January 5, 2004
Mr. Dennis Healey
Chief Financial Officer
865 SW 78th Avenue
Plantation, FL 33324
Re: Engagement Letter
Dear Mr. Healey:
This letter agreement (this Agreement) confirms Viragen Inc.s (the Company) engagement of HPC Capital Management (HPC) as investment banker, financial advisor and consultant of the Company and sets forth the terms and conditions pursuant to which HPC shall perform in said capacity.
1. Retention Subject to the terms and conditions of this Agreement, the Company hereby engages HPC to act on behalf of the Company as a non-exclusive investment banker, financial advisor and consultant commencing on the date hereof and continuing for a period of 12 months hereafter (the Engagement). Either party may cancel this Agreement upon 60-calendar days written notice.
2. Services. During the Engagement and subject to the terms and conditions herein, HPC agrees to provide financial services to the Company consisting of: (i) evaluating the Companys requirements for funding growth and expansion of the Companys operations; (ii) advising the Company as to alternative modes and sources of financing; (iii) analyzing the impact of business decisions, policies, and practices on the value of the Companys business and securities; (iv) increasing the public exposure of the Company through introductions to institutions, brokers and the investment community; (v) bringing to the attention of the Company possible business opportunities and evaluating business opportunities generally, whether or not HPC or others originate such opportunities; and (vi) providing a research report respecting the Company in accordance with HPCs typical format and practices for such reports. Any opinions expressed in such report shall consist solely of the independent opinions of HPCs research department, and HPC does not represent to the Company that such report shall contain a favorable investment recommendation or any investment recommendation at all. HPC agrees to devote such time, attention, and energy as may be necessary to perform the services hereunder. The Company expressly acknowledges and agrees that nothing herein shall be construed, however, to require HPC to (i) provide a minimum number of hours of service to the Company or to limit the right of HPC to perform similar services for the benefit of persons or entities other than the Company, (ii) commit to purchase securities of the Company or secure financing on behalf of the Company by third parties, (iii) ensure that any potential investor(s) introduced to the Company by HPC will execute final agreements with the Company, or (iv) guaranty the
obligations of any investor(s) introduced to the Company by HPC under any final agreements with such investor(s).
3. Remuneration. For undertaking the Engagement and for other good and valuable consideration, including but not limited to, the substantial benefit the Company will derive from the ability to announce its relationship with HPC, the Company agrees as follows:
|(a) Commencement Retainer. The Company will agree to issue and deliver to HPC Capital Management within 10 business days from the date hereof 480,000 shares of the Companys common stock, in the aggregate (the Commencement Retainer Shares), which shares are nonrefundable.|
|(b) Placement Fees. The Company shall pay to HPC a cash placement fee equal to 6.5 % of the total purchase price of the Companys securities sold, including all amounts placed in an escrow account or payable in the future (including future issuances resulting from anti dilution provisions) and all amounts paid or payable upon exercise, conversion or exchange of such securities received or receivable directly by the Company (Aggregate Consideration) in any placement of the Companys securities in connection with HPCs efforts hereunder. Such consideration paid in cash shall be paid directly to HPC out of escrow, as and when such consideration is paid to the Company. Notwithstanding the foregoing, in connection with the exercise of any investor warrants issued in connection with a placement of the securities in connection with HPCs efforts hereunder, HPCs placement fee shall be reduced to 4% of the cash proceeds and shall be paid on receipt of such funds into the escrow account established for this purpose by the Company.|
|(c) Warrants. On each closing date on which Aggregate Consideration is paid or becomes payable, the Company shall issue to HPC 40,000 warrants (the Warrants) per $1 million raised by HPC. The exercise price of the Warrants shall equal the lower price (to any investor(s)) at which any common equity of the Company is or may be sold in such placement or upon the conversion, exercise or exchange of such securities. The Warrants shall be exercisable immediately after the date of issuance, and shall expire 5 years after the date of issuance, unless otherwise extended by the Company. The Warrants shall include a cashless exercise provision and will be non-redeemable and provide for automatic exercise upon expiration. The Warrants shall be transferable, subject only to the securities laws, by the holders thereof.|
