Document:

EX-10.6 Registration Rights Agreement

 

EXHIBIT 10.6

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of July 24, 2007, by
and among ADVANCED VIRAL RESEARCH CORP., a Delaware corporation (the “Company”), and the
undersigned Buyers listed on Schedule I attached hereto (each, a “Buyer” and collectively,
the “Buyers”).

     WHEREAS:

     A. In connection with the Securities Purchase Agreement by and among the parties hereto of
even date herewith (the “Securities Purchase Agreement”), the Company has agreed, upon the
terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to the
Buyers (i) secured convertible debentures (the “Convertible Debentures”) which shall be
convertible into shares of the Company’s common stock, par value $0.00001 per share (the
“Common Stock,” as converted, the “Conversion Shares”) in accordance with the terms
of the Convertible Debentures, and (ii) warrants (the “Warrants”), which will be
exercisable to purchase shares of Common Stock (as exercised, collectively, the “Warrant
Shares”). Capitalized terms not defined herein shall have the meaning ascribed to them in the
Securities Purchase Agreement.

     B. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute (collectively, the
“Securities Act”), and applicable state securities laws.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Buyers hereby agree as follows:

     1. DEFINITIONS.

     As used in this Agreement, the following terms shall have the following meanings:

          (a) “Effectiveness Deadline” means, with respect to the initial Registration Statement
required to be filed hereunder, the 150th calendar day following the date filed;
provided, however, in the event the Company is notified by the U.S. Securities and Exchange
Commission (“SEC”) that one of the above Registration Statements will not be reviewed or is
no longer subject to further review and comments, the Effectiveness Date as to such Registration
Statement shall be the fifth (5th) Trading Day following the date on which the Company
is so notified if such date precedes the dates required above.

          (b) “Filing Deadline” means, with respect to the initial Registration Statement
required hereunder, the 30th calendar day following Filing Eligibility Date. the date the Company
can properly file the Registration Statement for the resale of the Registrable Securities under
Rule 415.

          (c) “Filing Eligibility Date” means the later of (i) November 29, 2007 or (ii) the
date that is sixty (60) days from the date that the Buyer has sold substantially all the shares
registered for resale on the registration statement with file number 333-140634, or such earlier
date that the Company may file the Registration Statement for the resale of the Registrable
Securities in reliance on Rule 415.

 

 

          (d) “Person” means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.

          (e) “Prospectus” means the prospectus included in a Registration Statement (including,
without limitation, a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

          (f) “Registrable Securities” means all of (i) the Conversion Shares issuable upon
conversion of the Convertible Debentures, (ii) the Warrant Shares issued or issuable upon exercise
of the Warrants, (iii) any additional shares issuable in connection with any anti-dilution
provisions in the Warrants or the Convertible Debentures (without giving effect to any limitations
on exercise set forth in the Warrants or Convertible Debentures) and (iv) any shares of Common
Stock issued or issuable with respect to the Conversion Shares, the Convertible Debentures, the
Warrant Shares, or the Warrants as a result of any stock split, dividend or other distribution,
recapitalization or similar event or otherwise, without regard to any limitations on the conversion
of the Convertible Debentures or exercise of the Warrants.

          (g) “Registration Statement” means the registration statements required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including (in
each case) the Prospectus, amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration statement.

          (h) “Required Registration Amount” means an amount of shares of the Company’s Common
Stock equal to 33 1/3rd percent of the Company’s outstanding shares of Common Stock held
by non affiliates at the time of the filing of such Registration Statement (i) with respect to the
initial Registration Statement at least one hundred million three hundred seventy-four thousand
three hundred forty (100,364,340) shares of Common Stock issued or to be issued upon conversion of
the Convertible Debentures and one hundred million three hundred seventy-four thousand three
hundred forty (100,364,340) shares of Common Stock issued or to be issued upon exercise of the
Warrants, and (ii) with respect to subsequent Registration Statements all remaining Registrable
Securities to be filed, in each case subject to any cutback set forth in 
Section 3(c).

          (i) “Rule 415” means Rule 415 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC having substantially the same purpose and effect as such Rule.

     2. REGISTRATION.

          (a) On or prior to the Filing Deadline, the Company shall prepare and file with the SEC a
Registration Statement on Form S-1 or SB-2 (or, if the Company is then eligible, on Form S-3)
covering the resale of all of the Registrable Securities. The Registration Statement prepared
pursuant hereto shall register for resale at least the number of shares of Common Stock equal to
the Required Registration Amount. The Registration Statement shall contain the “Selling
Stockholders” and “Plan of Distribution” sections in substantially the form attached
hereto as Exhibit A and contain all the required disclosures set forth on Exhibit
B. The Company shall use its best efforts to have the Registration

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Statement declared effective by the SEC as soon as practicable, but in no event later than the
Effectiveness Deadline. By 9:30 am on the date following the date of effectiveness, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the final Prospectus to be
used in connection with sales pursuant to such Registration Statement. The Company shall cause the
Registration Statement to remain effective until all of the Registrable Securities have been sold
or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the counsel to
the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Holders (“Registration Period”). Prior to the
filing of the Registration Statement with the SEC, the Company shall furnish a draft of the
Registration Statement to the Buyers for their review and comment. The Buyers shall furnish
comments on the Registration Statement to the Company within twenty-four (24) hours of the receipt
thereof from the Company.

          (b) Failure to File or Obtain Effectiveness of the Registration Statement. If: (i)
a Registration Statement is not filed on or prior to its Filing Date (if the Company files a
Registration Statement without affording the Holders the opportunity to review and comment on the
same as required by Section 3(a), the Company shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five Trading Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the SEC that a Registration
Statement will not be “reviewed,” or not subject to further review, or (iii) a Registration
Statement filed or required to be filed hereunder is not declared effective by the SEC by its
Effectiveness Deadline, or (iv) after the effectiveness, a Registration Statement ceases for any
reason to remain continuously effective as to all Registrable Securities for which it is required
to be effective, or the Holders are otherwise not permitted to utilize the Prospectus therein to
resell such Registrable Securities for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period (which need not be consecutive calendar
days) (any such failure or breach being referred to as an “Event”), then in addition to any
other rights the holders of the Convertible Debentures may have hereunder or under applicable law,
on each such Event date and on each monthly anniversary of each such Event date (if the applicable
Event shall not have been cured by such date) until the applicable Event is cured, the Company
shall pay to each holder of Convertible Debentures an amount in cash, as partial liquidated damages
(“Liquidated Damages”) and not as a penalty, equal to 2.0% of the aggregate purchase price
paid by such holder pursuant to the Securities Purchase Agreement for any Convertible Debentures
then held by such holder. The parties agree that (1) the Company shall not be liable for
Liquidated Damages under this Agreement with respect to any Warrants or Warrant Shares and (2) the
maximum aggregate Liquidated Damages payable to a holder of Convertible Debentures under this
Agreement shall be twenty-four percent (24%) of the aggregate Purchase Price paid by such holder
pursuant to the Securities Purchase Agreement. The partial Liquidated Damages pursuant to the
terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of
an Event.

