in
connection with the investigation, preparation, defense or settlement of any
claim, action or proceeding, whether or not resulting in any liability),
incurred by an Indemnified Party: (a) arising out of, or in connection with,
any actions taken or omitted to be taken by the Company, its affiliates,
employees or agents, or any untrue statement or alleged untrue statement of a
material fact contained in any of the financial or other information furnished
to HPC by or on behalf of the Company or the omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (b) with respect to, caused by, or otherwise arising out of any
transaction contemplated by the Agreement or HPC’s performing the services
contemplated hereunder; provided, however, the Company will


 






 


not be liable under clause (b) hereof to the extent, and only to the extent,
that any loss, claim, damage, liability or expense is finally judicially
determined to have resulted primarily from HPC’s gross negligence or bad faith
in performing such services.


     If the indemnification provided for herein is conclusively determined (by
an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unavailable or
insufficient to hold any Indemnified Party harmless in respect to any losses,
claims, damages, liabilities or expenses referred to herein, then the Company
shall contribute to the amounts paid or payable by such Indemnified Party in
such proportion as is appropriate and equitable under all circumstances taking
into account the relative benefits received by the Company on the one hand and
HPC on the other, from the transaction or proposed transaction under the
Agreement or, if allocation on that basis is not permitted under applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and HPC on the other, but also
the relative fault of the Company and HPC; provided, however, in no event shall
the aggregate contribution of HPC and/or any Indemnified Party be in excess of
the net compensation actually received by HPC and/or such Indemnified Party
pursuant to this Agreement.


The Company shall not settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in which any Indemnified Party is or could be a party
and as to which indemnification or contribution could have been sought by such
Indemnified Party hereunder (whether or not such Indemnified Party is a party
thereto), unless such consent or termination includes an express unconditional
release of such Indemnified Party, reasonably satisfactory in form and
substance to such Indemnified Party, from all losses, claims, damages,
liabilities or expenses arising out of such action, claim, suit or proceeding.


     In the event any Indemnified Party shall incur any expenses covered by
this Section 9, the Company shall reimburse the Indemnified Party for such
covered expenses within ten (10) business days of the Indemnified Party’s
delivery to the Company of an invoice therefore, with receipts attached. Such
obligation of the Company to so advance funds may be conditioned upon the
Company’s receipt of a written undertaking from the Indemnified Party to repay
such amounts within ten (10) business days after a final, non-appealable
judicial determination that such Indemnified Party was not entitled to
indemnification hereunder.


     The foregoing indemnification and contribution provisions are not in lieu
of, but in addition to, any rights which any Indemnified Party may have at
common law hereunder or otherwise, and shall remain in full force and effect
following the expiration or termination of Rodman’s engagement and shall be
binding on any successors or assigns of the Company and successors or assigns
to all or substantially all of the Company’s business or assets.


     10.     Notices. Except as otherwise specifically agreed, all notices and
other communications made under this Agreement shall be in writing and, when
delivered in person or by facsimile transmission, shall be deemed given on the
same day if delivered on a business day during normal business hours, or on the
first day of business day following delivery in person or by facsimile outside
normal business hours, or on the date indicated on the return receipt if sent
registered or certified mail, return receipt requested. All notices sent
hereunder shall be sent to the representatives of the party to be noticed at
the addresses indicated respectively below, or at such other addresses as the
parties to be noticed may from time to time by like notice hereafter specify:


 






 



	 	 	 
	
If to the Company:
	 	Mr. Dennis Healey
	 	 	Chief Financial Officer
	 	 	Viragen, Inc.
	 	 	865 SW 78th Avenue
	 	 	Suite 100
	 	 	Plantation, FL 33324
	 	 	 
	
If to HPC:
	 	HPC Capital Management
	 	 	200 Mansell Court East Suite 550
	 	 	Atlanta, GA 30076
	 	 	Attn: Paul T. Mannion, Jr.
	 	 	(770) 992-6800 (Fax)



     11.     Entire Agreement. This Agreement contains the entire agreement
between the parties. It may not be changed except by agreement in writing
signed by the party against whom enforcement of any waiver, change, discharge,
or modification is sought. Waiver of or failure to exercise any rights
provided by this Agreement in any respect shall not be deemed a waiver of any
further or future rights.


     12.     Survival of Representations and Warranties. The representations,
warranties, acknowledgments and agreements of HPC and the Company shall survive
the termination of this agreement. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided, however, that, such severability
should be ineffective if it materially changes the economic benefit of this
Agreement to any party.


     13.     Governing Law. This Agreement shall be construed according to
the laws of the State of New York and subject to the jurisdiction of the courts
of said state, without application of the principles of conflicts of laws. Each
of the parties’ consents exclusively to personal jurisdiction in the Southern
District of New York, waives any objection as to jurisdiction or venue, and
agrees not to assert any defense based on lack of jurisdiction or venue. In
any litigation, arbitration, or other dispute resolution arising out of or
relating to this Agreement, the prevailing party shall be reimbursed by the
other party (as determined by a court of competent jurisdiction) for reasonable
attorneys’ fees and/or arbitration costs.


     14.     Successors. This Agreement may not be assigned by either the
Company or HPC without the prior written consent of the other party. This
Agreement shall be binding upon the parties, their permitted successors and
assigns.


     15.     Execution. This Agreement may be executed in any number of
counterparts each of which shall be enforceable against the parties executing
such counterparts, and all of which together shall constitute a single
document. Except as otherwise stated herein, in lieu of the original
documents, a facsimile transmission or copy of the original documents shall be
as effective and enforceable as the original.


 






 


     Agreed to and accepted this 5 day of January, 2004



	 	 	 	 	 	 	 	 	 
	 	 	Viragen, Inc.
	 	HPC Capital Management
	 	 	 	 	 	 	 	 	 
	 	 	
By:
	 /s/ Dennis W. Healey
	 	By:
	 /s/ Paul T. Mannion Jr.
	 	 	 	

	 	 	

	 	 	 	Dennis Healey
	 	 	Paul T. Mannion, Jr.
	 	 	 	Chief Financial Officer
	 	 	President