|(d) Mergers and Acquisitions. The Company agrees that if HPC, directly or indirectly, introduces the Company, during the term of this Agreement, to any person or entity that becomes a party to a merger, acquisition, joint venture or other similar transaction with the Company or any affiliate thereof, then the Company shall pay to HPC a cash fee calculated as a percentage of the Transaction Value (as defined herein) in accordance with the following scale:|
|||6% on the first $5,000,000|
|||5% on the amount from $5,000,001 to $7,000,000|
|||4% on the amount from $7,000,001 to $9,000,000|
|||3% on the amount from $9,000,001 to $11,000,000|
|||2% on the amount from $11,000,001 to $13,000,000|
|||1% on the amount above $13,000,001|
|Transaction Value shall mean the aggregate value of all cash, securities, notes,|
|debentures purchase options, royalties, management, and consulting agreements; marketing, licensing and revenue contracts; agreements not-to-compete, including contingent and installment payments; consideration paid for assets owned by majority owned subsidiaries of the Company or entities in any business relationship which are used in or are potentially useful in the Company s business; the total value of liabilities avoided by the Company or assumed by the acquirer; the total value of all liabilities on the Companys balance sheet that are transferred to the acquirer of the stock of the Company in a stock transaction and any other tangible net benefit to the Company, its shareholders or directed beneficiaries and other property and valuable consideration of every kind either (i) transferred to the Company and its affiliates in connection with any transaction involving any investment , loan or any other equity or debt financing for, or acquisition of, the Company or any affiliate thereof, or in connection with an acquisition of equity or assets thereof or (ii) transferred by the Company and its affiliates in any transaction involving an investment in or acquisition of any third party, or acquisition of the equity or assets thereof, by the Company or any affiliate thereof or (iii) transferred or otherwise contributed by all parties to enter into any joint venture or similar joint enterprise or undertaking with the Company or any affiliate thereof. The aggregate value of all such cash, securities and other property and valuable consideration shall be the aggregate fair market value thereof as determined jointly by HPC and the Company, or by an independent appraiser jointly selected by HPC and the Company.|
|(e) Tail Period. The Company shall and shall have caused its affiliates to pay HPC all compensation described in this Section 3 with respect to all financing candidates at any time prior to the expiration of 1 year after the Termination Date (the Tail Period) if such candidates were identified to the Company by HPC during the Authorization Period and HPC provided written notification to the Company of the introduction and Company does not dispute in writing that HPC identified such candidates to the Company.|
4. Representations, Warranties and Covenants of the Company. The Company hereby represents warrants and covenants as follows:
(a) (i) The Company has the full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder, (ii) this Agreement has been duly authorized and executed by and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms, (iii) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not conflict with or result in a breach of (A) the Companys certificate of incorporation or by-laws, or (B) any agreement to which the Company is a party or by which any of its property or assets is bound.
(b) Upon the filing of any registration statement by the Company pursuant to the Securities Act of 1933, as amended, in connection with the proposed offer and sale of any of its securities by it or any of its security holders, the Company shall also register for resale by the holder(s) thereof in such registration statement any common equity securities issued or issuable as a result of any placement made pursuant to this Agreement.
5. Representations, Warranties and Covenants of HPC. HPC hereby represents and warrants that: (i) it has the full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder, (ii) this Agreement has been duly authorized and executed by and constitutes a valid and binding agreement of HPC enforceable in accordance with its terms, (iii) the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby do not conflict with or result in a breach of (A) HPCs certificate of incorporation or by-laws, or (B) any agreement to which HPC is a party or by which any of its property or assets is bound.