          (c) Liquidated Damages. The Company and the Buyer hereto acknowledge and agree that
the sums payable under subsection 2(b) above shall constitute liquidated damages and not penalties
and are in addition to all other rights of the Buyer, including the right to call a default. The
parties further acknowledge that (i) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (ii) the amounts specified in such subsections
bear a reasonable relationship to, and are not plainly or grossly disproportionate to, the probable
loss likely to be incurred in connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons for the Company and the Buyer
reaching an agreement as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Buyer are sophisticated business parties
and have been represented by sophisticated and able legal counsel and negotiated this Agreement at
arm’s length.

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     3. RELATED OBLIGATIONS.

          (a) The Company shall, not less than three (3) Trading Days prior to the filing of each
Registration Statement and not less than one (1) Trading Day prior to the filing of any related
amendments and supplements to all Registration Statements (except for annual reports on Form 10-K
or Form 10-KSB), furnish to each Buyer copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by reference) will be subject
to the reasonable and prompt review of such Buyers, The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements thereto to which the Buyers shall
reasonably object in good faith; provided that, the Company is notified of such objection in
writing no later than two (2) Trading Days after the Buyers have been so furnished copies of a
Registration Statement.

          (b) The Company shall (i) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the Prospectus used in
connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any
comments received from the SEC with respect to a Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Buyers true and complete copies of all
correspondence from and to the SEC relating to a Registration Statement (provided that the Company
may excise any information contained therein which would constitute material non-public information
as to any Buyer which has not executed a confidentiality agreement with the Company); and (iv)
comply with the provisions of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration Statement. In the
case of amendments and supplements to a Registration Statement which are required to be filed
pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s
filing a report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall
incorporate such report by reference into the Registration Statement, if applicable, or shall file
such amendments or supplements with the SEC on the same day on which the Exchange Act report is
filed which created the requirement for the Company to amend or supplement the Registration
Statement.

          (c) Reduction of Registrable Securities Included in a Registration Statement.
Notwithstanding anything contained herein, in the event that the SEC requires the Company to reduce
the number of Registrable Securities to be included in a Registration Statement in order to allow
the Company to rely on Rule 415 with respect to a Registration Statement, then the Company shall be
obligated to include in such Registration Statement (which may be a subsequent Registration
Statement if the Company needs to withdraw the initial Registration Statement and refile a new
Registration Statement in order to rely on Rule 415) only such limited portion of the Registrable
Securities as the SEC shall permit. Any Registrable Securities that are excluded in accordance
with the foregoing terms are hereinafter referred to as “Cut Back Securities.” To the
extent Cut Back Securities exist, as soon as may be permitted by the SEC, the Company shall be
required to file a Registration Statement covering the resale of the Cut Back Securities and shall
use best efforts to cause such Registration Statement to be declared effective as promptly as
practicable thereafter.

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          (d) The Company shall furnish to each Buyer whose Registrable Securities are included in any
Registration Statement, without charge, (i) at least one (1) copy of such Registration Statement as
declared effective by the SEC and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Buyer may
reasonably request) and (iii) such other documents as such Buyer may reasonably request from time
to time in order to facilitate the disposition of the Registrable Securities owned by such Buyer.

          (e) The Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities or “blue sky” laws of
such jurisdictions in the United States as any Buyer reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to its articles of incorporation or
by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall
promptly notify each Buyer who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the
United States or its receipt of actual notice of the initiation or threat of any proceeding for
such purpose.

          (f) As promptly as practicable after becoming aware of such event or development, the Company
shall notify each Buyer in writing of the happening of any event as a result of which the
Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state 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 (provided that in no event shall such notice contain any material, nonpublic
information), and promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such supplement or
amendment to each Buyer. The Company shall also promptly notify each Buyer in writing (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Buyer by facsimile on the same day of such effectiveness),
(ii) of any request by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

          (g) The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction within the United States of America
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension
at the earliest possible moment and to notify each Buyer who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.

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          (h) If, after the execution of this Agreement, a Buyer believes, after consultation with its
legal counsel, that it could reasonably be deemed to be an underwriter of Registrable Securities,
at the request of any Buyer, the Company shall furnish to such Buyer, on the date of the
effectiveness of the Registration Statement and thereafter from time to time on such dates as a
Buyer may reasonably request (i) a letter, dated such date, from the Company’s independent
certified public accountants in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, and (ii) an opinion, dated
as of such date, of counsel representing the Company for purposes of such Registration Statement,
in form, scope and substance as is customarily given in an underwritten public offering, addressed
to the Buyers.

          (i) If, after the execution of this Agreement, a Buyer believes, after consultation with its
legal counsel, that it could reasonably be deemed to be an underwriter of Registrable Securities,
at the request of any Buyer, the Company shall make available for inspection by (i) any Buyer and
(ii) one (1) firm of accountants or other agents retained by the Buyers (collectively, the
“Inspectors”) all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed
necessary by each Inspector, and cause the Company’s officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however, that each Inspector
shall agree, and each Buyer hereby agrees, to hold in strict confidence and shall not make any
disclosure (except to a Buyer) or use any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the Securities Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this or any other
agreement of which the Inspector and the Buyer has knowledge. Each Buyer agrees that it shall,
upon learning that disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.

          (j) The Company shall hold in confidence and not make any disclosure of information concerning
a Buyer provided to the Company unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning a Buyer is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Buyer and allow such Buyer,
at the Buyer’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.

          (k) The Company shall use its best efforts either to cause all the Registrable Securities
covered by a Registration Statement (i) to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange or (ii)
the inclusion for quotation on the National Association of Securities Dealers, Inc. OTC Bulletin
Board for such Registrable Securities. The Company shall pay all fees and expenses in connection
with satisfying its obligation under this Section 3(j).

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          (l) The Company shall cooperate with each Buyer who holds Registrable Securities being offered
and, to the extent applicable, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant
to a Registration Statement and enable such certificates to be in such denominations or amounts, as
the case may be, as the Buyers may reasonably request and registered in such names as the Buyers
may request.

          (m) The Company shall use its best efforts to cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.

          (n) The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a
twelve (12) month period beginning not later than the first day of the Company’s fiscal quarter
next following the effective date of the Registration Statement.

          (o) The Company shall otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

          (p) Within two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Buyer whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit C.

          (q) The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by each Buyer of Registrable Securities pursuant to a Registration Statement.

     4. OBLIGATIONS OF THE BUYERS.

          (a) Each Buyer agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(f) or the first sentence of Section 3(e), such Buyer
will immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement covering such Registrable Securities until such Buyer’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of Section
3(e) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for
shares of Common Stock to a transferee of a Buyer in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with respect to which a
Buyer has entered into a contract for sale prior to the Buyer’s receipt of a notice from the
Company of the happening of any event of the kind described in Section 3(f) or the first sentence
of 3(e) and for which the Buyer has not yet settled.

          (b) Each Buyer covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it or an exemption therefrom in connection with
sales of Registrable Securities pursuant to the Registration Statement.

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     5. EXPENSES OF REGISTRATION.

     All expenses incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees,
printers, legal and accounting fees shall be paid by the Company.

     6. INDEMNIFICATION.

     With respect to Registrable Securities which are included in a Registration Statement under
this Agreement:

          (a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Buyer, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls any Buyer within the meaning of the
Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether
or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which
any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of the offering under
the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are
offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in any final prospectus
(as amended or supplemented, if the Company files any amendment thereof or supplement thereto with
the SEC) or the omission or alleged omission to state therein any material fact necessary to make
the statements made therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without limitation, any state securities law, or
any rule or regulation there under relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). The Company shall reimburse the Buyers and each such
controlling person promptly as such expenses are incurred and are due and payable, for any legal
fees or disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a
Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by such Indemnified
Person expressly for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim
is based on a failure of the Buyer to deliver or to cause to be delivered the prospectus made
available by the Company, if such prospectus was timely made available by the Company pursuant to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Buyers pursuant to Section 9 hereof.

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          (b) In connection with a Registration Statement, each Buyer agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers, employees,
representatives, or agents and each Person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim or
Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any
Violation, in each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the Company by such Buyer
expressly for use in connection with such Registration Statement; and, subject to Section 6(d),
such Buyer will reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Buyer, which consent shall not be unreasonably withheld;
provided, further, however, that the Buyer shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Buyer as a
result of the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by
the Buyers pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not
inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact
contained in the prospectus was corrected and such new prospectus was delivered to each Buyer prior
to such Buyer’s use of the prospectus to which the Claim relates.

          (c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses of not more than
one (1) counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such counsel in such
proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information reasonably available
to the Indemnified Party or Indemnified Person which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or proceeding effected
without its prior written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or litigation.
Following

9

 

indemnification as provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.

          (d) The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

          (e) The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

     7. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable
Securities.

     8. REPORTS UNDER THE EXCHANGE ACT.

     With a view to making available to the Buyers the benefits of Rule 144 promulgated under the
Securities Act or any similar rule or regulation of the SEC that may at any time permit the Buyers
to sell securities of the Company to the public without registration (“Rule 144”) the
Company agrees to:

          (a) make and keep public information available, as those terms are understood and defined in
Rule 144;

          (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the Company’s obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing of such reports and other
documents as are required by the applicable provisions of Rule 144; and

          (c) furnish to each Buyer so long as such Buyer owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to permit the Buyers to
sell such securities pursuant to Rule 144 without registration.

10

 

     9. AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Buyers who then hold at least two-thirds (2/3) of the
Registrable Securities. Any amendment or waiver effected in accordance with this Section 9 shall
be binding upon each Buyer and the Company. No such amendment shall be effective to the extent
that it applies to fewer than all of the holders of the Registrable Securities. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.

     10. MISCELLANEOUS.

          (a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or
is deemed to own of record such Registrable Securities or owns the right to receive the Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two (2) or
more Persons with respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such Registrable
Securities.

          (b) No Piggyback on Registrations. Except as set forth on Schedule 10(b)
attached hereto, neither the Company nor any of its security holders (other than the Buyers in such
capacity pursuant hereto) may include securities of the Company in the initial Registration
Statement other than the Registrable Securities. The Company shall not file any other registration
statements until the initial Registration Statement required hereunder is declared effective by the
SEC, provided that this Section 10(b) shall not prohibit the Company from filing amendments to
registration statements already filed.

          (c) Piggy-Back Registrations. If at any time during the Registration Period there is
not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with the stock
option or other employee benefit plans, then the Company shall send to each Buyer a written notice
of such determination and, if within fifteen (15) days after the date of such notice, any such
Buyer shall so request in writing, the Company shall include in such registration statement all or
any part of such Registrable Securities such Buyer requests to be registered; provided,
however, that, the Company shall not be required to register any Registrable Securities
pursuant to this Section 10(c) that are eligible for resale pursuant to Rule 144(k) promulgated
under the Securities Act or that are the subject of a then effective Registration Statement.

          (d) Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) business day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

11

 

	 	 	 
	If to the Company, to:
	 	Advanced Viral Research Research Corp.

	 	 	200 Corporate Boulevard South

	 	 	Yonkers, New York 10701

	 	 	Attention: Stephen Elliston

	 	 	Telephone: (914) 376-7383

	 	 	Facsimile: (914) 845-8720

	 
	 	 

	With Copy to:
	 	Berman Rennert Vogel and Mandler, P.A.

	 	 	29th Floor — Bank of America Tower at International Place

	 	 	100 S.E. Second Street

	 	 	Miami, Florida 33131

	 	 	Attention: Charles J. Rennert

	 	 	Telephone: (305) 577-4171

	 	 	Facsimile: (305) 373-6036

If to an Buyer, to its address and facsimile number on the Schedule of Buyers attached hereto, with
copies to such Buyer’s representatives as set forth on the Schedule of Buyers or to such other
address and/or facsimile number and/or to the attention of such other person as the recipient party
has specified by written notice given to each other party five (5) days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically generated by the
sender’s facsimile machine containing the time, date, recipient facsimile number and an image of
the first page of such transmission or (C) provided by a courier or overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

          (e) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

          (f) The laws of the State of New Jersey shall govern all issues concerning the relative rights
of the Company and the Buyers as its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of New Jersey. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the Superior Courts of the
State of New Jersey, sitting in Hudson County, New Jersey and federal courts for the District of
New Jersey sitting Newark, New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. If
any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION

12

 

HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (g) This Agreement shall inure to the benefit of and be binding upon the permitted successors
and assigns of each of the parties hereto.

          (h) The headings in this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.