6. Independent Contractor. HPC and the Company hereby acknowledge that HPC is an independent contractor. HPC shall not hold itself out as, nor shall it take any action from which others might infer that it is a partner or agent of, or joint venture with, the Company. In addition, HPC shall take no action, which binds, or purports to bind, the Company.
7. Confidentiality. The Company acknowledges that all opinions and advice, whether oral or written, given by HPC to the Company in connection with this Agreement are intended solely for the benefit and use of the Company in considering the transactions to which they relate, and the Company agrees that no person or entity other than the Company shall be entitled to make use of or rely upon the advice of HPC to be given hereunder, and no such opinion or advice shall be used by the Company for any other purpose or reproduced, disseminated, quoted or referred to by the Company in communications with third parties at any time, in any manner or for any purpose, nor may the Company make any public references to HPC or use HPCs name in any annual report or any other report or release of the Company without HPCs prior written consent, except that the Company may, without HPCs further consent, disclose this Agreement (but not information provided to the Company by HPC) in the companys filings with the Securities and Exchange Commission, if such disclosure is required by law. Similarly, the Company may provide proprietary and confidential information to HPC in connection with this Agreement, which Company will identify as such at the time it is disclosed to HPC. HPC will keep such information confidential and not disclose it to any third party without Companys consent, and will use any such information provided by the Company solely for the purpose of providing services to the Company under this Agreement. The Company does not guarantee the accuracy of any technical or economic projection and forecasts that may be provided to HPC hereunder.
8. Reimbursement. The Company agrees to reimburse promptly HPC, upon request from time to time, for all reasonable, out-of-pocket expenses incurred by HPC (including fees and disbursements of counsel and of other consultants and advisors retained by HPC) in connection with the matters contemplated this Agreement. The Companys prior approval in writing will be required for any individual expenses above $500.00.
9. Indemnification. The Company agrees that it shall indemnify and hold harmless, HPC, its stockholders, directors, officers, employees, agents, affiliates and controlling persons within the meaning of Section 20 of the Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933, each as amended (any and all of whom are referred to as an Indemnified Party), from and against any and all losses, claims, damages, liabilities, or expenses, and all actions in respect thereof (including, but not limited to, all legal or other expenses reasonably incurred by an Indemnified Party in connection with the investigation, preparation, defense or settlement of any claim, action or proceeding, whether or not resulting in any liability), incurred by an Indemnified Party: (a) arising out of, or in connection with, any actions taken or omitted to be taken by the Company, its affiliates, employees or agents, or any untrue statement or alleged untrue statement of a material fact contained in any of the financial or other information furnished to HPC by or on behalf of the Company or the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (b) with respect to, caused by, or otherwise arising out of any transaction contemplated by the Agreement or HPCs performing the services contemplated hereunder; provided, however, the Company will
not be liable under clause (b) hereof to the extent, and only to the extent, that any loss, claim, damage, liability or expense is finally judicially determined to have resulted primarily from HPCs gross negligence or bad faith in performing such services.
If the indemnification provided for herein is conclusively determined (by an entry of final judgment by a court of competent jurisdiction and the expiration of the time or denial of the right to appeal) to be unavailable or insufficient to hold any Indemnified Party harmless in respect to any losses, claims, damages, liabilities or expenses referred to herein, then the Company shall contribute to the amounts paid or payable by such Indemnified Party in such proportion as is appropriate and equitable under all circumstances taking into account the relative benefits received by the Company on the one hand and HPC on the other, from the transaction or proposed transaction under the Agreement or, if allocation on that basis is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and HPC on the other, but also the relative fault of the Company and HPC; provided, however, in no event shall the aggregate contribution of HPC and/or any Indemnified Party be in excess of the net compensation actually received by HPC and/or such Indemnified Party pursuant to this Agreement.