          (i) This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

          (j) Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

          (k) The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will be applied against
any party.

          (l) This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

     IN WITNESS WHEREOF, each Buyer and the Company have caused their signature page to this
Registration Rights Agreement to be duly executed as of the date first above written.

	 	 	 	 	 
	 	COMPANY:

ADVANCED VIRAL RESEARCH RESEARCH CORP.

 	 
	 	By:  	/s/ Stephen Elliston
 	 
	 	 	Name:  	Stephen Elliston 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	BUYER:

CORNELL CAPITAL PARTNERS, L.P.

 	 
	 	By:  	Yorkville Advisors, LLC
 	 
	 	Its:  	Investment Manager
 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ Mark Angelo
 	 
	 	 	Name:  	Mark Angelo 	 
	 	 	Title:  	Portfolio Manager 	 

13

 

	 	 	 	 	 

SCHEDULE I

SCHEDULE OF BUYERS

	 	 	 	 	 
	 	 	Address/Facsimile	 	Address/Facsimile
	Buyer	 	Number of Buyer	 	Number of Buyer’s Representative
	Cornell Capital Partners, L.P.

	 	101 Hudson Street — Suite 3700
	 	101 Hudson Street — Suite 3700
	 

	 	Jersey City, NJ 07302
	 	Jersey City, NJ 07302
	 

	 	Facsimile: (201) 985-8266
	 	Facsimile: (201) 985-8266
	 

	 	 	 	Attention: David Gonzalez, Esq.

 

 

EXHIBIT A

SELLING STOCKHOLDERS

AND PLAN OF DISTRIBUTION

Selling Stockholders

     The shares of Common Stock being offered by the selling stockholders are issuable upon
conversion of the convertible debentures and upon exercise of the warrants. For additional
information regarding the issuance of those convertible notes and warrants, see “Private Placement
of Convertible Debentures and Warrants” above. We are registering the shares of Common Stock in
order to permit the selling stockholders to offer the shares for resale from time to time. Except
as otherwise notes and except for the ownership of the convertible Debentures and the warrants
issued pursuant to the Securities Purchase Agreement, the selling stockholders have not had any
material relationship with us within the past three years.

     The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of Common Stock by each of the selling stockholders. The second column
lists the number of shares of Common Stock beneficially owned by each selling stockholder, based on
its ownership of the convertible debentures and warrants, as of                     , 200     , assuming conversion
of all convertible debentures and exercise of the warrants held by the selling stockholders on that
date, without regard to any limitations on conversions or exercise.

     The third column lists the shares of Common Stock being offered by this prospectus by the
selling stockholders.

     In accordance with the terms of a registration rights agreement with the selling stockholders,
this prospectus generally covers the resale of at least (i) 300% of the number of Conversion Shares
issued and issuable pursuant to the convertible debentures as of the trading day immediately
preceding the date the registration statement is initially filed with the SEC, and (ii) 100% of the
number of warrant shares issued and issuable pursuant to the warrants as of the trading day
immediately preceding the date the registration statement is initially filed with the SEC. Because
the conversion price of the convertible debentures and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of all of the shares
offered by the selling stockholders pursuant to this prospectus.

     Under the terms of the convertible debentures and the warrants, a selling stockholder may not
convert the convertible debentures or exercise the warrants to the extent such conversion or
exercise would cause such selling stockholder, together with its affiliates, to beneficially own a
number of shares of Common Stock which would exceed 4.99% of our then outstanding shares of Common
Stock following such conversion or exercise, excluding for purposes of such determination shares of
Common Stock issuable upon conversion of the convertible debentures which have not been converted
and upon exercise of the warrants which have not been exercised. The number of shares in the
second column does not reflect this limitation. The selling stockholders may sell all, some or
none of their shares in this offering. See “Plan of Distribution.”

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum Number of	 	 	 	 
	 	 	Number of Shares	 	 	Shares to be Sold	 	 	Number of Shares	 
	 	 	Owned Prior to	 	 	Pursuant to this	 	 	Owned After	 
	Name of Selling Stockholder	 	Offering	 	 	Prospectus	 	 	Offering	 
	Cornell Capital Partners, L.P.
(1)
	 	 	 	 	 	 	 	 	 	 	 	 

 

	(1)	 	Cornell Capital Partners, L.P. is a Cayman Island exempt limited partnership. Cornell is
managed by Yorkville Advisors, LLC. Investment decisions for Yorkville Advisors are made by Mark
Angelo, its portfolio manager.

 

PLAN OF DISTRIBUTION

     Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the                      or any other stock exchange, market or trading
facility on which the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the following methods when
selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified number
of such shares at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.

     In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the Common Stock in the course of hedging the positions they
assume. The Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to reflect such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each

2

 

Selling Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to distribute the Common Stock.
In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate,
would exceed eight percent (8%).

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation M, prior
to the commencement of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by
the Selling Stockholders or any other person. We will make copies of this prospectus available to
the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act).

3

 

EXHIBIT B

OTHER DISCLOSURES 

See attachment provided separately.

 

 

EXHIBIT C

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

     Attention:

			
	           Re:	 	ADVANCED VIRAL RESEARCH RESEARCH CORP.

Ladies and Gentlemen:

     We are counsel to Advanced Viral Research Research Corp., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain Securities
Purchase Agreement (the “Securities Purchase Agreement”) entered into by and among the
Company and the Buyers named therein (collectively, the “Buyers”) pursuant to which the
Company issued to the Buyers shares of its Common Stock, par value $0.00001 per share (the
“Common Stock”). Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Buyers (the “Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the
“Securities Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on                                , the Company filed a Registration Statement on Form                
(File No. 333-                    ) (the “Registration Statement”) with the Securities and
Exchange Commission (the “SEC”) relating to the Registrable Securities which names each of
the Buyers as a selling stockholder there under.

     In connection with the foregoing, we advise you that a member of the SEC’s staff has advised
us by telephone that the SEC has entered an order declaring the Registration Statement effective
under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that purpose are pending
before, or threatened by, the SEC and the Registrable Securities are available for resale under the
Securities Act pursuant to the Registration Statement.

	 	 	 	 	 
	 	Very truly yours,

[Law Firm]

 	 
	 	By:  	/s/
 	 
	 	 	 	 
	 	 	 	 
	 

cc: [LIST NAMES OF BUYERS]EX-10.27 Employment Agreement Jeffrey Giguere

 

EXHIBIT 10.27

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into and shall be effective as of April
9, 2007, by and among FGX International Inc., a Delaware corporation with a mailing address of 500
George Washington Highway, Smithfield, Rhode Island 02917 (the “Company”), and Jeffrey J. Giguere,
an individual with a residence in the State of Rhode Island (“Executive”).

AGREEMENT

     In consideration of the premises and mutual promises herein below set forth, the parties
hereby agree as follows:

     1. Employment Period. The term of Executive’s Employment by the Company pursuant to
this Agreement (the “Employment Period”) shall commence on the date hereof (the “Effective Date”)
and shall continue until terminated as provided herein. For purposes of this agreement
“Termination Date” means the date on which the Employment Period ends.

     2. Employment; Duties. Subject to the terms and conditions set forth herein, the
Executive shall serve as the Executive Vice President, General Counsel and Secretary of the
Company, of FGX International Holdings Limited, a British Virgin Islands corporation and the
indirect parent of the Company (“FGX Holdings”), and each of its subsidiaries during the Employment
Period. The duties assigned and authority granted to Executive shall be as set forth in the
By-laws of the Company and those that are typically assigned and/or afforded to a general counsel,
and such other duties and responsibilities as may otherwise reasonably be assigned to him by the
Chief Executive Officer from time to time. Executive agrees to perform his duties for the Company
diligently, competently and in a good faith manner. Notwithstanding anything to the contrary set
forth herein, the Executive shall be permitted during the Employment Period to (a) engage in civic
and charitable activities to the extent they are not inconsistent with Executive’s duties hereunder
and (b) serve as a member of the board of directors of not more than two additional for profit
corporations.

     3. Salary and Bonus.

          a. Base Salary. Executive shall be entitled to receive a base salary from the Company
during the Employment Period at the rate of Two Hundred Twenty-Five Thousand Dollars ($225,000) per
annum (as from time to time, if at all, increased, the “Base Salary”). The Base Salary may be
increased from time to time during the Employment Period, at the same time and under the same
circumstances as other Executive Vice Presidents of the Company. The initial review of the Base
Salary will occur in June, 2008. In addition, the Board of Directors, or Compensation Committee,
of the Company or its parent corporation (collectively, the “Board of Directors”), or the Chief
Executive Officer, may further increase Executive’s Base Salary from time to time in their
discretion, based upon the Company’s performance and Executive’s particular contributions.

 

 

          b. Bonus. Executive shall be eligible for and shall receive a cash bonus for the full
plan year 2007 (i.e., Executive’s Base Salary for bonus computational purposes for 2007
shall not be prorated to Executive’s employment start date), and thereafter during each year
of Executive’s employment, subject to the discretion of the Company’s Board of Director’s, of up to
thirty percent (30%) of his Base Salary under the Company’s Executive Incentive Compensation Plan
(“Annual Target Bonus Amount”) on account of the services rendered by him during each calendar year
during the Employment Period and the attainment of certain performance goals and successful
completion of certain initiatives established by the Company. The cash bonus shall be paid on or
before the later of (i) March 15 of the year following the calendar year for which the bonus was
earned and (ii) the date on which the Board of Directors has been able to determine within a
reasonable degree of certainty the amount of the bonus. The Board of Directors may from time to
time increase the Annual Target Bonus Amount.

     4. Other Benefits.

          a. Insurance and Other Benefits. During the Employment Period, Executive shall be
entitled to participate in, and shall receive the maximum benefits available under, the Company’s
insurance programs (including health, supplemental health and life insurance) and any ERISA benefit
plans, as the same may be adopted and/or amended from time to time, and shall receive all other
benefits that are provided by the Company to other senior executives.

          b. Paid Time Off. Executive shall be entitled to twenty (20) days of paid time off
annually in accordance with the Company’s paid time off policies in effect from time to time, to be
taken at such time(s) as shall not, in the reasonable judgment of the Chief Executive Officer of
the Company, interfere with Executive’s fulfillment of his duties hereunder. Executive shall be
entitled to as many holidays, sick days and personal days as are generally provided by the Company
from time to time to its employees in accordance with the Company’s policies as in effect from time
to time.

          c. Automobile Allowance. During the Employment Period, the Company shall provide
Executive with a monthly automobile allowance consistent with the plan adopted or to be adopted by
the Company for other senior executives. As of the Effective Date, the monthly automobile
allowance provided to Executive shall be $950.00.

          d. Stock Options. Executive will be included in the first granting of options
concurrent with the Company’s initial public offering. The number of options shall be equivalent
to 0.325% of the number of shares of the FGX Holdings issued and outstanding on the date of the
initial public offering.

     5. Termination by the Company With Cause. Upon prior written notice to Executive, the
Company may terminate Executive’s employment if any of the following events shall occur (any of the
following events shall constitute “Cause” for all purposes hereof):

          a. the conviction of Executive for a crime involving fraud or moral turpitude;

          b. deliberate dishonesty of Executive with respect to the Company or any of its subsidiaries
or affiliates; or

-2-

 

          c. the refusal of Executive to follow the reasonable and lawful written instructions of the
Chief Executive Officer of the Company with respect to the services to be
rendered and the manner of rendering such services by Executive, provided such instructions
are in accordance with the duties of the Executive under this Agreement and provided further that
such refusal is material and repetitive and is not justified or excused either by the terms of this
Agreement or by actions taken by the Company in violation of this Agreement.

     6. Termination by Executive; Termination by the Company Without Cause.

          a. Notice/Events:

     i. Termination by Executive. Executive may terminate his employment at
any time by providing written notice to the Company.

     ii. Termination by the Company Without Cause. The Company may
terminate Executive’s employment at any time, without Cause by providing written
notice to Executive. As used in this Agreement, the term “without Cause” shall mean
termination for any reason not specified in Section 5 or Section 7 hereof.

          b. Executive’s Right-to-Terminate. Executive may terminate Executive’s employment for
Good Reason at any time during the term of this Agreement. For purposes of this Agreement, “Good
Reason” shall mean any of the following (without Executive’s express written consent):

     i. the assignment to Executive by the Company of any duties materially
inconsistent with Executive’s status with the Company or a material alteration in the
nature or status of Executive’s responsibilities from those in effect on the date
hereof, or a material reduction in Executive’s titles as in effect on the date
hereof, or any removal of Executive from, or any failure to reelect Executive to, any
of such positions, except in connection with the termination of his employment for
disability or for any reason specified in Section 5 hereof or as a result of
Executive’s death or by Executive other than for Good Reason;

     ii. a reduction by the Company in Executive’s Base Salary as in effect on the
date hereof or as the same may be increased from time to time during the term of this
Agreement;

     iii. except if such action applies to all senior executive officers of the
Company generally, any failure by the Company to continue in effect its present
Executive Incentive Compensation Plan, any fringe benefits, the taking of any action
by the Company which would, directly or indirectly, materially reduce Executive’s
benefits or deprive Executive of any fringe benefits enjoyed by Executive at the date
hereof, or the failure by the Company to provide Executive with the number of paid
vacation days to which Executive is entitled at the date hereof;

     iv. a relocation of the Company’s principal executive offices to a location
more than 50 miles from their current location in, or the Company’s
requiring Executive to be based anywhere other than the Company’s principal
executive offices; or