The Company shall not settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in which any Indemnified Party is or could be a party and as to which indemnification or contribution could have been sought by such Indemnified Party hereunder (whether or not such Indemnified Party is a party thereto), unless such consent or termination includes an express unconditional release of such Indemnified Party, reasonably satisfactory in form and substance to such Indemnified Party, from all losses, claims, damages, liabilities or expenses arising out of such action, claim, suit or proceeding.
In the event any Indemnified Party shall incur any expenses covered by this Section 9, the Company shall reimburse the Indemnified Party for such covered expenses within ten (10) business days of the Indemnified Partys delivery to the Company of an invoice therefore, with receipts attached. Such obligation of the Company to so advance funds may be conditioned upon the Companys receipt of a written undertaking from the Indemnified Party to repay such amounts within ten (10) business days after a final, non-appealable judicial determination that such Indemnified Party was not entitled to indemnification hereunder.
The foregoing indemnification and contribution provisions are not in lieu of, but in addition to, any rights which any Indemnified Party may have at common law hereunder or otherwise, and shall remain in full force and effect following the expiration or termination of Rodmans engagement and shall be binding on any successors or assigns of the Company and successors or assigns to all or substantially all of the Companys business or assets.
10. Notices. Except as otherwise specifically agreed, all notices and other communications made under this Agreement shall be in writing and, when delivered in person or by facsimile transmission, shall be deemed given on the same day if delivered on a business day during normal business hours, or on the first day of business day following delivery in person or by facsimile outside normal business hours, or on the date indicated on the return receipt if sent registered or certified mail, return receipt requested. All notices sent hereunder shall be sent to the representatives of the party to be noticed at the addresses indicated respectively below, or at such other addresses as the parties to be noticed may from time to time by like notice hereafter specify:
|If to the Company:||Mr. Dennis Healey|
|Chief Financial Officer|
|865 SW 78th Avenue|
|Plantation, FL 33324|
|If to HPC:||HPC Capital Management|
|200 Mansell Court East Suite 550|
|Atlanta, GA 30076|
|Attn: Paul T. Mannion, Jr.|
|(770) 992-6800 (Fax)|
11. Entire Agreement. This Agreement contains the entire agreement between the parties. It may not be changed except by agreement in writing signed by the party against whom enforcement of any waiver, change, discharge, or modification is sought. Waiver of or failure to exercise any rights provided by this Agreement in any respect shall not be deemed a waiver of any further or future rights.
12. Survival of Representations and Warranties. The representations, warranties, acknowledgments and agreements of HPC and the Company shall survive the termination of this agreement. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided, however, that, such severability should be ineffective if it materially changes the economic benefit of this Agreement to any party.
13. Governing Law. This Agreement shall be construed according to the laws of the State of New York and subject to the jurisdiction of the courts of said state, without application of the principles of conflicts of laws. Each of the parties consents exclusively to personal jurisdiction in the Southern District of New York, waives any objection as to jurisdiction or venue, and agrees not to assert any defense based on lack of jurisdiction or venue. In any litigation, arbitration, or other dispute resolution arising out of or relating to this Agreement, the prevailing party shall be reimbursed by the other party (as determined by a court of competent jurisdiction) for reasonable attorneys fees and/or arbitration costs.
14. Successors. This Agreement may not be assigned by either the Company or HPC without the prior written consent of the other party. This Agreement shall be binding upon the parties, their permitted successors and assigns.
15. Execution. This Agreement may be executed in any number of counterparts each of which shall be enforceable against the parties executing such counterparts, and all of which together shall constitute a single document. Except as otherwise stated herein, in lieu of the original documents, a facsimile transmission or copy of the original documents shall be as effective and enforceable as the original.
Agreed to and accepted this 5 day of January, 2004
|Viragen, Inc.||HPC Capital Management|
|By:||/s/ Dennis W. Healey||By:||/s/ Paul T. Mannion Jr.|
|Dennis Healey||Paul T. Mannion, Jr.|
|Chief Financial Officer||President|