-3-

 

     v. any material breach, which remains uncured for twenty (20) days after
reasonable notice, by the Company of any provisions of this Agreement.

     c. Severance.

     i. Without Cause. If the Company terminates Executive’s employment
without Cause, or if Executive terminates his employment pursuant to Section 6(b)
hereof, then, subject to Section 8, commencing on the date of termination of
employment, the Company shall provide Executive with a severance package which shall
consist of the following: (i) for a period equal to one (1) year after the date of
termination or, if the Company exercises its Non-compete Extension (as defined
below), eighteen (18) months (x) payment on the first business day of each month of
an amount equal to one-twelfth of Executive’s then current Salary under Section 3(a)
hereof; (y) payment on the first business day of each month of an amount equal to
one-twelfth of Executive’s Annual Target Bonus Amount under the Company’s Executive
Incentive Compensation Plan for the year of termination (assuming for purposes of
calculating such amount that the percentage of Salary payable as a bonus to
Executive on account of the year of termination will be the same percentage of
Salary paid as a bonus to Executive on account of the immediately preceding year, or
the percentage of Salary paid as a bonus reasonably certain to be paid to Executive
for the recently concluded or substantially completed fiscal year if no bonus was
paid to Executive on account of the immediately preceding year); and (z)
continuation of all benefits under Section 4(a) hereof; provided, however, that the
amount of any severance payments hereunder shall be reduced by the amount of income
otherwise earned by Executive from alternative employment during the one year period
following termination and provided, further that benefits under Section 4(a) shall
be discontinued as of the date on which Executive is provided comparable benefits
from any other source.

     ii. General Release. As a condition precedent to receiving any
severance payment, Executive shall execute a general release of any and all claims
which Executive or his heirs, executors, agents or assigns might have against the
Company, its subsidiaries, affiliates, successors, assigns and its past, present and
future employees, officers, directors, agents and attorneys, except for claims
arising under this Agreement or any employee benefit plan (other than any employee
benefit plan providing a benefit in the nature of a severance benefit) in which
Executive participates or for any right to indemnification to which Executive may be
entitled under this Agreement or as an officer and director of the Company.

     iii. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by the
Employer under applicable law.

-4-

 

     iv. Certain Reductions of Payments by the Company.

     1. Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a “Payment”), would constitute an “excess parachute payment”
within the meaning of Section 280G(b) of the U.S. Internal Revenue Code (the
“Code”), and thus would result in the Executive incurring an excise tax
under Section 4999 of the Code, then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this Agreement
are hereinafter referred to as “Agreement Payments”) shall be reduced to the
Reduced Amount, but only if and to the extent that the after-tax value to
the Executive of reduced Agreement Payments would exceed the after-tax value
to the Executive of the Agreement Payments received by the Executive without
application of such reduction. The “Reduced Amount” shall be an amount
expressed in present value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. Anything to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined further
that any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of Payments’
which are not Agreement Payments shall also be reduced (but not below zero)
to an amount expressed in present value which maximizes the aggregate
present value of Payments without causing any Payment to be nondeductible by
the Company because of Section 280G of the Code. For purposes of this
Section 6(c)(iv), present value shall be determined in accordance with
Section 280G(d)(4) of the Code. Thus, for illustrative purposes only, if
the Executive’s average W-2 compensation for the five (5) years prior to the
year in which a change in control occurs (the “Base Amount”) was $500,000,
and the value of the payments and benefits that are contingent upon the
change in control (the “Parachute Payments”) was $1,510,000, the Executive
would have an excess parachute payment within the meaning of Section 280G(b)
of the Code since the value of the parachute payments ($1,510,000) would be
greater than three (3) times the Executive’s Base Amount ($1,500,000). The
amount of the excess parachute payment would be $1,010,000 (the amount by
which the value of the parachute payments exceeds one (1) times the Base
Amount), and if the aggregate amount of the parachute payments was not
reduced, the Executive would incur an excise tax under Section 4999 of the
Code equal to 20% of the excess parachute payment (or $202,000). This
excess parachute payment could be avoided if instead, the value of the
parachute payments was reduced by $10,001 to $1,499,999 (since the value of
the parachute payments then would be less

-5-

 

than three (3) times the Base Amount). Since the Executive would
receive a greater after tax amount, under the foregoing example, if his
parachute payments were reduced by $10,001 (to $1,499,999) than he would if
his parachute payments were not reduced and the Executive incurred a
$202,000 excise tax (reducing his parachute payments to $1,308,000) on the
excess parachute payment, the Executive’s parachute payments would be
reduced under this provision to $1,499,999 (by $10,001) to avoid any excess
parachute payments.

     2. All determinations required to be made under this Section 6(c)(iv)
shall be made by the Company’s accountants for the Company’s last fiscal
year or, at the mutual agreement of the Executive and the Company, any other
nationally or regionally recognized firm of independent public accountants
(the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within twenty (20)
business days of the date of termination or such earlier time as is
requested by the Company and an opinion to the Executive that he has
substantial authority not to report any excise tax on his Federal income tax
return with respect to any Payments. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. The
Executive shall determine which and how much of the Payments shall be
eliminated or reduced consistent with the requirements of this Section
6(c)(iv), provided that, if the Executive does not make such determination
within ten business days of the receipt of the calculations made by the
Accounting Firm, the Company shall elect which and how much of the Payments
shall be eliminated or reduced consistent with the requirements of this
Section 6(c)(iv) and shall notify the Executive promptly of such election.
Within five business days thereafter, the Company shall pay to or distribute
to or for the benefit of the Executive such amounts as are then due to the
Executive under this Agreement. All fees and expenses of the Accounting
Firm incurred in connection with the determinations contemplated by this
Section 6(c)(iv) shall be borne by the Company.

     3. As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Payments will have been made by the Company
which should not have been made (“Overpayment”) or that additional Payments
which will not have been made by the Company could have been made
(“Underpayment”), in each case, consistent with the calculations required to
be made hereunder. In the event that the Accounting Firm, based upon the
assertion of a deficiency by the Internal Revenue Service against the
Executive which the Accounting Firm believes has a high probability of
success, determines that an Overpayment has been made, any such Overpayment
paid or distributed by the Company to or for the benefit of the Executive
shall be repaid to the Company; provided, however, that no amount shall

-6-

 

be payable by the Executive to the Company if and to the extent such
payment would not either reduce the amount on which the Executive is subject
to tax under Section 1 and Section 4999 of the Code or generate a refund of
such taxes. In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.

     7. Death or Disability. In the event of Executive’s death or disability, the
Employment Period will automatically terminate effective as of the date of such death or
disability. As used in this Agreement, the term “disability” shall mean inability on the part of
Executive for a period of more than six (6) months in the aggregate during any twelve (12)
consecutive month period to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both Executive and the
Company, provided that if Executive and the Company do not agree on a physician, Executive and the
Company shall each select a physician and these two physicians together shall select a third
physician, whose determination as to disability shall be binding on all parties.

     8. Change in Control.

          a. If Executive’s employment is terminated by the Company without Cause or by Executive for
Good Reason within six (6) months before and in anticipation of, or twelve (12) months after, a
Change in Control (as defined in Paragraph (b) of this Section 8), Executive shall be entitled to
receive a supplemental bonus payment (the “Change in Control Payment”) from the Company equal to
one (1) times the sum of Executive’s then current Salary and Executive’s Annual Target Bonus Amount
(assuming for purposes of calculating such amount that the percentage of Salary payable as a bonus
to Executive on account of the year of termination will be the same percentage of Salary paid as a
bonus to Executive on account of the immediately preceding year, or the percentage of Salary paid
as a bonus reasonably certain to be paid to Executive for the recently concluded or substantially
completed fiscal year if no bonus was paid to Executive on account of the immediately preceding
year) under the Company’s Executive Incentive Compensation Plan for the year of termination. The
Change in Control Payment shall be paid to Executive within fifteen (15) days after: (i) the
Change in Control if Executive’s employment was terminated within six (6) months before the Change
in Control; or (ii) the termination of Executive’s employment by the Company if Executive’s
employment terminates within twelve (12) months after the Change in Control. Executive shall also
be entitled to continuation of all benefits under Section 4(a) hereof, ending on the earlier of (x)
the one year anniversary of the termination date and (v) the date on which Executive is provided
comparable benefits from any other source. In addition, all stock options, restricted stock,
restricted stock units and other equity-based interests held by Executive shall vest and become
immediately exercisable. If Executive is entitled to a Change in Control Payment and benefits
under this Section 8(a), Executive shall not have any rights to receive any severance payments or
benefits pursuant to Section 6(c) hereof. If Executive’s employment by the Company terminates
within six (6) months prior to the Change in Control and Executive received severance payments
pursuant to Section 6(c) hereof, any amounts so paid by the
Company to Executive shall be deducted from any Change in Control Payment otherwise payable to
Executive pursuant to this Section 8(a).

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          b. A “Change in Control” will be deemed to have occurred if (i) a Takeover Transaction occurs,
or (ii) any election of directors of FGX Holdings takes place (whether by the directors then in
office or by the stockholders at a meeting or by written consent) and a majority of the directors
in the office following such election are individuals who were not nominated by a vote of
two-thirds of the members of the Board of Directors immediately preceding such election, or (iii)
FGX Holdings effectuates a complete liquidation of FGX Holdings or a sale or disposition of all or
substantially all of its assets. A “Change in Control” shall not be deemed to include, the
recapitalization of FGX Holdings or any transactions related thereto, consummated on or prior to
the Effective Date.

          c. A “Takeover Transaction” shall mean (i) a merger or consolidation of FGX Holdings with, or
an acquisition of FGX Holdings or all or substantially all of either of its assets by, any other
corporation, other than a merger, consolidation or acquisition in which the individuals who were
members of the Board of Directors of FGX Holdings immediately prior to such transaction continue to
constitute a majority of the Board of Directors of the surviving corporation (or, in the case of an
acquisition involving a holding company, constitute a majority of the Board of Directors of the
holding company) for a period of not less than twelve (12) months following the closing of such
transaction, or (ii) when any person, including any “group” as such term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes after the date
hereof the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of
FGX Holdings representing more than fifty percent (50%) of the total number of votes that may be
cast for the election of directors of FGX Holdings, as applicable, excluding (i) any person that is
excluded from the definition of “beneficial owner” under Rule 16(a)-1(a)(1) under the Exchange Act
and (ii) any person (including any such group) that consists of or is controlled by (within the
meaning of the definition of “affiliate” in Rule 144 under the Securities Act of 1933, as amended
(an “Affiliate”)) any person that is a shareholder of FGX Holdings on the Effective Date or any
Affiliate of such person.

     9. Non-Competition. During the Employment Period and after termination of Executive’s
employment hereunder, whether or not such termination is without Cause or for Good Reason,
Executive shall not be involved in the Restricted Business Activities, as defined below, for the
period ending twelve (12) months after the date of termination of Executive’s employment (the
“Non-compete Period”) provided that the Company has not otherwise breached its obligations under
the Agreement. As used in this Agreement, the term “Restricted Business Activities” shall mean any
business which markets and sells to customers of a class or category to which FGX Holdings or any
of its subsidiaries, markets and sells at the time Executive’s employment terminated products or
services marketed and sold by FGX Holdings or any of its subsidiaries at such time or products or
services which at such time FGX Holdings or any of its subsidiaries was actively considering
marketing and selling to such customers. During the Non-compete Period, Executive shall not,
without the written approval of the Company, directly or indirectly, either as an individual,
partner, joint venturer, employee or agent for any person, company, corporation or association, or
as an officer, director or stockholder of a corporation or otherwise, enter into or engage in or
have a proprietary interest in the Restricted Business

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Activities other than the ownership of (a) the stock of the Company then held by Executive,
and (b) no more than five percent (5%) of the securities of any other publicly-held company.
Notwithstanding the foregoing, for so long as a majority of the issued and outstanding capital
stock of the Company is owned directly or indirectly by Berggruen Holdings, Limited or one or more
of its affiliates or a representative of Berggruen Holdings, Limited or one or more of its
affiliates is on the Board (or any entity owning a majority of the issued and outstanding shares of
the Company, whether directly or indirectly), the Company shall have the right to extend the
Non-compete Period for an additional six (6) months for a total of eighteen (18) months (the
“Non-compete Extension”) by delivering to Executive written notice of such decision prior to
termination of the original twelve (12) month Non-compete Period.

     Executive recognizes and agrees that because a violation by him of his obligations under this
Section 9 will cause irreparable harm to FGX Holdings or any of its subsidiaries that would be
difficult to quantify and for which money damages would be inadequate, any party included in the
definition of FGX Holdings or any of its subsidiaries shall have the right to injunctive relief to
prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete
Period will be extended by the duration of any violation by Executive of any of his obligations
under this Section 9.

     Executive expressly agrees that the character, duration and scope of his obligations under
this Section 9 are reasonable in light of the circumstances as they exist at the date upon which
this Agreement has been executed. However, should a determination nonetheless be made by a court
of competent jurisdiction at a later date that the character, duration or geographical scope of
such obligations is unreasonable in light of the circumstances as they then exist, then it is the
intention of both Executive and the Company that Executive’s obligations under this Section 9 shall
be construed by the court in such a manner as to impose only those restrictions on the conduct of
Executive which are reasonable in light of the circumstances as they then exist and necessary to
assure the Company of the intended benefit of Executive’s obligations under this Section 9.

     10. Confidentiality Covenants. The Company will not disclose the terms and conditions
of Executive’s employment, unless it is required by law to do so.

     11. Section 409A. To the extent that the Executive otherwise would be entitled to any
payment (whether pursuant to this Agreement or otherwise) during the six (6) months beginning on
the Termination Date that would be subject to the additional tax imposed under Section 409A of the
Code (“Section 409A”), (x) the payment shall not be made to the Executive during such six (6) month
period and (y) the payment, together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code shall be paid to the Executive on the earlier of the six-month
anniversary of the Termination Date or the Executive’s death. Similarly, to the extent that the
Executive otherwise would be entitled to any benefit (other than a payment) during the six months
beginning on the Termination Date that would be subject to the Section 409A additional tax, the
benefit shall be delayed and shall begin being provided (together, if applicable, with an
adjustment to compensate the Executive for the delay) on the earlier of the six-month anniversary
of the Termination Date, or the Executive’s death.

-9-

 

     12. Governing Law/Jurisdiction. This Agreement shall be governed by and interpreted
and governed in accordance with the laws of the State of Rhode Island. The parties agree that this
Agreement was made and entered into in Rhode Island and each party hereby consents to the
jurisdiction of a competent court in Rhode Island to hear any dispute arising out of this
Agreement.

     13. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels any
and all previous agreements, written and oral, regarding the subject matter hereof between the
parties hereto, with the exception of the Proprietary Rights Agreement signed by Executive on March
26, 2007, and which is attached hereto and incorporated by reference herein. This Agreement shall
not be changed, altered, modified or amended, except by a written agreement signed by both parties
hereto.

     14. Notices. All notices, requests, demands and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall be deemed to have
been given if delivered by hand, sent by generally recognized overnight courier service, telex or
telecopy, or certified mail, return receipt requested.

	 	 	 
	(a)

	 	to the Company at:
	 

	 	500 George Washington Highway
	 

	 	Smithfield, Rhode Island 02917
	 

	 	Attn: Chief Executive Officer
	 
	 	 
	(b)

	 	to Executive at:
	 

	 	the last home address appearing on the Company’s records

     Any such notice or other communication will be considered to have been given (i) on the date
of delivery in person, (ii) on the third day after mailing by certified mail, provided that receipt
of delivery is confirmed in writing, (iii) on the first business day following delivery to a
commercial over-night courier or (iv) on the date of facsimile transmission (telecopy) provided
that the giver of the notice obtains telephone confirmation of receipt.

     Either party may, by notice given to the other party in accordance with this Section,
designate another address or person for receipt of notices hereunder.

     15. Severability. If any term or provision of this Agreement, or the application
thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable,
the remainder of this Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall be considered
severable and shall not be affected thereby, and each term of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall,
to the extent permitted by law, be deemed amended and given such interpretation as to achieve the
economic intent of this Agreement.

-10-

 

     16. Waiver. The failure of any party to insist in any one instance or more upon
strict performance of any of the terms and conditions hereof, or to exercise any right or privilege
herein conferred, shall not be construed as a waiver of such terms, conditions, rights or
privileges, but same shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any
other violation of, breach of or default under any other provision of this Agreement.

     17. Successors and Assigns. This Agreement shall be binding upon the Company and any
successors and assigns of the Company and shall inure to the benefit of Executive and his heirs,
personal representations and assigns.

     18. Indemnification. The Company shall indemnify Executive to the maximum extent
permitted under applicable law against all liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees, reasonably
incurred by him in connection with the defense or disposition of any civil, criminal,
administrative, or investigative action, suit or other proceeding, whether civil or criminal, in
which he may be involved or with which he may be threatened, while an officer or director of the
Company or FGX Holdings or any of their direct or indirect subsidiaries or affiliates or
thereafter, by reason of his being or having been an officer or director of the Company or FGX
Holdings or any of the their direct or indirect subsidiaries or affiliates. Expenses (including
attorneys’ fees) incurred by Executive in defending any such action, suit or other proceeding shall
be paid by the Company in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of Executive to repay such amount if it shall be
ultimately determined that he is not entitled to be indemnified by the Company. The right of
indemnification provided herein shall not be exclusive of or affect any other rights to which
Executive may be entitled. The provisions hereof shall survive expiration or termination of this
Agreement for any reason whatsoever.

     19. Counterparts. This Agreement may be executed in counterparts and by facsimile,
each of which shall be an original with the same effect as if the signatures thereto and hereto
were upon the same instrument.

     20. Third Party Beneficiaries. Each of the parties hereto agree that FGX Holdings and
each of its subsidiaries is and shall be deemed an intended third party beneficiary of the
Company’s rights under Section 9 and 10 of this Agreement with full rights to enforce the
provisions thereof as if a signatory hereto.

     21. Attorney’s Fees. In any action or proceeding brought to enforce any provision of
this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and
costs from the other party to the action or proceeding. For purposes of this Agreement, the
“prevailing party” shall be deemed to be that party who obtains substantially the result sought,
whether by settlement, mediation, judgment or otherwise, and “attorneys’ fees” shall include,
without limitation, the actual attorneys’ fees incurred in retaining counsel for advice,
negotiations, suit, appeal or other legal proceeding, including mediation and arbitration.

[Signatures Appear on Next Page]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	FGX INTERNATIONAL INC.

 	 
	 	By:  	/s/ Alec Taylor
 	 
	 	 	Name:  	Alec Taylor 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	EXECUTIVE

 	 
	 	By:  	/s/ Jeffrey J. Giguere
 	 
	 	 	Name:  	Jeffrey J. Giguere 	 
	 	 	 	 
	 

[Signature Page to Executive Employment Agreement]

-12-

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